I welcome Mr. Kieran O'Brien, head of the standing committee on energy and related environmental matters and Dr. Anthony Barry, Irish Academy of Engineering.
Energy Policy: Discussion with Irish Academy of Engineering.
Mr. Kieran O’Brien
The Irish Academy of Engineering thanks the committee for its invitation and hopes it will be the beginning of a useful dialogue which will inform the committee in its important policy-development role.
The academy has a membership of approximately 120 experienced engineers drawn from a wide range of disciplines. Using the experience and knowledge of its members, the academy focuses on issues in which the engineering profession can make a unique contribution to economic, social and technological development. It is an all-island body with no political or commercial affiliations.
Our aim is to facilitate communication and dialogue on engineering-related matters. With this in mind, we publish reports, the most recent on an infrastructure for an island population of 8 million people which was presented to the Taoiseach last week.
The energy standing committee, of which I am chairman, published a status report on energy issues which focused significantly on competitiveness and has been circulated.
Climate change exercises some of the finest minds across the world. An avalanche of data, theory and policy suggestions makes it difficult for policy-makers to make sense of. The academy has already published a report on adapting to climate change, launched by the Minister for the Environment, Heritage and Local Government, Deputy Gormley. We do not provide advice on climate science as this is outside our area of technical competence.
We are well aware of the impact of energy consumption on carbon emissions and many policy issues surrounding this, which I hope we can deal with in sufficient detail. We are keenly aware of the balance that needs to be struck between the costs and price of energy, its impact on employment, the environment and supply security. Given the immense financial, technological and resource-availability uncertainty surrounding this issue, we would be the first to admit there is no one right answer.
However, as a general principle, we would caution strongly against betting the farm on any forecast or technology. A conventional generating plant commissioned in 2020 is likely to remain operational past 2050 while a nuclear plant may be past 2080. The investment decisions made in the coming decade on future energy policy will have a direct relevance not just to our children but to our great grandchildren.
If one wonders of what we assume today about 2050 is likely to be correct, then one should think of the assumptions made in 1960 about 2000 with some degree of humility. Against such uncertainty the academy strongly recommends we retain a flexible approach to the future. For example, we should accept projections of future energy demand will be wrong. This does not mean we should not have a plan but we need one that permits us to change our course and adjust to changed circumstances. The world will need all available technologies to meet future energy demand. The academy recommends Ireland remain open to all technologies, adopts or rejects technologies on evidence-based research and refrains from emotional policy-making.
The academy has several recommendations to make to the committee. Ireland should retain a flexible approach to future energy technology investments and consider all technologies based on their techno-economic merits. Policy-makers urgently need to update techno-economic energy studies to take account of the dramatic fall in energy demand and the recent significant changes in world energy markets. EirGrid is carrying out some of these studies which we look forward to examining.
While meeting its international carbon abatement obligations, Ireland, given its small size and many domestic economic problems, should not seek a leadership role in the international climate change debate. Instead, it should be conscious that the EU position on climate change, as shown at the Copenhagen summit, is not acceptable to most of the rest of the world.
Ireland's permitting system for large infrastructure investment is not fit for purpose as has been demonstrated repeatedly on the Corrib gas project. Recent legislation dealing with strategic infrastructure is most unlikely to alter the situation. This dysfunctional system must be re-examined with a view to a radical legislative overhaul.
There is a major opportunity to improve Ireland's carbon emissions at low cost by engaging in a large-scale programme to upgrade the installation of existing Irish dwellings. Investment in such a scaled-up programme would also provide an ideal economic stimulus with a positive effect on employment and minimal leakage overseas. The recent budget made some moves in this regard and we applaud the moves. We request they be ramped up further.
We strongly recommend all significant policy changes and investment proposals be accompanied by a comprehensive pricing impact analysis, detailing the effect of the proposal on prices paid by energy consumers. Such analysis should be carried out by the promoter of the proposal, submitted to the CER and published for comment prior to proceeding. In order to benefit from increased electricity interconnection with the UK, it is essential that trading rules in the UK and Ireland converge on some common processes and principles. Given that the east-west interconnector is under construction, this issue is now urgent.
