JOINT COMMITTEE ON AGRICULTURE AND FOOD díospóireacht -
Wednesday, 28 Jan 2004

Wind Farming: Presentation.

Chairman

The minutes of the meeting of 20 January 2004 have been circulated. Are the minutes agreed? Agreed.

On behalf of the joint committee, I welcome Mr. Tom Reeves and Mr. Denis Cagney from the Commission for Energy Regulation. The joint committee has asked the commission to attend the meeting to speak to us about the effects on farming activities arising from the decision of the Commission for Energy Regulation on wind farming.

Before Mr. Reeves commences his presentation, I draw to his attention the fact that while members of the committee have absolute privilege, the same privilege does not extend to him. Members are reminded of the long-standing parliamentary practice that they should not comment on, criticise or make charges against a person outside the House or an official by name in such a way as to make him or her identifiable.

Mr. Tom Reeves

I thank you, Chairman. I am pleased to have this opportunity to meet the committee this afternoon. The Commission for Energy Regulation operates under the Electricity Regulation Act 1999 and the Gas (Interim) (Regulation) Act 2002, in addition to amendments to those Acts. I would like to provide the committee with a background context regarding the various Government and independent statutory bodies involved in the field of renewable energy and how we fit into it.

The renewable energy division of the Department of Communications, Marine and Natural Resources is responsible for implementing all measures necessary to increase the penetration of renewable energy technologies in electricity production. At present, the Government provides support for renewable energy under the alternative energy requirement scheme, generally known as AER. AER awards people power purchase agreement contracts with the ESB for up to 15 years. Since the programme was launched in 1995, six AER competitions have been held. The technologies supported include wind energy, small scale hydropower, combined heat and power and biomass. The Department recently launched a consultation process on further renewable support after AER because perhaps AER has had its day.

Our role in terms of AER has been in licensing successful applicants. In addition, the additional cost of AER over and above the cost of conventional generation is recovered from all customers in the market, irrespective of whether they are supplied by the ESB or one of the independent suppliers through the public service obligation levy, which we calculate based on the basis of the statutory instrument published in 2002. In line with our duty to consumers, we are conscious of the impact this has on the overall cost faced by final customers.

The total cost for renewable energy under the PSO last year was €6.6 million and that will rise to €16.1 million in 2004, an increase of 150% in one year. We anticipate the impact of this on the average electricity tariff will not be insignificant. It could be close to 1% of the increase. As the level of renewables increases, the ability of consumers to absorb these increases must be considered.

Sustainable Energy Ireland was established under the Sustainable Energy Act 2002. Its functions include advancing the development of renewable sources of energy. The authority's renewable energy information office in Cork provides an independent information and advice service to people who wish to develop renewable energy projects.

As regards our role in renewable energies, since our establishment we have tried to carry out our functions as laid down in the Act. We must exercise those powers having regard to the need to promote the use of renewables or green energy. Renewable energy is broadly defined in the Act and covers 11 sources of energy such as wind, hydro, biomass, waste, biofuel, geothermal, fuel cells, tidal, solar and wave. To date, the main focus of development has been on exploiting wind energy since wind is the most economic of these technologies.

Since February 2000 the market for green energy has been 100% open. That means everyone has the right to purchase electricity from a green supplier. One does not have to stay with the ESB. The market for conventional or brown electricity will not open fully until February 2005. In order to promote green energy, we generally lean towards green when we have decisions to make. We are happy that there is a lot of activity in the green area. We have on a number of occasions, for example, amended the trading and settlement code, which forms the rules in the wholesale market under which all players in the market must operate and which determines how moneys are transferred. We made those decisions in favour of the green sector.

For increased flexibility and in recognition of the fact that the wind does not blow all the time, we have allowed the green sector to mix green and non-green electricity in its sales in the market and also in its trades across the interconnector. This allows the green sector to continue with its sales and then to reconcile the differences afterwards. The Act stipulates that the holders of green licences must balance their green sales with green energy production. I have established that this should be done within a 5% margin on an annual basis. Furthermore, this balancing period is initially set at two years to assist new entrants.

As a measure of our success, a green supplier, Airtricity, is the third largest supplier of electricity in the market. It currently supplies approximately 28,000 businesses with green electricity. The bulk of our authorisations and licences are issued for green electricity. Since its establishment, the commission has authorised the provision of 320 megawatts of wind energy and issued licences to generate to 275 megawatts of wind energy.

The commission is mindful of renewables in the design of the new replacement wholesale market arrangements for electricity, which is the new market that is scheduled to come into effect in February 2006. There are clear benefits for renewables under the new trading arrangements, such as the fact that there is a guaranteed market for their sales, they do not require contracts with all their customers, they get pay capacity which they do not get at present, it will be easy for them to bid into this market and they will not have to balance schedules over the year. The commission was also involved in the grid upgrade development programme for renewables, known as the cluster scheme, which was promoted by the Minister. The commission approved €30 million for that in 2003. The commission is also interested in the promotion of the full spectrum of renewable technologies. With this in mind, the commission is examining the potential for promoting new technologies, such as tidal and wave energy, through the establishment of a special research and development tariff.

I would like to discuss the present moratorium on wind farm connections to the electricity networks. I have agreed to this moratorium based on the advice of ESB National Grid, which is the operator of the transmission system. Operators of electricity grids are conservative by nature, which is right, and they will not countenance anything that might jeopardise the integrity of the system. We have seen a number of system blackouts around the world and in Europe in the past year and most of those were triggered by network problems. It has advised me that the number of megawatts which potentially could be connected to the system could impact on its stability. I have to take full account of that advice and could not lightly discount it.

All offers made to potential generators to connect to the system are on the basis that the stations meet the requirements of the grid code, which I will describe in a few minutes. None of the proposed wind farms meets these requirements. Up to now what has happened is that developers have applied to the commission for derogations from the code and generally we have agreed to those.

The code is a technical document containing the rules governing the operation, development and use of the transmission system. They are the rules of the road for the transmission system, comprising approximately ten volumes which set out all these conditions. The main provisions that wind farms struggle to comply with are known as fault ride through, to which I will refer briefly, voltage and frequency, among others things. I will mention fault ride through only.

