I welcome Mr. Dermot Byrne, chief executive of EirGrid, Mr. Andrew Cooke, executive director, grid development, and Mr. Fintan Slye, executive director, operations. We look forward to hearing your submissions.
Electricity Grid: Discussion with EirGrid.
Mr. Dermot Byrne
I will run through the presentation and will then be available to answer queries the committee may have. At the last meeting we attended on 9 July 2008 I briefed the committee on the need for grid development. At that time the grid development strategy was nearing conclusion, which I made known to the committee.
The strategy has since been completed and published. We are delighted to be here to brief the committee on the outcome of the strategy process. The grid development strategy has a role as a vital enabler in delivering secure, economic and sustainable energy. Everyone here is well aware of the two overriding policy issues, to address climate change and ensure security of energy supplies.
I have a number of slides on EirGrid, but everyone here understands what EirGrid is and I will not dwell on them. I wish to draw the attention of the committee to one of our slides which shows our stated policy on renewables facilitation. EirGrid intends to be a world leader in the facilitation of renewables. To achieve this it is proactively committed to working with all stakeholders and customers to ensure all Government targets on renewables are realised, while also ensuring the continued security, safety and reliability of the power system itself. This is the policy, goal and ambition it set for itself about one year ago. There are groups of very enthusiastic people in the company working to deliver on that ambition.
The transmission grid is the high capacity efficient link between generation and demand centres, and interconnects us to other systems. The committee is aware we are developing a further interconnection between the Irish grid and the UK grid in Wales. In one sense, the grid is the equivalent of broadband in telecommunications terms or to motorways, to use a road analogy.
The national control centre is a 24/7 operation, manned by two trained engineers who at all times control the grid and power system. We have all heard talk of smart grids. EirGrid has a particularly smart grid and it is getting smarter. At any point in time the control centre is taking feeds from 170 different locations around the country. There are 37,000 items flowing into it every one or two seconds which is all being collated in the computer systems in the control centre.
EirGrid has very sophisticated software packages turning that raw data into information for the control engineers so they can do their job. Some of the data are processed and directed to other stations to control, for example, the output of Turlough Hill, without interference by any manual input. It is a particularly smart grid. When we think of smart grids and facilitation of renewables we are really talking about smart power systems. What we are really talking about is integrating all the players in the power system, that is, the generators, the grid, the networks, the distribution system and the customers through smart meters to integrate them as actors into the power system and to get a better result.
The next slide shows the average fuel type for Ireland for 2007. We are putting together the figures for 2008 and will have those in the next few weeks. We are highly dependent on gas and on oil. Gas and oil account for more than 60% and coal for 18%. Increasingly, however, we are seeing a growth in the renewables slice of the pie. It was at 11% in 2007 and it certainly will be higher in 2008.
I will turn now to some of the key challenges in delivering on the policy agenda in terms of security of supply, competitiveness and sustainability. In delivering on those policy objectives the adequacy of the transmission grid is essential. I will return to that and talk specifically about Grid 25. There is a diagram which explains from our perspective what is meant by security of electricity supply. There are a number of dimensions. We need to consider the short term and the longer term. In the short term we are talking about operational security. EirGrid is directly responsible for that through the national control centre. We talked about that before. We also issue the winter outlook every year. In August last year we issued the outlook for this past winter and made that information available to the public in terms of whether they would be able to cook their Christmas turkeys or whatever.
The longer term is more important for this committee. There are three dimensions to that. First, there is access to primary fuels. The events of recent days in Russia and Ukraine have put that to the top of the policy agenda in terms of making sure Ireland has sufficient and reliable access to primary fuels. There is the issue of system adequacy. That can be further broken down. In terms of generation, we must consider, first, whether the generation portfolio is adequate to meet the demand and the demand forecasts that are coming down the tracks and, second, whether the network is adequate to deal with all that is required of it. I will come to that shortly. The third dimension is market adequacy, whether the system of incentives and signals in the market — we now have an all-island market which is competitive — are adequate to incentivise new generation coming onto the system and to make sure that investors in wind generation, hydro and offshore generators will be able to meet their bank loan repayments. The market itself is critical in terms of ensuring security of supply.
On the two issues of generation adequacy and network adequacy, which is where EirGrid has a key role, we have published two documents, the Generation Adequacy Report, the cover of which is shown on the next slide, and the Grid 25 report. We have copies available if any member would like to take one. The Generation Adequacy Report effectively looks ahead to the next seven years and does a complete analysis of what new generation is coming onto the system. It looks at various demand scenarios. It makes recommendations, where needed, to ensure we have enough generation. By way of interest, the cover picture of the Generation Adequacy Report is Ocean Energy's OE Buoy prototype device which I understand this committee has visited in the past.
In looking at generation adequacy over the next seven years a number of things are happening. Endesa has recently taken over some of the older ESB plant and has assured us that it will keep that plant open until approximately 2012 while it develops new plant. That is very reassuring to us in terms of generation adequacy. A new ESB plant and new Bord Gáis plant will be coming on stream. They are currently being built. That helps towards ensuring generation adequacy. Our assessment, based on detailed analyses set out in the Generation Adequacy Report is that after about 2011 or 2012 we will need to look again at further generation. That could change depending on how the load develops. We are all very conscious of the economic situation so we will monitor developments on the grid on a week-by-week and month-by-month basis. Based on the analysis we did at the end of last year, we are okay until 2011 or 2012 and we know there are many developers in the queue to enter the system so, again, that is very reassuring. This is a signal to the market that new generation is required at a point in time. That enables developers to bring forward their projects.
I will turn now to competitiveness. There are two key areas where EirGrid influences competitiveness and enhances the competitiveness of the Irish electricity system. One is in the operation of the electricity market itself. As I said earlier we have an all-island market now so that generators, North and South, are competing with each other for dispatch onto the system. Depending on the price they bid into the market operator they will get dispatched to meet the demand. We, and our counterparts in Northern Ireland, SONI, System Operator Northern Ireland, jointly run the all-island electricity market. The next slide shows the average market price over the past year. The system marginal price from January 2008 up to January 2009 is shown there. What I show there is the daily load rated average. The red dot, showing on a monthly basis, is the monthly average. What is interesting is that the monthly average certainly correlates with fuel prices. That is evident in the last number of months from about September through to January 2009 where one can see a falling average monthly price from approximately €100 per megawatt hour down to about €65 per megawatt hour. It is reflective of what is happening in the fuel markets. That market itself is a key element in bringing further competitiveness into the wholesale market. The sale by the ESB of its plants to Endesa brings another player into the market and that builds towards a more competitive market.
The second area where EirGrid impacts on competitiveness is in relation to interconnection. We have existing interconnection between Ireland and Northern Ireland because it is operated as a single grid. Northern Ireland in turn is connected to Scotland. What we are doing is strengthening that interconnection. We are building the east-west Interconnector from Ireland across to Wales in the UK. That project is well advanced. We are at the final stages of tender evaluation for a main contract for that project. We are using HVDC, high voltage direct current technology, and we have already made our application to the strategic infrastructure board for planning. We have funding in place for phase 1 which is the construction phase. Much of that is moving ahead at a pace. We expect that towards the end of 2009 we will have our planning in place and will be able to issue the full notice to proceed to the successful tenderer. All of that is in place to deliver that interconnector by 2012, which is the target the Government set for us. That is on track.
The other interconnector we are putting in place is the second North-South interconnector. Again, we are in the consultation phase on that project. Between the middle and the end of this year we will move towards getting planning for that. We are still in the consultation phase. The committee will be aware of many of the issues around that project, which I will not go into here. They will probably be aired in another committee on another occasion.
On the next page there is a more detailed view of the east-west interconnector. That is going from a strong point on the Irish network north west of Dublin in a place called Woodland, which is a 400 kV station. That will interconnect across the Irish Sea to Deeside, which is the strong point on the United Kingdom network. We are looking at a 500 MW import and export connection.
In addition to bringing further competition into the Irish market, this will be key in facilitating higher levels and higher penetrations of renewables onto the Irish system, which again is relevant to this committee. For example, at times of high wind but low demand in Ireland, there is an export route for that generation as opposed to just switching it off and losing it. Equally, in a high-demand, low-wind scenario we will be able to import electricity from the UK.
Sustainability is the third key challenge, and there are two elements to that, namely, the demand side and the supply side. On the demand side, policy is and must be to improve the overall efficiency of our use of energy and electricity. I am aware there is a great deal of work going on in this area and I look forward to the publication shortly of the national energy efficiency action plan. We are already active in this space through the Power of One campaign.
Also, we have a particular offering that we make available to large industrial consumers. I refer to the winter peak demand reduction scheme, which helps them to optimise their operations by reducing their demand over the key 5 p.m. to 7 p.m. period in the winter time. We have run that for quite a number of years and it is a very successful campaign.
Also on the demand side, the prospect of reducing greenhouse gas emissions from the transport sector through electrification of transport is interesting and topical. That is at an early stage but it is very much on the policy agenda. EirGrid supports that because as the electricity system is decarbonised, we see a great opportunity to begin to decarbonise other sectors which up to now have not lent themselves to being decarbonised. We see a great future in that regard.
