Vol. 678 No. 1
6 Deputy Andrew Doyle asked the Minister for Communications, Energy and Natural Resources the position regarding the ocean energy fund; the amount of the fund that will be spent in 2009; the projects that will benefit from it; and if he will make a statement on the matter. [10428/09]
48 Deputy Jack Wall asked the Minister for Communications, Energy and Natural Resources his target for ocean energy technology; the megawattage of ocean energy connected to the grid; the number of applications received; the amount of the €26 million announced for ocean energy that will be spent in 2009; and if he will make a statement on the matter. [10507/09]
I propose to answer Questions Nos. 6 and 48 together.
The Government is giving high priority to supporting the development of Ireland's ocean energy potential. Not only will ocean energy contribute to Ireland's renewable energy targets, it has considerable potential for inward investment and enterprise activity in support of economic renewal.
The multi-annual ocean energy package, which I launched last year, involves a number of initiatives, namely, the establishment of the ocean energy development unit based with Sustainable Energy Ireland, the creation of a state-of-the-art national ocean energy facility at University College Cork; the development of a grid-connected wave energy test site off the west coast; the establishment of an ocean energy prototype fund; and the introduction of a new feed-in tariff under the REFIT scheme for wave and tidal technologies of €220 per megawatt hour. I am pleased to confirm that all initiatives under the package are well under way and are being implemented with the full involvement of stakeholders. Some €7 million has been allocated by the ocean energy development unit to the ocean energy package in 2009. This is in line with projected expenditure this year, subject to obtaining Department of Finance sanction on a quarterly basis.
The ocean energy development unit has launched the industry prototype development fund. To date, 20 expressions of interest, leading to seven firm proposals, have been submitted by developers. Contracts for the funding of three projects will be issued within the coming weeks. Four proposals are currently the subject of technical and business evaluation. Funding decisions will be made in light of these evaluations. Expenditure on the prototype fund in 2009 is projected to be at least €4 million.
The Government has set a target of 500 MW from ocean energy by 2020. At present, there are no ocean energy devices connected to the grid in Ireland. This technology is still very much in early development. Current assessments show that across the globe only a small number of test projects, totalling under 10 MW in size, are connected to the grid. The ocean energy development unit, in partnership with the Marine Institute and ESBI, undertook an extensive process over the past two years to identify the most suitable wave energy test site. The development partnership will now develop a grid-connected site off Annagh, County Mayo. This will test operational pre-commercial wave energy devices directly connected to the electricity network.
The project team is undertaking detailed technical consultation with prospective industrial users of the facility. It is also completing engineering specifications and progressing onshore and offshore lease applications, network connection and necessary onshore works. Expenditure on the project this year is expected to be at least €2 million. The project is scheduled to be completed by 2010, subject to external factors including offshore sea conditions during the development phase.
The ocean energy development unit is also working with UCC to upgrade the existing wave basin located at the hydraulics and maritime research centre, HMRC, at UCC. This wave basin provides research and testing facilities for a variety of offshore purposes. The upgrade of the existing facility will include new wave generating equipment, new experimental test rigs, improved workshop facilities and advanced computer solutions for numerical analysis and modelling. Expenditure on the facility in the current year is estimated at €1 million. Proposals for a new national ocean test facility, NOTF, will be developed by 2012 as part of a proposed maritime and energy research centre to be located adjacent to the National Maritime College at Ringaskiddy.
When one cuts through the spin, one can only judge the priority the Government gives to a particular area by the amount it is willing to spend. This time last year the Government, with considerable fanfare, launched an ocean energy programme and stated that €26 million would be spent over three years. Last year it spent €1 million and the Minister of State indicated it plans to spend €7 million this year. The only new information he provided is that this money will be subject to sanction from the Department of Finance on a quarterly basis. By the end of the second year of the three-year programme, the Government will only have spent €8 million. It is supposed to spend €26 million on the entire programme. The Minister of State has indicated that even the €7 million for this year is not certain.
