I welcome the representatives of Energy Needs Ireland.
Energy Policy: Discussion with Energy Needs Ireland.
Ms Muireann Lynch
Go raibh maith agat, a Chathaoirligh, as ucht cuireadh a thabhairt dúinn teacht anseo inniu. I will be brief as members may wish to get home.
It is not that we are going home in any case. We will be here until 10 p.m. as we have other meetings. The witnesses are welcome and I look forward to their presentation.
Ms Muireann Lynch
Thank you. To explain who we are, over the summer, we were involved in an undergraduate research project on energy issues in Ireland. We were given a broad brief, and we would like to present some of our findings, as representatives of the younger generation, in terms of what we think should happen with Ireland's energy policy.
It is important to remember that ultimately, all we can do to tackle climate change is to reduce carbon emissions. There are other ways of creating jobs and stimulating investment, but there is only one way of tackling climate change. For that reason, it is important that all policy decisions be informed by their carbon abatement potential, although other factors may also be taken into account. The effect of any policy decision on carbon emissions should always be borne in mind.
The energy industry in Ireland has been completely deregulated. In order to ensure that carbon emissions are abated, we must send the correct signals to investors, in terms of making low-carbon investment an attractive opportunity, and disincentivise carbon-intensive investment. There is the question of whether to go with a tax or a carbon price; at the moment, we have implemented a tax, which was introduced in the last budget. There are certainly advantages to a tax over a price in that it brings a more consistent stream of revenue which can be used to offset more economically damaging taxes such as income tax, and it provides a sounder investment signal, with investors knowing they will have to pay a set tax as opposed to an intermittent price. Having said that, however, if we do continue with a carbon tax into the future it must be consistent and it must mirror, or shadow, carbon prices on the international markets. This will mean that the most efficient amount of carbon is being emitted at any time, and it will minimise the incentive for lobbying by interest groups which want to produce more or less carbon.
At the moment the carbon tax is €15 per tonne, but refit tariffs range from €66 per MW/h to €220 per MW/h, depending on the renewable technology. If we consider all renewable technologies to be carbon-neutral, putting such a diverse range of refit tariffs on various technologies essentially means we are putting a different price on carbon depending on which technology is being used to abate it, and the result is that we do not have a consistent carbon price across the economy. We recommend that rather than considering the various renewable technologies and deciding how much we would like to subsidise them, we should instead consider how destructive we believe carbon to be to the economy, set a consistent price and then consider whether a particular technology needs extra incentives. Whether a particular course is pursued should depend on whether the technology concerned would provide a net benefit to society in the long run. There has been much talk about that today.
There has been much talk about "green" jobs. We believe that in the present climate anything that would stimulate employment in Ireland should be considered seriously. Any technology or investment which would provide employment should provide sustainable employment if it is to be of net benefit to society in the long run. There is no particular reason to pursue a technology or investment simply because it is environmentally friendly. We believe an investment should be pursued if it would provide sound, sustainable employment into the future, whether it is in green technology or not. That is not to say there are not tremendous opportunities in green technology; it may well be that Ireland will become a leader in this regard, as we believe it should. However, we do not believe green technology should have what may be termed a "get out of jail free" card; it should still be subject to the same scrutiny as any other investment opportunity. A large green jobs initiative was undertaken in Spain and a study concluded that for every green job created, more than one job was destroyed in another sector. This is a note of caution in that even if a job is green it is not necessarily of net benefit to society.
Carbon policy does not necessarily inform energy policy in Ireland. Under current legislation, peat stations must be run at full capacity at all times, despite the fact that peat is tremendously expensive and is also the most carbon-intensive fuel available. We recommend that the PSO legislation be reformed so that the peat stations can run on a dispatch basis, which means they are switched on whenever it is economical to do so rather than running them all the time.
There is one issue that has been sidestepped despite its representing a low-carbon option. We should consider nuclear power on its merits rather than simply maintaining a ban that was introduced in the 1970s. We understand there are some Eurobarometer reports on public attitudes to nuclear energy across Europe, but we could not find one for Ireland. It is important that we engage with the public, determine the perception of nuclear energy and, if possible, review the legislative ban. That does not mean we must or should go ahead with building a nuclear power plant immediately, but it means that if and when the time comes that it is economical and optimal to do so, we will be able to proceed without having to negotiate the legislative red tape. At least we will have dealt with that. We should consider this issue as a matter of urgency.