We have done a piece of analysis in the generation adequacy report. I have reproduced one of those graphs on the next slide. Looking ahead to 2020, we are showing a typical day in terms of demand indicating the load at night time rising to the morning peak and then rising to the evening peak. We are examining the impact of charging up to 250,000 vehicles, which is a little more than 10% of the transport sector, on the grid. As members can see, it is very manageable. We believe much of the charging will take place at night time when the demand is low and therefore we can offer better prices. Members can see the impact it has in the night valley. It actually helps us operationally during that night valley and if there is a good deal of wind, it enables us to keep more wind on. Not in all cases but in many cases that will be the right thing to do economically. There will be some charging during the day time because inevitably people will forget to charge or whatever and we are allowing for an 80%:20% variation in that regard. This is an initial piece of analysis to get a quick overview of the impact it will have on the grid. We are saying that with 10% vehicles, that is very manageable and that is the analysis that supports that.
Moving to the supply side, I am sorry I am not showing this because it is a dynamic slide but people will be aware that Ireland is very high up in terms of its wind resource. We are very rich in wind and ocean resources. The next slide would have shown that through colour coding the various parts of Europe which are high in renewables.
In terms of what we are doing to access that resource, I refer to the next slide, Progress on Wind Connections. As of late last year we had exceeded the 1,000 MW of wind capacity connected to the power system. That is connected to both the transmission grid and the distribution grid. The smaller wind farms connect at distribution level. The bigger ones connect at transmission level but they all have an impact on the operation of the power system.
As of now we have over 1,000 MW, which in itself is a milestone but as members can see, to reach our 2020 target, which is 40%, we need to get up to about 5,500 MW. That is roughly equivalent to the peak load. The peak load on the system currently is 5,000 MW. Peak load in 2020 will be higher than that but to reach 40% we will need approximately 5,500 MW of renewables connected to the power system. As members can see from the graph, that is a huge challenge for everybody involved in the system.
I refer members to the little yellow line over the 2008 figure. At 2008, I have shown the amount connected, which is 1,000 MW. I have also shown on top of that the connection contracts that are in place after Gate 2. Gate 2 is the group processing system whereby EirGrid and ESB networks make connection agreements with developers. As of now, between connected and offered we have approximately 2,500 MW. They are now in development. They have their connection agreements with EirGrid and with ESB networks.
What do the two lines across that graph represent?
Mr. Dermot Byrne
The bars relate to capacity.
Yes, I see that.
Mr. Dermot Byrne
The X axis on the left hand side relates to capacity. In energy terms the two bars relate to energy. They relate to the 40% on the right hand side. The top line hits the right hand axis at 40%, and that is energy. The lower line is wind and the difference between the two lines is hydro. Both hydro and wind, therefore, are counted as renewables. That is the way we meet our 40% target.
The right hand side shows that EirGrid is hitting 40% when it is at 4,000 MW.
Mr. Dermot Byrne
No. At 2020 we are at 5,500 MW. If the Deputy looks to the left hand side, the bar is 5,500 MW.
That is the total, in other words.
Mr. Dermot Byrne
That is capacity, 5,500 MW.
Regarding the yellow line, if I understand Mr. Byrne correctly, the point he was making is that there are connection contracts in place. Have they the capacity to turn and eventually be represented in the blue line? What is stopping them from turning——
Mr. Dermot Byrne
No. Those developers are now building. They are ordering their turbines, installing their turbines, putting in the civil works and building the roads. That is going on currently.
Mr. Byrne is imagining they will flat out across the curve and that all of them might appear on the grid this year. What is to stop that turning and being represented in the blue line? Does Mr. Byrne understand the point I am making? We constantly hear from people who have contracts in process but they do not get connected. Therefore, their projects do not proceed to come under the blue line on the graph. Mr. Byrne is telling us that the capacity exists for these projects to come under that blue line.
Mr. Dermot Byrne
Under the yellow line of the graph.
Gate 3 is the next process. They are separate developments.
Mr. Dermot Byrne
I apologise for presenting this information in this way. It should have been shown on screen, as it would have been easier to follow. The green lines on the graph up to 2008 signify the projects that have been connected, which represents a capacity of 1,000 MW. It is now early 2009 and the yellow line signifies projects in development. Those developers are building their wind farms.
When will they be completed?
That is my point.
Mr. Dermot Byrne
There is a timescale for those projects. Part of that lies in the developers' hands. ESB Networks is also developing the grid connections. All that work is taking place.
We constantly hear from people who have their projects stopped from coming under the blue line or from being connected and active on the grid. What are the constraints that will prevent projects under the yellow line coming under the green line in 2009?
Mr. Dermot Byrne
As we go forward, the developers of those individual projects that make up that yellow line will be connected to the grid, depending on how quickly they can build their stations. That is all happening.
It has nothing to do with their being constrained by EirGrid.
Mr. Dermot Byrne
We also have to put in place the connections, but all that has been agreed with the developers. The developers would like us to have that done now, but we are working hand in hand with them. That is all happening.
The next stage, which is the interesting process, is Gate 3. Prior to Christmas the regulator issued a direction in regard to Gate 3. He said that while Gate 1 had a capacity of 380 MW, Gate 2 a capacity of 1,300 MW, Gate 3 will have a capacity of 3,900 MW plus an indeterminate number of conventional plants because we have a considerable number of conventional plants in the queue which are also needed for security of supply. Over the next two years we, together with ESB Networks, will work through those, issue contracts and agreements and enter into agreements with those developers. We will put in place contracts with those developers for more electricity generation than we have connected in this country since the foundation of the State. This is a huge undertaking.
I am slightly confused. The top of the yellow line on the graph is more or less in line with projects that would be operational in 2013. Is there a putative yellow line on top of every one of the lines signifying the estimated projects for the new few years?
Mr. Dermot Byrne
I understand the Senator's point. I ask members to think of the green lines as what we have to do.
Yes.
Do they not represent what has been done? I thought they represented projects that were active.
Mr. Dermot Byrne
The green lines up to 2008 are the projects that have been done. The lines beyond that point is what has to happen.
Fair enough.
Mr. Dermot Byrne
The contracts that are in place now are shown on the yellow line, which brings capacity up to 2,500 MW. Those projects are being developed. Do members have the latest version of the graph, which also shows a blue line?
Mr. Dermot Byrne
The blue line represents the Gate 3 process.
Mr. Byrne is assuming there will no delays or snags with the contracts signified by the yellow line. Issues such as grid connections and objections to planning applications will arise.
Mr. Dermot Byrne
Yes, they will.
Under this graph, Mr. Byrne is estimating that all the current projects represented by the yellow line will probably take up until 2011, 2012 or possibly into 2013 before they will produce power. At that time the projects represented by the yellow line will then be represented by the green line.
Mr. Dermot Byrne
They will come on stream gradually. Some of them will come on stream next year and some the year after.
That is why the green line increases each year up until 2012 to 2013. That increase signifies projects under the yellow line proceeding and then coming under the green line.
Mr. Dermot Byrne
Those under the yellow line will proceed and come under the green line.
Yes.
Mr. Dermot Byrne
The blue line on the graph shown above the year 2010 signifies that by 2010 we will have issued contracts to a capacity of 3,900 MW to wind developers. They will come on stream up to 2020. The biggest issue in all of this, to which I will return, is developing the grid. Grid 25 is central to this happening. I am simply setting the scene here, but Grid 25 is central to delivering that objective. I want to return to this issue.
How far can EirGrid proceed without the development of the interconnector? How much of this energy can be absorbed into the grid without the development of the east-west interconnector? A point will be reached at which it will not be possible to absorb any more energy.
Mr. Dermot Byrne
The interconnector will enable us to facilitate the renewables. The interconnector will be in place by 2012 or that type of timeframe. That is what we are aiming for and that is what we will do. We can absorb the energy, but the problem is that instead of exporting it, it will be turned off and that is not very effective.
EirGrid will not be able to shed more conventional plants until it has access to the interconnector. It will need to have alternatives for when the wind does not blow if the interconnector is not in place.
Mr. Dermot Byrne
Absolutely. The interconnector will not be a silver bullet in this process. A number of processes have to happen.
I accept that but the format cannot be changed. We will still have to have the other capacity in the system indigenously if the interconnector is not in place. Is that correct?
Mr. Dermot Byrne
We will have a combination of the interconnector plus conventional power plants because there are times when wind does not blow, as we know.
We will need almost 100% of the other capacity on standby until the interconnector is in place.
Mr. Dermot Byrne
This is where the generation adequacy report comes into play. We take account of wind energy in the generation adequacy report. We allocate wind at capacity value. It has a capacity value, but it does not have the same capacity value as, for example, a conventional power plant which has energy available at any time.
In order to sustain Government policy, when the choice is presented and we have full capacity, is EirGrid allowed to prioritise buying energy from renewables as opposed to buying it from conventionals? The conventionals will be operating on the ground. If the energy is available to EirGrid and it buys it every hour, on a certain hour when it needs X kW of energy, if it is available mainly in wind energy and EirGrid has a choice between buying renewable energy and another energy source, which will it buy?
Mr. Dermot Byrne
Wind energy is given priority to be dispatched.
Is that legislated for or how does that happen?
Mr. Dermot Byrne
It happens through the trading and settlement code, under which we have an obligation in regard to the cheapest plant.
EirGrid has an obligation in that respect.