Fault ride through deals with the reaction of power stations to faults, which are often caused by lightning on the transmission system. If we get a lightening strike on the transmission system, there is a voltage dip and wind farms shut down immediately, whereas we want them to stay connected to the system and continue to operate, as conventional power stations do. In that way, electricity continues to be supplied and there are no black outs or load shedding. That is one of the particular characteristics of wind farms, which will have to be dealt with.

At present, there are approximately 166 MW of wind on the system. Between new signed connection agreements and live offers, however, there are over 600 additional MW, which, if all were built, would bring the total to 775 MW on the system. There are 422 MW of further applications in process, which would bring the total to 1,200 MW. At present on the island only about 3% of installed capacity is wind. With the extra offers now available this could rise to 10%, if all the people who have made offers are connected, and would reach over 16% if all the potential projects outlined were connected.

This potential contracted percentage is higher than in all other European countries, except Denmark. People keep quoting the Danish example but Denmark is fully interconnected both with the UCTE System - that is, the wider European mainland network system with 550,000 MW - and with the Nordel system, including Norway, Sweden and Finland, which has 90,000 MW. The Nordel capacity is over 4,500 MW of potential interconnection.

The island of Ireland has at present about 7,000 MW of installed capacity with very limited interconnection. The only interconnection on the island is one interconnector of 400 MW to Scotland, so our system is very small and the reliability of the power system depends on generators contributing to this.

Wind has specific technical characteristics: it is intermittent and cannot be controlled. There will be periods when there is no wind and, hence, no production from the wind farms. That requires backup generation to be on stand by. To put it in context, yesterday morning, for example, wind was contributing less than 20 MW out of a demand for almost 4,000 MW. On the other hand, sudden surges of wind can also create problems because they are difficult to control.

ESB national grid has stated that the reasons for the moratorium are system reliability and stability issues, which relate to maintaining the supply-demand balance following faults, the technical nature of wind turbines and the dynamic stability of the system. It is worth noting that ESB National Grid has also advised that the moratorium has nothing to do with grid capacity issues. It does not relate to the investment programme that has been undertaken. There is plenty of space and all these stations can be hooked up to the grid and reinforcements can be built to take the power. It concerns the actual operation of the system, not the capacity, so the grid capital investment programme that has been undertaken has nothing whatsoever to do with this moratorium.

On 3 December 2003, ESB National Grid wrote to me and requested an interim pause on wind connections to the end of the year. The commission expressed its concern that any future remedial action must be necessary and proportionate to the threat facing system reliability by the scale of wind connections. In keeping with our policy of openness and transparency the commission requested the national grid to host a public forum to outline the issues. That meeting was held on 17 December 2003 and was attended by a large number of interested parties. In addition, the commission held a public consultation process on the pause. Some 20 submissions were received and have been published on our website. On 19 December, ESB National Grid wrote to me again requesting an extension of the pause for a further three months. The commission sanctioned this subject to a number of agreed actions taking place during this period, which is the work that is currently in progress.

We have secured an accelerated programme for the grid code review for wind. While that is being prepared, there is a representative committee that sits on that panel. The ESB National Grid has agreed to prepare this for our approval by 9 April, with some interim arrangements in between. We have also committed ourselves to undertaking a survey into wind connections agreed to date, in order to assess projected timeframes and potential system impacts.

We have requested the national grid to produce a detailed programme and timetable for the modelling of wind generation plant and the impact of greater penetration of wind on the transmission system. We have also asked the national grid to submit a detailed work plan on the programme of work for the next three months, which we will publish. We are strongly committed to actively monitoring progress and ensuring timelines are respected.

In addition, we have established a representative working group containing both the transmission and the distribution system operators, Sustainable Energy Ireland, the Irish Wind Energy Association and Meitheal na Gaoithe, to monitor progress. That group has had its first meeting, which was chaired by Mr. Cagney.

Within a few months we will have reached a position where long-term decisions can be made concerning wind. It is essential that we continue to have reliable, high quality electricity to supply our economy and consumers, having due regard, as ever, for the environment.

Chairman

Thank you very much, Mr. Reeves. I will now invite questions from members of the committee.

Deputy Upton

I thank the commissioner, Mr. Reeves, and Mr. Cagney for coming in to make the presentation to the committee. This is clearly an area in which we are all very interested. It includes green energy and renewable energy, which is welcome. I have a couple of questions for clarification. It seems to me that the reasons for not being able to expand or allow more people into the system at the moment are basically technical. As regards those who are already within the system - Airtricity seems to be the main player - what commitments have they given that they can overcome the technical requirements that must be in place as part of the process? I know this is a technical area and I may have misunderstood the requirements but it seems to me that faults may arise.

As Mr. Reeves said, wind is not something we can guarantee every day, so it will be variable. Do all the existing wind farms meet the necessary requirements? What is the basis of the derogations that have been given to those already within the system?

Senator Coonan

I also welcome the commissioner and Mr. Cagney. We are discussing a topical subject, which will no doubt be very important in the future. A number of points have been brought to my attention concerning this matter. Many farmers are now turning to wind farming projects as an alternative source of income. They have invested considerable funds, have gone through the planning process and have developed infrastructure only to discover that they cannot get connected to the system and must wait to do so. Ordinary people find this hard to swallow because we have heard warnings from the ESB that there are likely to be occasional power cuts or blackouts due to a lack of electricity.

Wind power is a green and renewable source of energy, in which people are ready and willing to invest. Mr. Reeves said it would take some months before they are ready to go ahead, which is disappointing. It looks as if somebody has fallen seriously behind in this.

I would like to know if money that was allocated under the national development plan for upgrading the ESB has been spent. If not, could it not be spent on developing the infrastructure to link the wind farms to the national grid? It also called for greater co-operation between the ESB, Airtricity or whoever is involved in renewable energy production through wind farms and the county councils. The councils have their own specific areas of responsibility, but at the moment it appears as though some of these companies embark on courses of what I would call a provocative nature. If they do not want to connect to the wind farm they will use every excuse, like building the line near houses, causing dissent among the public, looking for people to object and so on. There are serious concerns among the public as to how this is being managed. Perhaps our guests will address some of those issues.