We have some recommendations for the committee. We need to commit to a consistent carbon price across the economy and aim to reflect this in all the refit tariffs. We recommend that we avoid ring-fencing carbon tax revenue for carbon abatement, although this has not yet happened. We should encourage any initiatives that would provide sustainable employment, whether they are in green technology or not; alter the PSO legislation to remove the peat stations from the current must-run obligation; and engage in transparent public debate with a view to reversing the current ban on nuclear generation.
I will now ask my colleague Eamon Keane to speak on Ireland's transport policy.
Mr. Eamon Keane
I will talk about oil, bio-fuels and our transport target.
There is a broad consensus among experts that peak oil is coming fairly soon, probably within five years, depending on world GDP growth. If the rate of growth picks up to about 3% per year we will have peak oil by 2015; if not, perhaps 2017 or 2018. However, it is coming, and Ireland is in quite a vulnerable position. As we emerge from the recession, this could be the next crisis that confronts us.
Ireland is much more vulnerable than most of the rest of the world. We are far above the world and EU average in the amount of our primary energy we obtain from oil. In 2008, 55% of our primary energy came from oil. A study released by SEI in December last year found that if we add up the effects of all current policies — such as the national energy efficiency action plan, the sustainable transport action plan, and the White Paper on transport — they represent a reduction of only 1% in our dependence on oil. Thus, in 2020 we will still be very dependent on oil although peak oil will probably have already arrived. That is not a good situation.
Let us consider the history of oil prices. During the Celtic tiger period we were blessed with very cheap oil — about $20 per barrel on average — which equated to a spend of about €2 billion per year on oil. Today the price is about $80 per barrel, which equates to about €4 billion per year taken directly out of the economy. Various experts project anything from $100 to $220 per barrel in the coming years. Our dependence on oil has the potential to prevent us from emerging from recession. We import everything from different countries by air, road and sea, and that will affect the price of our imports and the competitiveness of our exports.
One suggested solution to the challenge of peak oil is bio-fuels. Currently, EU legislation supports bio-fuels, as does Ireland in the targets it has set for their use. The main bio-fuel in Ireland is biodiesel from rapeseed. However, if we consider the figures released by the Department of Transport in 2008 for carbon dioxide emissions, those for rapeseed biodiesel are above the EU threshold and thus would not qualify for subsidies either from the EU or from Ireland. We must also consider the question of indirect land use change. Although there has been some debate on the magnitude of this change, there is no doubt it is substantial and will put almost every first-generation biofuel over the emissions threshold. They will not reduce the carbon intensity of transports.
The remarks of a top civil servant in the Department of Agriculture in the European Union in December last year were leaked a number of weeks ago. He said, "An unguided use of ILUC would kill bio-fuels in the EU". This is because the European Union has commissioned a number of reports on indirect land use change, which it has not yet released. They show clearly that if one accounts for indirect land use change, they push bio-fuels over the threshold and, therefore, there would be no support for bio-fuels in the European Union. It would kill them. It has not released the reports because the subject is so sensitive and it knows what they would cause. Bio-fuels are currently subsidised to the tune of €5 billion per year. It is a politically sensitive issue and no one wants to rock the boat. The EU may yet release the reports, which would stop the giving of subsidises to bio-fuels.
Advanced bio-fuels are proposed to move beyond the challenges of first-generation bio-fuels and cellulosic ethanol is the main contender. In 1921 Thomas Midgeley said, "From our cellulose waste products we can get, by present known methods, enough alcohol to run our automotive equipment in the United States". The technology is not new. It has been known about for some 200 years. One has to ask why it has not yet been scaled up, given that we have known about it for so long. The reason is that it is very difficult, technically and commercially, to scale it up. Even though we are currently throwing money at the issue there is no guarantee in the next five or ten years the technology will scale up and be affordable or widely available.