Mr. Fintan Slye
That happens today when the wind is blowing. The conventional plant also exists and will have offered itself into the market. If the wind is blowing, we could have 800 MW or 900 MW of wind energy available. As long as the wind can be accommodated on the system it will be dispatched first. Then we would find the most economic set of conventional generations to make up the rest of the energy required.
I thank Mr. Slye for that.
Another alternative to wind energy is ocean energy, which is probably more reliable on a consistent basis. If that is built into the system, would that, even without the interconnector being in place and I am not harping on about the interconnector, allow EirGrid not to depend so much on conventional fuel? The development of it is perhaps a few years hence, but it is critical to having a sustainable and more reliable renewable energy.
Mr. Dermot Byrne
Absolutely. What we value here is diversity. If we have diversity between the different types of renewables, that helps and increases the capacity value. That is the issue with wind. If the wind is not blowing in one part of the country, it tends not to be blowing throughout the country. Nevertheless, there is some diversity and we analyse such diversity in the generation adequacy report between, for example, generation in Northern Ireland and southern Ireland. The Deputy will note from the report that there is a value to diversity. However, if there is a high pressure system over Ireland and we tend to see wind at a very low level. That is a reality with which we have to work. If we can supplement that with wave energy, which is not working in synchronism with wind, that adds diversity to the system which has to be of value to us.
How much wind energy has been put on the system?
Mr. Dermot Byrne
As of now there is 1,000 MW of capacity on the system. It is delivering in the order of 10% or 11% of energy. We do not have the figures for last year but we will get them soon. We have a target for 2010, which is the generation of 15% of energy from renewables. The graph shows that we are on line for delivering that target. We are also on target for delivering the 40% but I do not want to underestimate the challenges, and that is why I want to come back to Grid 25.
Mr. Byrne said EirGrid prioritises wind. In a major wind farm near to where I live, the turbines are switched off for considerable amounts of time when the wind is actually blowing.
Mr. Dermot Byrne
I do not know about that. The Senator would have to talk to the developer about that. We do not turn turbines off. If the wind is blowing, we take it on the system. The only time we might turn turbines down is if there is a particular problem in the area, but we have very seldom done that.
Mr. Fintan Slye
The only other possible reasons could be that the wind turbines are turned off for maintenance or that the turbines shut down in high winds. One gets a high speed shut down when the wind is too strong for the structure of the turbine.
It is not the case that they are deliberately shut down.
Mr. Fintan Slye
No.
Anecdotal evidence from locals who live in the area, which is near Deputy Fitzpatrick's home place, is that it is not functioning fully and that they believe the reason is that priority is given to other sources.
Mr. Dermot Byrne
That is certainly not the case. We can answer that question more directly if the Senator has information for us. We can talk off line on that.
The next line refers to making it all work, which is, looking at the challenges for EirGrid. We have identified three challenges. The first is the operational challenge, which we addressed here. Given the variable nature of the wind resource, obviously our forecasting tools are very important. For example, the weekend before last, there were very high winds which were very forecastable and consistent. Over those two days, the total energy we delivered from wind was approximately 25% or 26% of the total energy required on the system for those two days. That was very high.
Is that the highest ever produced?
Mr. Dermot Byrne
Yes. In energy terms, it is the most produced over two days. At one point, we were probably generating approximately 40% of the total amount.
Did EirGrid issue a statement on it?
Mr. Dermot Byrne
Perhaps we should.
It certainly should.
It caused more problems than it solved because it knocked out power——
Mr. Dermot Byrne
Last weekend was different.
——for 30,000 homes.
Mr. Dermot Byrne
That was the weekend before last.
Sorry.
Mr. Dermot Byrne
Last weekend was different. There were very high winds but they were very blustery, blowy and stormy winds, so forecasting was very difficult. It was very difficult for our engineers to manage through that process.
During those two high output days from turbines across the country, which power generating stations were idle or switched off for that period? For example, would EirGrid target somewhere like Moneypoint? Does it target the most polluting power stations in terms of switching off or does it look purely at competitive pricing after wind has been prioritised?
Mr. Dermot Byrne
It is competitive pricing. That is what we are obliged to do.
Mr. Fintan Slye
It is based on the bids submitted by the generators themselves, so it is the most economic dispatch of the conventional plant that will ensure security of supply.
Do the bid prices have to factor in the cost of carbon?
Mr. Fintan Slye
Yes, from this year on. The generators and the Commission are looking at that.
I know they have to do so for the consumer. The consumer pays for the cost of carbon. At the wholesale price level, does the bidding system factor in the cost of carbon because that is the whole point of that policy, that is, that one gives a competitive advantage to people who are not producing carbon in terms of price?
Mr. Dermot Byrne
Carbon is included.
Turning Moneypoint off is a bit of a challenge.
I do not want chats across the room.
Mr. Dermot Byrne
That is the operational challenge we face.
The other challenge we face is around the generation portfolio itself. We are talking about transforming the generation portfolio. In terms of developing the wind and ocean resource, we must ensure we have the other generation to fill in when wind is not there. Getting that whole portfolio right is very important. That must be managed over the next ten to 15 years.
The last challenge is the infrastructure which brings me to Grid 25. The adequacy of the transmission grid is essential. I will focus on Grid 25 for the reminder of my contribution. There are three different voltages shown on the graph circulated to members. The red circuits are the 400 kV network from Moneypoint, from the south west up towards Dublin. The 220 kV network is the green one and the 110 kV network is the black one. As members will note, there are more than 6,000 km of network. Using the analogy of the roads, I suppose 110 kV can be compared to the national roads, 220 kV can be compared to the dual carriageways and the 400 kV can be compared to the motorways.
If I strip away the 110 kV network and show the bulk transmission system, which is the high capacity system, 220 kV and 400 kV, that is the system which links the different regions. That really provides for the bulk transmission of power from one side of the country to the other. In terms of developing a very large renewable resource, in particular on the west coast, it is in this system that we need to beef up the grid. That grid has not substantially changed for the past 20 years and we now need to invest in it. Our engineers have been analysing this.
When we factor in the wind resource, using the findings of the all-island grid study, and the national spatial strategy, in terms of where development will take place, the big lines show the primary corridors needed for reinforcement.
Why develop the grid? Everybody here will understand that the grid itself, which is the backbone of the power system, is essential to provide a platform for economic growth. We are all very conscious of the situation in which the country finds itself in terms of economic growth, but we will rebound. We must ensure the grid is there to facilitate that economic rebound, which we expect. The grid is also an enabler for regional development. We want every region and county to be able to participate in renewed growth and we certainly do not want the grid itself to be a barrier in any county or region to economic growth.
Of particular relevance to this committee is the access to the indigenous renewable resources, mainly along the west coast, although not confined to it.
I understand there is much demand in Europe for a supergrid to be developed so that we can be less dependent on imported gas from Russia. If we became exporters of renewable energy to the supergrid, would this Grid 25 be the maximum we could export? Are we planning far enough ahead?
Mr. Dermot Byrne
Absolutely.
Instead of thinking of our needs, we should think of developing a system in which we can be net exporters of energy into a European market which the European Union is anxious to develop. Any works being done or planned should be planned in such a way that not only will we meet our own demand, but we can be a net exporter which, in turn, could result in the development of a whole new industry here in terms of the manufacture of turbines, advanced technology, etc. We could become the centre of future development in that area. We should be thinking along those lines as opposed to being concerned about our needs into the future. I intervened in order to inquire whether Grid 25 will be the be all and end all in the context of our being able to export energy.
Mr. Dermot Byrne
In planning Grid 25, we made provision for further interconnection. It is, therefore, quite robust. It only takes into consideration the onshore grid but it is pretty robust in the context of additional interconnection to, for example, France. We are not concluding our studies with Grid 25. We have a number of other studies on the agenda, one of which relates to interconnection with, perhaps, France. I will ask Mr. Cooke to comment at this point.
The interconnector with France would connect us with the European market. If Europe is anxious to develop the concept of a supergrid, surely grant aid must be available to Ireland in the context of developing a system that will allow us to export energy to the Continent.
Mr. Dermot Byrne
Yes, that is the study on which I would like Mr. Cooke to elaborate.
Mr. Andrew Cooke
As Mr. Byrne stated, the emphasis behind Grid 25 was to consider the onshore network requirements in Ireland.
What is meant by onshore network requirements?
Mr. Andrew Cooke
Such requirements are those which broadly relate to an Irish context.
Do they relate to the entire island?
Mr. Andrew Cooke
Yes. It would be robust up to at least 40% renewables penetration and probably somewhat more than that. Two complementary studies are ongoing and these must almost be taken in conjunction with Grid 25. The first of these studies is aimed at examining the case for further interconnection, be it with the UK or mainland Europe. An important component of illustrating whether further interconnection is a good idea will relate to renewables and the case for the export thereof at times of high wind in Ireland. The second study is examining how we might integrate large volumes of offshore wind, most likely on the east coast. When one takes these various aspects — namely, the network requirements in Ireland, integrating offshore wind energy into the system and building interconnection from this country to mainland Europe or the UK — together, they form the seed of how Ireland might ultimately be integrated into a European supergrid.
Mr. Cooke used the term "might ultimately". Is it not EirGrid's vision that it would of course be integrated into such a supergrid? In the same way Russia and the Ukraine are seen as suppliers of gas to Europe from the east, Ireland could equally be seen as the supplier of clean energy from the opposite direction. I presume our guests are probably of the view that Ireland will be part of the supergrid.