New technologies such a smart metering and electric transport will undoubtedly arise over the next decade. However, there remain many uncertainties about the adoption of these technologies and we advocate a cautious approach, particularly with respect to large-scale up-front capital investment. The academy is greatly concerned at the risks taken on natural gas supply security. The immediate priority is to complete the Corrib project. While the proposed LNG project on the Shannon Estuary will also increase security it is imperative that Ireland moves quickly to increase gas storage from the very low level pertaining today. These are the main recommendations and there are many more in our report. We will be pleased to respond to the committee and its agenda in respect of moving the discussion forward.
I welcome the delegation and thank it for attending. It is important that we meet again when we have more time to discuss in greater detail the recommendations.
I agree with a number of the recommendations and I fundamentally disagree with others. The point on gas storage is urgent for Ireland. We have 11 days storage capacity for gas, compared to an average of 52 across the EU 15. Other countries have up to 80 or 90 days storage. We have the capacity to develop gas storage facilities in Ireland in an ambitious way by using empty gas fields offshore that already have a piping infrastructure linking them and by expanding the proposed LNG plant in Foynes to allow for more State-controlled storage of gas. That is a solid recommendation and one I agree with. I also agree with the need for a techno-economic energy studies to ensure we constantly assess and reassess whether we are applying best practice in terms of the direction we are trying to drive the country.
I disagree with the point on whether Ireland should be a leader or a follower of the green economy or responding to climate change. Energy security is a bigger driver than climate change to force a real revolution in the Irish energy market, which is more about producing from renewable sources than importing fossil fuels at very high expense. The level of ambition of the delegation is disappointing in this respect. It is overly cautious in its recommendations and this is very much an engineering solution. It is based on a tried and tested method. The approach is to let other countries, regions or continents take the risk and the benefit of first mover advantage. When we know it is safe to implement and when we see it as cost-effective, it can be introduced to Ireland. That is not the basis for economic growth based on research and technological development to allow Ireland to be a leader in terms of smart charging, electric transport and renewables.
Let us consider the benefits Denmark and its companies have from being a leader in the wind industry. It now has a multibillion euro industry based in the country and exporting all over the world. Applying the rationale of the witnesses, Denmark would never have done that. The delegation is correct to be cautious in certain areas because Ireland cannot afford to be making mistakes in big capital investment projects. We do not have the money to make mistakes but we should be ambitious. When there are exciting proposals they must be tested but if there is a possibility to be the first mover we should encourage that rather than making blunt statements to the effect that Ireland should not be a leader in the climate change agenda. That is not why I am in politics.
I respect the caution of the delegation and this meeting is a good and appropriate sounding board for us. Any new fresh ideas, whether emotive or driven by the aspiration to create new industry, must be tested by scientists and engineers to ensure we are not wasting public money or creating imaginary jobs. Ireland must be ambitious in providing potential solutions and pilot projects. We have competitive advantages in certain areas and we need to take advantage of these. That involves some risk. The main problem I have with the thesis of the delegation is that it is all about minimising risk and therefore minimising potential returns. I do not think that way. I find it difficult to buy into but the nine recommendations are a useful sounding board for the new ideas. These recommendations set a bar over which the new technologies must jump before they can be considered and invested in.
A valid comment was made about the Corrib gas project. Our permitting system is flawed and as a result we do not have a hope in hell of building the grid infrastructure we aspire to in the 2020 models and Grid 25 models. Communities will not allow it under the current system. EirGrid and others are finding progress frustrating in this area. New legislation is currently before the Dáil to improve the permitting system in terms of the safety elements when bringing gas and oil ashore. Hopefully that will improve the situation somewhat but further work must be done. The delegation's advice is good.
I have a mixed reaction to the delegation's presentation. Caution and testing of technologies is important but I fundamentally disagree with the recommendations on whether Ireland should be a leader in the technologies that will offer exciting job potential in Ireland.
I will not cover the same ground as Deputy Coveney. I warmly welcome the delegation. This contribution has been very significant in its assessment even though we may not agree with everything said. It provides food for thought. I hope we can repeat this experience in dealing with the issue of adaptation for climate change. I may be wrong but my impression is that nobody within any Department is taking on the task of working out an adaptation strategy and that needs to be addressed. I hope we will have an opportunity to examine that.
