I am pleased to welcome officials from the Department of Communications, Energy and Natural Resources - Mr. Martin Finucane, principal officer; Mr. Eugene Dillon, assistant principal officer; and Mr. Richard Browne, assistant principal officer. I ask Mr. Finucane to begin the presentation.
Scrutiny of EU Proposals.
Mr. Martin Finucane
I thank the Chairman and members for the invitation to assist the committee in its scrutiny of the proposed new EU directive on the promotion of renewable energy. At the European Council meeting held in the spring of 2007 EU Heads of State and Government agreed to transform the European Union into a highly energy efficient economy that emits low levels of greenhouse gases. The Council asked the Commission to develop proposals to achieve a number of objectives. For example, it asked it to aim to deliver a 20% share of all EU energy consumption from renewable sources by 2020 and to reduce by 20% the Union's energy consumption, compared to "business as usual" projections, by the same year. It also asked the Commission to undertake a unilateral commitment to achieve at least a 20% reduction of greenhouse gas emissions by 2020 compared to 1990, together with a further commitment to a 30% reduction in greenhouse gas emissions by 2020 in the event of a global and comprehensive post-2012 agreement and to develop a framework to enable environmentally safe carbon dioxide capture and sequestration for fossil fuel power plants if possible by 2020.
At the end of January 2008, the Commission released its climate change and energy package of implementation measures designed to deliver on these objectives. It contains four proposals. These include a directive on the promotion of the use of renewable energy sources; a proposal for a directive to improve and extend the EU greenhouse gas emission allowance trading system, also known as the EU ETS; a proposal on the effort of member states to reduce their greenhouse gas emissions to meet the community's greenhouse gas emission reduction commitments up to 2020, which is also known as the non-ETS effort sharing; and a proposal for a directive on the geological storage of carbon dioxide, commonly referred to as the CCS directive.
The renewable energy directive puts forward proposals which the Commission consider will result in the share of renewable energy in the EU increasing from its current level of 8.5% to 20% by 2020. It sets out renewable energy targets for each member state which together will ensure the European Union achieves the 20% figure. To date there are separate directives already in place to encourage the promotion of renewable electricity and bio-fuel development. There is no directive in place to encourage renewable heat or cooling. This directive differs in that it is targeted at overall energy usage, so it encompasses the electricity, heating and cooling and transport sectors. Subject to each member state having an overall 10% renewable transport fuel target, it is left to each member state to decide on the overall sectoral mix to achieve their individual national targets.
The directive sets out a target of 16% renewable energy for Ireland for 2020. This compares to the 2005 position of 3.6% of energy from renewable sources. The energy White Paper, Delivering a Sustainable Energy Future, published in March 2007, sets out a number of energy targets. The main targets are as follows: a reduction in energy use of 20% by 2020 on a business as usual calculation; a renewable electricity target of 33% of electricity consumption to come from renewable sources; a heat sector target of 12%; and a target of 10% renewable energy in transport. These targets are broadly in line with achieving an overall renewable energy target of 16% by 2020 as set out in the proposed directive.
The directive sets out a requirement for each member state to introduce a national action plan to show details of how it is planning to achieve its 2020 target. Member states will have to adopt biannual interim targets to monitor progress towards the 2020 target. These interim targets are not linear in nature and are structured to be more challenging in the later years. The Commission proposes to extend the concept of the guarantee of origin to facilitate the development of virtual green electricity trading, that is, trading of certificates which are not related to the sale of the physical electricity. The Commission sees this as a way of encouraging the development of inter-member state trading. This proposal by the commission is perceived by many member states as potentially undermining national support schemes and challenging the ability of individual member states to reach their own targets. This is the area of the directive which is garnering most debate in the Council working group and a number of different proposals have been made to date to clarify the intent of this provision. The directive proposes to give priority access to the grid for renewable electricity projects and priority dispatch for renewable generating plants. This is qualified by higher requirements for system security and continuity of supply.
With regard to bio-fuel development, the proposal seeks to establish a set of criteria to be applied to all bio-fuels used within the EU in order to minimise the environmental consequences of their production and to maximise the greenhouse gas emissions savings resulting from their use. The greenhouse gas emissions are dealt with by means of setting a minimum standard of savings to be achieved, currently set at 35%. The proposal also set out a series of environmental criteria, suggesting that bio-fuels sourced from land from a number of different categories would not be acceptable, such as from the displacement of established forestry or highly bio-diverse grassland areas. The directive also requires all bio-fuels grown within the European Union to be grown on land that meets the agricultural cross-compliance rules. The Government fully endorses the move by the Commission to introduce demanding and ambitious sustainability criteria for bio-fuel development.
The Government broadly welcomes the proposed renewable energy directive and will work constructively within the Council working groups in finalising the directive over the coming months. The targets set for Ireland are in line with the challenging targets set across the energy efficiency, electricity, heating, cooling and renewable transport fuel targets already established in the framework of our energy White Paper.
Thank you, Mr. Finucane. Before the appearance of the delegation the committee decided to hold a separate meeting to deal with the bio-fuels question in light of the recent controversy over food supply and cost. While we might refer to it briefly during the discussion, we will not go into deep conversation about it.
I thank the Department officials for attending and briefing the committee today. I have questions on what is currently proposed by the Commission. Are the Department and the Government happy with the targets set and the proposed manner in which the directive will work and be implemented and imposed by the Commission, or are there elements of the proposal the Department intends to lobby for change? If so, what are those areas? It is important we know that in the context of the European Parliament debate in the autumn.
The targets set in the document Delivering a Sustainable Future include 33% of electricity consumption to come from renewable sources; a heat sector target of 12%; and 10% in transport. I am particularly interested to see where the Department thinks the transport saving will be made. The transport section is the perhaps the most challenging of the three because the ESB intends to give leadership in shifting from fossil fuels to more renewable sources of fuel. That will happen anyway through the emissions trading system which will encourage a move away from carbon emitting fuels. The transport and heat sectors must be lead by Government policy, for example, in terms of how the transport fleet is led. The committee has not seen much direction in that area.
The committee will not focus on bio-fuels today, but I have a concern regarding the Commission's proposal on the land that can be used to grow bio-fuels. The presentation mentioned that the directive also requires all bio-fuels grown within the EU to be grown on land that meets the agricultural cross-compliance rules. I understand that means land eligible for area payments in the past, used as a base year. I thought the challenge was to try to find new land that is not productive in Ireland at the moment to grow bio-fuels in a sustainable way. We should not be competing with land used for food production. This aspect of the proposal coming from the Commission will have a problem if it says land can only be used that is under the agricultural cross-compliance rules. That is farmed land that currently produces food. In other words, the Commission is saying, "The only land you can use is land that is currently producing food, either grazed or with cereals or crops on it". I want to get the delegation's thinking on that. We should be looking at land that is not being used for food at the moment. If we are going to grow first-generation bio-fuels, which are questionable in the first place, and not rely on second generation, it must be done in an environmentally responsible way, not by chopping down forests.
I thank the delegation for being here today. The impression I get when we talk about the 20% reduction regarding EU policy is that the general thinking is that the 30% which may come out of the global agreement is the more likely target we should be setting ourselves. Perhaps the delegation could comment on that because that is a 50% increase and has a significant impact on any directives, legislation or plans for meeting targets.
We are getting snowed under with targets and plans. I have concerns about how we are doing now. When the new Government was formed and I first became a member of this committee, in my innocence I questioned how the 3% per annum was going to be met this year. Clearly the answer is it will not be met because these should be seen as long-term rather than as per annum targets. How are you assessing the progress of the 3% per annum target? This was an agreed, specific target set by the Government and some measure is required as to how we will perform. I understand the target set at home is appropriate to what is sought at EU level.
I need clarification on what the Taoiseach said yesterday when he pointed out that the sub-committee on climate change had only met twice since the Government was formed. I presume he meant since he became Taoiseach. We need to try and get more information regarding what is happening within that committee.