Is the Minister of State in a position to indicate that the entire €7 million will be spent this year? Can the Minister also offer some certainty about fulfilling the commitment that was made of expenditure totalling €26 million by the end of next year? Of all the industries that require a boost, this is a potentially huge employer and in the current environment it is one of the areas that justifies significant capital expenditure.
The Deputy judges the priority the Government gives to something by the amount of money it spends on it. There is probably some truth in that. The Deputy mentioned this on the last Question Time and the Minister explained clearly——
The situation is worse now because the Minister has just told us it is subject to Department of Finance sanction.
No. For capital expenditure the Department of Finance is taking a hands-on approach. It is doing that in the interest of the country to ensure that what we are spending needs to be spent and that we are getting good value for the spend. I am being honest with the Deputy. I agree that there is huge potential in ocean energy. A study carried out by Bacon/ESBI calculated that up to 1,900 jobs could be created in the sector by 2020 if we invest in ocean energy technology. A great deal of work is taking place and our objective is to support research and applied research leading to full scale commercialisation of the technology. As I mentioned earlier, however, the technology has not yet been fully developed but it offers huge potential. We have been working on trying to put the nuts and bolts together and on putting a good team in place to ensure that we maximise the potential that exists.
There is a certain amount of concern at the approach now being adopted to the €26 million that was announced not long ago with such positive statements by the Minister. As I understand it, the only Irish prototype that is connected to a grid is connected to the British grid. Are the 20 applications all of Irish origin? The Minister said that approximately €4 million can be provided for the seven successful applicants. Can he confirm that the money will be available to them or is he saying that it is up to the Department of Finance? This is pioneering work and there must be some certainty for people who are, in effect, taking a step into the dark. Is the Minister saying the €4 million grant aid is subject to the Department of Finance stranglehold? Looking ahead, can the Minister say when he expects the first project to be connected to the Irish grid? What is the calculated date for connection?
So far there have been 20 expressions of interest, leading to seven firm proposals being submitted by developers. Contracts for funding of three of those projects will be issued within a few weeks. Four proposals are currently the subject of technical and business evaluation. Funding decisions will be made in light of these evaluations. The expenditure on the prototype fund in 2009 is projected to be at least €4 million. With regard to the moneys, there is little point in me repeating what I have said about finance. Obviously, given our difficult financial situation, the Department is taking a keen interest in what Departments are spending.
The point of view of the Department is that ocean energy offers great potential. It needs investment and we will make every effort to ensure that not only do we have the right people in place, but also that we provide the necessary funds. The supports we are providing this year include €1 million towards the world class state-of-the-art national ocean energy facility in UCC and €2 million to support and develop the grid connected wave energy site near Belmullet in County Mayo, which is very important.
Since the Minister is being blunt and honest about the funding, will he clarify if the announced €26 million over a three year period still stands? If the Minister spends everything it is planned to spend by the end of this year, and hopefully the Department of Finance will sanction it, it will amount to €8 million. Does that mean there is still €18 million that the Government plans to spend next year? People need to know this. They are investing their own money as well as the grant aid from the Government. This research and development area has exciting prospects but people will not invest if they do not have certainty on State finance. If the €26 million is not available or is revised, can the Minister please say so? People can plan on that basis. Can the Minister say if, next year, the Government commitment of €18 million of the three year programme will be forthcoming?
There is an issue about certainty. With regard to the contracts that will be signed in a couple of weeks with three contenders, is there a clause in the contract stating that moneys will be subject to approval by the Department of Finance? I understand that an bord snip nua has not yet met with the Minister or the Department. Is it possible that recommendations would come from that group advising that this fund be slashed? The fund appears to be vulnerable, at least to attack, because of its nature. What assurance can the Minister offer? People are investing their money and commitment in developing an important energy resource and they should not be treated in a way the Minister appears to foresee they might be treated.
We are all probably vulnerable to attack in these times. With regard to the announcement of €26 million, that figure was given as the amount required to be invested in the short term to develop the industry and provide the type of support needed for research and applied research leading to the full scale commercialisation of the technology. One of the first companies operating in this area was Wavebob. A significant Swedish player has come on board for a joint operation with Wavebob to try to develop the technology further.
