Vol. 454 No. 7
7 Mr. N. Treacy asked the Minister for Transport, Energy and Communications the consequences, if any, for Ireland of the recent report on electricity systems by the European Commission; and if he will make a statement on the matter. [11373/95]
The Energy Council has for some time been discussing the introduction of a single electricity market in Europe. The report referred to by the Deputy was prepared by the Commission on foot of a Council request of November 1994.
The Deputy's question goes to the heart of the debate currently taking place in the Council. Can a liberalised electricity market, permitting third party access to networks, co-exist with a more restricted approach which would rely on a single buyer of electricity?
The Commission's analysis, most importantly from Ireland's point of view, examines the specific problems of opening the market in small electricity systems.
The Commission has now put forward its report. That report represents its views and it has not been considered by the Council, but I am disappointed with it because it concludes that there is no difference between small and large systems. That is a conclusion with which I cannot agree in terms of Ireland's interests. I have made clear my opposition to the report's conclusion and I already raised the matter in Brussels. I can assure my colleagues in the Oireachtas that I will vigorously pursue my opposition to the report at Council.
Our opposition to the report's conclusion will be effective and I anticipate a successful outcome to the discussions at Council. I hope the directive, when finally agreed, will fully accommodate the special requirements of small systems such as Ireland's.
I share the Minister's disappointment at the Commission's report. What instructions has he given our officials at COREPER on the attitude they should take in negotiations with Commission officials in order to ensure that Ireland is not further disadvantaged in any future decisions?
At the recent Council meeting I made a very strong case putting forward Ireland's point of view, which is fully supported by my officials dealing at Council and Commission levels. Small systems have specific needs and requirements and that was not taken into account in the report's conclusions. I have brought that matter successfully to the attention of the Commission. Agreements have been reached in respect of large systems and the position of small systems will now be examined closely. I am convinced there are differences between the large and the small systems and on how competition can be introduced in each system. Measures that are appropriate for the introduction of competition in the larger continental systems are unsuitable in the context of the small isolated Irish system.
The proposals in the report will not lead to the introduction of genuine competition in our electricity industry and they are incompatible with our concept of long term co-ordinated planning. As Deputies know, the Irish system is extremely small compared with the larger systems in member states. It serves an area of extremely low population density and by the year 2000 it will be almost entirely dependent on imported fuels. It is not connected to any of the large systems in the European Union. In addition it is required to support a developing economy which is classified as an objective 1 region of the Union. Taking account of all those factors the appropriate system for Ireland is the one we have proposed and which I have endorsed and am vigorously pursuing, that is a centrally planned system.
Based on the alternative energy initiatives that have been taken in recent years and given that the peace initiative has led to much greater co-operation and co-ordination with the energy suppliers in Northern Ireland, will the Minister assure the House he will put up a vigorous fight with the Commission to ensure that the capacity required by Ireland to develop, economically, and industrially, will be available so that there can be no impediment to our development?
I agree with Deputy Noel Treacy's sentiments and I am glad we are of the one view on this matter. I have already put forward that view in the strongest possible fashion to ensure a successful conclusion and that our needs will be catered for in the directive.
Will the Minister elaborate on the system he favours, the centrally planned system? Is the Minister referring to an integrated system combining generation, transmission and local distribution? Will he elaborate on the differences between what the Commission is proposing and his preferred position as this seems to be different from what he said in reply to an earlier question?
What we have agreed, and the Government recently has made decisions in respect of this, is that there will be competition in the generation of electricity. I discussed this on a number of occasions in the House and the Deputy is aware that the new peat fired power station will be constructed through open competition and the construction, operation and maintenance of the plant will be by an open tendering process. That will bring competition into the generation side. We are proposing also, as a compromise to the European Commission, that we will have competition on the supply side but it will be through the centrally planned system and will not allow for direct access by consumers to the power generating plant, which is what the Commission is looking for.
The Minister makes continuous references to the invitation of tenders for the peat fired stations as the introduction of competition would seem to tip the hat in the direction of competition, but will he open up the generation of electricity to all interested oil fired, gas fired and hydro suppliers or will he confine it to peat fired power stations? He has only referred to the peat fired power stations, which are not economic when compared with the cost of producing a unit of electricity from a coal fired, oil fired or gas fired power station?
I can confirm to the Deputy that there will be competition for all future generation needs, including alternative energy sources, and that the ESB's monopoly on the retail side as a result of a recent Government decision will be ended with effect from 1 January 1998 for consumers with peak demand of one megawatt or greater. Suppliers, including the ESB's supply business, will purchase electricity from the power procurer and will compete for retail sales to all eligible consumers. Where supply competition takes place, independent suppliers will pay the same charges for the use of the ESB's transmission and distribution network as the ESB's supply business pay.
Has the Minister considered what the situation in the market place would be if there were an oversupply of energy?
This is a growth sector and it is not expected there will be an over supply in the immediate future. It is anticipated that the capacity generated through the Poolbeg power stations, phases two and three and the new peat fired power station in the east midlands will be taken up on the home market. However, we have a North-South link which will enable us to export overcapacity.
Will the Poolbeg stations, phases two and three, meet the expected electricity demands over the next few years? Does the Minister agree that this would, in effect, discount the possibility of competition?
That is not the case. The Poolbeg stations, phases two and three, are required to come on stream in the immediate future and will shortly be the subject of a Government decision. It will take a number of years to put that capacity in place but even with that there would still be a requirement to expand the capacity of the network. That will be done on a planned basis, and the next phase of that plan will be the peat fired power station in the east midlands.
There will be no competition.
There will be competition. The Government has brought forward radical and fundamental proposals in respect of bringing competition into the electricity supply area, at generation and at supply level.
It is being done at the peat fired level.
Those are major decisions put into the public arena and agreed at Government level.