Mr. Andrew Cooke
We would obviously like that to happen. It is an extremely interesting challenge and it will give rise to some very large projects, in which it will be good to engage. If it moves in that direction, we would be extremely supportive.
I am disappointed by Mr. Cooke's use of the phrase "If it moves in that direction". There is no question that it will move in said direction.
Mr. Dermot Byrne
We are working with our peer TSOs in examining this matter. I am not sure if the Senator is aware that just prior to Christmas the various European TSOs entered into an agreement to form a new organisation called the European Network of Transmission System Operators for Electricity, ENTOS-E. This body, of which EirGrid is a founder member, was formed under the auspices of the European Union and the third package is up and running. The study to which Mr. Cooke referred involves work we are carrying out on our own. More importantly, in terms of a supergrid we will be working with our peer organisations. It is not merely a case of EirGrid working towards this goal, it must be a combination of all the parties involved.
The first aspect of this work is investigating whether the establishment of a supergrid would be feasible. It is fine to discuss the matter but we may ultimately have responsibility for delivering the supergrid. Such a project must be feasible in technical and economic terms. A great deal of work will be required in order to achieve this goal. We have the vision but it is a case of whether it will be possible to deliver upon that vision. We must assess the costs and challenges involved. We want to engage in work relating to such an assessment and the Senator may rest assured that we will be extremely proactive in respect of it.
I apologise for interrupting Mr. Byrne.
Mr. Dermot Byrne
There is no problem in that regard. It is great to be asked questions by members.
On the considerations relating to the development of the grid, it must be safe and reliable. In addition, it must, to a certain extent, be future proofed. Even this discussion in which we are engaging has focused on the grid being future proofed regarding whether it will be robust beyond 40% in the context of the supergrid. The grid must also be affordable, fit for purpose and smart.
I used the word "smart" previously. The grid is smart and is getting smarter. However, we need to integrate all partners into the power system through the use of, for example, smart meters. Such meters provide the mechanism by means of which people can, in their own homes, become actors in the power system. The objective is to optimise the operation of the entire system. That is the real advantage of smart meters. We are not directly involved in this regard and these meters will be involved by ESB Networks. On the incorporation of consumers as actors in the system, we will be involved in the context of ensuring that the power system operates seamlessly and optimally.
With regard to the development strategy relating to the grid, our analysis points to the need to double the capacity of the bulk transmission system to which I referred earlier. The way we propose to achieve this increase in capacity is to upgrade as much of the existing system as possible, which will minimise the need for new build. However, there will be a degree of new build. Overall, the doubling of capacity will involve the construction of over 1,000 km of new circuits and the upgrading of a further 2,300 km. We will use best practice and new technology in this regard. We must ensure, from a societal point of view, that we get the balance right in the context of reliability, cost and the impact on the environment and communities. We are conscious of the fact that new lines must be run through existing communities.
Mr. Byrne stated earlier that the system is similar to a road network, which is the point I was trying to raise. We have often been behind the times in terms of what we construct. For example, we put in place roads with two lanes when they should have had three lanes. As a result, there has been a need to spend further money on upgrading what was done perhaps ten or 15 years previously. I hope that the type of behaviour is a thing of the past.
Mr. Dermot Byrne
The Chairman has hit the nail on the head. In Grid 25 we have taken a long-term strategic perspective. The next slide shows that this is more cost effective. Building the third lane now rather than later is more effective. That is why we are taking the strategic view because it will allow us to work towards our long term goals. An incremental approach would be less costly in the short term but it would be more expensive in the long term.
What is the estimated cost relating to Grid 25?
Mr. Dermot Byrne
We estimate that it will cost €4 billion during the period to 2025.
Does the Chairman want members to wait until the end of the presentation to ask questions?
If members wish to raise particular points in respect of certain matters, that is fine.
Mr. Byrne stated that the cost relating to Grid 25 will be €4 billion. How does EirGrid propose to finance the project? Will the infrastructure involved be owned by the ESB but managed by EirGrid or will it, as is the case with the interconnector, be owned and financed by EirGrid? Will there be a State element to the financing required? The Minister may make a statement to the effect that the State is investing €4 billion in upgrading the grid. However, the ESB will then state that it is investing €4 billion in such an upgrade in order that renewable energy might be facilitated, which is the same funding. How is the financing structured? That is a significant amount in the current context. EirGrid will clearly not be allocated taxpayers' money in the current climate. Is this ESB money or money borrowed by EirGrid?
A sum of €4 billion is nothing when compared with what we are giving to banks.
Mr. Dermot Byrne
The model we have is the customer pays through his or her bill for all the elements that go into delivering electricity to a house. The bill covers generation, transmission, distribution and supply. They are bundled, not split up, in the bill. Transmission represents about 10% of the cost of a unit of electricity. That will continue because, at the end of the day, the customer benefits from this. Over the past 80 to 90 years, that is how the 6,000 km transmission grid we have was built. The investment has come from billing and that is the way it will continue to be funded.
Is there a different model now because 50% of generation is not provided by the ESB? It is factored into the regulated price, which is the ESB price, but the company only generates half the electricity for the domestic market. How will EirGrid recoup the money?
Mr. Dermot Byrne
We recoup it from all customers, whether they are customers of the ESB or any other supplier. We collect the money through the transmission use of system charge, which is a regulated tariff determined by the regulator. It amounts to €250 million per annum. The customer does not see that because the charge is bundled. The supplier pays us and it, in turn, charges the customer. All of that flows from all customers and not only the ESB.
The Deputy is right in a sense when he asks who is charged with building it and this is where the model changes because the Government has made a policy decision to transfer the ownership of the transmission assets from the ESB to EirGrid. That has not happened yet and if the current model were to continue, the ESB would fund that. We are calling for it but the ESB will fund it. We will oversee its development. However, the model is to change and we are waiting for the Minister. He signalled as recently as the economic recovery plan that this will happen.
This involves a great deal of money. If no legislation is introduced to transfer the assets to EirGrid, the ESB will continue to own them as they are built but it will not pay for them. Mr. Byrne said EirGrid raises €250 million a year by rightly charging customers for transmission. All the generators, including the ESB, are charged. Presumably, this charge will fund the building of Grid 25 but it will be owned by the ESB and, therefore, there will be an asset on the ESB's balance sheet, which has been paid for by all the other generators.
Surely Grid 25 cannot go ahead because of the ownership of the asset, which would be ambiguous.
Mr. Dermot Byrne
It will go ahead one way or the other.
EirGrid needs to have ownership of the transmission system. The complete severing from the ESB, which has been delayed, needs to happen in order that the investment required on behalf of the State is made and it is clear this problem does not arise. A separate company cannot be expected to pay for Grid 25 and be left with a question mark over its ownership. It needs to be clear that EirGrid owns it. No investment can take place until total separation between the companies happens and EirGrid assumes ownership of the transmission network.
That is not happening politically. The legislation was supposed to have been done and dusted by the end of last year and now we are being told there is no plan to introduce the legislation to transfer ownership, which is why a separate Bill was introduced to facilitate the interconnector that will be owned by EirGrid, which is welcome. Mr. Byrne is correct that the investment will proceed anyway because it needs to happen but the other generators that provide 50% of the generation capacity are helping to fund Grid 25, which will become an asset on the ESB's balance asset. Am I misreading this?
Mr. Dermot Byrne
I absolutely agree this needs to happen quickly. Given the enormity of what we have to do, it would be more effective for us to manage the total transmission business. That is our clear position and it is also the Government's position. It needs to be progressed but that is Government policy, which was recently restated in the economic recovery plan published before Christmas. It is a matter of timing as to when it happens.
We are investing in transmission under the existing model and that is working. It will be more effective under the new model but it is working currently under the old model. We give the money we collect to the asset owner. We collect €250 million and we give €150 million to the ESB because it owns the assets. That helps the company to pay its debts and so on. Under the new model, we will retain the money and it will help us to pay the debts. The money flows are straightforward. It is a regulated business and there is little borrowing risk. This is as safe as one can get in the current or any other climate.
If EirGrid owns the transmission grid, will the network management and maintenance remain the responsibility of the ESB?
Mr. Dermot Byrne
The Minister has announced a process under an independent chairman. We are waiting for that to kick off but he has announced this is what he wants to do. That process will tease many out of the issues around this. It is probably not helpful to talk that through now.
We will invite the Minister to appear before the committee and we will ask him these questions. Perhaps we will move on. We cannot solve this problem today but it is up to the Minister to answer to the committee.
Presumably, apart from the €4 billion, EirGrid will seek State investment anyway. Is that correct?
Mr. Dermot Byrne
This is normal transmission investment. We have invested in the grid year on year for the past 80 years through the bill. The money coming in through the bill enables companies such as ours to borrow to build. It is factored into the regulated price.
We are paying but it is a different way of doing so.
Mr. Dermot Byrne
The consumer gets the benefit of this and, therefore, he or she pays for it. That is the way business is done.
We will take up the issue of the transfer of assets from the ESB to EirGrid.
On the funding issue, which is complicated, while nothing is being done directly to reduce our carbon emissions, the grid will facilitate additional renewables. Carbon credits that are achieved could be credited against this investment.
