They have strong constitutions.
The committee asked us to talk about three issues, regional market integration, the PSO levy and renewable energy sources. I will quickly go through the presentation we have circulated to the committee, as I prefer to find out what questions Deputies and Senators really have on their minds.
On regional market integration there is an effort to get one European market in energy. As part of that the countries have been divided into different regions and on the electricity side we are in a region with France and the UK, the FUI region as it is called. We are working together with Ofgem and the Northern Ireland and French regulators to try to develop integration within this area as a first step towards wider integration in Europe. Obviously interconnection is vital for market integration. As members undoubtedly know, there is an electricity interconnector at the Moyle from Northern Ireland to Scotland and we have a project under way to build an interconnector from Ireland to Wales, which is due to be completed in 2012. The UK has an interconnector to France and is building one to the Netherlands at the moment.
We will certainly look to see what we can do on further interconnection in the future. Up to now we were waiting to see whether the proposal from a private company to build interconnectors would go ahead, but it has not, and we shall have to look at what comes later: should the Government ask EirGrid or someone else to build another one or what sort of process should we use?
The benefit of increased interconnection is certainly security of supply. Wind being intermittent, having interconnection facilitates the integration of wind on to the system. We get more competition and more efficient market prices with greater integration. EirGrid has estimated in building the case for the east-west interconnector that there would be a €66 million per annum benefit from interconnection to Wales. We are overseeing the roll out of that project.
We published a document a few months ago which looked at how we would integrate our market more with the UK and France. We only introduced the single electricity market joining Northern Ireland and the Republic in 2007. It is now three years old. We keep being told the market does not want radical changes to take place too soon and wants this to bed down first. Therefore, we are looking, essentially, at how to adapt the market to bring it more into line with the other markets and facilitate trade. First, we must comply with EU regulations and, second, we must maximise the use of the interconnectors but in a way that brings us closer to the target models that are emerging at a European level to integrate all the markets. In particular we are focusing on introducing facilities for intra-day trading in the single electricity market. At present we have to bid into the market a day ahead but we need to get more flexibility into the system to be able to use the interconnectors as much as possible. We are looking at ways of doing that while not changing our basic market too much and also at how we can have day ahead price coupling with other markets. There is an effort at European level to have day ahead coupling of prices throughout Europe, a single algorithm that will cover the whole of Europe. It is an impressive project and I wait to see how it can be done. We are trying to see how can we get a day ahead price in our market in order that we can fit in with what is happening elsewhere. We are looking at adapting our market to get greater integration and greater use of the interconnector that will be in place in 2012.
The PSO levy was introduced in 2002 for security of energy supply, environmental protection and the use of indigenous fuel sources. These objectives are pursued through the support mechanisms of the PSO for certain gas installations, use of indigenous fuels and alternative and renewable fuelled plant. Our role is simply to calculate the costs associated with the PSO schemes the Government has introduced and what the levy should be on the basis of our calculations. We do not have any role in determining who should be subsidised or how much of a subsidy they should get.
The PSO levy scheme in place covers a number of different areas. There are three peat plants, two owned by the ESB and one owned by Bord na Móna, which together have 378 MW of capacity. The alternative energy requirement scheme, the old AER, was a forerunner to the renewable energy feed-in tariff, REFIT, scheme, which has 400 MW of generation, mainly wind covered. The REFIT scheme, which is the successor to AER, has 998 MW of capacity, mainly wind covered, and there is much more to come. There is also the CADA scheme — capacity and differences agreement — with two gas plants. That was put in place in 2005 at a time when there were no proposals to build generating stations in Ireland and a competition was run to encourage two plants to operate and give them a guaranteed price for the output. Aughinish Alumina and Tynagh are the two plants involved.
The actual PSO levy from October 2010 to 2011 amounts to €156.6 million, of which the peat plants receive €78.2 million, the AER scheme €13.5 million, REFIT scheme €27.7 million, CADA plants €14 million and there is a further amount of €21.2 million, partly for administrative costs but also the carryover from previous years when not enough was collected. These costs are estimated in advance and afterwards we have to ascertain whether the figures were right or wrong. There was a carryover in this particular year. I note the Minister has indicated he is reviewing the peat PSO levy and that he will be working with the CER and others on this topic in the coming months.
We have had very significant development of renewables in recent years and are among the world leaders in the top tier of countries for renewables. About 15% of our electricity comes from renewables and we are working to achieve the Government target of 40% from renewables by 2020. At present we have almost 1,500 MW of renewables on the system which compares with approximately 600 MW in 2004, which is significant growth. Our decision under the Gate 3 process to provide connection offers to a further 4,000 MW of capacity, which is almost entirely wind, will bring us up to and above the 40% target. Even if a significant amount of that 4,000 MW of extra wind connections does not go ahead we will still be able to achieve the 40% target. Of those that are getting connection offers, 3,200 MW are on-shore and 800 MW are off-shore wind. The Gate 3 connection offers have been going out from December 2009. A liaison group brings together the developers, the Irish Wind Energy Association, ESB Networks and ourselves to ensure the process works well. Also EirGrid's Grid 25 proposals are designed to achieve the 40% renewable target for 2020.
I have included a slide which shows the geographical distribution of the wind farms. It is clear the west coast is the main area but there are many other wind farms in other places. Those are my introductory remarks and I look forward to questions.