Another advanced bio-fuel is algae, about which there are many press releases and much hype. A quote from the Milwaukee Journal 1952 refers to getting oil from algae, but that many problems remain to be resolved. That statement is as true today as it was 60 years ago. If one examines the issue behind scaling up algae, it is clear to me that they will not scale up. A life-cycle analysis of algae was released in January which showed it is a negative net energy producer, that is, one puts more energy in than one gets back out. It also has higher emissions than diesel or petrol. It is likely to be a pipe dream.
Our RES-T target is 10% of renewable energy in transport by 2020, which is based on SEI figures for December 2009. They show that one will achieve 20% of the target if one meets the Government's target of 250,000 EVs by 2020, which is an ambitious target. The rest will have to come from bio-fuels, which would have to be first-generation bio-fuels. They will require one million hectares of land in order to grow rapeseed biodiesel in Ireland, which is over twice the current level of tilled area in Ireland. One would have to encroach massively on pasture land, which would not be feasible. The main consideration is that it would feed 1 million people for a year. In a world where 1 billion people go to bed hungry, is it ethical for us to take the food which would feed 1 million people and run 8% of our cars on it? The answer is clearly "No", and first generation bio-fuels are a very bad idea.
In summary, we should abandon first generation bio-fuels as we will be forced to do so if the European Commission releases the reports on indirect land use change. From an ethical and monetary point of view, they also have to be subsidised. If one abandons that principle, one will not reach the RES-T target. One then has to reduce to overall renewable target or substantially increase the RES-E or RES-H. As the current policies are not sufficient to dramatically reduce our dependence on oil, we should form a peak oil committee and establish oil reduction goals, such as a reduction of 10% or 20% by 2020.
I welcome the witnesses. The main thrust of the presentation is consistency, in policy terms, which is very important. I was struck by the suggestion that we should not ring-fence carbon taxation. One argument which has been put to us quite strongly is that if we are to correctly address fuel poverty, there is some merit in ring-fencing revenue and clearly identifying where it is being used. It could be used to upgrade homes or improve the fuel allowance in order that those most at risk of fuel poverty benefit in the short to medium term. I am interested in the delegation's response to the issue of ring-fencing.
I note the quote from Gabriel Alvarez. I presume in the Spanish context in which the quote is based there was a particular concern about the use of feeding tariffs with sunset clauses which artificially hot-housed certain green jobs in the Iberian context. The delegation may be able to expand on the context in which it was stated. Many of the wider reports on green policies and jobs have a double dividend which can accrue if the correct measures are put in place. I ask the delegation to expand on that point.
Deputy Michael Fitzpatrick will take the Chair as I have another appointment. I thank the delegation for its submission and noted every point it made.
Deputy Michael Fitzpatrick took the Chair.
Ms Muireann Lynch
On the Spanish context, the content of the actual paper would have referred to feed-in tariffs. The point was more general. The Deputy is correct; many green job initiatives provide a dividend to the economy. It was more an attempt to caution against moving towards a particular technology simply because it is green. One of the main reasons the Spanish report was written was to try to inform the Obama Administration, which is currently investing heavily in renewable technology, much of which is cost-effective and some of which is not, in particular the bio-fuels aspect. I would not recommend that we put too much emphasis on the Spanish or any other report. We referred to it in order to make the point that we need to differentiate between whether something is sustainable and cost-effective or not. That should be applied to everything, regardless of whether it is green.
On the issue of ring-fencing, the issue of fuel poverty needs to be addressed. If we introduce a carbon tax, we need to consider how people will afford to pay it. Professor Sue Scott of the ESRI did a lot of work in this area. While it is proposed to ring-fence the revenue in order to subsidise fuel to prevent fuel poverty, I am not sure I would call that ring-fencing. I caution against it because it is slightly dangerous to take an entire chunk of revenue and allocate to one specific area. What happens if the amount of revenue garnered by the carbon tax is too much or too little to compensate for fuel poverty?
It would be a better idea to insure against those on lower incomes who do not have enough money to pay for fuel than to subsidise them. That does not mean we have take to a particular bundle of money and use it to subsidise fuel poverty.