Mr. Dermot Byrne
I would have to think about that and get my head around it.
If this grid was not upgraded and it was just forgotten about, the whole aspiration to reduce our carbon emissions by this means would not be possible.
Mr. Dermot Byrne
The key point is that the customer pays for this but the customer also benefits from the fact that we now have wind energy on the system which is facilitated by this investment. The customer is looking at the total bill, not just at this piece of it. We estimate that the total bill will be more or less the same because there is growth as well so the total bill will not be impacted upon hugely, maybe by about 3% in total by the end of 2025, which is quite a small amount. On the other hand, by doing it we are now facilitating the reliability and economy of this fantastic resource. There might be a small extra charge here but a much reduced charge and a much greater security of supply——
It might not become cheaper but it will not become drastically more expensive if oil became so again.
Mr. Dermot Byrne
Exactly. The IEA is very clear that the era of cheap oil is over and we all understand that. Whatever about the current dip, the long-term view is that oil will become dearer and it is a finite resource.
The next slide in the presentation shows expenditure by region. For example, we are investing €750 million in the north west. This slide shows how the €4 billion will be spent in each region. We will be communicating this information in each region and looking for the support of stakeholders in each region for this investment because it is essential for the delivery of jobs in those regions and in those counties.
The next slide shows how the Grid 25 strategy is essential to support regional development, reliability and security of supply, renewable energy, carbon emissions, connectivity to the European grid and ultimately to a super grid as that emerges. The strategy underpins the competitive electricity market.
With regard to next steps, the Grid 25 strategy will be communicated and we will be looking for stakeholder support. We will then be bringing forward the proposed solutions to give effect to Grid 25, the particular circuits we need to build and the new stations. Those proposals will be included in the planning process and they will be brought to the strategic infrastructure board. We will be consulting with all parties with regard to those projects and we will then turn to project development and delivery.
The next slide refers to the challenge in the Grid 25 strategy, which is about achieving the correct balance between security of supply and reliability, cost and efficiency and the impact on the environment and on communities. More generally, the challenge associated with renewables is significant. We are talking about a revolution in terms of the power system in Ireland. It is a case of transforming the generation system and the transmission grid and also distribution through smart meters. There is a revolution under way and it will be a huge challenge to construct the renewable generators, connect them to the grid, reinforce the grid, construct the interconnectors and the super grids.
I wish to make a point about meeting this challenge. I have an 18 year old son who is currently filling out the CAO form. I want to warmly invite young people to consider engineering as a career with very good prospects, given what we have to do in this country. We have a shortage and there is an international shortage so I want to give the message that there are very good career prospects in undertaking what we have to do in revolutionising the power system in Ireland in order to deliver on our sustainability agenda.
The next slide shows that in order to meet the challenge we need support from all stakeholders and I emphasise that this is essential. We need support from all those mentioned, including public representatives such as the members of this committee and the various Oireachtas committees. We welcome this opportunity to make a presentation, answer questions and have this discussion.
The final slide refers to the delivery of Ireland's climate change strategy which will require EirGrid to expand and upgrade the grid. This will require the proactive support of all stakeholders and we look forward to working with the members of the committee and answering any further questions from members.
My question concerns the Grid 25 strategy. I am a little disappointed that Mr. Byrne has listed the issue of underpinning competitive electricity markets as being the last of the priorities. I would have thought a competitive price for electricity should have been much higher up in the list of priorities. I am not dismissing the validity of all the other priorities. It is not essential that every county should produce electricity. I do not care whether it comes from Cork or Offaly or Laois. I do not mind where my electricity comes from when I plug in an appliance. It may be a good form of politics but I would have thought a good competitive price available to industry and consumers should have been a higher priority as it would keep jobs.
Mr. Byrne referred to the upgrading of the 400 kV lines of which there is currently 400 km. He stated that the vast majority of the 1,150 km to be built will be 400 kV lines. Will this wash with the Irish people? There are just two big 400 kV lines running from Moneypoint to the east coast. I think they were constructed about 20 years ago. I am familiar with them because they run very close to where I live. Will EirGrid be able to construct almost quadruple the length of those lines and 400 kV pylons across the country? I do not know how realistic is this proposal. I wonder if people will allow EirGrid get away with this. EirGrid's whole strategy is based on this proposal.
Will the east-west connector between Ireland and the UK be 400 kV or is it possible to have a higher voltage connector? I refer to the map and the pyramid corridors. The vast majority of the extra supply will be required on the east coast. Would it not be an easier undertaking to have an interconnector from east of Dublin under the Irish Sea rather than thinking it possible to quadruple the amount of 400 kV pylons right throughout the country? There are lines running from Mayo, Galway and Cork, all heading towards Dublin. I would flag to the delegation that there will be a major problem in getting that through.
On a point of information, it was stated that approximately 11% of what was produced last year was in the form of renewable energy. How much of this is hydro power versus wind power? How much is wind power?
I do not know the word for it — I mean the micro turbines which farmers will be encouraged to have at their dairies. They can supply their own source and then they can get supply back. I understand they can feed directly into the system almost into the power lines at their own house rather than having to go back through the system. Would more of this in the system obviate the need for these 400 kV lines? How many of such connections will be possible? I will not call them domestic connections but perhaps every school in the country should have a little wind turbine at the gable end supplying the school and encouraging green activity and during school holiday seasons they could supply power directly back into the grid. Is this feasible for those small turbines? I could envisage a situation where there would be thousands of such connections throughout the country. The emphasis is on, as Mr. Byrne says, getting the motorways right. Is the system at a lower level, below 110 kV, capable of absorbing multiple collection points and a metering system? Where are we regarding the tariff? I believe the regulator decides that, but what is EirGrid's position on the level the tariff should be? It will have major implications on whether some things can work.
Mr. Dermot Byrne
I apologise if the Deputy thought in any sense I was downplaying the competitiveness issue.
It was the last one on the chart.
Mr. Dermot Byrne
If the Deputy looks at the first point, I mentioned "towards secure economic and sustainable energy". I am not prioritising any of those. A priority is a priority and I am not assigning priority or ranking in the list. Of course competitiveness is critical especially given the climate we are in at the moment and the need to get Ireland competitive again. I have talked about the kind of impact we are having through building the interconnector, operating a competitive market and all those kinds of issues.
In terms of the grid itself, we have talked about 400 kV. Given what we have to do, the alternative to 400 kV is multiple 220 kV. The big advantage is that the capacity of one 400 kV line is three times the capacity of a 220 kV line. They look very similar. The pylons in one case might be 10% or 15% higher than in the other case. They cost approximately 30% more. However, they deliver three times the capacity. To put it another way, instead of one 400 kV line we might need three 220 kV lines. What we are trying to do here is minimise the impact on new build. We are very conscious of the issues the Deputy has raised regarding getting the balance right between impact on customers and communities.
On the east-west interconnector we are using a particular technology — high voltage direct current of 500 MW. It is about the size of a large generator, similar to the size of what the ESB and Bord Gáis are building in Cork. It is one element of a solution but cannot be the total solution.
I am sorry if the graphs gave a misleading impression on the flows of electricity. When there is high wind and we want to export some of that wind-generated power, the dominant power flows will be from the west across the country through the interconnectors and across to the UK, picking up load along the way. When the wind is not blowing, the flows will probably be in the opposite direction, providing reliable power supply to every town on the west coast and the east coast. It is critical for security of supply and access to the grid to have an adequate grid, not just for Dublin, Cork or Galway but also for every town so that people are able to plug in. The Deputy talked about plugging in. People want to have a reliable power supply. For those who have a micro turbine or whatever, if that is not working they want to be able to rely on the grid. The grid needs to be there to provide that security of supply.
There is much talk about micro turbines. ESB Networks is working on putting in smart meters. As we are a key enabler in enabling net-metering — exporting out of the grid as opposed to just importing — we just need to wait and see. We are not involved. We have large demand for big wind farms to connect to the grid and that is what we need to deliver. We will be put under great pressure to deliver the 3,900 MW. They are all big wind farms and are not micro turbines. We need to export and facilitate many megawatts, moving mainly from the west coast to its destination. That is the task we have. We cannot evade that task; that is the task we are given.
There were two points on which I remain unclear. Mr. Byrne gave me an answer in a different format that I did not understand on the east-west interconnector between Ireland and the UK. Is the amount it can carry the equivalent of a 400 kV line or a 220 kV line? He also mentioned 500 MW. How does that relate to——
Mr. Dermot Byrne
It is a different technology. It is 500 MW.
How does that relate to a 400 kV line?
Mr. Dermot Byrne
A 400 kV line can carry approximately 1,500 MW at its maximum.
So it would carry about three times the amount that a 400 kV line would.
Mr. Dermot Byrne
It is the other way around.
It is one third.
One third is quite small.
Mr. Dermot Byrne
If I can just——
It is direct current so it is a different issue.
Mr. Dermot Byrne
It is a different issue. They are not directly comparable here.
Instead of quadrupling the amount of the 400 kV power lines that are going to go across the country, which we all know will be difficult to achieve, did EirGrid ever investigate running an underground cable around the country? Would that be cheaper? EirGrid will need to consider that. It will not get An Bord Pleanála approval unless it has done the figures on that.
We should not get into a discussion on power lines at the moment. That is not this——
I thought that was what that document was.