Senator Callanan

I raised this issue at a recent meeting, and I congratulate you, Chairman, and our clerk for inviting the witnesses in on our behalf. I am pleased they have come. I am fully cognisant of the fact that this committee does not exactly deal with this area, but I sought this meeting in order to understand why the regulator saw fit to agree with the ESB. As has been mentioned already, we should look at alternatives to land use in the post-Fischler era, and income for rural people.

This is one area that has grown rapidly in the minds and, indeed, the pockets of the farming community and landowners. They have invested substantial sums of money in getting planning permission and EIS reports and doing all the things required, and now they find themselves in limbo. The witnesses bring some clarification, and I thank them for that, but I have some difficulty in understanding the position of the ESB or that of the commissioner.

We know that since 1999 and before, it has been Government policy that we should go rapidly down the road of renewable green energy. What has the ESB been doing since then? What has the regulator been doing since it came into being to follow this route? These are pertinent questions. I know the commissioner may not be able to answer for the ESB but he can certainly answer for himself.

I have in front of me a copy of the report of Mr. O'Donnell, an American energy executive. He comments very succinctly, "One would expect the national grid to have performed substantial generation planning studies prior to the issuance and acceptance of the alternative energy requirement proposals now being built, and the issues involving technical performance and standards should have surfaced well before planning and regulatory permissions were granted in the first place."

The chairman of the IFA, in his commentary, deals in particular with the point I made earlier, and which other speakers have mentioned, about alternative land use and green energy requirements. We note the Government's position and we see where we are in regard to the Kyoto requirements. We are way over the limits, and this was seen as an ideal opportunity to reduce our emissions into the atmosphere. Why are we not up to speed?

I am aware, for example, of the Government report conducted by Scottish consultants which advocated following the Danish and German policies on wind power. I know the commissioner has dealt with this but it is not entirely acceptable. I am sorry to say that, and I take no pleasure in noting from the report that in Denmark, 20% of electricity comes from wind power while in some German states the figure is as high as 56%. The report concluded that Ireland was in a unique position in Europe to promote the growth of wind energy and that at least 2000 megawatts of wind energy could be added to the electricity system, the equivalent of several large gas- or coal-fired stations.

In essence, what these reports are saying——

Chairman

The committee will suspend due to the sounding of the fire alarm.

Sitting suspended at 3.36 p.m. and resumed at 3.45 p.m.

Senator Callanan

Irish landowners and others have responded to the Government requirement. I am talking primarily about the landowners and farmers of Ireland who view this as an opportunity for alternative income and to assist Ireland's needs.

Page 2 of the document deals with biofuel, geothermal fuel cells, tidal, solar and wave energy. Is that aspirational or will it be achieved? It is important we get an answer to that question. I do not accept the points made in the final page of the document - I dealt with the points made about Denmark and Germany. We are an island nation in the best position to achieve this, as recognised by all reports in this regard. If it is not achievable within the technical field, it is the fault of the commission and ESB.

On agreed actions with ESB, are the conclusions outlined in the document aspirational? Will they be concluded by April 2004? If not, we will have to ask the delegation to come before this committee again.

Deputy Wilkinson

I, too, welcome Mr. Reeves and Mr. Cagney and thank them for their presentation. Senator Callanan has covered much of the ground I wanted to go over.

Is the commission casting a doubt over the future of wind-farms or is it confident the problems now encountered can be rectified? Are new applicants currently on hold as a result of these problems? What percentage of power, assuming the problems will be rectified, does the commission envisage will come from wind power in the future?

Chairman

Our next speaker is Deputy Fiona O'Malley whom I welcome to this, her first meeting of this committee. It is nice to have a lovely woman as a member of the committee.

Deputy F. O’Malley

The Chair is trying to disarm me with his charm.

I am grateful to be here and to have the opportunity to put questions to the delegation. While the commission's report highlights many issues, I am disappointed at a glaring omission - the establishment of Eirgrid. Undoubtedly the delegation is familiar with Statutory Instrument 328 on the development of Eirgrid. Perhaps the delegation will take this opportunity to provide the committee with a report on the establishment, implementation and workings of Eirgrid and the current position in that regard. I am sure the commission is aware of its role in this area.

The Commission on Energy Regulation is charged, though not exclusively, with responsibility for overseeing renewable energy. This moratorium, in terms of public opinion, could be viewed as its way of preventing renewable energy in this country. That is a bad perception to have to deal with. The new grid code mentioned in the conclusions appears to be a grid code review for wind. Perhaps the commission could clarify if that relates only to wind or does it accept there is a need for a total examination of the grid code?

It can be noted from some of the submissions received that many groups, for example Hibernian Wind, say that no generator of any type ever has been, or is ever likely to be, fully compliant. This is something the commissioner should be aware of before targeting renewable energy, wind in particular, as if it were the only generator not compliant with the grid. It is false to give that impression.

I take issue with ——

Chairman

The Deputy should keep within the remit of today's presentation and not stray if she can help it.

Deputy F. O’Malley

I will keep to what has been said about the amount of wind energy possible in Ireland, the comparisons with Denmark and ESB National Grid advice that the moratorium has nothing to do with grid capacity issues, which I cannot believe. If we have access to a wider grid through interconnectivity, then surely we need have no fear with regard to grid capacity. I am interested in a comment on that situation as we would then be in a similar situation to Denmark. Denmark is the example we should allude to rather than worry about capacity.

Last Monday the Financial Times reported on the problem caused by valves in some storage capacity in a gas field in the North Sea which has had a huge effect on the price of gas and will consequently affect the price of electricity. We are tied into the use of gas at the moment and must try to protect ourselves against the effect of this type of problem. Can Mr. Reeves guarantee the Irish consumer will not be exposed to vast price increases?

Are we currently generating 166 MW of wind energy? Mr. Reeves mentioned some figures today and capacity percentages built into the agreements already made. I am sure he recognises that these agreements will not actually deliver that capacity. Is it not alarmist to continue to cite them when everybody knows their delivery is in question?