There is also Oceanenergy. There are two big companies.
I have outlined the €7 million we plan to spend now. We have clearly set out the priority we are giving to ocean energy and we are providing the necessary funds to allow that sector to develop.
We must move on to the next question.
I asked a question.
I will allow a very brief supplementary question, not a statement. We are well over time on this question.
Will the Minister confirm whether the Government is still committed to spending €26 million to kick-start this industry? Is €7 million the new commitment?
We never gave a commitment to spend €26 million over——
The Government did.
Let me finish.
Allow the Minister to reply.
We never gave a commitment to spend €26 million over a particular 12 month period.
It was three years.
That is different. We gave the figure of €26 million, which we considered to be the investment that was required over the three-year period. That has not yet happened. We have had to develop the strategy and get the right people on board. That took a little longer than anticipated. We are quite clear about the strategy we have adopted and I have outlined the €7 million we will spend this year in going further on this road.
I asked the Minister about the contracts.
The contracts will be finalised over the next few weeks.
Is it likely there will be a caveat in them?
I cannot divulge what those contracts will contain.
I call Question No. 7.
Excusez-moi, s'il vous plaît?
Vous êtes excusé, Monsieur le Ministre.
7 Deputy Paul Connaughton asked the Minister for Communications, Energy and Natural Resources the progress being made on agreeing and signing the management contract for the MANs II infrastructure; and if he will make a statement on the matter. [10409/09]
The engagement of a management services entity, MSE II, is the subject of a procurement process and is currently in the contract negotiation phase with the preferred bidder, eNet. I expect that to conclude by the end of March. Because it is a procurement process, it would be inappropriate for me to comment further.
All completed phase II networks are being managed, maintained and operated on an interim basis by the technical services firm, Magnum Opus, on behalf of the Department. Magnum Opus will continue to manage the phase II MANs until such time as an MSE II is engaged.
How many of the 60 metropolitan area networks built under phase II are operating currently? Most of them have been there for more than a year.
A total of 58 MANs covering 64 towns have been completed during 2007 and 2008. The remaining two MANs towns of Edenderry and Kinsale will be substantially completed during 2009.
I asked how many are actually operating. We have spent €80 million putting that infrastructure in the ground. I am asking how many of the 60 MANs that are in the ground are actually lit up and operating, providing broadband services to the towns for which they were built and, most importantly, giving the State a return?
Under phase I of the metropolitan area networks programme——
I am asking about phase II.
Deputy Coveney should allow the Minister to reply.
I am just saying that under phase I, a total of 27 have been constructed and all 27 are operational and open for business. Four phase II MANs are being used by services providers. They are in Killarney, Tralee, Longford and Carrigaline. A number of other requests have been received from service providers and they are being considered.
I am trying to be helpful in this area, but I have raised this issue consistently since last July. The reason all of the phase I MANs are operating successfully and giving a good return to the State is that they are being managed properly by a management entity. As it happens that is eNet, but the company is irrelevant. It is giving a good return to the State on investment.
The management contract for MANs phase II was due to be finished by the end of last summer and the preferred bidder happened to be the same company that is managing MANs phase I, but that is largely irrelevant. Does the Minister agree the issue is the delay by Government to put in place a proper management contract for the 60 metropolitan area networks under phase II, which is preventing them from being managed properly and therefore used properly to give a return to the State at a time when we could do with sweating those assets and getting a significant return, which is feasible?
I agree with the Deputy that it is vital that we get a return to the State but the engagement of a management services entity is the subject of a procurement process.
What is the delay?
As I said——
The preferred bidder was chosen last July.
The Minister should be allowed to speak.
We are in contract negotiations at present and we expect to conclude those within a matter of a few weeks.
It is baffling why it is taking so long, especially when the Department has already had the experience with phase I. Perhaps the Minister can bring us through the process going back to last July. What exactly was involved? Were there a lot of meetings or is there a lot of documentation? What exactly went on over that period that it should take so long?