In respect of carbon storage, have we any role to play at all? It is being taken seriously by the Commission as it issued a directive in this regard. However, whenever it is raised, the view is that Ireland does not have the capability, it is not something we are dealing with, it is not in the all-Ireland grid study and we should not be thinking about that at all. Should we be thinking about it?
I did not follow the reference to the guarantee of origin, and how it could impact negatively on what we are trying to do here. There are certain efforts being made, for example by Sustainable Energy Ireland, where a mechanism exists to help people to change their ways. Is that the kind of support, tax supports or whatever, the delegation is talking about? Perhaps that could be clarified.
The last point concerns the sustainability of bio-fuels. When the term "bio-fuel" was first used it meant social and environmental sustainability. With the development of environmental thinking the social aspect of sustainability seems to have fallen off the map. That has created a lot of difficulties when one looks at the issues of food and fuel. I would like to know the definition of sustainability being used by the EU Commission so we know what we are talking about.
I thank the delegates for their presentation. I have a brief comment to make on the guarantee of origin concept and the problems in that regard. While the presentation was being made I could see that might cause problems. In an area where things could fall between two stools and good intentions might be lost, it was mentioned as an area where there is concern. To what extent is that capable of being lost? Ireland is entering a challenging time and is up against it to reach its targets. For a while we need to have our self-interest at heart. We need to retain the credits achievable in Ireland. Is there any danger that this system might compromise the efficiencies we may be able to declare for Ireland?
In the presentation reference was made to priority dispatch for renewable generating plants. History has taught us differently but perhaps there has been a change of thinking. When a new plant was being commissioned the use of renewables was way down the line. I know there is a question about security of supply and the type of plant that is most able to cope with fluctuations, but that is something that I would worry about. I would need to be reassured that a renewable plant would be given priority because the last plant commissioned by the ESB did not use renewables. It was a big opportunity for the ESB to demonstrate where it was going.
Mr. Martin Finucane
I propose to answer the issues in the order in which they were raised by members and I will ask Mr. Browne to address some of the agricultural issues, specifically on the sustainability of bio-fuels which is his area. I will start with the issues raised by Deputy Coveney. He asked if we were happy with the targets. From our perspective we were fortunate that the energy White Paper process predated the energy and analytical work carried out by the Commission in setting targets for member states. Our White Paper was published in March 2007. Targets have been set for the different sectors for the first time across electricity, heat, transport and energy efficiency at the one time. If we deliver programmes which implement those target we will be broadly in line with the EU target. The existing targets in Ireland are technically and financially challenging. We were in line with the aims and ambitions set at EU level and with the new directive proposals.
The second issue raised concerned the work of the directive and the key issues for Ireland. The directive was introduced into the Council working group in February. It has been discussed weekly since then. The main issue raised by the majority of member states concerns the guarantee of origin and how the inter member state trading rules interact. This is a concern and was identified in the original directive. However, we are supportive of many of the positions being adopted and proposals made by member states in tightening and defining more clearly some of the objectives around inter-member state trading. From our perspective, although this was originally perceived as a threat and continues to be so if retained in its original format, the likelihood is that the specific proposals will be changed significantly around the Council table before they re-emerge. It is also interesting to note some of the early discussions at the European Parliament. The rapporteur on the renewables directives, Mr. Claude Turmes, MEP, is also singling out this area for high priority and is unhappy with the original directive, as proposed.
The next item raised was in respect of savings in transport, one of the challenging areas in which to deliver savings. We are approaching the issue in a number of ways. One focus is on the overall development of second generation bio-fuels. The Department launched the Charles Parsons energy research awards about two years ago and is supporting research, development and demonstration, R&D, in the bio-energy area, particularly in respect of the development of second generation bio-fuels. Several universities are being supported as a result of the awards.
A further focus is on the interaction of first generation bio-fuels, not all of which are produced from food stocks. Significant portions of first generation bio-fuels are produced either from waste materials such as recovered vegetable oils or parts of the crop which are not traditionally used. For example, while oil is squeezed out of the top of rapeseed, the cake feed which is made with the rest of the plant is still used as animal feed. It is probably not true to describe all first generation bio-fuels as bad; some of them are deemed to be sustainable or useful.
Bio-fuels are not the only item under examination in the overall transport sector. We are also examining the development of electric and hybrid vehicles in our system. This would help us to achieve the 10% transport energy target contained in the directive. In the past two months Sustainable Energy Ireland has published two detailed reports on the use of such technologies, specifically in an Irish context. Recently, the CEO of the ESB spoke at length about the prospects for developing electric vehicles in an Irish context. The Department is also examining the possibility of developing other fuel options.
The Minister for Transport will shortly publish a sustainable transport action plan which, in addition to addressing transport usage up to and beyond 2020, will deal with other fuels such as bio-energy and fuel cell technologies. It will also closely examine the issue of increasing energy efficiency, particularly the expansion and use of more efficient public transport. These are the areas being considered in addressing the transport issue.
As I indicated, we will address the agricultural aspects of bio-fuels. Many of Deputy McManus's questions related to the 3% annual reduction target. The target is in respect of carbon as opposed to energy reduction.
It was the great white hope.
Mr. Martin Finucane
While energy will be a major component of their delivery, it is not the only game in town in achieving our overall carbon reduction targets. The challenge will be to deal with the non-emissions trading sector in respect of carbon reduction. By far the two largest trading areas in the non-emission trading sector are agriculture and transport. While there is significant room for improvement, for example, in the built environment through energy efficiency in commercial and residential dwellings, a large part of the solution will have to come from the agriculture and transport sectors.
The lead responsibility from a Government perspective in respect of the carbon targets and individual targets which come under that umbrella will rest with the Department of the Environment, Heritage and Local Government. I understand the joint committee has met Mr. Tom O'Mahony from the Department who discussed several other proposals arising from the energy and climate change target produced by the European Commission.
Mr. Finucane mentioned electricity generation.
Mr. Martin Finucane
I am about to discuss that issue. The three separate areas in which we have targets are electricity, heat and transport. In respect of electricity, we have a 33% renewables electricity target for 2020. Our 2010 renewables target under the existing electricity directive is 13.2%. We have significantly increased the production of electricity from renewable sources in recent years. Whereas in 2004 less than 5% of electricity was produced from renewable sources, indicative figures available to us for 2007 show approximately 9.5% of electricity was generated from such sources.
In respect of the flow of electricity from renewable sources onto the grid and new projects being developed, the prime delivery technology will be onshore wind energy projects. The current build rate and forecast connection dates for projects with both planning permission and a connection offer show we are fully on track to meet our 2010 targets and significantly on track towards making a very good start on achieving the 2020 targets.
In the past two years we carried out a major grid study with our counterparts in Northern Ireland, the results of which were published earlier this year. The study showed that, subject to technical and infrastructural developments on the grid, the electricity system was capable of taking up to 42% renewable source energy on an all-island basis. Building on that work, I understand EirGrid will shortly finalise or publish its grid development strategy for 2025. The strategy will make a strong contribution towards the infrastructural perspective required to deliver on our targets. The Department is also examining the possibility of increased North-South and east-west interconnection in terms of transmission lines as a means of contributing towards the achievement of these targets.
The Deputy raised the issue of carbon capture and sequestration, CCS. The Commission, in its directive, aims to have in the region of 12 demonstration plant projects in the European Union as a whole. The part Ireland may play in the context of those 12 demonstration plants may be an issue, given the scale of our system compared to most of the electricity systems on the Continent and the generation fleet type. As many other member states have older, larger and dirtier coal plants than we have in our system, they may be in a better position to immediately address the issue of carbon capture and storage.
Carbon capture and sequestration will be critical for future developments, particularly in the context of likely targets stretching beyond 2020, even if these are only being pencilled in. For example, the G8 is discussing possible 50% carbon cuts by 2050. We envisage carbon capture and storage probably playing a minor role in helping Europe achieve its 2020 targets but playing a critical role if Europe is more ambitious and seeks to go beyond those targets, particularly if a carbon reduction target of close to 50% were to emerge.