With regard to energy conservation Mr. O'Brien is positive about insulation, as I am, and measures to reduce energy use. However, I wonder how deeply he has looked into this. Not much additional money was provided in the budget for a retrofit programme, particularly when one considers that for 2009, approximately €35 million was not spent. I presume the additional money includes part of this amount being rolled over. We need to be much more ambitious about retrofitting. It has many pluses, quite apart from reducing energy use. It puts people back to work, tackles fuel poverty, makes people more comfortable and so on. However, I am a little dismayed because while Mr. O'Brien pinpointed a central issue, he seemed to say it is grand because the Government is looking after that. That is not happening at all. We can be prudent while also targeting investment in this area and secure a good return. It does not solve the problem but we know it works. He is prudent by saying we need to know what works and what does not but energy conservation is one area in which we need to be ambitious.
The submission refers to competitiveness and electricity prices. Perhaps Mr. O'Brien can elaborate on how he sees us being able to reduce prices. Now that the interconnector is going ahead, the academy will not continue to fight it but I do not understand why standardising the system in order that the trading rules between the two countries can be aligned is so important. Currently, we have an interconnector and an all-Ireland market and nobody is complaining. What is the obstacle and problem that requires change in legislation?
With regard to legislative changes, I am delighted Mr. O'Brien thinks we have a dysfunctional licensing system. The Chairman has made the point many times and he has spearheaded legislation being published by the committee relating to the Foreshore Acts. It is a disease that infects many of the areas we cover, whether it is geothermal power, wind energy or whatever. Will he outline his priorities for reform in that area?
Smart meters are a good idea but my only problem is I do not know why they have not been installed on a widescale basis. I acknowledge costs are involved but this technology could assist us to address energy use. It would be a pity if we lost out by not using the technologies available to us and making sure we are up to speed because it is not a question of standing idly by and watching while the rest of Europe moves ahead. We cannot afford to do that. For example, we are at a significant disadvantage regarding broadband because the Government did not do what it had to do in the communications sector.
I tend to agree with both of the previous speakers. I suspect the academy is being deliberately provocative. I am sure that is the nature of its submission, which makes many excellent recommendations. I am taken by Mr. O'Brien's overview of the economy. While I agree with one of his reasons for our economic failure, the overemphasis on construction activity, we do not need to throw the baby out with the bathwater. Foreign direct investment is needed for export growth while growth in indigenous industries is also needed. If there is a great alternative to that, I would love to hear from him. We need growth and we need to improve competitiveness.
The most provocative aspect of the presentation is the suggestion that we leave the leadership of the climate change debate to other countries, which are better positioned. Mr. O'Brien took up the line that Ireland is a small country and asked why we should do so. I am less than impressed with his views on that. If the same approach had been taken to other environmental or social issues, we would be in a much worse place than we are now. Rather than throw myself at him on that, I am underwhelmed by this suggestion.
I note his thoughts on the interconnector. On the one hand, he is asking whether the Government should throw €500 million at it while, on the other, it is one of the few ways we can bring nuclear power into Ireland. It makes sense in the context of security of energy supply and I agree wholeheartedly that regulation needs to be improved on both sides of the pond.
I endorse Mr. O'Brien's view on biomass. We have had a few false starts in that area and we need to push on.
I agree with Deputy McManus and the academy on energy conservation but, as the Deputy said, we need to go further. That is the low hanging fruit on the McKinsey curve. It makes so much sense and more needs to be spent on it but one needs to get it right. At this stage we need to review where the grant funding has gone. The competence of the installers must be improved. As engineers, the witnesses will be well aware of the dangers of interstitial condensation and similar issues, which are not being addressed in sufficient detail currently.
I appreciate their thoughts on energy storage, particularly gas storage. We must be able to deal with shocks better in both the oil and gas sectors, given our huge reliance on imported fuels.
This is a worthwhile submission. One of the stronger ways out of our current difficulties is to emphasise green technologies in the energy, transport, construction and agriculture sectors. That is where new jobs are being created and much more employment will be generated in these sectors in future.
With regard to the issue of planning consent, the Corrib gas field is the perfect example of conflicting systems with different consents given by the EPA, the local authority, An Bord Pleanála and various Departments. It started badly but, hopefully, we will have energy security through that field. However, enactment of the Strategic Infrastructure Bill has made it easier for major infrastructural projects to come through the planning pipeline and the lesson of the past ten to 15 years is planning consent was given too easily for the wrong type developments in the wrong places. As taxpayers, we will pick up the tab for that through the National Asset Management Agency over the next five to ten years at least. We need a much more rigorous and clearer planning procedure and it must be more accessible to the general public and developers. I look forward to further engagement with the academy on that issue. On the planning front, both the public and developers have been badly done by through the current system and there is need for improvement. The current Bill will go a long way towards improving some of those systems.