As the Deputy will appreciate, for a variety of reasons these matters often drag on for a little longer than one would want. I do not have specific information at my disposal relating to the number of meetings that took place. I will make an effort to get it and pass it on to the Deputy. The process has taken longer than we would have wished but the good news, which we will all welcome, is that it will be concluded within a few weeks.
Is the Minister not curious about this? Surely he has an interest in the way things work in his Department. Has he never ask why in God's name it is taking forever to do a relatively simple contract?
We spent three hours yesterday in a committee with Eircom discussing the problems with rolling out next generation broadband infrastructure into rural Ireland. The State has spent €80 million putting in place that infrastructure and we are not lighting it up. It is nine months since the preferred tender was chosen and we have still not put in place a contract to make it happen.
People may have been unhappy with the lack of progress in the early stages but more recently we have made significant progress in the provision of broadband throughout the country. A recent development in regard to the national broadband scheme will be welcomed throughout the country. We have put in place the necessary investment to ensure we do not have a digital divide in the country and that people have access to new technology. We will ensure in so far as is possible that everybody has an opportunity to avail of that new technology.
8 Deputy James Bannon asked the Minister for Communications, Energy and Natural Resources the way the reduction of 10% in the regulated domestic electricity price and the reduction of the 12% in the regulated gas price is being achieved; if further price reductions can be expected in 2009; and if he will make a statement on the matter. [10393/09]
9 Deputy Shane McEntee asked the Minister for Communications, Energy and Natural Resources if he proposes to bring about change to the way in which domestic electricity is regulated; and if he will make a statement on the matter. [10451/09]
30 Deputy Pat Breen asked the Minister for Communications, Energy and Natural Resources if he will justify the continuation of an electricity price regulation model that does not allow the ESB to compete on price with its competitors in the domestic supply market; and if he will make a statement on the matter. [10397/09]
46 Deputy Seymour Crawford asked the Minister for Communications, Energy and Natural Resources if changes are being proposed in the way electricity and gas prices are to be regulated in the future; his views on whether at the present time there is too long a period between the reduction in cost prices on the world market and the actual decrease in prices, as was recently witnessed before the Regulator decreased the price for both electricity and gas; and if he will make a statement on the matter. [10363/09]
71 Deputy Lucinda Creighton asked the Minister for Communications, Energy and Natural Resources if, in view of the price drops caused by the entry of Bord Gáis to the electricity market, he has further plans for liberalisation of the energy market; and if he will make a statement on the matter. [10467/09]
I propose to take Questions Nos. 8, 9, 30, 46 and 71 together.
Is it possible to oppose that?
I am afraid it is the Minister who groups the questions rather than the House. The Deputy can un-group them if he is so minded.
Will we have enough time to deal with all of the questions?
We will have plenty of time.
There will be time. There will be time for vision and revision.
Indeed.
Poetry included.
At the request of the Minister a number of weeks ago, the Commission for Energy Regulation, CER, undertook an urgent review of options to bring forward a reduction in energy prices for business and domestic consumers. The need for an early review was underlined by the various cost pressures facing Irish businesses in the current economic climate.
The proposed decisions on the ESB and Bord Gáis tariffs to apply from May next were published for consultation by the CER last week. The CER has concluded that the best way to deliver a reduction in electricity prices in the short term is through the deferral of both transmission and distribution network revenues. A total of €165 million of network revenue will be deferred for five months and recovered over the following year.
The exact reduction to be seen by a particular customer or category of customer will depend on his or her pattern of energy use. It will tend to average at approximately 10%. The reduction in electricity costs now is bringing forward the reduction that consumers would otherwise see in October due to the fall in fossil fuel prices. The approach of the regulator ensures that the benefits of lower prices are passed on to all customers, of all suppliers, in a way that does not distort the market. In regard to gas prices, the regulator concluded that downward trends in global gas prices and higher sales of gas by BGE during the cold winter months, would allow a significant reduction in BGE's regulated prices to residential and small industrial and commercial customers.
In the normal course, this reduction would come into effect next October, which is the start of the gas year. However, in view of the exceptional difficulties currently facing the economy, the CER proposes to bring forward the price reduction to 1 May next. That will result in a 12% price reduction for domestic and SME gas users.