The guarantee of origin is a certificate-based trading system. It has the effect of separating the green value from the electricity generated. In other words, a renewable energy generator would allow electricity to flow into the ordinary system in the same way as any generation plant would. For every megawatt hour of power generated there would be a separate certificate which in some member states is used for disclosure purposes and allow people to trade the green value of the electricity generated. It separates the green value which can be sold to one party.
As "green" is defined, does it include nuclear-generated electricity?
Mr. Martin Finucane
No, it does not include nuclear power. The definition of renewable electricity is strongly regulated in the current electricity directive. This will also be the definition used in the new renewable energy directive. It does not include nuclear-generated electricity.
Is it defined by its emissions or by its renewability?
Mr. Martin Finucane
By its renewability. Green electricity is measured by its generation capacity. It is normally one certificate per megawatt hour generated, regardless of the technology involved. It does not matter if it comes from an onshore wind energy project or a biomass plant.
What benefits come from it?
Mr. Martin Finucane
It allows trading to develop in a different way. It would allow generators in Ireland to receive guarantees of origin in respect of electricity generated in Ireland. They could then sell the green value of the electricity generated to a member state which needed it.
The other aspect to the proposal is that in reaching our renewable energy targets, particularly in electricity, one of the main costs will be infrastructural development. The all-island grid study points out that it will take significant infrastructure development in order to accommodate and deliver that level of renewable electricity supply on the grid. It would not be good if we invested large amounts of money, at great cost to consumers, in upgrading the grid to gain a green value of electricity to trade abroad and fail to reach our domestic targets. That is another aspect of the original guarantee of origin proposal.
Mr. Browne wanted to make a point about agriculture.
Mr. Richard Browne
I presume the section of the directive referred to is Article 15.5 on cross-compliance. Once bio-fuels are taken from land, the land has to be farmed under cross-compliance rules. The issue does not really arise because if the land is not in production, it is not covered by cross-compliance rules.
It is important to clarify that point. Let us take as an example a drained bog which has not been eligible for EU payments. Can that land be used for the growth of first or second generation bio-fuels? My reading of the proposal is that it would not be eligible.
Mr. Richard Browne
The simple answer is yes but it depends on the specific land type, as other considerations come into play such as carbon stock. The majority of crops grown for bio-fuels are only suitable for growing on arable or grazing land. The issue does not arise yet but it may at a later date as second generation bio-fuels become more viable. Biomass crops for the production of bio-ethanol can be grown on less suitable land, for example.
What land is eligible under the proposal?
Mr. Richard Browne
This is where it becomes slightly more complex. The basic way the directive is supposed to operate on sustainability criteria is that there is an outline carbon dioxide emission reduction which has to apply before the fuels can be counted towards the EU target, which stands at 35%. A series of other criteria must also be met. For example, in simple terms, a forest cannot be knocked down to plant bio-fuels. Pristine bog cannot be used. A bog cannot be stripped for the planting of bio-fuels. It depends on the land to be used.
When one examines the 35% figure for carbon dioxide emission reductions, one has to examine the carbon stock. If land use is changed, Annexe 7 contains calculations that--
That is very complex. Is it any wonder people got confused about the Lisbon treaty? This is unreal.
Mr. Richard Browne
It sounds terrible but once one is used to it, it is not that complex.
One would need a university degree to understand the rules of this proposal.
The average farmer will not find it easy to follow.
Mr. Richard Browne
This is a draft. When it is finalised, farmers will not have to involve themselves in this level of detail.
They will want to know what lands can be used for the production of bio-fuels.
This is an important issue. The State should conduct a land audit in terms of productivity and best use. Land could then be labelled as suitable for forestry, arable farming and dairying. For example, my family has a small holding in County Cork, of which 55 acres are eligible for a single farm payment. However, another 15 acres are not eligible but it is land that can be farmed. There are pockets of land across the country that do not qualify under cross-compliance rules but are still suitable.
I accept that the proposal is under discussion. However, if we are serious about bio-fuels and developing an industry that does not impact on food production, we need to be crystal clear for farmers, the IFA and Teagasc.
It is a vital first step.
Having common rules across the Europe Union makes this ten times more difficult. Agriculture is responsible for 9.2% of the European Union's carbon emissions, whereas in Ireland it is responsible for 28%. Food shortages and prices have been serious issues. Ireland was supposed to be one of the bread baskets of Europe. If we start cutting back on agricultural production and land use to meet emission targets, there will be a greater shortage of food products. Setting the targets based on GDP is not necessarily the wisest course of action. Some effort should be made to recognise the contribution that each member state can make to Europe, whether it is to achieve an overall target, or striving to achieve other targets such as producing sufficient food, milk beef and so on - ensuring that we do not knock ourselves down in the process. No doubt much of this will emerge in the working groups and perhaps the Department will keep the committee informed of any progress made in this regard.
I wish to comment on the cross-compliance rules. We have mentioned this before. Coillte representatives were before the committee a couple of weeks ago discussing the whole aspect involving a joint partnership with Bord na Móna regarding the production of renewables, which is not a matter of the food chain supply but rather fuel supply. However, even it is used for bio-fuel production, in no way will it come under the current cross compliance rules, so that an anomaly exists straightaway.
Mr. Richard Browne
I shall come back to that. One other issue has been dragged into the debate. There is a proposal on the table for a bonus for restored degraded land. It is quite complex, but without going into too much detail, to meet the carbon dioxide savings it is proposed that people should receive a bonus for bringing formerly degraded land back into production. This is precisely the type of land we are talking about here, but includes former rubber plantations, for example, in other parts of the world - land that is currently not in agricultural production. That issue is at the very heart of this.
The issue the committee is discussing, cross-compliance, is very much in the limelight. Some member states have a real problem with it in that they believe it gives importers an unnecessary advantage over European Union producers, which is one perspective. The guidelines do not say that the land has to meet cross-compliance criteria, but rather "the requirements set out in", and can be somewhat Jesuitical at times. It is important to recognise across the sustainability criteria that the primary focus of the methodology is to try to incentivise and push the more efficient producers towards first and second generation bio-fuels - to incentivise people to produce bio-fuels in the most efficient way possible, whether measured in terms of energy production, output for land or the mix between land and food. It is difficult to pin down what is being proposed here and the debate is focusing on that at the outset.
Mr. Martin Finucane
That is one of the reasons for the Cabinet sub-committee on climate change and energy and reporting to that body is a senior officials group drawn from all the relevant Departments, including the Department of Agriculture, Fisheries and Food and the Department of Transport. This means that many of the issues being raised here, particularly the challenges being faced by the Irish agricultural industry, are germane. Not only are views being passed on to the Commission in terms of the individual working groups, and the proposed directives as they stand, but also in terms of the combined Government response towards the Commission in general. We are very aware that at the domestic level there is a major cross-cutting issue to be addressed between the Departments and sectors. We are co-ordinating that issue through the group, which is chaired by the Department of the Taoiseach, because it crosses so many Departments.
This is very interesting, and we could keep the officials here all day, but unfortunately we have two other groups to meet. I thank them most sincerely.
Can I have a definition for sustainability?
Mr. Richard Browne
There is a definition in the directive, and as far as I recall it is the one taken from the UN Bruntland report, but I can clarify that. There is a formal definition.
I remember there was one, but I could not recall what it said.
Perhaps Mr. Browne might send it on to the committee.
Mr. Richard Browne
We shall clarify that.
I thank Mr. Browne. I have discovered that our esteemed clerk has a definition of sustainability for Deputy McManus, which he will communicate to her.
I want to know about the one that the Commission uses.
We shall now hear the views of EirGrid on the renewables proposal. I welcome Mr. Dermot Byrne, the chief executive, and his team, Mr. Andrew Cooke, head of grid development and commercial, and Mr. Fintan Slye, head of operations. Is Mr. Michael Kelly with us?
Mr. Dermot Byrne
Mr. Kelly was not able to join us today.