I welcome the delegation. Will they elaborate on the nuclear power option? The representatives say it is a proven technology. We are a small country. The submission states it could be 25 years before the technology could be up and running. How do they see the need for nuclear power 25 years hence? What is their assessment of the projected level of demand for electricity in 2020? The east-west interconnector was referred to. Are there not many reasons for building it? We have heard many reasons it should not be built. What are the possible consequences of not proceeding with it at this point? How would investors into the country view us deferring it?
Mr. Kieran O’Brien
That is a most comprehensive list of questions which I shall do my best to take. I shall bring in my colleagues in appropriate areas. In response to Deputy Coveney, I believe we are all agreed on gas storage. It is more than strategic. If we want a very large amount of intermittent renewable energy sources on our system, then we need gas storage for operational reasons. If we have a target of 40% from renewable sources, much of that will be intermittent. We will have times when we need to back that up in the short term with gas-fired generation. That means having a gas supply that needs to be able to respond to changing weather. As gas producers do not produce gas on that basis, it means having a storage capability that operates on a much more short-term basis. We would like to see a significant amount of technical and economic work done on storage for operational reasons as well as for strategic reasons, on which we fully agree with the Deputy. I think we are agreed on the technical economic studies.
I might take the criticism we have received from most members of the committee on the green economy, etc. When we talk about climate change leadership, we are specifically saying that we do not believe we should set targets in Ireland that exceed the targets being agreed internationally.
There is no chance of that.
Mr. Kieran O’Brien
I will bring in my colleague, Mr. Moore, to discuss that in a moment. Our concern is that we should not move more quickly than the international community. We would argue that the EU at the moment may not represent where the international community is moving post-Copenhagen.
Let us be clear on this. The target setting on emission reductions——
They are set.
—— are set collectively by the EU and not by Ireland.
Mr. Kieran O’Brien
Yes.
The only choice we need to make is how to meet those targets or, if we do not meet those targets, to purchase allowances or credits.
Mr. Kieran O’Brien
We are saying we should meet our international obligations in this regard and should not move beyond those given the position of our economy at the moment.
The Deputy mentioned technologies. We are very conscious of the capital scarcity in Ireland. For example, we have been very complimentary of the Minister's position on ocean energy. We believe what he is doing is correct. We are supportive of the amount of money being devoted to it, the types of pilot studies being contemplated, the interactions taking place with the universities and the way we are bringing in the intellectual property issues associated with it. We have made that clear in our report.
We are more concerned, or perhaps slightly less enthusiastic, about smart metering. In the US many companies are touting smart metering in very wealthy communities. Smart metering by and large means the ability to have a two-way communication between the energy supplier and the user. The economic theory is that a consumer who sees the price of electricity going very high will immediately cut back, and this is all very good stuff. We would like to see the pilot studies that indicate that behaviour will be modified. That is the key. If behaviour is not modified, one makes a significant investment without getting the return. I worked for many years for the ESB and 20 years ago I had a two-part tariff meter installed, which meant that my wife started her washing machine and dishwasher at night and did all the good things to save energy, money, etc. We still have the two-part meter. However, we do not do our washing or other household chores at night, mainly because we have become a wealthier society and we could not care less at the end of the day.
There are now more sophisticated ways to manage energy.
Mr. Kieran O’Brien
Correct. However, will people respond to those more sophisticated ways? We strongly support what is being done at the moment, which is a series of pilot studies in this regard. We are all in favour of it. We believe that smart metering will come. It is being rolled out for large customers in any case because it makes excellent economic sense. Having spoken to regulators in the United States, my take is that they will not approve this technology for large-scale roll-out in many states because they are not convinced they will get the value from consumers and they want to see this first. Our view is that we should be cautious. We are not a country that can easily afford to invest in this. It has been estimated that it would cost €1 billion to roll it out in Ireland. We would rather see that €1 billion spent on a conservation programme because we believe we would get much bigger bang for our buck at the end of the day. These are the choices the members of this committee, as policymakers, will need to make.
We are also less than enthusiastic about immediately rolling out infrastructure for electric vehicles. We believe electric vehicles will come. We believe that many technical and social barriers need to be overcome before they are fully adopted. We are concerned that with a capital scarcity at the moment, we might rush into this and we do not want to be at what I call the bleeding edge of technology. We would rather be at the leading edge. We are advocating a certain amount of caution in that area.