I apologise for missing most of the meeting. I had an off-site meeting which took longer than I anticipated. I looked forward to both presentations. On the stall the delegation has set out, if it accepts there is climate change and the issue needs to be addressed, it has to deal with the issue in terms of reducing carbon, which is the overarching principle of our policy for the future. The other conflict concerns decision-making regarding food versus energy supply and how to best match the two in order that one is not favoured at the expense of the other.
On the presentations from Spirit of Ireland and the Irish Academy of Engineers, we have to develop ideas in this country. Did the delegates study examine Ireland's economic capacity or the potential for the production of renewable energy by whatever means, both onshore and offshore, with a view to meeting our energy needs?
The committee has been made aware of a plethora of technologies. It has been bamboozled with them at this stage. I stated in our draft work programme that we need to catalogue them all and evaluate their viability. Assuming we regard carbon reduction as a necessity or a bottom line criterion, we must then ensure there is no compromise between food production and energy production. We must not do something that would result in excessive carbon emissions, as in Brazil where rain-forests are cut down to produce sugar cane for ethanol on the better land and where the cattle are moved to higher land. I am not saying we will do this but it must be considered. The planning process must also be considered, as must social acceptability and the cost in terms of benefits and sustainability. It is the Cabinet sub-committee, in the first instance, that needs to catalogue all the alternatives and determine the best one. We must carry out a cost-benefit analysis of every technology and then strike a balance.
We must determine how much to invest in another interconnector such that we will have the capacity to export energy if we produce a surplus. We must also determine how much is to be spent on developing the grid and the exploitation of the various energy sources. Should we ensure that our transport fleet, for instance, will be run on bio-fuel, including ethanol, or gas harvested from grass? A balance must be struck. Energy Needs Ireland could be very valuable in assisting in this thought process. This is how we must proceed. There is enough technology being developed for us to have a policy in this regard. Some of the technology is pretty advanced.
I suggest that we invest in the grid and interconnectors and proceed from there. However, we need to establish what we are trying to connect to and how the energy is to be harvested, be it tidal energy, offshore wind or wave energy, or energy derived from pump storage. With renewable energies, an issue arises with regard to balancing supply and demand. There is volatility in the supply of wind energy.
There is nothing like having keen, younger, qualified people to drive these projects and inform some of the older people, who may be a little cautious about making decisions. I thank the delegation for its input. I would love to have heard all the presentations but was unable to attend. Many of the questions were asked that need to be asked, especially about Spirit of Ireland. "Spirit of Ireland" is a great name. In marketing terms, it started with a +5 with regard to public image. This is always a help. It is certainly better than -5.
Will Energy Needs Ireland comment on the Spirit of Ireland proposal? What potential does Energy Needs Ireland envisage for ocean and wave energy? What is the best way to exploit its potential? Energy Needs Ireland advocated the withdrawal of subsidies for peat stations in Ireland? Would this lead to higher costs for imported fossil fuels?
Mr. Eamon Keane
I will answer the question on Spirit of Ireland. I have been following its activities since last May when it made its big splash. I am trying to make sense of its figures and engage with it on its forum and website. I met its representatives last summer. I tried to make its figures work for myself on the back of an envelope and believe none of them adds up. The numbers changed a lot as time progressed. A report was supposed to be published in September but it was not. It was then supposed to be released in January but this did not occur, and it is now expected in the next few weeks. Spirit of Ireland means well and is thinking big but I would appreciate some figures. Energy policy must be informed by figures and cold, sober analysis. The way Spirit of Ireland started, by trying to generate positive feeling, does not really help to reduce carbon emissions. However, I look forward to the publication of its report, on foot of which I hope I will be able to make sense of its figures.
Ocean and wave energy technologies are a lot more expensive than some others and are not yet developed. They are technologies of the future and have not matured. To talk of them as contributing to our energy needs is a bit premature at this stage. It will be at least five or ten years before they are developed. When developed, the issue of cost will arise. Can they be rolled out cost-effectively? One should just place a price on carbon and let the investors decide. There are so many technologies that it makes it very difficult for the Government to decide which will win out in the marketplace. When the price of carbon is set, the cheapest technologies will come forward. At present, the only mature, worldwide renewable technology is onshore wind energy technology. Solar energy technology is still very expensive and must be subsidised. Wind energy is on the margin. It is a bit more expensive than gas but is our best hope in terms of renewable energy penetration.