We met him the last day. I thank EirGrid again for the welcome we got on our recent visit, those of us who went. Other members of the committee had visited previously. I passed on the kind invitation to those members who could not make it the last day. I have informed the clerk and I am sure arrangements for further visits are in hand.
Mr. Dermot Byrne
We shall be delighted to have any visitors to the control centre.
I thank Mr. Byrne and invite him to proceed.
Mr. Dermot Byrne
I thank the Chairman and members of the committee. I shall start by thanking the committee for the opportunity to meet with it today and make a short presentation. The Chairman has already introduced the team.
I propose to take five or ten minutes to give an overview of the key provisions of the directive as they relate to electricity, then look at how these relate back to energy policy in Ireland - specifically, the White Paper - and also indicate the work done to date through the all-island grid study to identify the challenges that must be met and addressed in order to deliver on the potential that Ireland undoubtedly has in terms of generating electricity from renewables, and in particular wind energy.
I will then turn to the most important challenge facing us - the requirement to deliver significant increases in the grid capacity and infrastructure to support not only the integration of renewables but sustainable and balanced development going forward over the next ten to 15 years. At the end of this we shall be happy to take any questions the committee members may have.
The directive introduces binding targets for final consumption of energy by renewable sources for the year 2020. These targets, at a macro European level, indicate that 20% of all final consumption will be met by renewable sources and 10% of transport will be run from bio-fuels. While the 20% renewable target applies across the whole of the EU, there are specific individual targets for each member state - for Ireland the directive proposes a level of 16% renewable energy in final consumption by 2020.
For the purposes of the directive the final consumption of energy is split into three categories, namely, electricity, heating and cooling and transport. Specific targets across each of these categories have been set out in the White Paper, as Mr Martin Finucane explained earlier. These include electricity - renewable energy will contribute 33% to electricity consumption by 2020; heating and cooling -12% of thermal energy to come from renewable sources; and transport - target for bio-fuels penetration of at least 10% by 2020.
As demonstrated by analysis done by SEI, combining the contributions yields a renewable energy production which represents 16.4% of final energy demand in 2020, very much in line with the targets in the directive, as Mr. Finucane explained. I propose to focus now on the electricity component. In addition to establishing a target penetration for renewables, the directive introduces a number of specific provisions that are designed to encourage and promote their increased integration. These include: provision of priority access and despatch for renewables; taking necessary steps to develop grid infrastructure to accommodate further development of renewables; and the development of transparent and objective rules for charging, taking account of the cost benefits of connecting renewables. All of these must be done while ensuring the safety, security and reliability of the power system, and EirGrid is working with the Department, the Commission, the Irish Wind Energy Association and all key stakeholders to ensure these issues are addressed appropriately and in a timely manner.
Earlier this year the all-island grid study published its findings. This was a significant and important study into the integration of renewables into the power system on the island of Ireland. It indicated that the 33% target should be achievable, and levels above this could be possible. Levels such as this in a small island power system such as Ireland's have not been achieved elsewhere. The grid study outlined a number of technical challenges that must be overcome if we are to deliver them. In particular, detailed analysis is required to understand the dynamic behaviour of the system and ensure its stability, as well as to assess the technical feasibility of operating a safe and secure system with such high wind energy penetration levels. In addition, the study clearly indicated that a prerequisite to moving to these increased levels was the timely development of transmission networks. This is echoed in the directive which refers to taking the necessary steps to develop grid infrastructure to accommodate the further development of renewables.
If we take a macro view of the probable evolution in the generation portfolio of the country in the coming ten to 15 years, the level of change required is staggering, considering the level of installed generation, the source or type of generation, as well as geographic location. There is a transformation of the existing plant portfolio under way, with the sale and closure of some of the older ESB power stations and the commissioning of new large gas-fired plant. In the period to 2020 between 4,000 and 5,000 MW of new or replacement conventional plant, the majority probably being gas-fired, would be expected to be commissioned. To reach the 33% target for renewables it would require the connection of about 3,700 MW of new wind farms. This is almost five times the total amount installed in Ireland and would require almost 250 MW to be installed and commissioned each and every year from now to 2020.
This new generation is typically not at the same location as existing resources. Wind farms tend to be smaller and more dispersed and located in the west. In order to take this power from wind farms and relay it safely and securely around the country to the centres of demand where it is needed, massive investment in networks infrastructure will be required. At EirGrid we have always planned and developed the transmission system to ensure it meets current and future needs of all electricity users by delivering a high quality supply which can be relied upon. In the White Paper EirGrid was clearly tasked with codifying this planning in a grid development strategy, setting out the needs and investment requirements of the transmission system as far as 2025. This has been a major piece of work in the past 18 months and is now nearing conclusion. We intend to launch the strategy in September. It will set out clear priorities for grid development in the next 15 to 20 years and chart the course of transmission infrastructure development for years to come. It will take into account the renewables targets set out in the White Paper and the directive, with the requirements to ensure continued provision of reliable, secure supplies of electricity to all parts of Ireland. It will also take account of the spatial strategy and the need to facilitate balanced regional development and enable ongoing and sustainable economic growth.
It is imperative for all involved that we get this right - for Ireland, the economy, the electricity user and the environment - to ensue we deliver increased levels of renewables onto the grid. We are committed to supporting the achievement of the renewables targets in a co-ordinated, proactive and transparent manner, working with all stakeholders to ensure issues and challenges relating to the accommodation of particular technology on the system are addressed fairly. In recent years we have championed key industry initiatives aimed at promoting increased levels of renewables to ensure system safety and security. These include: the gate process for efficiently dealing with large volumes of connection applications; the wind grid code setting out tailored technical criteria appropriate for wind farms; making specific ancillary services payments available for wind farms; and the adoption of a formal renewables policy setting out clearly EirGrid's commitment to facilitating increased levels of integration.
A critical project is the east-west interconnector, one of the key enablers in accommodating high wind energy penetrations on the grid. The project is well advanced, with a dedicated project team and a target to award the contracts before the end of the year. We are also realigning key elements of the organisation, including managerial responsibilities, specifically to ensure the operational issues highlighted are comprehensively addressed in an open, collaborative, transparent and timely manner. Large elements will be done in conjunction with our counterparts in Northern Ireland, SONI. We are working with the Commission to finalise a new gate three process which will look at processing applications for new wind farms involving thousands of megawatts.
The delivery of grid infrastructure is fundamental to the achievement of the increased levels of renewables, as envisioned in the directive and White Paper. The grid development strategy to be published later this year will set out the shape of the grid and identify what basic infrastructure is required to achieve the goals in respect of climate change and renewables integration. This will require significant investment in transmission infrastructure and, most importantly, the support of the key policymakers, including this committee.
I thank committee members for their time and giving me the opportunity to present to them. I will welcome any questions they have.
I thank the representatives from EirGrid for coming and for their reception last week.
One of the issues we identified was the difficulty in providing high powered electricity lines in rural areas to attract industry. I am talking about 220 kV lines. The grid map in Fitzwilliam Square is naked in that respect. Wind energy projects have the potential to assist in this regard. What technologies is EirGrid examining to deliver a network that will address energy requirements by using wind energy as soon as possible? Does it need a major increase in resources to deliver such projects, especially wind energy projects? Given the targets - 20% and higher - set down, what does Mr. Byrne propose to do to obtain the necessary resources to meet them? Is there urgency on the part of the company in particular areas of the country in order to maximise wind power usage? Has it become involved with any of the private companies to connect supplies to the grid quickly? Is there a plan for the whole country, or specific plans for specific areas?
I thank Mr. Byrne for coming again. He comes here on a regular basis, including for discussions on specific projects. However, we are talking in macro terms today.
There is much confusion about when the Gate 3 grid connections will be announced. How many megawatts will be provided for? My understanding is that close to 2,000 MW could potentially be linked the through Gate 3 process, although the figure may be slightly less. There are applications involving a figure of up to 8,000 MW, only one quarter of which at best will be linked up.