Further energy price reductions in 2009 will depend on trends in fossil fuel prices, particularly gas and coal, which are still the largest components of electricity generated in Ireland. The regulator will continue to closely monitor global price trends in the coming months. On current trends, the regulator has advised that there potentially may be scope for a further reduction in gas prices in October. In the case of electricity, the regulator is bringing forward the entire reduction now, as opposed to having any reduction in the autumn.
The regulator has stated that the regulated prices are currently set at a level that is cost reflective. However, if either ESB or BGE can demonstrate to the regulator that they can provide electricity and gas at lower cost then the regulator will permit them to reduce their prices. The regulator has also made clear the intent to exit from regulated prices as competition takes hold in the market. The regulator has already ceased regulating tariffs for large energy users. The majority of these have now switched away from ESB to independent suppliers and negotiate their own specific arrangements.
There is no doubt we will see an end to regulated tariffs as soon as the market power of the dominant player is sufficiently reduced. It is a matter for the regulator to judge when the moment is right. The Electricity Regulation Act 1999 is not prescriptive in terms of the timing and frequency of decisions by CER on charges by ESB customer supply. The legislation does not preclude the regulator reviewing electricity prices very regularly. As its two-phase structure adopted last year and its current tariff proposal have shown, the regulator is showing flexibility in its approach to tariff regulation in the interests of all energy consumers, without distorting the market.
The entry of BGE and Airtricity to the domestic electricity market is welcome. It shows that the Government's policies and the regulatory framework are working. I also welcome plans by the regulator to carry out a more fundamental review of energy tariff structures during the year in consultation with all stakeholders.
I would like to focus on electricity pricing, because there seems to be some confusion in that regard. The justification for the 10% reduction in the ESB domestic electricity price by the Regulator is explained by — as the Minister of State has just said — deferring distribution and network charges the ESB would be charging users. Therefore, the Minister of State is saying the reduction in price is not linked to a reduction in the price of oil, gas and coal internationally. I find this difficult to accept. The Minister of State has also said we may have another gas price reduction in October, but will not see another reduction in ESB prices.
Last summer, oil was at $147 a barrel and gas was significantly more expensive than it is now. As a result, we had a 17% increase in the cost of energy at that time. Why are we not seeing a corresponding reduction in the cost of electricity now that the raw material or fuel for generating electricity has dropped dramatically? I understand how the energy companies work in terms of buying fuel. They buy six months in advance or more, but six months ago energy prices had also collapsed. Therefore, how can the Government, which is responsible for the regulator, justify the fact that no reduction in electricity bills is attached to the cost of oil, gas and coal?
Last summer, the price of oil was $147 a barrel and we saw the effect of this at petrol pumps. At that time both Bord Gáis Éireann and the ESB applied for significant price increases. The regulator decided to adopt a flexible approach and partially granted both requests and said the matter would be reviewed again in December. We all know that between July and December the price of oil and gas reduced considerably and in December a small reduction in energy prices was announced. These lower prices have continued. Just a few weeks ago, the Minister asked the regulator to re-examine the situation and, as announced earlier, we will see a further reduction in prices within a few weeks.
The Minister of State is missing the point. We are not seeing a reduction in the price of electricity. I accept we are seeing an adjustment in price in domestic electricity bills, but that is only because the ESB is deferring the distribution and network charges it applies. We are not seeing cheaper electricity being produced here as a result of the collapse in the cost of the fuel used to generate electricity. We see a 12% reduction in the cost of gas, but why do we not see a 12% reduction in the cost of electricity production from that gas?
Over 50% of the electricity generated in Ireland is generated from gas. As we discussed earlier, in trying to bring competition into the market, we had to provide certainty on pricing to new entrants. As a result, it is possible that some customers will see a reduction of up to 24% within a few weeks.
Not ESB customers.