Deputy Blaney

It is hard to believe that when the country is crying out for more power, farmers willing to diversify, give up traditional farming and start wind farms were turned down by the national grid, particularly in Donegal where there seems to be no more room for wind farms. We have failed these people.

They have been failed too by those involved in the planning of the industry. While this may not have been part of the remit of these people presenting to the committee, it is an issue which should be considered by Government. We should have Government guidelines for a policy on wind farming. It is ludicrous that local authorities will not grant planning permission for wind farms unless they are almost totally hidden from view. In some countries wind farms are pushed out into the sea. Both the national grid and the planning position are issues which must be addressed as soon as possible.

The British authorities have put forward a proposal to construct a wind farm off Inishowen Head, the Tunes Plateau proposal. Is the commission for or against that proposal or what dealings has it had with the British authorities in regard to it?

Deputy Timmins

I thank the commissioner for his presentation. The general public perception is that wind energy is good, clean and green and that therefore it is the type of energy we require. In the past year we have realised how vulnerable the supply of power and energy can be, not just in Ireland but across Europe. We saw what happened in the United States when the inadequacies of the grid caused a blackout. Brazil and many Asian countries have also had difficulties. We have taken electricity for granted just as we took water for granted for a long time.

As the commissioner pointed out, it is disappointing to discover that many wind farms may not meet the requirement of the grid code. We have been hypocritical to some degree with regard to wind energy. We do not have national or Government directives setting out a policy. Applications are made through local authorities. However, except for a few local authorities which have amended their plans - Cork being one - when people make applications to build wind farms they are turned down on the basis that they are interfering with scenic amenities. People who have seen these farms on the Continent, in Cyprus, or even the one in Carnsore in Wexford, know they do not impinge negatively upon the landscape.

Leaving aside the issue of meeting the requirement of the grid code, we must adopt a more proactive and user friendly approach to wind farms. It costs money for an individual to prepare an application for a wind farm, whether he is a farmer or an entrepreneur. What should we say to people in the process of making planning applications for wind farms? Should we tell them to hold back because they are wasting their money making an application? Is there any hope for them? The commissioner's submission suggested there might be a decision made by mid-April. Should we tell them that due to the technical difficulties with the intermittent supply from wind farms, they appear to be detrimental to the national grid and not the way to go forward? Should we advise people to wait until mid April to make their applications? What future is there for wind farms? This is the most important question for many people in rural areas who see wind farming as a means to diversify.

I thank the commission for its presentation, particularly the up-to-date information on the national grid.

Deputy Sargent

I am sorry I was not here to hear the commissioner's presentation but I have read it. This is an issue close to my heart. There is potential in the agricultural sector to meet a considerable amount of our energy needs through wind farming. As imports of fossil fuels become more difficult, we will no longer have a choice but will have to face up to a decision to produce wind energy.

I understand the regulator has a report indicating it would be possible to have 1,000 MW of renewable energy, wind energy in particular, go into the grid without any alteration. How much wind energy is on the grid at the moment?

Mr. Reeves

It is only 166 MW at the moment.

Deputy Sargent

The margin between 166 MW and 1,000 MW is fairly wide. In the commissioner's opinion, what overriding factor in the report produced for the commission indicates that 1,000 MW is no longer an acceptable figure? We need to get to the bottom of this issue because it has paralysed much of the initiative in the wind energy sector. This is tragic at a time when we are trying to inspire and facilitate initiative.

The commissioner mentioned that Airtricity is the third largest supplier on the market. It is my understanding that Airtricity does not become involved in the AER programmes, yet much of the presentation is focused on the hopes of AER. Ultimately the evidence shows more that AER has not been the success the Government tries to portray. A considerable number of announcements have been made about licensing of wind farms and so forth, but in many cases they have not come to fruition.

The lessons should be learned. The 1990 figures showed Germany as having 3,500 MW and Denmark at 1,560 MW. Ireland's meagre 166 MW is an absolute disgrace when one examines the potential and the wind maps of Europe. These maps show deep colours of excellent wind in Ireland. The Germans and the Danes are probably green with envy when they look at Ireland and see our potential. I cannot imagine what they think when they read about what has happened here.

The import costs for fossil fuels should be a focus of our discussions. I understand that the costs are approximately €7 billion. The commissioner may know the figure.

Mr. Reeves

I do not know what it is.

Deputy Sargent

It is considerable. By coincidence I read in the business section of the Irish Independentof 17 December that Ireland may face fines of €7 billion, never mind the import costs of paying the bills for the energy from the Middle East or Russia. The fines are for failure to meet our energy targets. Those targets are not just a result of Kyoto but also part of our obligations to the European policy on the use of renewable energy.

Ireland is at approximately 3% wind energy use. I am asking for clarification because my figures might not be as up to date as the commissioner's. I ask the commissioner for his view on whether he sees Ireland meeting its obligation of a target of wind energy of 13.2% by 2010, a target of at least renewable resources by 2010. Unless that will all come from incinerators, I wonder whether the commissioner can say whether wind will be the greater portion of that.

To focus on agriculture, this committee has an important job of work to do in realising the potential of agriculture, at least in terms of policy, as a key energy supplier. We have become habitually conditioned to think of agriculture as a food producing sector but in the future agriculture will become as much an energy producing sector, a building materials producing sector, as a food producing sector. It is appropriate the Joint Committee on Agriculture and Food is dealing with an issue of energy, given that the future requires the agricultural sector to be at the forefront of meeting our energy requirements, whether that be by way of diesel, ethanol, biomass or wind. There could also be issues to do with the sea such as wave energy which go beyond the farm gate. I am asking the commissioner to address the potential of the agriculture sector to provide the energy needs of the country.

There will be a peak of global oil production before 2010 and inevitable oil shocks following such a peak in production. The UK saw a peak in gas production in 2000 and in 1970 there was an peak in oil production in the United States. We cannot continue to assume that there will be the same levels of energy available from fossil fuels as are taken for granted today. Ireland is slower in coming to terms with the challenges in that regard.