I am concerned about our efforts to further wind energy projects. While there has been great interest in and a great deal of money spent on preparation for Gate 3 applications in respect of planning permission, consultants' reports on grid connection and its cost and so on, three quarters of applicants have no chance of getting a connection. This is a matter of genuine concern. The witnesses should outline to members the timescale and the likely quantity of connections to the grid in terms of numbers and megawatts. Members also will have the opportunity to ask such questions of the regulator in a while. This is not a trick question as my understanding was that although Gate 3 was to be announced six weeks ago, this has not happened.
Members had an interesting meeting in UCD yesterday with Professor Mark O'Malley. He noted the cost of producing electricity from carbon-based fuels - that is, coal, gas or whatever - will increase as the percentage of electricity coming on to the grid from wind increases. What were baseline plants that simply produced power 24 hours a day will become plants in which power generation must be switched off or increased, depending on whether the wind is blowing. The witnesses should outline the increased cost of producing power from carbon-based fuels as a consequence of increasing the percentage of wind-generated power, as well as the management challenges faced by EirGrid in this regard. While it is EirGrid's job to implement Government policy, increased generation from wind also potentially constitutes a huge headache.
Does energy storage feature in EirGrid's plans? A number of proposals are on the table at present for a potential new and bigger pump storage facility in the west of Ireland. Is such thinking in line with EirGrid's with regard to what will be needed to facilitate 30% or 40% of our power coming from wind? Alternatively, does EirGrid consider that such challenges can be managed by the use of interconnection and the security it may offer by bringing in additional power when required?
While I apologise for labouring this point, Mr. Byrne's presentation stated it is expected that by 2020, between 4,000 MW and 5,000 MW of new replacement conventional plant, the majority of which probably will be gas-fired, will be commissioned. Will such plant replace or be in addition to existing plant, or both? In other words, has EirGrid anticipated what will be required to meet energy demand in 2020? How much of the conventional plant, to use such terminology, essentially will provide substitute energy for wind energy? By 2020, I presume power demand will be approximately 8,000 MW or 9,000 MW, as demand at present is at 5,000 MW. Were 33% of demand to be met from renewable sources, what proportion of such additional demand must come from conventional plant to have in place back-up and substitute energy? I am attempting to get a handle on the level and cost of the back-up EirGrid plans to provide.
I refer to the issue of rolling out grid infrastructure as EirGrid faces great challenges in this regard. Its first major project will be to install a decent backbone comprising a 400 kV line through counties Meath, Cavan and Monaghan. However, EirGrid faces great challenges in this regard pertaining to the planning process, the report published today, dealing with communities and so on. It merely is the first of a series of items of infrastructure EirGrid must put in place. Most of the others probably will involve 220 kV lines. However, I understand the infrastructural requirements for carrying either, in terms of pylon size and so on, are more or less the same. The witnesses should provide members with an update in this regard without discussing in detail the report published today or the specific project to which I referred. EirGrid must engage in a highly significant public relations exercise in this regard.
Some of my questions already have been asked. I welcome Mr. Byrne and his colleagues before the joint committee again. It seems we are like old friends at this stage. He did not mention the issue regarding the separation of assets. Although I presume that was because it no longer is on the agenda, he might confirm this.
Why not start with an easy question?
While I appreciate EirGrid must publish its report on the grid development study, the scale of what is required to build the infrastructure is hard to grasp. It would be helpful were the witnesses to provide members with an idea of the scale involved. As for the Gate 3 issue, I am learning fast. I was taken by the Minister's excitement regarding offshore wind when he announced his tariff scheme last January. While the industry had stated it would spend approximately €4 billion to €5 billion on offshore wind on the announcement of such a magic tariff scheme, nothing has happened since then and the tariff scheme has not been approved. If one begins to ask questions in this regard, the issues involved appear to pertain to cost or to grid connections. The witnesses should outline to members the importance or otherwise of offshore wind generation. Essentially, should one take the view that this is an experimental technology like tidal energy and get on with the business of developing the wind farms, as outlined in some detail by EirGrid?
Mr. Byrne mentioned the provision of additional capacity of approximately 250 MW per year from land-based wind farms. What is the amount at present in this regard? How much development of this source of renewable energy has taken place in recent years? It appears there has been increased concentration on this technology as being the renewable source of energy. However, this is a time when many building projects simply have disappeared and banks are not giving out money. There are many reasons we cannot necessarily depend on a continual stream of wind farms seeking planning permission. The witnesses should discuss EirGrid's forecasts in this regard.
As for the east-west interconnector, which is a vital protect supported by everyone, the last time Mr. Byrne appeared before the joint committee he expressed some concerns as to whether it would come under the scope of the critical infrastructure legislation and whether possible difficulties might arise in that regard. Is everything going according to plan? While Deputy Coveney has discussed the North-South interconnector at some length, perhaps there is little point in such discussion until the report is dealt with. As for renewable penetration, two figures have been made available. While I do not mean to nitpick, one is for 10% for this year and the other is for 9% this year. What is the actual figure for 2008 in respect of replacement by renewable sources?
The witnesses might answer the questions asked thus far, after which I will call in Senator O'Malley.
Mr. Dermot Byrne
Very well. We have a record of them anyway. Deputy Calleary asked several questions pertaining to technologies, resources, investment and timescales. I will ask Mr. Andrew Cooke to respond.
Mr. Andrew Cooke
The Deputy is quite correct to state there is a requirement for infrastructure in the west, which is the predominant area for onshore wind at present and in the immediate future. At times when the wind blows, it will be able to supply power requirements in the west. However, the amount of wind-generated capacity being installed will far exceed the west's power requirements. It must be exported by the network across towards the east coast and other load centres and potentially, at times of excess wind on the island of Ireland, offshore via the interconnectors to other countries. Consequently, we are looking at significant high voltage infrastructure, which will serve to export the energy from the high wind areas when the wind is blowing but equally will serve to supply electricity demand in those areas when the wind is not blowing. We will look at the full range of technologies that exist or are developing. This includes both control technologies in terms of how the grid can be operated more smartly and, more particularly, the hardware technologies. These could be technologies like new types of conductors that are in development and high-voltage DC where it is appropriate to use it. We are looking at the full range of scenarios and will cover this in the grid development strategy when it comes out in September. Does that deal with the main points?
Will the grid development strategy have a timescale or will it just be a general aspirational document?
Mr. Andrew Cooke
Assuming that is identifying the requirements out to 2025, in due course, that will come forward into a specific plan. We would see a wide range of priorities in terms of the grid developments required. Certainly, priority would be attached to projects that ensure security of supply and adequate supply to customer demand. Of course, projects required to connect new generation and wind generation are also high priority so it will be a very challenging programme. We must look at the resource implications and the ability to deliver that programme. We are talking about long lead time infrastructure for some of it so we want to start as many projects as possible as quickly as possible to bring them all forward to conclusion.
Mr. Dermot Byrne
Deputy Coveney's first question related to the Gate 3 process. Can I leave it to CER to answer the specifics of that question? We work very closely with CER but at the end of the day, it will be making the determination about the exact amount of megawatts that will be in the gate and equally, the qualification criteria--
In respect of the aspect that applies to EirGrid, does EirGrid group them together in terms of grid connection to maximise efficiency? Is that how it works?
Mr. Dermot Byrne
The principle behind the group processing, of which this will be the third phase, is about grouping adjacent wind farms together so that one optimises the network. It also considerably accelerates the time that one can get through a large queue. If we did it on a one-by-one basis, they would be interacting with each other, which would take forever. That was the basis on which we brought forward the group processing.
Do applicants deal with EirGrid rather than ESB Networks in terms of connection?
Mr. Dermot Byrne
They deal with both. They deal with ESB Networks in respect of the distribution system because it is the distribution system operator. The larger wind farms would deal directly with us where they need to connect to the transmission grid. However, we work with ESB Networks in respect of distribution and even those connected ones because, in turn, they have an impact on the transmission.