Ms Muireann Lynch
I am not entirely convinced that removing subsidisation for peat stations would cause the cost of imported fossil fuels to rise. This is because the markets for oil and gas are so international and because Ireland would be generating an extra 300 MW or 350 MW from an alternative fuel. I would be surprised if this would cause prices to shift. The idea of running peat stations on a dispatch basis essentially means that if there were to be a blip in the market, for whatever reason, and if the cost of imported fuels were to rise, we could switch them back on. We could use the peat stations as arbitragers. We could run them when the cost of other fuels rise, thus making it cheaper to generate energy from peat. At the moment the peat stations are running flat-out, no matter what, and thus they cannot be used as arbitragers. We do not have much arbitrage available to us at present. We are building another interconnector that can act as an arbitrager.
If one were to run peat stations on a dispatch basis, it would cost slightly more to generate a kilojoule of peat, simply because one would not know whether the same amount would be needed every day. If one were to run peat stations on a dispatch basis, they would only be run when economically viable. I cannot see it having too great an impact on the overall system cost.
To add to the comments on Spirit of Ireland, this discussion feeds very much into what I was trying to touch upon with regard to how carbon emissions should inform policy. Spirit of Ireland tends to give a list of approximately 12 reasons its proposal is a good idea but we believe the primary reason for any project should be carbon abatement in a cost-effective manner. If it is true that Spirit of Ireland can build a dam of the size to which it refers for €800 million, that is great. We may well need it or other projects it can develop as part of the overall portfolio of energy options for Ireland but I am not sure why we should hone in on and go gung ho for this one massive, incredibly high-risk project. They talk a great deal about the intermittency of wind. At the moment none of the wind I am aware of is being dumped so that any time the wind blows all that energy gets straight onto the grid and is used. A very high penetration wind, of say, about 40% is needed — which will not happen until 2020 — before any significant amount of wind would be dumped. While there may be a need for storage in the future we do not need it now and neither do we need it at the cost and scale that is being talked about. That is my opinion, in any event.
There will be an issue as regards the economics of firing the peat stations up and down. To give a layman's observation on all this, the peatlands, where the peat is harvested, are not in the food chain already. Peat is an exhaustible source but it seems ideally suited to growing of renewable energy sources. I asked Bord na Móna this question two years ago: is it possible for that type of power station to be recommissioned to generate power from renewables that would be grown on the extensive peatlands? Is there an environmental issue as regards growing something on peat as against harvesting it?
Ms Muireann Lynch
I would not know enough about the geology.
Peat soils are known to be good for growing vegetables and greens as well as miscanthus. Much of the research that was done, years ago, by Professor Gordon and others in Hillsborough was on peat marginal ground for the specific reason that it did not interfere with the food chain. It seems terribly simplistic, however.
Mr. Eamon Keane
In terms of the scale of biomass needed relative to the power dome, there probably would not be enough. I am not sure what area the Deputy has in mind.
It is an enormous area of land.
Mr. Eamon Keane
Amy O'Mahony added up all the various biomass in Ireland and found there was only half the amount needed to 30% co-fire the peat with biomass. Currently, there is nowhere enough to even get near 30% of co-firing. To get to 100% biomass would probably require a very large area.
There are a couple of peat burning stations in existence. We would not necessarily have to transfer them all. There is also potential on that exposed land, perhaps, for windmill and hydro-generation, because it goes through the middle of the country, but I do not know. It just seems that if one of them was recommissioned to take biomass fuel from the peatlands, this might be something worth investigating.
Mr. Eamon Keane
Yes, certainly, I do not know enough about the area of land, so it could be viable.
That concludes our meeting. As Acting Chairman I want to thank the three groups that presented to us this afternoon, the Spirit of Ireland, the Irish Academy of Engineering and Energy Needs Ireland. I thank each of the delegations for making their presentations, for being informative, enlightening and very helpful to the committee and its work.
The joint committee adjourned at 5.05 p.m. until 2.30 p.m. on Wednesday, 24 March 2010.