No, that is not our committee's function. We are here to ensure there is power.
I will finish at that. I respect the Chairman's view. I thought it was directly——
Mr. Dermot Byrne
Perhaps I might make a brief response.
Does Mr. Byrne understand my question?
Mr. Dermot Byrne
Of course we are investigating all technologies.
However, there is no mention of it.
Mr. Dermot Byrne
In the context of the north-east power lines of course we are talking about circuits here. We are looking at all options.
Will EirGrid consider going around the country?
Mr. Dermot Byrne
Perhaps I might be allowed to answer the question. In the context of the north-east 400 kV lines we are dealing with the issue of underground versus overhead. We will be issuing a detailed report on that matter shortly.
I do not want to draw Mr. Byrne into that matter because it is a significant issue.
Mr. Dermot Byrne
A report will be in the public domain very shortly.
I am not talking about underground, but under the sea around the coastline. If it is possible to bring a power line from Britain to Ireland under the sea, surely it could be brought around the coast past Cork and Tramore, and back up to Dublin.
Mr. Dermot Byrne
That does not really deal with the onshore requirements of towns such as Mullingar, Cavan and others. Grid 25 is really about the onshore grid serving every town and ensuring that the grid does not become a barrier to regional development and that we access the generation.
I will close with these comments because I do not want to stretch the Chairman's patience too much. The message I have got today is that EirGrid sees no other option — I consider this as very blinkered vision — other than quadrupling the number of 400 kV pylons to achieve this. I have heard no other options.
Mr. Dermot Byrne
The Deputy has used the word "quadrupling". We are not quadrupling it. We are talking about perhaps 800 km of overhead lines.
On top of 400 km.
Mr. Dermot Byrne
On top of 400 km.
That is trebling. I was not far off. Does EirGrid believe that will work? I have not got the sense that it is seeking a way to avoid doing that.
Mr. Dermot Byrne
We should consider what other countries are doing. There are more than 100,000 km of 400 kV lines. We all listened to President Obama and his vision for smart grids in the US. One of the scenarios in the US would be an additional 19,000 miles of not 400 kV, but 765 kV lines in order to tap into its renewable resource. That is the kind of grid being considered in order to deliver in the US. We are ahead of the curve here because we have already got our Grid 25. The US is now talking about developing its Grid 25. We will be using best technology, within all the constraints under which we must work. We believe it is entirely doable and that is what we will be bringing forward.
Does the €4 billion include the cost of going underground at all?
Mr. Dermot Byrne
There will be certain areas where it will be appropriate to go underground. We already have underground cables, for example in the Dublin area. We are building a circuit across the Shannon Estuary and of course across Cork Harbour. We are familiar with underground technology. The HVDC technology we are building across the Irish Sea is state-of-the-art technology. We will use this technology where it is appropriate, but it is not always appropriate. Everybody here will understand from the independent report commissioned by the Minister that 400 kV to any large extent is just not technically or economically feasible going underground.
I am not sure I agree with that statement definitively. However, that is for debate on another day. There have been other reports. Ironically a delegation from another committee was supposed to be in Copenhagen today to ascertain what policymakers there had done in terms of legislation requiring future grid infrastructure to go underground. It is not a clearcut debate. Perhaps it is not a debate for today.
I would like to make a comment about the national pay agreement, which is now largely defunct. I ask the delegates from EirGrid not to consider my comments in this regard as a low blow. I would like to put them on the record nonetheless. Last week, many people were outraged when they learned that the ESB is implementing the first phase of the national pay agreement at a time when we are trying to reduce the cost of producing energy in Ireland. I hope EirGrid will not follow that lead. Perhaps such decisions are taken by the ESB — I do not know. I ask the representatives of EirGrid to comment on it, if they can.
I would like to respond to some of the other things that have been said by the EirGrid delegation. I am pleased that today's presentation contained a section dealing with electric vehicles. The report that will be produced by this committee will set out a far more ambitious target than the current Government target, which is to ensure that 10% of vehicles are electric by 2010. In my view, no vehicles other than electric vehicles will be bought after 2015. It is obvious that there will be a process of phasing out petrol and diesel engines. There will be a second-hand market in non-electric vehicles for ten, 15 or 20 years after 2015. It is quite possible that far more than 10% of vehicles will be electric by 2020. The true figure may be closer to 40% or 50%. If that is the case, will Grid 25 be able to cope? If not, it will need to revise its plans.
I agree that the level of infrastructure that has been mentioned needs to be put in place. It does not matter whether it is put in place underground or on the ground. It needs to be put in place and paid for. Perhaps that infrastructure can be doubled up through the provision of broadband infrastructure. I am aware that the ESB has done that quite successfully on its networks in certain parts of the country. EirGrid needs to consider doing the same thing. The grid needs to be built from west to east. Wave farms and wind farms with a significant generation capacity need to be built offshore. What would be the thinking if a wind farm that can produce 1,000 MW or 2,000 MW of energy were to be built off the coast? Developers are talking about very large-scale offshore wind farms.
Is there anything to be said for putting a DC line in place from the west coast to the east coast as part of the grid infrastructure? It is obvious that it would not be possible to take smaller lines off such a line, as it would not be an AC line. If a direct current west-east interconnector were in place on the island of Ireland, many planning problems would be resolved. Such an interconnector would take power in a renewable way from where it is produced to where it is used on the east coast. It could potentially link with an interconnector to Britain, if we wished to export electricity. The reality is that most of the power on such a line would not be needed in the midlands. We are being asked to put infrastructure in place to carry a great deal of power across the midlands on controversial pylons. Has EirGrid thought about that? I appreciate that it is not easy to integrate DC lines into an AC grid, but we need to consider how best to develop infrastructure that can take large amounts of power from one side of the country to the other side of the country. Essentially, we need to build a tunnel to facilitate the renewable energy projects on the west coast, where there are better wind speeds and wave sizes. Ironically, all the big offshore wind projects currently planned are on the east coast. I do not expect that to be the long-term vision.
The Government target has been upgraded to make it more ambitious. It is now planned to obtain 40% of energy from renewable sources. Do the witnesses think that is achievable? I presume they will have to say on the record that it is. The target was 33% until a few months ago, but it has now been increased to 40%. Is the upgraded target achievable? How is it envisaged that the pie chart on page 4 of the EirGrid document will look in 2020? At the moment, 11% of energy comes from renewable sources. Perhaps my question has largely been answered in the wind connection progress chart. I imagine that wave energy will developed in addition to energy from other renewable sources.
I would like to speak about the section of the document dealing with the demand for growth. One of the charts in that section points out that there was a demand for 2,000 MW in 1985, but that figure has since increased to over 5,000 MW. If the growth trend depicted in the graph continues, we will face significant challenges. The level of growth we have seen over the past ten years will not be evident in the next ten years. Is EirGrid reviewing its estimate of the likely demand for energy, in the context of what is happening at the moment? Has any such review been factored into Grid 25?
I will conclude by speaking about the cost of grid connection, which is mentioned by project developers all the time. I am interested in getting some detail on how EirGrid calculates the cost of grid connection. Does the cost directly relate to the actual cost of doing the job? Is there a set formula for calculating the cost of grid connection? It seems to vary widely across the country. Are more problems associated with putting the infrastructure in place if it is a greater distance from the grid? Am I missing something in this regard? I have asked all my questions.
Does Senator O'Malley wish to ask any more questions?
No. Many of my questions have already been answered. I thank the Chairman for allowing those questions and I thank the representatives of EirGrid for answering them.
How can this committee assist the work EirGrid is doing? Its representatives have told us that substantial lines will have to be developed throughout the country. It will be hard to get the people to accept that there is a need for additional lines, particularly at the present time. The witnesses are dealing with national issues, but we also need to reflect on local issues. How can the two be reconciled? Can Ireland achieve its targets without needing to add to its present voltage infrastructure?
Mr. Dermot Byrne
A number of questions have been asked. I assure Deputy Coveney that we are conscious of the state of the country's finances and the economy as a whole. A number of complex issues are at stake. All I can say is that we are in discussions with various stakeholders on the national pay agreement that has been agreed. That is all I can say on the matter.
I appreciate that Mr. Byrne cannot go into the negotiations at this forum.
Mr. Dermot Byrne
Deputy Coveney also asked me about electric vehicles. I thank him for his comments on the generation adequacy report, which has helped us to put the target into perspective. People are wondering what impact the target will have on the grid. We have set out the impact it will have on the grid clearly in our report. It depends on the efficiency of the electric vehicles that are introduced. That is measured in terms of kilowatt hours, or kwh, per 100 km. It is also a question of the decarbonisation of the electricity supply system. We have clearly set out the possible benefits of electrification. One of the graphs in the report makes it clear that an electric vehicle with an efficiency rating of 20 kwh per 100 km would not — under the current system, given the current level of decarbonisation — have the effect of reducing greenhouse gas emissions. If we reach the 40% target by 2020, as planned, that will have a very significant impact. The more efficient the electric vehicle, the less it draws down from the system and the more greenhouse gas emissions we avoid. We have produced a graph with some analysis which is worth considering.
If EirGrid has done any detailed work on this issue, it would be helpful if it submitted it to the joint committee as we are doing a report on electric vehicles and their impact on the energy sector and so forth.