Does EirGrid have an input into planning applications if a group comes together?
Mr. Dermot Byrne
Not so much in the--
Does EirGrid see it strategically as something into which it would have an input?
Mr. Dermot Byrne
We actually determine the optimum grid development needed to connect that particular group so we are the ones who bring forward the fact that one needs a new 110 kV line and a new station. The actual build of the connection in the case of transmission is contestable. Applicants can either choose to build it themselves or request us to get it built.
Have we finished with everybody's replies?
Mr. Dermot Byrne
There are a number of other questions. Reference was made to the meeting between members of the committee and Professor Mark O'Malley. A question was asked about the understanding of the incremental costs. Mr. Slye will address this issue.
Mr. Fintan Slye
I am sure that Professor O'Malley was referring to the additional costs of existing portfolio plant being shifted and turned on and off during the day or week. It has always been the case that as new plant has come on, the older plants slip down the merit order and would not run as baseload plant. This is happening to a greater extent as one increases the amount of renewables on the system. The short-run marginal cost of electricity from wind is at or close to zero whereas conventional plants have a source of fuel for which they must pay. Therefore, the amount of cycling or turning on and off of conventional plants increases as one increases the amount of renewables on the system. This leads to a requirement for more fast-acting or responsive plant on the system, which has been signalled for a while and which I understand was discussed in the all-island grid study.
What Professor O'Malley was probably referring to is the fact that the older plant is not designed to do that. The large Moneypoint sets are designed to run flat out. They are at their most efficient when they are running flat out at or close to their maximum output that is the design specification.
Much of the new plant being designed and developed at the moment can operate at those high levels of efficiency at a much greater range of outputs than the old plant. As the newer plant comes on to the system, even though much of it will still be the large-scale combined cycle gas turbines, it has more flexibility to operate to a range of output and still deliver the high efficiency that is required.
There is a lot of investor interest in smaller peaking plants. These are plants that would come on for a short number of hours during the day. Some aero-derivative-type gas turbine engines are being developed by some manufacturers that are extremely high in efficiency for plant like that which would not have been available in the past. So we are seeing a lot of interest in that triggered, in part, by the change in market design with the advent of the SEM and the capacity pockets available there. This means that generators are rewarded for being available even if they do not generate megawatts. Hopefully, the actual design of the market is encouraging the shift towards that going forward.
What is aero-derivative-type plant?
Mr. Fintan Slye
It uses technology derived from the development of jet engines. It is effectively jet engine technology.
How is it fuelled?
Mr. Fintan Slye
It is gas-fuelled. The highly efficient ones are typically gas-fired fuels. They are about 50 MW and 100 MW or around 120 MW.
Mr. Dermot Byrne
If I can add to what Mr. Slye said, we published a report on our website about two years ago which develops a framework for evaluating the cost and benefit of wind on the Irish system. It needs to be updated because fossil fuels have moved very significantly. It balances the benefits of wind, which involve fuel displacement, sum capacity and carbon, against the cost. If one did not have wind, one would need other plant. It models those effects that were mentioned. It is a very good approach. Perhaps we will circulate that to the members of the committee.
In respect of energy storage and pump storage, we said before that as operators, we like pump storage because it makes the system very flexible. If it is to complement a very significant amount of wind, it must address the three-day storage issue, not just the daily cycle that Turlough Hill currently has. Anything with very large storage that would address that issue is certainly to be welcomed.
We understand the project referred to. There are very significant costs involved in pump storage because of the sheer work involved in it. At this stage, we have no knowledge of what would be involved in that particular project. If it is deemed to be economic, as operators, we see many benefits in terms of its interaction with wind if it addresses that three-day storage issue rather than the hour-by-hour or daily storage issue. Challenges lie ahead in terms of rolling out grid infrastructure. I appeal for support from key stakeholders.
Deputy McManus referred to separation of the assets. The issue has not gone away. We welcome the process announced by the Minister. It is necessary because the issue will not move on by itself.
With all due respect, it is a long way away. A date has not been set.
Mr. Dermot Byrne
We look forward to the process kicking off and we understand that the Minister remains fully committed to it as a policy objective. We also look forward to engaging in the process.
Has EirGrid not engaged in it yet?
Mr. Dermot Byrne
We must await the appointment of a chair, which we expect to occur near the end of the year.
I thank Mr. Byrne for that information.
Mr. Dermot Byrne
Deputy McManus had a question on Gate 3 and off-shoring. From a grid point of view, we deal with the connections before us irrespective of whether they are onshore or offshore. Any applicant for connection to the grid is a customer. A number of years ago, we were successful in connecting the Arklow Bank project. While other offshore wind farms remain in the queue, I am unsure as to whether they will fall into the Gate 3 category. We must wait and see what develops from the process.
We have clarity on the east-west interconnector. Pre-consultation discussions have been held with the SIB of An Bord Pleanála, which has jurisdiction up to the 12-mile limit, to ensure that we have everything that is required to make an application, including environmental reports and so on.
In terms of renewables, capacity of nearly 900 MW is currently connected to the system.
Mr. Fintan Slye
Yes.
Mr. Dermot Byrne
Some of that is being tested. We expect to have approximately 950 MW generating shortly. In energy terms, we expect the overall figure to be over 10% by the end of the year.
Mr. Fintan Slye
Some 10.5%.
Mr. Dermot Byrne
It will depend on how quickly the units being tested currently are formally placed on the system.
Regarding the level of wind farm construction and connection, the figure for constant production provided by EirGrid was 250 MW per year.
Mr. Dermot Byrne
That will be the average requirement.
What has been the record in recent years?
Mr. Dermot Byrne
In 2006, the amount of approximately 250 MW was about right. Recently, I referred to our disappointment with the level of connections to the system in the past year. We will do our part to facilitate the collective connection or commissioning of the 250 MW required per annum.
In terms of megawatts, how many of the Gate 1 and Gate 2 approved projects have not materialised?
Mr. Dermot Byrne
All of the Gate 2 offers have effectively been made, although there may be a number outstanding.
Mr. Andrew Cooke
Approximately half of Gate 2 is transmission-connected. Of the 18 projects, 15 have been accepted and the offers in respect of two remain live. Only one offer, which was in the order of 4 MW, was not taken up. There is a high level of take-up, a situation that also pertained in respect of Gate 1 and other wind farms. So far, there has been little fallout in terms of projects reaching fruition.
Were capacity in a previous gate not taken up, would it be transferred to another?
Before Mr. Byrne answers, I have two more questions. We have heard of the objective of reducing the EU's energy consumption by 20% by 2020. Is this objective having an impact, what is the level of energy consumption in Ireland, how quickly is it growing and will we reach the 20% target?
Are any of the aero-derivative plants in service and, if so, where are they? I assume that they are expensive to run. Will the plants' customers pay for them or will it be an additional electricity charge spread to every customer?
Mr. Dermot Byrne
On the plants, while I should not mention a specific manufacturer, one manufacturer is marketing 100 MW plants. Their level of efficiency is reasonably high.
They are not connected to our grid or generating electricity in Ireland.
Mr. Dermot Byrne
No, developers are making proposals on the use of such technology. It is relatively new, but there are examples of its use in other countries. It is a proven technology.
What about its cost?
Mr. Dermot Byrne
The cost is the same as other plants. Aero-derivative plants will participate in the market and get capacity prices therein. All costs must be borne by someone, the customer in this instance. In the portfolio, there is room for all technology types. A portfolio that was all base load would be inefficient. This, however, is flexible plant. Through various workshops with the industry, we have been advocating the necessity for flexible plant to balance and work with renewable energy. That people are making such proposals is positive.
Renewables are and will be cheaper, particularly given rising fuel prices. To balance that, the aero-derivative flexible plant may be a little bit more expensive. I apologise for missing the meeting with Professor Mark O'Malley, but he may have claimed that renewables might be more expensive. This may eventually be the case, but the price of fossil fuels and oil in particular must be taken into account.
