Dáil Éireann díospóireacht -
Thursday, 23 Feb 1995

Vol. 449 No. 6

Adjournment Debate. - Proposed Peat Fired Power Station.

Mr. Dukes

I hesitated to interrupt the interruption by Deputy O'Rourke but she has departed in high dudgeon and, therefore, I will proceed.

I am grateful to you, Sir, for allowing me to raise this matter. It is an issue I have been pursuing for the last year by means of parliamentary questions, statements on the Adjournment, debates on the Estimates and so on. It is a matter of considerable potential importance to the east midlands area. There is a very keen interest among the population of the area in this project. I am anxious, like I am sure all other representatives of the area, that progress is made as quickly as possible and that the public is kept fully informed of progress.

To emphasise the importance of this matter I will outline the other factors involved in that area. The briquette factory at Lullymore closed some time ago with a number of job losses and the peat fired power station at Allenwood closed, also with a number of job losses —— from my information there are difficulties in the redeployment of former employees there to other units. There are fears for the peat fired generating stations at Ferbane and Rhode. In that whole area, which covers north-west Kildare and a good part of County Offaly the population settlement pattern has been heavily influenced by dependence on the peat resource. Without further employment opportunities based on that source we can foresee very serious disruption of the population and great difficulties for the social structure of the whole area.

The Minister for Transport, Energy and Communications recently told me by way of private communication that the outgoing EU Commission, which went out of office last month, had not made a decision on the Government's application for funding for this project in the context of the Community Support Framework for Ireland. I understand that all the information, analyses and studies requested by the Commission to assist it in coming to a conclusion on this application has been made available. As I understand it — I am sure the Minister of State will confirm this — all those studies and analyses were positive in that they have shown that the project is feasible, it represents reasonable value for money and it can be expected to perform as projected.

I ask the Minister of State to press the Commission for an early and favourable decision on the application for funding. That is a crucial step in the development of this project. I understand that more than three-quarters of the funding for this project will have to be raised commercially by way of equity, with or without additional loan funding. I gather that the Government's intention is to seek equity partners on a competitive tendering basis. The amounts involved are substantial. The total projected cost of the power station is in the region of £90 million. The application for European Union funding is for a sum of £21 million, leaving a balance of £69 million to be raised by a combination of equity and loan funding. It is obvious with the state of markets today that a substantial proportion of that funding would have the form of direct equity injection. It will not be easy to find £69 million for a project of this kind. The process of assembling the funding cannot even begin until the Commission has made the necessary decision on the allocation of funding. A favourable Commission decision will not guarantee that the project will go ahead, but it certainly will not go ahead without it. The Commission decision is, therefore, a crucial factor.

I am delighted my constituency colleague, the Minister of State, Deputy Stagg, is in the House because he is familiar with and very close to this issue. I need hardly assure him that I will support him in whatever he seeks to do on the issue. I would be grateful if the Minister of State would indicate the steps he proposes to take to persuade the Commission to take the necessary action.

Minister of State at the Department of Transport, Energy and Communications (Mr. Stagg)

I thank the Deputy for raising this matter and affording me the opportunity to outline the position to the House. To understand the importance of this station to Bord na Móna, it is necessary to look at the changes within the company in recent times and to look at its current status. Since the late 1980s Bord na Móna has been forced, for financial reasons, to undergo a major programme of rationalisation which included massive redundancy, resulting in the halving of its workforce of approximately 4,800 to just over 2,200 at present. However, the company still has an extremely serious debt problem. At the end of its last financial year, 31 March 1994, this debt stood at around £180 million of which £126 million was regarded as unmanageable.

The future of Bord na Móna, and the company's ability to pay off this debt, all of which is State guaranteed, is contingent on its ability to continue to sell a minimum of three million tonnes of milled peat annually to the ESB for the foreseeable future. Current forecasts show that annual sales of milled peat to the ESB from existing peat stations, which in 1994 were around three million tonnes, will decline rapidly over the next 20 years as older peat plants reach the end of their operating life and reserves of peat are depleted. In this context, it can be clearly seen that the proposed station, which will use an additional one million tonnes of peat per annum, will be crucial in helping to secure the future viability of Bord na Móna.

In 1993, the board of Bord na Móna submitted a proposal to the Minister for Transport, Energy and Communications for a new 120MW peat fired power station. Due to the availability of sufficient reserves of peat, this station would be located in the east midlands region and would be designed to take one million tonnes of milled peat annually from Bord na Móna over the next 25 years. The total recoverable peat reserves estimated to be available to Bord na Móna for use in the proposed power station are 39 million tonnes, which is more than adequate to meet the needs of the proposed station over its expected life.

The proposal is in line with Government policy on peat usage. Ireland's energy policy has a number of broad guiding principles among which are competitiveness, security of supply and due regard to the environment. Security of supply is of vital strategic importance to this country and to that end it is Government policy to promote as strongly as possible the development and exploitation of our indigenous resources. The Government is committed to the continuing development of our peat resource to our maximum economic benefit. However, this has to be done in the most cost effective manner possible.

Based on studies undertaken on behalf of Bord na Móna, the main features of the new station would be: capital costs of £90 million in 1993 prices; employment of 90 in the station itself, the majority of which would be permanent; the employment of 450 at peak construction; the support of 250 permanent and 250 seasonal jobs in peat extraction when fully operational; an improved conversion efficiency factor of 36.7 per cent compared to the average of 25.5 per cent in existing peat stations and a direct income impact of £19 million during construction and £8 million annually thereafter, most of which will accrue to the local economy.

The proposed new station is included as an energy measure in the Economic Operational Infrastructure Programme for Ireland as approved by the European Commission in July 1994 and EU financial assistance of £21 million has been sought towards the project. At the request of the EU Commission, a socio-economic cost benefit analysis of the project has been completed by a firm of international consultants and is being considered by the Commission. The study shows that the building of a peat station would result in a net overall benefit of just under £12 million to the economy above the best alternative, that is the building of a gas powered station.

All power stations are owned and operated by the ESB. It is envisaged that the new station will be put up for competition on the open market on a build-own-operate basis. This would ensure that the station is built in line with best international practice. A competition for the project would be consistent with developing EU policy on liberalisation of the electricity markets and would also conform with the Government's response to the Moriarty Task Force on the implementation of the Culliton report. No decision has been made on the exact location of the proposed station in the east midlands. If the Government decides to hold an open competition the final decision on the site of the station will rest with the successful bidder. Obviously, the location of the station will be influenced by among other things, the logistics of supplying peat from the peat supplying production areas.

In accordance with national and EU legislation the proposed station will be the subject of an environmental impact study. When application is made for planning permission an environmental impact assessment will be carried out as the plant will require a licence from the Environmental Protection Agency.

The cost benefit analysis is under consideration by the EU Commission. I understand that the Minister, Deputy Lowry, expects to meet with Commissioner Wulf-Mathies shortly to discuss the proposal and I am confident that a decision will be forthcoming in the near future. On receipt of this decision, the Minister will put immediate proposals to Government so as to ensure the necessary measures are put in train for the construction of the station. It is envisaged that the timescale for the project will be in the order of four years.