Perhaps I can put the question another way. The situation is puzzling. The reason there has been a drop of 10% in electricity prices is because of the deferral of charges. The Minister of State said in his response that there would not be a further reduction in October. Where then do we get the benefit of the reduction in oil prices? Gas prices are tied in with oil prices and there has been a significant drop in oil prices, as can be seen at the petrol pumps. We were told before that the reason we did not see a corresponding drop in electricity prices was because of the way energy operators acquire their oil and gas. This is no longer sustainable because we have long passed the six-month period. When will we see the benefit of the drop in oil prices in electricity bills?
We are already seeing the benefits of the reduction in prices.
We are not.
The regulator stated that current prices must be set at levels that are cost reflective. It indicated that if any suppliers are in a position to provide electricity or gas at a lower cost, it will permit them to reduce prices further.
Not the ESB. It is the largest producer, but it cannot reduce its price.
It can. The regulator has shown, in the way it has dealt with recent requests for price increases and with the reduction of world prices for gas and oil, that it is very flexible in its approach. We have seen a number of price reductions over recent months.
The most recent increase was over 17%. We are now getting a 10% reduction, but that does not bring us back to where we were. The Minister clearly does not know the answer to the question, but will he ask the regulator for the information as to when we will see the effect of the drop in the cost of oil and gas in the price charged for electricity by the ESB?
There are a number of factors ——
I want the Minister of State to ask the regulator because I do not believe the Minister of State knows the answer.
The Deputy should allow the Minister to answer the question.
I hope the regulator will be more helpful than I have obviously been.
The question of the commercial and industrial price of electricity is where the problem lies in terms of competitiveness and jobs. It costs almost twice as much to power a business in Ireland as in a place like Manchester, Liverpool or wherever. Does the deferral of distribution and network costs in the domestic sector also apply to the industrial sector?
Big businesses enter into negotiations with the ESB or other independent suppliers with a view to making their own price arrangements.
Does that mean it does not apply?
It applies to everybody. The price reduction as announced by the regulator or Minister last week——
I want to be helpful on this matter.
Allow the Minister of State to finish.
I am sorry.
The recently announced price reductions will apply across the board.
With respect, I want to make sure we are not misleading the House. The price reductions only apply to domestic ESB bills and are being justified by the regulator on the basis of the ESB deferring what it charges to itself, between power generation and networks and distribution.
Has the Deputy a question?
In an effort to lower electricity prices in the commercial sector also, will the Government seek to have distribution and network charges in the industrial sector deferred in an effort to give the economy a competitiveness injection to reduce prices, if this is not already happening? The Minister of State says it is but I suspect it is not.
The Deputy referred to the cost of energy in Ireland by comparison with Manchester or many other countries. We are very conscious of the competitiveness difficulties and the action required to deal with these. As an island nation importing over 90% of our energy, we are obviously in a very vulnerable position. This is why our energy policy indicates we must place great emphasis on alternative energy sources. Renewable energy, in particular, must be developed. Wind and ocean energy have been prioritised and we are investing in them because we regard the growth in renewables as essential to securing competitiveness and to meeting at least some of our energy needs.
The Minister of State will know the ESB does not have a majority stake in the industrial-commercial sector. There is free competition and, as is correct, the ESB's market share in this area has fallen because of competition. There is now competition in the domestic electricity supply market. I am concerned about the ESB's future in terms of power generation because the Government, through regulation, is deliberately preventing the ESB from competing in the domestic sector. Does the Minister of State not agree that, in the industrial sector, the role of the ESB, with the exception of ESB International, which is a separate company, has already been diminished and that we are now facilitating the collapse of market share in the domestic sector also by preventing the ESB from competing in terms of price with Bord Gáis and Airtricity?
It was the wish of all Members that competition be introduced to the market. To achieve this, it was necessary to make some changes with regard to the ESB, which had a monopoly for longer than people would have desired. To make the market attractive to new entrants, it was essential to provide certain guarantees for them such that it would be viable for them to enter the market. It was essential to regulate prices but I admit it causes certain difficulties for the ESB. However, these difficulties are very much in the short term. They will obtain until the market develops and competition becomes stronger, at which time regulation will no longer be required and all companies will be on a level playing field.
Written Answers follow Adjournment Debate.