Energy conservation is a critical part of the overall picture and in which this country scores very badly against international comparisons. Will the commissioner explain his decision, based on the fact that he was given a report indicating that 1,000 MW would be possible from wind energy sources without any alteration to the grid? Has he considered the agricultural sector in his thinking on the provision of energy needs in the future?

Deputy Ferris

I apologise for my late arrival as I was in the House and I missed the presentation. I have some observations on the economic benefits of wind farms to certain parts of rural Ireland, and in particular within the agricultural sector. It contributes to the economy of the communities as well as contributing to green, clean energy supply.

The commissioner mentioned that he had in mind an examination of the potential for promoting new technologies such as tidal and wave energy. Will he explain how far developed is his study of this subject? Does this type of energy, particularly as it may not be affected by acts of nature such as lightening which has a habit of tripping the wind energy connection, offer prospects for the future? How does it compare to the other types of natural clean energy available?

Mr. Reeves

There are many issues there. I will try to recollect all the issues raised by the members and attempt to deal with them.

Deputy Upton asked for clarification as to the existing wind farms on the system. There are only two wind farms connected to the transmission system which is the high voltage system; the rest are connected to the distribution system. None of the current wind farms meets the requirements of the distribution or grid code. However, there are so few of these in existence that it does not matter. It can be absorbed in the system with the size of it at present. It is only when one gets to the larger numbers that these imperfections begin to be noticed. It is not the building of the grid but rather the cumulative effect of a large amount of wind behaving as a unit in the single machine of the network that causes the perturbations on the system. It is not any individual unit in itself.

A question was asked about the grid code. The current code encompasses everything. The one being reviewed will have a chapter on wind which will probably have conditions that are not quite as strenuous as might be required for the larger conventional power stations. Ultimately there will be a central grid code with chapters for gas-fired stations, coal stations and all the rest including wind and other renewable energy. There will be specific requirements for each one of those.

It is true that none of the existing power stations meets all the requirements of the grid code but some of the items they miss are absolutely minor. By far the bulk of the power stations, 90% or more, were there before I appeared on the scene and before the grid code was written. This is a forward-looking code for new stations coming on the system. I acknowledge that this came abruptly to me and everybody else. We are certainly sorry that happened. However the advice I got from ESB National Grid - I also took some independent advice and looked at our obligations under the Act - was that we really had no choice but to agree with this.

It would be rather foolhardy of us not to acknowledge there was an issue here. We recognise that people are investing and have put money on this. That is why we want to deal with it as quickly as we possibly can and that is why we put the pressure on. The work had already commenced on a wind grid code prior to this, but it was moving along at a more relaxed pace. We have now speeded it up and hope to get through it in that period of time.

While this is the Oireachtas Joint Committee on Agriculture and Food and Senator Callanan and others have mentioned farming matters, if I were to be very precise about my duties under the Act, there is mention of rural customers purchasing electricity, but there is no mention of farmers as producers. My duties relate to regulating the sector and trying to see the electricity produced is satisfactory for customers. I have no specific responsibilities for agriculture.

I wish to clarify my role as opposed to Government policy. It is very clear that my office is an executive office which can advise the Minister. There are powers in the Act allowing me to advise the Minister either informally or formally. I must recognise that ultimately the Minister makes the policy, not myself. I execute the policy that he makes. He is clear on that. Within that policy there are lots of things I can do.

I wish to touch on the last intervention on tidal and wave power. The Act requires me to encourage renewables, but nowhere does it specify what this means, nor does the Act specify there will be money available to me to encourage renewables, so we must find some means for doing it. Members should not forget that Sustainable Energy Ireland has a specific remit and money for encouraging research and development in and demonstration of all these types of projects, and it works on that basis.

I will outline what I propose to do with what is now known as ocean energy. I have already met with the Marine Institute. We will meet with the Department and SEI. We are forming a group to see how we can move this forward. At present tidal streams, ocean energy and wave energy are expensive. However, there is enormous potential. More work has been done in Northern Ireland than here. We have arranged a meeting with an academic in Northern Ireland to find out what has been done there. Tidal energy has great potential in that it is forecastable. We know that every 12 hours and 20 minutes the tide will come in again, whereas with wind this is not possible. I have tried to broaden the issue of renewable energy to more than wind. While a lot of these are currently expensive, there is a role for all of them in the future.

There was mention earlier of fines, which may arise under the EU directive on greenhouse gases or under the Kyoto Protocol. The value of renewables will be determined by the level of fines and the cost of the carbon that can be avoided by having renewable energies. At the moment renewable energy is still more expensive, but as time goes by renewable energy will become much more economical because the conventional power stations will have to buy carbon credits and it is likely they will not get all they need. If they get 80% of what they need they will have to buy the rest, which will increase the price for conventional stations which will then be available for those involved in renewable energy to make more profit and make these more economical.

As time goes by the renewable sources will come into their own much more as the costs of conventional electricity go up, whatever about the supply and availability of the fuels. Even with the fuels being available the price will go up because they will have to pay the full external cost of the environmental damage they are doing. This will start next January when this EU directive comes into full force and effect.

I am very limited in what I can do in renewables, as I indicated in my paper. I have always leaned in favour of renewables. When I worked at the Department of Public Enterprise, I proposed that initially the green market be 100% open and it has been a resounding success. While Airtricity has been the prime mover in this, many more organisations are now involved. Airtricity has been taking part for some time in the AER competition.

Not all the successful AER projects which have been offered contracts will come to fruition. The previous history has been rather chequered. This time it is more tightly organised and there were many obligations such as planning permission before being able to apply. The likelihood of these happening is increased.

People have referred to what is either called my report or a Government report by a Scottish consultancy with some Irish input from UCC and from here in Dublin. The company is called Garrad Hassan. That study was commissioned by both the regulator in Northern Ireland and myself to try to get some feel for what this network could hold on the system. It assumed a figure for the entire island, which is about 800 megawatts. It also assumes that these wind farms and windmills could meet the appropriate green code requirements and would not cause any dynamic instability on the system. In that circumstance the consultants said with the stations reasonably spread around the country we could probably accommodate about 800 North and South. I appreciate that the Deputy was not here. However he will see that at present in this part of the island we have almost 1,300 applications. It would be like putting all these people on a boat - we would either topple over one side or sink. There is a limit to what we can handle.