Mr. Dermot Byrne
While I cannot speak for Professor O'Malley, he would not claim that the overall price would be more expensive. Given a target of 33%, there is an optimum portfolio that best delivers value for the customer. It can comprise base load plant and flexible plant. In this context, a market should optimise the situation because people have incentives to step forward.
What about the growth in energy consumption?
Mr. Dermot Byrne
It is too early to tell, as many factors are in play. While growth is still visible, the economy is heading into a decline. It is too early to see evidence of a reduction in growth, let alone energy efficiency. However, we expect there to be energy efficiencies. In the long term, a balancing factor may be a shift towards using electricity in, as mentioned by Mr. Slye, transport as we decarbonise the energy portfolio.
We monitor trends and demand growth month on month, quarter on quarter and year on year. Change will not occur overnight, but we will detect the trends, build them into our forecasts and continually adapt the latter.
I thank Mr. Byrne and his colleagues, whose attendance I appreciate. This discussion has been beneficial.
I now welcome Mr. Tom Reeves, chairman, Mr. Michael Tutty, commissioner, Mr. Dermot Nolan, commissioner, from the Commission for Energy Regulation.
Mr. Michael Tutty
It is difficult being the third party to make a presentation to the committee as most of the best lines have been taken.
Renewable energy production in Ireland has greatly increased since 1999. The amount of renewable electricity connected to the grid is 1,083 MW with over 800 MW coming from wind sources. The balance is from other sources that are being tested. Over 1,065 MW is contracted which EirGrid and ESB networks have accepted. There is another 577 MW of outstanding offers that have not been accepted. Ireland has potentially the capacity for 2,725 MW of renewable energy sources before entering the Gate 3 phase.
All electricity suppliers must put the fuel mix disclosure on their consumers' bills. The commission had to calculate this and used a different methodology than Sustainable Energy Ireland which has the official figures. Its 2006 figure was 8.56% from renewable sources. Whichever one is right, it has gone up in 2007 and will reach the 2010 EU target of 13.2% and the Government target of 15%. The Government's target for 2020 is 33%.
There was a surge in the number of applications from wind farms. As the application process could not continue one after the other, we moved to a system of gates which grouped providers in the same areas together. Gate 1 provided for 373 MW and Gate 2, 1,300 MW. For Gate 3, the commission published a consultation paper at the beginning of the year. A large volume of response was received. This morning, the commission agreed that Gate 3 would provide for 3,000 MW. The commission will publish the proposed decision on Gate 3 later this week.
What period does this cover?
Mr. Michael Tutty
The period depends on what grid reinforcements will be needed to get these wind farms hooked up. The combined total of the three gates will bring Ireland to - even above - the 33% target. We expect it will take some years to get it all done. A substantial amount of grid development will need to be completed. At the same time as that 3,000 MW of wind-generated electricity will be put on the system, much conventional plant will be needed to be built to back it up. The offers will go out over the next year but the build will take a considerable time.
Will that include offshore wind-generated electricity?
Mr. Michael Tutty
For Gate 3, the first applications in the queue which were deemed complete will be taken on first. These will then be grouped in the different areas around the country. It will include some offshore wind farms. It would not be equitable to just take offshore providers and ignore other providers who have been in the queue since 2005. It would be impossible to try to choose the best projects out of the 7,000 plus applications. The date of application will be the main criteria for choosing projects.
The sole criterion is date of application?
Mr. Michael Tutty
If the Deputy could give me a better criterion--
It is not a criticism. I am trying to establish the facts.
Mr. Michael Tutty
Okay. We are taking the providers in the order they applied. This will include all providers who applied until the latter half of last year. Since Gate 3 was proposed, a large volume of applications has been received. Some argued all 7,000 applications should be accepted. However, it would take a long time for the grid to process these. It would also mean supply would be above the Government's target and far ahead of what the grid development study suggested was a feasible level of renewable source electricity on the system.
Do these applicants have to report to the commission at what stage they are? If the commission gave them the go-ahead, would they be able to begin operating?
Mr. Michael Tutty
Given that some have been in the queue for a few years already, they may have planning permission. Given the studies to be done on when these can be linked up quite a number of them will be a good distance in the future. They cannot all be built immediately. It will depend on the amount of grid development which is needed. We all know that there are long timelines in the transmission reinforcements needed for Gate 2 applicants and there will also be long timelines for the Gate 3 people.
There will be provision to allow them to the extent that the grid can take them and even if all the reinforcements are not done, once the shallow reinforcements are done they can have "non-firm access". Whatever can be taken by the grid will be taken but full access will only come when all of the reinforcements are done.
The reason I ask the question is that some of the people who have come before the committee, in particular off-shore wind people, complained about the long timeframe to get through the planning process. So many different bodies are involved and one can be waiting two or three years for final approval. We must examine how we can speed up each application.
Mr. Michael Tutty
Yes, there is that problem on the one hand. On the other hand, people are in the queue with planning permission which is running out.
Are these onshore projects?
Mr. Michael Tutty
Onshore and perhaps also offshore projects. I do not think many onshore projects go back a long way. Planning will be a problem for onshore and offshore projects. It is not only offshore projects which have difficulties.
There is an administrative problem with foreshore licences.
May I ask about the length of time it takes? If the determining factor is one's length of time in the queue it seems to be a relatively simple matter to open the gate and license people. I would have thought strategic factors are involved, such as location and technical factors. Mr. Tutty is suggesting that older schemes are prioritised. I would have thought technology would have an influence and that the more recent applicants would have something more to offer. It seems to be a curious way to determine who loses out. Some of these people might as well forget it if they do not get in to the 3,000 MW.
Mr. Michael Tutty
We cannot tell people who were there in 2005 that we will forget about them and deal with the people who came in 2007. We are making provision--
Mr. Tutty is telling people from 2007 to forget it.
Mr. Michael Tutty
It is the most equitable way to decide who gets the relatively scarce resource of access to the grid.
Surely if we are trying to design an electricity grid for the country for the next 100 years we should give connections to the best projects and not to the people waiting the longest.
Mr. Michael Tutty
Yes, but how does one decide what are the best projects?
This issue is critical because it is enormously frustrating for promoters of wind farms. Planning is controllable. Councils are proving to be adaptable. It is dealing with this process which is doing their heads in. Surely, in this day and age we can come up with a more efficient and rapid process to deal with it.
Mr. Tom Reeves
The scarce resource is the capacity on the network. Applications only go back two or three years. They have not taken delivery of their new plant so they will be getting the latest technology for construction. An extensive period of consultation has taken place. People are waiting for Gate 3 and we consulted widely to ensure we are equitable and we think we are. The total of 3,000 MW is enormous. If every project is built we will have 5,700 MW of wind on the system which is higher than peak demand this year. Ask Mr. Dermot Byrne whether he could run the system with this amount of wind on it.
This is a permissive system. People apply for permission to receive authorisation from us and a licence to generate. There is no delay in giving it. The scarce resource is getting on to the grid. The grid is constrained by the efforts and difficulties of obtaining planning and building and the expense of it. This is where the problem is.
If somebody has been in the queue for two or three years we are not entitled by law to choose his or her project over anybody else's. We do not look at the economics of any of these plants. This is for the developers, the Minister with his support scheme and the banks. We are just here to rule. We would have liked this to have come in an orderly fashion but it has come in huge bursts and we must do some allocations. After all the consultation, this is the best system we managed to get. It might not be perfect but it is the best we can come up with.
Mr. Michael Tutty
Naturally, those who fall outside the first 3,000 MW will argue that a different system should be used.
When somebody comes through the queue and gets the go-ahead, how long does he or she have to connect to the grid? Is there a deadline? Does this affect other people in the same geographical area gaining access? I am thinking of a particular project which predates Mr. Tutty's time; perhaps it was Gate 1. It involves a large company which is sitting on permission and access to the grid and this means a large number of small operators in the area cannot get access to the grid.