Mr. Dermot Byrne
While we have only done the analysis, we would be pleased to talk through the information available to us. We will send the couple of the pages of analysis to the joint committee. I will also be pleased to answer any questions members may have on the matter. EirGrid is not involved in producing business models as our business is the grid and what impacts on the grid. EirGrid welcomes the move towards decarbonising the transport sector.
EirGrid has shown that Grid 25 will be able to handle the load. It is clear the grid is able to handle more than 10% or 250,000 vehicles and as penetration increases, it may become a driver for some investment. That eventuality is a long way down the road and would be picked up in our normal planning cycle. EirGrid does not plan in a single episode but in cycles which pick up changes in our assumptions. For example, we will pick up changes in demand growth in our next planning cycle when we examine developments in the economy this year. These changes will then be built into our plans.
I accept the Deputy's comments on broadband. EirGrid is examining this issue in connection with the east-west interconnector. At relatively little incremental cost we will be able to lay fibre with the cable being laid under the Irish Sea for the interconnector.
On Deputy Coveney's question on providing a DC line as part of west to east infrastructure, EirGrid has always accepted that there is a place for different technologies. HVDC technology has a role to play, including in linking two grids, and potentially in the scenario the Deputy outlined. EirGrid will examine this issue. An example of this is in Brazil where 18,000 MW of hydro-generation from the Itaipu facility is transported via HVDC technology in overhead lines towards Sao Paulo and the main load centres. There is a place for bulk transfer using HVDC technology. That is its purpose and role.
Is it dangerous?
Mr. Dermot Byrne
In what sense?
My question is put as a layperson. It strikes me that, as raw electricity, it is more potent. Is that correct?
Mr. Dermot Byrne
No, a person who touches AC or DC electricity in any form would be killed.
Would it have to be totally isolated?
Mr. Dermot Byrne
Yes, it would be isolated in the same way as existing cables and overhead power lines. As the advertisements show, electricity is a force of nature and safety is of paramount importance.
Can existing pylons be used for DC transmission or must it be transmitted separately?
Mr. Dermot Byrne
It cannot be mixed.
Can it be isolated?
Mr. Andrew Cooke
It would be transmitted as part of a different project. We are examining the potential of the specific project raised by Deputy Coveney of using DC transmission from east to west on the Irish system. Large onshore wind farms are proposed in close proximity in County Mayo. As part of a solution, rather than building new high voltage, alternating current infrastructure, there is potential to build a DC project. We are examining the economics of this potential and technical issues as to whether it would work. While it has some applications in this regard, it would not sit on the same pylons as an AC solution. It would be a separate project with separate structures.
Mr. Dermot Byrne
I have been asked several times whether a 40% target for renewables is achievable. My response is always that targets are fantastic because they focus minds on overcoming obstacles. This is how EirGrid approaches the 40% target. We have set out our stall on Ireland becoming a world leader in facilitating the integration of renewables. The delivery of this target is energising young engineers in EirGrid and we have a number of projects under way to facilitate it. We are taking the all-island grid study to the next stage and examining stability issues. These have different characteristics and the grid will feel different. As a dynamic system it will act differently with significant wind generated power on it. We must, therefore, ensure we do not compromise energy security.
Members must forgive the pun but there is huge energy across the industry behind meeting this target. EirGrid has good relationships with the wind energy associations and we attend one another's conferences to explore the issues. We are all focused on overcoming barriers. The largest single challenge in achieving the 40% target is the development of the grid.
As to what the pie chart will look like in 2020, renewables, including wave technology, will account for a 40% chunk of it. The contribution of wave technology depends on how quickly it comes on stream as it is in the development phase. Wave energy is a major resource which is receiving support and about which there is considerable optimism. We must wait and see how quickly it comes on stream.
What effect will the new gas development in County Mayo have on power generation?
Mr. Dermot Byrne
The Chairman will note from the pie chart that 55% of energy was generated from gas in 2007. The figure for 2008 will be similar. If one projects beyond 2025, when Moneypoint will have closed having reached the end of its life cycle and we have reached the target of 40% renewables, gas will, almost by definition, account for 60% of our power. Turf will also have been eliminated at that point.
We are about to commence a study on the shape of the portfolio beyond 2025. As matters stand, we will have only two legs of a stool. Once Moneypoint closes, a significant element of power diversity is removed, leaving renewables and gas. If winds are not blowing on a particular day or in a particular week, one is 90% or 100% dependent on gas for the period in question. Is this the position in which we wish to find ourselves, given the uncertainty surrounding the physical delivery of gas and the volatility of gas prices? A third leg of the stool may be needed. While I do not know what this will be, we will commission a study to identify what are the options.
Mr. Byrne is inviting a question on nuclear power.
Mr. Dermot Byrne
That is not the case.
He has prompted me to ask a question. It is possible, given stated Government policy, that EirGrid will be prohibited from examining nuclear power as an option. In terms of the diversity of power generation, has EirGrid considered this option?
Mr. Dermot Byrne
What is the third leg of the stool and what are the options? The Senator has identified one option, while another may be clean coal technology or some breakthrough in renewables. Let us not close our minds to what is possible. We all need to think ahead and explore all the options. My approach is that we must do work to identify the options and place the conclusions in the public domain for debate. While I am not an expert on nuclear power or clean coal, I will make available any report we produce. People have referred to having a debate on this issue. The debate is not about whether we should have nuclear power but about what will be the third leg of the stool.
As a country, we set out to develop a proper and advanced information technology sector. We must think in terms of exporting and creating employment opportunities in energy production. People are inclined to believe we will have sufficient power from gas sources but they do not think in terms of the opportunities Ireland, as an island, can avail of to supply power via interconnectors to other parts of Europe. If we still had a steel plant, we would be considering whether to get involved in manufacturing turbines. I understand one of the problems in the wind sector is a shortage of steel. The entire process goes full circle, which makes it more expensive. We should be thinking of the development of a whole new sector here, although that is for another day. To get that sort of thinking out there is very important. We must examine it and see what is feasible and practical instead of just looking at our future energy needs.
Mr. Dermot Byrne
I take the Chairman's point.
To follow up on the nuclear issue, through the interconnector from Northern Ireland, are we getting nuclear power from the UK in the electrical sockets in our houses at present?
Mr. Dermot Byrne
It is mixed in there to a very small extent.
So the more interconnection we have, the more we will be using a proportion of energy which was generated in this way.
Mr. Dermot Byrne
More importantly, we will be able to have more renewable energy. The key is that we are able to facilitate more renewables by having an interconnector than by not having one.
Many people would have an absolute aversion to the concept of nuclear power but I am suggesting we are a little bit there already through the use of the interconnector.
We are continuing our debate in the committee to give people a forum so they can make up their minds in an educated fashion, if members understand me, and not be closed to debate.
We are importing power. One cannot separate the electrons that are produced from a nuclear power plant.
It is false thinking to suggest we do not want——
The question is whether we want the risk of a nuclear power station.
We want the benefits but not the risk. We know the Irish psyche well on this issue.
There are major advantages from renewables with regard to tackling CO2 and imports. Is EirGrid really committed to generating energy from wind and tidal wave energy?
Mr. Dermot Byrne
We are absolutely committed to facilitating renewables. There is a Government policy to reach 40% and we are absolutely committed to delivering that 40%. As everybody here appreciates, this is a huge challenge but we are up for the challenge and are committed to delivering it. We have customers who are gas generators, and there is a coal generator at Moneypoint, so we must be absolutely independent and objective, and treat all our customers the same in terms of access to the grid, unless we are told otherwise. We cannot favour one over another, other than as set out in policy and legislation.
For example, priority dispatch for wind will be legislated for but as wind energy is cheap, there is no issue. It is a priority in any case by virtue of it being effectively free.
I am concerned with regard to the cost of providing the back-up for wind power. We do not want to have wind power one minute and then have the lights go out without there being a way of switching them back on. Could that happen?
Mr. Dermot Byrne
We have analysed that very carefully. Wind is very good in terms of diversity of energy supply and energy security for Ireland Inc. It is very good in terms of delivering a reasonably fixed amount of energy over a year. It is not so good on capacity, so at any point in time, if the question is whether wind will be available at 5.45 a.m. on Friday week, I do not know — it depends on the weather. However, when it is available, it is very good for capacity, so there is a capacity benefit.
The Generation Adequacy Report fully details the capacity benefit of wind on the Irish system. For example, at 4,000 MW of installed capacity, in terms of capacity credits, that is good for approximately 400 MW. Members can see that it saturates. The more wind, the less benefit, which is absolutely standard in any analysis done by other countries and, in fact, Ireland's position is probably better than other countries.
In an all-island context, the graph which members can see demonstrates that when we take 4,000 MW, it is equivalent to approximately 500 MW because of the North-South diversity. That geographical diversity gives us the benefit of approximately an additional 100 MW of capacity. That has been fully analysed in terms of analysing what we need to install on the system.
Has Deputy Coveney any questions that have not been answered?
The only question is in regard to the cost of connecting to the grid for developers — the yellow part of the chart, if we want to call it that. An extraordinary cost often seems to be attached to connection to the grid. I want to try to understand that better, particularly in the context of Gate 3 being 3,000 MW, which will put huge pressure on EirGrid and ESB in terms of connections and obviously there will be a big cost attached to that.