I ask Mr. Moore to comment on the climate change leadership issue.
Mr. Don Moore
We were invited to make comments on the climate change Bill, which is in draft form at the moment. We were concerned with some of the language in the Bill which referred to Ireland leading. We understood this to mean leading in terms of reduction in greenhouse gases. There is a price associated with leading anything in this regard. We would prefer that the language be changed to state that Ireland will comply with all its international obligations, especially any obligations set by the EU. We were also somewhat concerned that specific targets going all the way out to 2050 would be enshrined in legislation in advance of any international agreement. We do not believe that would be wise and could be used in future by individuals who wanted to stop particular projects. We regarded that as a risk.
I wish to pick up on what Deputy McManus said about adaptation to climate change. We issued a report on adaptation to climate change and presented it to the Minister, Deputy Gormley, last November. It will be a major issue for the country over the next 30 or 40 years. As an island, a rise in sea levels and an increase in extreme weather events, especially rainfall and flooding, pose enormous challenges for us and will require incredible amounts of capital to solve it. For example, there may be a requirement for a tidal barrier across Dublin Bay with just a 0.5 m rise in sea level, which is on the conservative side of what is predicted at the moment. We mention this in terms of the climate change Bill. We believe much greater emphasis should be given to the adaptation challenge. It is below the radar at the moment. All the debate in Ireland has been about mitigating climate change, whereas I believe we will have our hands full with just adapting our infrastructure to deal with the effects of climate change.
Mr. Kieran O’Brien
I refer the conservation issue to Dr. Barry who will talk about what we believe would be appropriate in terms of a retrofit programme.
Dr. Anthony Barry
While we probably did not get it across in our summary document, we believe the approach to retrofitting existing buildings — mainly but not only housing — needs to be on a much bigger scale than is being done at present. We would suggest that the State should establish a body equivalent to the NRA with a ten-year programme, spending probably €1 billion a year on average over those ten years, to retrofit the existing housing stock, of which 1 million units are well below standard. It is not a simple issue of saying that grants are available and people should roll up to apply. Retrofitting a house externally costs a considerable amount of money relative to the house. We may have to be ingenious in setting up financing systems but a mortgage bank could be created which would provide mortgages to householders to allow them do it over a period of 20 years. That would get it privately financed and off the State's books, but a central driving force is necessary which provides the regulation and deals with the property aspects. It is far cheaper to do 100 houses at once than one house, but the agreement of 100 properties is necessary to do it. It is those types of issues that must be addressed. A major commitment and programme is needed, but by being intelligent about it, most of the financing could be taken off the State's books and put into private hands. That is the scale of work we believe is needed to address this problem quickly. It just cannot be left to happen. It must be programmed such as would be done for a major road network for the entire country.
Would Dr. Barry prepare a short paper on that? It would be very helpful.
Dr. Anthony Barry
Yes.
That is a sensible suggestion, but if we intend to put insulation into people's houses, replace their windows and doors and upgrade buildings to make them more energy efficient, it probably makes sense to upgrade the other areas that need to be upgraded as well, whether that is with a smart meter or a fibre cable to link them to a more sufficient bandwidth in terms of broadband, obviously where ducting is available. If we intend to retrofit houses, we should do a comprehensive job in the energy and telecommunications side and potentially the water side also in terms of water metering and so on. If a State body is to do that job, it should try to do a comprehensive upgrade of each home in groups of 100, as Dr. Barry suggested. It would be useful for the committee if Dr. Barry could come back to members with something on that.
I do not want to be a spoilsport but, unfortunately, time is not on our side. I deeply appreciate the representatives' paper and their contribution to the meeting but we have two other groups to meet and, unfortunately, some of our members are due in the Chamber for other business. This is the problem we have with committees. People have to go to other places. When Dr. Barry has got that paper together, we might arrange to have another discussion with him on the area of retrofitting and some of the other issues that arose. I thank the representatives most sincerely for attending.
Mr. Kieran O’Brien
I thank the Chairman. We would be happy to answer at another session the questions we have not answered at this one, especially those from Deputy McManus. We would be happy to meet the members individually at any stage too.
That would be great.
Any time the representatives wish to make a submission we would deeply appreciate it because we respect their good intentions.