Mr. Michael Tutty
I would have to defer to the grid on this. My understanding is that there is a cut-off date. However, a company must put money up front when it accepts an offer. Usually, this means it is committed to going ahead.
Mr. Tom Reeves
The authorisation to construct which we issue has a five year life. It is like planning permission in that it runs out.
We should allow Mr. Tutty to continue his presentation.
Mr. Michael Tutty
We can return to questions.
The estimate of what is needed to meet the Government's 2020 target on renewables is approximately 4,500 KW. If all the Gate 2 projects go ahead we will have 2,725 MW on the system and more than 7,000 MW is in the queue. If all of the 3,000 MW projects and all of the Gate 2 projects go ahead we will reach 5,700 MW of wind in the system. We do not expect that everybody will go ahead and this is why we chose the figure of 3,000 MW. We chose a figure which should definitely get us to the Government target by 2020, even if a significant number of people drop out.
The 2020 grid study was referred to previously. It was done by the two Governments North and South. It examined what is feasible and how much renewable energy we could have on the grid. It concluded that 33% was feasible. On the basis of studies, it also concluded that 42% was feasible. However, when it went to the next level it found it could not be done. The grid study found that more work is required in some areas. It did not examine all of the issues. EirGrid mentioned one of the follow-up studies it is conducting on dynamic modelling on the technical side.
We are doing an economic study examining the impact on the market. This is one of the elements which was referred to earlier. We want to see what happens to prices in markets and to the returns that all the operators in the market can make. Particularly when one is talking about wind, one needs almost a full backup of conventional plant on the system because on cold winter's days one often has no wind blowing and unless one has significant imports coming from abroad, one will have to have a significant backup on the system all of the time.
We want to determine what happens in the market. A lot of wind keeps prices down and keeps the conventional plant off the system but whenever the conventional plant comes on the system, it has to earn enough money to cover its costs and earn profits. Otherwise, it will not be built. We want to see what happens with 33% wind power on the system. That is something that the grid study did not examine but it acknowledged that it needed to be done. We are now setting out to do that.
The position in 2020, as per the grid study, is that peak demand would be 7,400 MW, with wind at 4,500 MW at 33% but we would need conventional plant of 8,300 MW. That is approximately 2,000 MW more than what is on the system currently. We would need an additional 2,000 MW and would also need to replace some run-down plant. We would have a total capacity, combining the conventional plant with wind, of approximately 12,800 MW, which, given peak demand of 7,400 MW, means an enormous amount of spare capacity - 72% more generation than peak capacity. That has implications for costs in terms of the capital for the generating stations as well as their running costs.
We welcome the proposed directive in principle. It is consistent with the targets the Government has already set. There are just two areas about which we, as regulators, are concerned. The first is priority access referred to in article 14. The existing directive provides that member states may give priority access to the grid to renewables while the proposed directive changes "may" to "shall". However, unlike the priority dispatch provision, which already exists, priority access is not made subject to the security of the national electricity system at all. If one examines the proposed directive, one will see that priority dispatch is subject to the security of the system but for priority access, that reservation is not there at all.
We and other regulators in Europe also feel that if priority access is to be given without any safeguards, then conventional plant will be left behind until all of the wind and other renewable applications are dealt with. If that happens, the conventional plant will not be built in time and we will have blackouts. We are seeking to ensure that the priority access provision is made subject to the security of the national electricity system, by which we would mean that if we need conventional plant to go on the system in order to maintain security of supply, it can be given the go-ahead in advance of the 7,000-plus MW of wind that are in the application queue. Effectively, we are already doing this. Even under Gate 2, we did provide that where a conventional plant was needed for security of supply reasons, that it would be given the go ahead in advance of wind. That is purely to keep the lights on and ensure that we have enough conventional plant on the system to back up the wind.
Is that a matter solely at the regulator's discretion?
Mr. Michael Tutty
We have responsibility for security of supply and we need to take action--
It needs a decision from the regulator, having consulted with the--
Mr. Michael Tutty
Yes, the grid, which receives the application from the conventional plant operators, consults us as to what it should do; that is, whether it should process it and give a connection application.
The second issue of concern is the guarantees of origin, which has already been covered quite well. We believe that further clarification in the proposed directive is needed, particularly concerning whether the guarantees of origin are to be tradeable instruments or just non-tradeable certificates. If they are tradeable instruments, that may have implications for the support mechanisms and the implementation of the restrictions on transfer contained in the draft directive. It is an issue that needs clarification.
We are already examining a system of guarantees of origin for the renewable output in Ireland because the suppliers have been asking for it. They want to be able to say to some of their customers that they are supplying them with renewable energy, even though it may only be 20% or 80% overall. The suppliers see a need to have some sort of certificate for that purpose. We are trying to devise a system which would not have any monetary value but would just be a certificate that suppliers could use. Such certificates could only be used for particular customers. Suppliers would not be able to claim to all of their customers that they are getting renewable energy, if only 50% of the supply emanates from renewable sources.
We welcome the proposals in the directive but need further clarification on the guarantees of origin provision. We also believe something must be done on the issue of priority access. We have already decided on Gate 3 and are conducting an economic analysis of the impact on the market, as a follow-up to the 2020 grid study. We are committed to achieving the Government's target of 33% by 2020.
On the issue of seeking a guarantee of supply from the conventional plant, the regulator makes no mention of storage, either in conjunction with renewable energy or otherwise. Is there an argument in favour of examining storage technology options which would allow one to run a conventional plant flat out for a period of time when it is economic to do so and then shut it down and store the power produced? This might be a better solution than trying to commission new conventional plants. If one examines the figures, there appears to a be a lot of conventional power being put into the system purely to back up the renewables. In that context, is there not a strong argument for developing storage technology and capacity?
Mr. Michael Tutty
There may well be but it depends on the economics of one option against the other. It has already been mentioned that pump storage can be very expensive. If storage capacity requires a subsidy to be built, we do not have any power to provide such, unless there is a real security of supply problem. We can do something in that instance because we are allowed to take action under EU directives if security of supply problems arise. We hope that storage will become economically feasible, however, and proposals have been made for increased pump storage in this country. I understand that battery storage is still down the line, although the technology is improving. In some respects interconnection provides storage abroad. I am not sure that we have the authority to ask people to build storage facilities or to subsidise them if they do so.
Mr. Tom Reeves
It is up to the individual developer to work out whether he or she can make money from this. The potential for developers to make money from renewables will depend on how they see the development of the market, as well as the amount of money the Minister puts in place as a support mechanism. We do not offer economic supports for these. For clarity, the figure on the chart for 2020 includes interconnection and everything but wind. From now until 2025, every 3 MW of wind generation constructed means 2 MW of conventional plant. In other words, we are building 50% more wind during that period. That represents a major structural change and it will be up to Eirgrid to decide whether the system can be run safely and securely with that level of wind energy.
Currently, there is currently priority access for wind but is it not a case of "may" rather than "shall"?
Mr. Michael Tutty
Yes.
In terms of how we treat our new peat power stations, these also have priority access as base load plants. Do they have the capacity and flexibility to act as peaking stations rather than base load plants? It has been suggested to us that there is no reason peat power stations cannot operate as peaking stations. It would make a big difference in terms of emissions.
Mr. Tom Reeves
I am not an engineer, so I do not know the operational details of these plants. They were designed to run on base load all the time and to consume a certain amount of peat. They are driven by fuel supply contracts. I do not know how they manage their peak capacities but I understand it is more difficult for solid fuel stations to adjust output levels than it is for petroleum and gas stations. The market study we are conducting for 2020 is based on the models we use at present and will indicate how these plants can be run. We will then be able to determine the economics across the full sweep from base load through mid-merit to peaking plant. The peat stations certainly produce a considerable amount of carbon.
I thank Mr. Reeves, Mr. Tutty and Mr. Nolan. We have noted the clarifications they feel are necessary and we will include them in our report to the negotiating team.
The joint committee adjourned at 3.50 p.m. until 10 a.m. on Wednesday, 16 July 2008.