It would not be a problem to put as much wind energy as one would like on the system. However, what would we do with it? If it all came on at once, it would not be good for controlling voltage. For this modern economy, high tech industries such as Intel require high quality electricity. While members may not have heard of high quality electricity, it exists. In the home or in this room people do not notice it because if the voltage or the frequency dips slightly it is not noticeable. However it can certainly be noticed in a high tech industry. This is vitally important. Unfortunately the frequency and voltage control at wind farms is not as good as it might be and they need support on the system.

All this wind energy can be introduced, but we would have a less reliable supply of electricity. Deputy Blaney mentioned the amount of wind in Donegal. Donegal probably has its full capacity of wind farms. If all the wind farms in Donegal were producing electricity at one time, I understand they would produce approximately 150% of the electricity requirement in Donegal and the surplus would be exported to the rest of the country. This is the case in Denmark and Germany. Donegal is a small part of the system here and it can deal with it because it can export it. Denmark can do the same. It is going into a large sink of 500,000 megawatts. It is only when a certain stage is reached that it is necessary to take account of the perturbations on the system.

As time goes by I am convinced we will be able to deal with these matters. We started with one windmill in Inis Oírr 20 years ago. One should look at where we are now and how the technology has improved. I have no doubt that the control systems will be in place. The report states it is possible to have systems that can curtail windmills so that if there is too much wind, the windmills can be shut down. Generally it is not possible to switch them on as this depends on whether the wind is blowing. However, it is possible to shut them down. Control systems and information systems need to be in place to do that. That technology will probably be there and those responsible for ESB National Grid will also take a look at that for us.

The driver here has been the advice we received on a system wide basis. It has nothing to do with any single power station. It is to do with the cumulative power stations on the system as to their impact and the modelling of that and how this might happen. I will give one example of a situation that was illustrated by ESB National Grid at the open forum we had in Tarbert in Deputy Ferris's constituency. If we had all the proposed wind farms, most of which are on the west coast, connected to the system and we had a lightening strike at Tarbert, the station at Tarbert would continue working but we would shed 560 megawatts of wind energy immediately. One would then be left with the problem of how to deal with that. The problem is not the individual. This is where one has what is termed "fault ride through". If there is a fault in the system, the power station can ride through it. Wind cannot do that.

Ironically, it was a major contibutor to the collapse in Italy earlier this summer. When there was a fault on the wires in Switzerland which fed into Italy, 1,700 MW of wind tripped and caused a cascade. We must have safety and control systems. We can probably handle somewhere of the order of 800 MW. That remains for the grid to advise me over the next few months. I have not put a moratorium on this simply because I want to wait while I keep to myself what I plan to do. I want to see what is the right thing to do. Committee members will probably conclude that my paper is very abrupt. I thought that myself. However, we do not yet have an answer. One could continue the moratorium and suspend wind energy, let it all on or find a middle way. It is our expectation that we will have to find a solution which is somewhere in between.

We must broaden our focus on renewable energy. While we focus constantly on wind, which has been developed very successfully in many places and has achieved very good prices, we have around us the oceans, agriculture, biomass and farm waste like slurry which can produce bio-gases. Some creative farmers have digestors and are using them to reheat their units. There is plenty of potential. The economics will improve enormously as the Kyoto Protocols begin to bite. They will come into their own far more than they have to date. There is scope for small units. I wish the committee to know that we are not anti-anything. We are pro-safety, stability, security and the economy. We are pro-renewables and wind to the maximum extent that is safe and secure on the system.

I am sure I have forgotten many of the questions members put. Deputy Fiona O'Malley asked about Eirgrid, which I am somewhat reluctant to discuss. Eirgrid was established in 2000 under Statutory Instrument 445 to which there have been various amendments and additions since. Many things were supposed to happen three years ago. I will not say that Mr. Cahill has gone grey from it, but the difficulties have been great. It is time to look at it again.

It is very clear that the transmission system operator and the distrbution system operator must be separate legal entities from the vertically integrated utility, according to the new EU directive.

Deputy F. O’Malley

Is there any progress on that? We need specifics.

Chairman

The Deputy can come back in at the end.

Mr. Reeves

The deadline for implementing the EU directive on electricity and gas is 1 July this year. This should be in place by then. That is an important issue.

People have said from time to time that an interconnector to the UK would help. However, that would still only involve 500 MW. The UK has something of the order of 75,000 MW on its system and 500 MW would be neither here nor there. It is fine for us, but it will not deal with the instability problem. One would need a good deal more.

UK gas was mentioned. Generally, the price of gas in Ireland is dictated by what is known as "the national balancing point gas price" in Britain. This changes every day and even within the day, as does the spot price for electricity. In our market, the spot price for electricity changes every half hour. It is a great deal more expensive on an evening like this than it would be on a summer night. The gas price changes also.

Most new power stations will be powered by gases as they are the cleanest and cheapest of the fossil fuels. Gases produce electricity at the highest efficiency. There is a combined cycle. Gas is burned to turn an engine, which is like that of a jet, and the exhaust is used to raise steam which turns another engine. The efficiency is of the order of 56% whereas the conventional power station has an efficiency of 35% or 36%.

Gas will be part of our future for quite some time. While we are reliant to a large extent on UK gas, we still have the Seven Heads field at Kinsale and we hope the Corrib gas field problems can be solved to allow it to come on stream in due course. The amount of gas to put on the system is also a Government issue. One will probably want a spread of fuels, which makes the matter important.

Questions were asked about the Inishowen wind farm but I will be absolutely silent and offer no comment on what is done outside my area of jurisdiction. I will also say nothing about planning guidelines, although it is my understanding that there has been positive movement forward in this area over time. Guidelines have been issued through the Department of the Environment, Heritage and Local Government and Sustainable Energy Ireland was involved in their composition. I do not get involved in this until after that has been done. There is no central planning of wind energy or power stations. There is central planning on the networks but not of power stations. If an individual wishes to construct a wind farm or a small hydro-station, he or she makes the decision as he or she would in terms of any other investment. When the decision has been made, the individual approaches me to obtain permission to connect to and operate on the system.