Mr. Andrew Cooke
This is somewhat complicated under the existing model, where EirGrid and the ESB both have a role in delivering the connections, but I will try to outline how it works. It is EirGrid's role to make offers to any generator which wants to connect to the transmission system. In costing this, we work out exactly what assets need to be built, how much overhead line needs to be installed or whatever it might be to allow the generator to connect to the nearest point on the transmission system. In working out those costs, we would take account of our own costs, which include the cost of bringing forward the project through the public planning process and the cost of entering into arrangements with land owners to get access to land to build the infrastructure. That is all within the EirGrid's remit. We also add ESB's costs, which are the costs of procuring and erecting the equipment and actually building the transmission. Those costs are as advised to us by ESB and as regulated by the Commission for Energy Regulation.
At present, we are working together to get to a point where there is a set of standard costs, so a developer can look up a list and see that its connection will need 10 km of line and it will cost so much per kilometre. We are trying to get to as standard and transparent an approach as possible for those costs. The Commission for Energy Regulation has a consultation ongoing on that issue and people are commenting on the level of costs and the degree to which they think they are appropriate.
At transmission level, a party connecting to the transmission system can decide to build their own connection to the standards we would set out. A number of generators do this while a number choose not to. That is one way of addressing concerns about the costs being higher than developers would like them to be. They can decide to build their own connections.
Has EirGrid had any problems with that?
Mr. Andrew Cooke
Not really. It is becoming a little more complex for developers now where, because of the number of wind farms that are coming onto the system, they are starting to share transmission connection assets with other developers. Therefore, where a number of the developers are sharing the same assets, obviously they must reach agreement between themselves as a group as to how they will do that, which is making the situation rather more complex at present. If they fail to reach agreement, we will provide the connection to them in the normal manner.
As yet, they do not have the right to build distribution connections, which is an issue that has been raised a number of times and there is an intention to move in that direction. That is not a matter for EirGrid because we just deal with the transmission level connections at present.
To follow on from one point that was mentioned earlier in the debate, there were high winds two weeks ago and a high level of wind power was produced over that weekend so the grid would not have needed some of the generators which are based on coal and gas. Did the witnesses suggest the price that producers would charge for electricity from this year onwards must factor in carbon emissions? What is the change in the price charged by, say, Moneypoint since 1 January compared to what it charged up to 31 December last? I presume Moneypoint has a lot of emissions, which from EirGrid's point of view signals a significant reduction in the call it will have on Moneypoint into the future — I know the witnesses said it will work its way out of the system in 2025. In other words, which will be the first of the plants producing electricity to be dropped off the list because of their price when EirGrid has additional wind energy? EirGrid must know its prices. Which stations will be dropped off the list first?
Mr. Dermot Byrne
I am not in a position to answer that question in detail. The prices change on a day-to-day basis because fuel prices change on a day-to-day basis. We take in whatever they bid on the day. There are guidelines, or perhaps more than guidelines, from the regulators concerning how generators can bid. Consequently, they are obliged to make bids on the basis of their actual marginal costs of generation and they must take into account actual fuel and carbon costs and whatever. Through the market operation function, we take in those bids and stack them up in merit order in order that at any point, depending on the load and wind generation, the balance is met by that stack. As for the cut-off point, obviously we dispatch the cheapest first and when we draw the line, the others do not get dispatched.
It depends on volume.
Mr. Dermot Byrne
It changes. I am unsure whether Mr. Slye can add anything in this regard, but as it changes on a day-to-day basis, generators——
Surely the cost of generating power from Moneypoint does not change so dramatically from day to day. I acknowledge the cost of coal changes. However, if a tankerload of coal arrives, the cost cannot change dramatically. While it can change by a fraction of a percentage point from day to day, that would not change the overall basis on which the calculations are made. Mr. Byrne may be able to tell members which power stations, of EirGrid's normal suppliers, were dropped off on that peak weekend. EirGrid must know the identity of those from which it did not take power.
Mr. Fintan Slye
In general, coal as a fuel is cheap and Moneypoint tends to run as a baseload plant in the system. By baseload, I mean it runs close to its full load most of the day on an ongoing basis. Typically, that would be the output from a station such as Moneypoint. The other stations operate with a mixture of oil and gas. Fuel is one of the key components, the other being the efficiency of the station itself, which in many cases pertains to its age. The newer stations that have come on-stream typically operate large 400 MW combined cycle gas turbines. They are highly efficient and are designed to run in a baseload manner. A number of such stations have been built. The older plant on the system, which is a mixture of some of the oil-fired or older gas plant, is what we call the mid-merit plant and it is dispatched up and down, depending on the load and general wind levels on the day. At times they tend to be switched off.
I understand that. If the witnesses do not have the data to hand, they should forward to the committee the identity of the plants that were dropped that weekend. Mr. Slye obviously has indicated the category from which they tend to——
Mr. Fintan Slye
We certainly can send the Deputy the dispatches in respect of what plants were on and off.
It would indicate to members those plants that are the most vulnerable in respect of their economic use.
I refer Deputy Fleming to another activity that might be worth his while. Some members had the opportunity to visit EirGrid's operations. As Mr. Byrne consistently reminds me, any member who wishes to attend is more than welcome to so do. Together with Mr. Slye and Mr. Cooke——
A visit to the control centre is absolutely fascinating because one can see from which generators EirGrid is taking the power.
I apologise to the Chair for dwelling on that.
I am not trying to state the Deputy is not entitled to information, as of course he is. My point is that if he so desires, the operations are well worth a visit as one will understand the process far more easily.
Mr. Fintan Slye
It might be useful, and I would be happy to take the Deputy through that weekend and explain to him what happened. On any given weekend, the control centre would be considering a number of factors that were in play regarding what would dictate what plant was operated, from the availability and reliability of the portfolio to the forecasts for the wind and what was going to happen.
Deputy Fleming's point is a good one in that potentially, policy decisions are to be made regarding whether we should prioritise power generation purely on the basis of price or whether we should factor in emissions in a more aggressive fashion. Clearly, Moneypoint and some of the peat stations are the dirtiest plants in respect of emissions even though efforts have been made to reduce them by screening and so on. However, although there is a valid argument to the effect that Moneypoint should be the first to be turned off because it is the dirtiest, that is not the approach that is taken. Although this should happen anyway with carbon trading, that does not appear to be the case. As coal seems to be so much cheaper than gas, the witnesses' observations suggest that even when the price of carbon is factored in, it does not give gas plants sufficient competitive advantage over coal.
Mr. Dermot Byrne
Certainly, as the carbon trading system moves forward and as auctioning takes place for the certificates, it will become more real and more biting perhaps. While we must see how that evolves, if the price of carbon increases through the carbon trading system and if one accepts that it is the correct carbon trading system, that should affect the cost that is bid in and therefore it still will be valid to dispatch on a cost basis, unless one has some overriding——
It will be weighted in terms of its carbon emission.
Mr. Dermot Byrne
It will automatically be weighted in terms of its carbon emissions by the actual price of carbon on the day.
However, that pricing differentiation should exist at present, because the price the ESB or whoever is required to factor in when bidding at a wholesale price is the price of carbon on that day. Consequently, the only difference between the present and the post-2012 scenario is that the companies are not obliged to pay for the credits. However, the consumer pays.
Mr. Dermot Byrne
One also would expect the price of carbon to rise.
That is true.
Mr. Fintan Slye
The markets should evolve and to the extent that it becomes a valuable commodity for consumers or that green energy becomes a valuable and available commodity, one also would expect that to change the dynamic in respect of the pricing of carbon. One would hope that such a carbon trading market would evolve to give the results to which the Deputy referred.
I wish to ask a brief question.
The Senator should be brief as it is now 5 p.m.
I know. Were the Government to change policy and decide to build a nuclear power station, what effect would that have on Grid 25?
Mr. Dermot Byrne
We did not factor in a nuclear power station. However it would be like going back to the 1980s or 1970s, when a decision was taken to build Moneypoint on the west coast. While planning at that stage was co-ordinated as we operated under a different regime, nevertheless, the grid had to be planned to coincide with its development.
Would it change it dramatically?
Mr. Dermot Byrne
That would depend on the location.
What if it was located at Moneypoint? If it was located there, for example, it probably would not have as big an impact as anywhere else.
Mr. Dermot Byrne
Yes, if it was at Moneypoint and the existing station at Moneypoint was closed. However, never mind getting public opinion around to even contemplating nuclear power, the lead time for building a nuclear power station is such that it facilitates a proper evaluation of the grid to support it. That is not the case with faster-build generation. While EirGrid has been able to manage through that, gas turbine plants can be built very rapidly, as can wind turbines. However, everyone knows the grid itself takes considerably longer to build. That is the reason being ahead of the curve with Grid 25 is extremely important. That is not to say we can plonk a nuclear power station or its equivalent in size terms anywhere on the grid because that is not possible. However, the associated lead times would allow us to manage that.
On behalf of the members, I thank Mr. Byrne, Mr. Cooke and Mr. Slye for their help today. This has been a most informative and enjoyable session. I also thank all the staff at EirGrid; members deeply appreciate the witnesses' openness and frankness. Any member who wishes to avail of the aforementioned offer to visit EirGrid should make arrangements.
Yes.
The joint committee adjourned at 4.58 p.m. until 2.15 p.m. on Wednesday, 4 February 2009.