We have magnificent wind resources here, as do west Scotland and Norway. While we must harness it to the best extent we can, we must consider EU directives. Deputy Sargent spoke of the EU directive which requires us to generate 13.2% of our electricity from renewable sources by 2010. The renewable source does not necessarily have to be wind. Even if we return to the question of the wind moratorium and place 800 MW on the system, we will be at over 10% within a few years. We are well on the way to getting there.

Peat is an interesting fuel. When Finland joined the EU, it argued that peat was a renewable fuel because it lays down more biomass per acre each year than woodland. While peat grows faster than trees, Finland failed because the turnaround time for trees is 40 years, but for bogs it is 500 years.

Deputy Sargent

Fianna Fáil could be in government that long.

Chairman

Continue, please, Mr. Reeves.

Mr. Reeves

Deputy Sargent also mentioned incinerators. If one looks at the Act, the burning of waste is renewable energy or an alternative energy form. If someone wishes to have an incinerator, that is fine, subject to all the laws of the land. If he or she wishes to generate electricity from it, he or she must obtain a licence from us and an authorisation to construct. Incinerators will not appear on my horizon until they apply to me, though it is quite likely that people will wish to generate electricity from them.

Deputy Ferris asked about tidal and wave energy. We are at the very early stages with that. Recognising that we do not wish to tread on the toes of agencies already operating in this area, including Sustainable Energy Ireland, we are examining a way to introduce a research and development tariff. Small demonstration projects could be put on the system, the electricity sold into the new market. We will get the prices for them and make some accommodation for them in respect of the charges we have in place for use of the system. In other words, they will get on the system for free. The process is at the earliest stages as wave and tidal energy production is in its infancy. It has significant long-term potential, however, and is certainly worth examining. I hope I have dealt with most of the issues and apologise if I have missed something.

Mr. Denis Cagney

I will add two specific points. Grid code derogations were described a couple of times as not being unique to green generators and, in fairness to green generators, we should acknowledge this. For example, two of the largest requests for derogations on our desks are from the new combined cycle plants operated by Synergen and Viridian. This reflects the difficulties with compliance with the grid code such plants encounter in the early years of operation.

One of the factors which triggered the current grid code for wind was specific requests for derogations made by one of the wind generators in Derrybrien. When these were given, it emerged that some of the issues arising in that case were not unique to the wind generator in question but generic to the wind generation sector. By its nature, the grid code is a vital and, to some extent, evolving document. It is currently being adapted to the unique requirements of wind generators. The industry is co-operating in this regard and we are reasonably optimistic that a grid code suitable for wind will emerge in March or April. We have clearly indicated that once this is in place, all wind generators will be expected to comply with it.

Deputy Fiona O'Malley asked how realistic is the figure for the number of megawatts under offer. It may be helpful to be clear about the figures as Deputy Sargent referred to a figure of 160 MW. The amount of wind currently connected to the system is 166 MW. Applications to supply a further 530 MW to 535 MW have been received and the applicants have accepted offers, while applicants to supply a further 75 MW have received offers which they have not yet accepted. It has been argued by some that it is unrealistic to expect this level of generation to be signed up and connected in the next year or two and we have employed a consultant to examine the issue in detail. To be fair to ESB National Grid, it has fully co-operated on this matter. The consultant will advise us on whether it is realistic to expect 700 MW to 775 MW to be connected to the system within two years. To the extent that this advice is to the effect that some of these generators will not be connected for a variety of reasons, other things being equal, it would ease the pressure on the moratorium.

Having said that, several other wind farms have written to us in recent weeks stating that delays caused by ESB National Grid or the distribution system resulted in their nor receiving offers before the moratorium was invoked. We are examining these matters and if the wind farm operators are found to have a legitimate case, we will determine that, notwithstanding the moratorium, the wind farms in question should be deemed to have received an offer.

Mr. Reeves

With the Chairman's permission, I will clarify Senator Callanan's comments on where people build their connections and planning difficulties. Wind farms can build their own connections at transmission level, though not yet at distribution level, which we hope and expect will become possible. If they do not like the offer they have received from the ESB or the route it has determined, they can proceed themselves and I understand Airtricity has already done so. They can also refer a dispute to us for resolution, which has already been done.

Chairman

We will take a couple of brief supplementary questions because we must conclude by 5 p.m.

Senator Callanan

I do not want to delay proceedings and thank Mr. Reeves for clarity. I did not, however, receive answers to my questions concerning the first five aspirations outlined in the conclusion of his presentation and I ask him to clarify the second of them. While I accept that he does not represent farming, he should note that without land use and the willingness of the agricultural sector to play its role, there will be no wind energy. This form of energy is provided on land owned by individuals without whose co-operation the objectives referred to will not be achieved. As Deputy Sargent pointed out, the agricultural sector will have a considerable role in the future.

I am concerned about the amount of research and development being carried out in wind energy relative to wave energy. Are these forms of energy being suppressed by the oil moguls, those holding the gas energy licences and so forth? Oil and gas are finite resources which will run in the next 30 to 40 years. What research and development is being carried out? This is the reason I asked - perhaps rather crudely - what the Commission for Energy Regulation and the ESB have been doing because the latter is totally dependent on coal and gas. What is being done?

Deputy F. O’Malley

I have one comment to make and I also seek clarification on an issue. I am disappointed at the information provided to us about Eirgrid. This meeting is an opportunity for the Commission for Energy Regulation to enlighten the Oireachtas on what is happening in this context, especially as we are approaching a deadline. One should never seek to meet a deadline at the last minute. I am interested in the reason for the significant delay in getting Eirgrid operational. Perhaps the committee will have to obtain further information by letter.

It appears grid code compliance will be variable and will apply differently for wind energy and gas turbines. Will it be a definitive code? I am not sure if the review of the code will be total and whether compliance will have be measured in terms of a factor of, for example, 5%. Will the grid code be applied universally? This was not made clear in the earlier explanation.

Deputy Sargent

I thank Mr. Reeves for his response. As regards the interconnector to which he referred, he stated its limit was 800 MW. He also stated that Denmark and Germany were able to use a larger energy pool and could spill, if that is the correct word, wind energy into other parts of the Continent. Given our significant wind resource, do we need to increase our technical and financial interconnectedness with the wider European Union? Would this not be worthwhile investment and what would be the technical requirements to do this?

Mr. Reeves stated, as I suspected he would, that Sustainable Energy Ireland has a separate remit. Given the synergies between its interest in meeting its objectives and that of the Commission for Energy Regulation, what level of co-operation takes place between the two offices? Mr. Reeves stated that Sustainable Energy Ireland receives funding but it does not even approach the amount needed to conduct research into wave and tidal energy and other forms of power, particularly when one considers the amount of research being undertaken worldwide on fossil fuel and nuclear technologies. Is the commission aware of the enormous need in this regard?

The tone of a report on this issue by Amárach Consulting borders on desperation to the point that it states we may be forced to lease a nuclear power plant in Britain in order to import its energy. This reminds me of the saying, "An Irish solution to an Irish problem", and is not unlike the approach to abortion, namely, that it is all right in England, but not here. I wonder whether the commission is cognisant of that type of crisis and whether it is advising the Minister accordingly or waiting for him to advise it.

Mr. Reeves

My remit is as a regulator rather than as a policy maker or research and development person. The ESB can speak for itself. The ESB has had no new power station for quite some time for various policy reasons quite separate from this. It is still reliant on fossil fuels. It is the counter party to all those AER contracts. It has contracted much of the renewable energy and has been agreeable to doing so.

My role is not in essence to promote anything but to exercise my powers to ensure that I lean in a certain direction. The remit for Sustainable Energy Ireland is the promotion of research and development, and there are units around the country in various colleges, for example, Cork, which are focusing on such matters. I cannot answer for the ESB, and the member should ask it.

However, we certainly have a very close working relationship with SEI. It is on the committee that we mention under point 5. My team meets it frequently to discuss the various issues related to that, and we have a very good working relationship.

I may ask Mr. Cagney to talk a little more about Eirgrid, the ESB National Grid.

Deputy F. O’Malley

I am aware of the difference between them. That is not what I am looking for.

Mr. Reeves

The only piece of the east-west interconnection that we have currently is from Belfast to Scotland. That is 400 MW. We have a proposal to build one ourselves. That is currently being investigated. We conducted a study last year. DKM Economic Consultants and some others examined it for us and reckoned that it would be worthwhile for the country to build a second interconnector. On the UK side, the National Grid Company is semi-indifferent to it. Ireland, in its context, is small beer. We are moving that forward and are in discussions with the Minister on it.

I will deal with where we have got to with Eirgrid and then let Mr. Cagney develop it a little more. Eirgrid was set up under a statutory instrument just before Christmas 2000 with various functions related to operating the transmission system. That meant the planning of the system. It also meant producing a development plan for the building of the system and dispatching the power stations each day to ensure that the lights stayed on. A board was appointed and a company set up. It also said that ESB would continue to own the network and would continue to extend and maintain it, but that the building and maintenance of the network would be overseen by Eirgrid and that, between ESB and Eirgrid, there would be an agreement called the infrastructure agreement.

That agreement has not yet been signed. We issued an instruction on how it should be done and ended up in the High Court as a result. That delayed it by a considerable period, but it has almost been signed. The next issue is that staff currently in the ESB were supposed to move to Eirgrid under a transfer scheme. That has not happened, and I am not holding my breath. Until that occurs, plans for Eirgrid will not take effect. Mr. Cagney has worked hard, and we have issued a licence to Eirgrid to operate the system. It is sitting there on ice waiting to be activated. These matters are almost intractable now. It is time to re-examine it and perhaps change the remit ever so slightly in the light of the new directive from Brussels.

Mr. Cagney

The TSO licence was formally issued to Eirgrid a few years ago. It is in cold storage or limbo. For Eirgrid to be able to operate the transmission system, it would have to have an infrastructure agreement in place, as well as the resources, including staff, who are dealt with under the transfer scheme. We have powers under the infrastructure agreement and have issued a direction. However, we have little or no power regarding the transfer scheme for staff and resources. We share the frustration of many people in the country at the failure of the Eirgrid/TSO licence to become operational. I will not go into detail, but the frustration exists. The delay has gone on so long that we thought we should suggest a rethink in the public interest, especially in the light of the new directive, which offers various models. We have taken that up with the Minister.

Forgive me if I give rise to confusion. The grid code is a very large document covering a whole range of issues. That will continue to be so. Even over the last few years, wind issues aside, there have been additions and amendments to it. When we speak of a grid code for wind, I should not give the impression that it would be a completely separate document. Wind generators will be expected to comply with the vast bulk of the obligations in the grid code, but for some matters such as frequency control, a certain kind of communications equipment, voltage control and so on, it is recognised that there will have to be special clauses in the grid code dealing with the unique circumstances of wind generators which distinguish them from others. It will be a slightly amended version of the generic wind code, but the wind generators will be expected to comply with everything.

Mr. Reeves

Lest Senator Callanan think that I am avoiding his question, he mentioned agreed action No. 2, the survey into wind connections. We have hired Mr. Liam O'Donnell to do that for us. He has now retired from the ESB and was involved in the AER schemes for many years. He is one of the most expert people around and knows the practical issues in delivering such projects. Mr. McDonnell is due to report in double-quick time. When we see what is going on, we will be able to assess the impact on the system of the number of stations likely to come on stream. It is more than an aspiration, since action has already been taken on it.

Chairman

I thank Mr. Reeves, Mr. Cagney and their colleagues for attending and responding to the questions raised by members. It has been a most informative discussion. Members are more enlightened about the role of the Commission for Energy Regulation and about wind farming.

Is it agreed that we defer the remainder of the agenda until 4 February at 4.15 p.m.? Agreed.

The joint committee adjourned at 4.50 p.m. until 4.15 p.m. on Wednesday, 4 February 2004.