The Deputy is absolutely right. We have considerable concerns with what is in the draft proposal. I have a separate slide dealing with Article 10 - the article to which the Deputy refers - later on and we can get into the deeper discussion then. It is something that causes us and a number of member states a fair degree of concern.
The Commission proposal was published last June. We have had fairly intensive discussion during the Polish Presidency so far. That will continue on into the Danish Presidency. Simultaneously, the European Parliament has a significant role to play under the new treaty arrangements and the directive proposal was referred to the relevant energy committee in July. That committee has held a couple of hearings so far and the plan is for a vote in January 2012, which is essentially the First Reading. There was a Council of Ministers discussion in November, at which a progress report on the directive was presented to Ministers. This is where we hope to achieve political agreement. To be honest, we simply do not know what will happen at this stage, but I know the ambition is that the Commission would like to see political agreement by next summer. Whether that is achievable or not remains to be seen, but there is a long way to go.
I would like to move on and deal with the articles. Article 3 is a Commission proposal that member states would set a national energy efficiency target and that they would review progress of same by June 2014. That target would be expressed as an absolute level of primary energy and it goes back to some of the earlier graphs I showed on megatonnes of oil equivalent and so on. In terms of the Council view, many member states would like to see this energy efficiency target better reflect national circumstances, or at least allow a degree of flexibility to member states. The Presidency has been working on revisions to the text. One revision which has been proposed in this article is for a two-step assessment of progress achieved, to be carried out in 2013 and 2015. There has also been discussion about the appropriate methodology adopted to assess progress. There are different methodologies at play here. We have traditionally followed the Commission methodology, which is known as the PRIMES model. The Department and the SEAI use this for forecasting. As we speak, the SEAI is publishing this morning its energy forecast for 2011, so that will effectively provide our up to date position on our overall NEAP targets. We already have a national target in our efficiency action plan, but we would be less keen on a binding national target at this stage.
Article 4 deals with requirements on public bodies. Essentially, the headline objectives are that member states would renovate 3% of the floor area owned by their public bodies, that a public inventory would be complied and that we would also look towards introducing and implementing energy management systems and energy efficiency plans for public bodies. There have certainly been suggestions for an alternative approach to the annual renovation target. There is certainly some concern about the figure of 3%. The alternatives would include something like an equivalence approach for member states to take the most cost-effective measures that are appropriate to their own public bodies. There are different administrations in place across Europe where local and municipal authorities have their own autonomy in many cases. That certainly causes the central government some challenges in that respect.
Several delegations have questioned the scope, the financial feasibility and the appropriateness of the annual 3% target. They are also concerned that any such obligation would be backed by additional sources of financing. We certainly support the concept of a national inventory, but clearly we have concerns with the cost. A 3% target is ambitious and would represent a fairly significant cost risk for the public sector. Our own view is that the focus of the articles should be on an energy usage target for the public sector, rather than a renovation target. We believe that would be a more appropriate measure.
I will move on to Article 5. The Commission is encouraging public bodies to purchase products, services and buildings with a high energy efficiency performance rating.
In terms of the stage the Council discussions have reached, the revisions to the text include caveats about taking account of cost effectiveness, economic feasibility, technical suitability and the need for sufficient competition. In general, the article does not cause major objections or concerns at this point. We generally support it and suggest the text should call for the highest energy efficiency performance class. That would reflect where we are in terms of a national policy and the green public procurement action plan which will be published early next year and for which the Department of Environment, Community and Local Government is the lead Department. It will ensure energy efficiency considerations are taken into account when public bodies are procuring products, services and capital projects.
Article 6 deals with obligation schemes. The ambition is that member states will establish an obligation scheme equivalent to 1.5% of final energy savings by energy saving companies in any one year, excluding transport. These energy savings will be published. There is room in the text for an alternative approach under Article 6.9. It is fair to say it is one of the central articles in the proposal, one which has generated a significant amount of discussion thus far.
On the Council's view, member states are looking for more flexibility on the design of the scheme to best suit their own circumstances and do not want to affect negatively national schemes in place across a number of member states, including Italy, France and the United Kingdom. There is resistance to establishing a system of mutual recognition of schemes across member states. It will be an area in which some negotiations will be required.
On the 1.5% target to be achieved, a number of member states will be looking for a gradual increase, potentially starting from a lower level to achieve higher savings over time. There are also questions as to how early action can be accommodated within the overall targets set.
With regard to having an alternative approach, provided for in Article 6.9, there is some scope and a desire for more detail in terms of what the scheme might look like and whether it would allow flexibility to combine elements of an existing obligation scheme with other possible policy approaches. While having an obligation scheme is consistent with our policy direction under the better energy programme which we started this year, namely, a voluntary obligation scheme with 25 energy supply companies, from where we are now reaching the target of 1.5% will involve a significant increase on the first phase figure. A figure of 1.5% will represent a fivefold increase.
Article 7 deals with energy audits. The Commission has proposals for the promotion of energy audits to final customers, with the particular aim of stimulating activity in households and small and medium enterprises. It also proposes that the first audit take place by June 2014 and thereafter every three years. There is broad agreement in the Council on the usefulness of energy audits as a concept to tap into the savings potential. There is some resistance to having mandatory requirements for larger companies, in particular, to conduct energy audits on the grounds of proportionality and the administrative burden involved. There is also a desire that implementation of the article focus on recommendations arising from audits and energy management systems. Some member states have called for a European energy audit standard to be developed which should be reflected in the directive.
We support the approach proposed which is consistent with national policy. Sustainable Energy Ireland has been to the fore in pushing energy audits and energy management systems, particularly for large industry. In Australia a public reporting mechanism is embedded into the senior management structures of companies. There are champions and leaders at very high levels in each company, which gives the process focus and direction. Having a similar obligation should not necessarily create a large administrative burden. By giving energy efficiency visibility one can encourage interest and uptake beyond what we are liable to achieve at this stage. There are moves in the revisions to the text to shift the requirement for undertaking audits from a three to a five year timeframe, moves which have been welcomed by a number of member states.
Article 8 concerns metering and informative billing. It is driving the push towards smart meters. The Commission wants to see a situation where final customers are provided with meters to measure actual energy consumption rather than bimonthly billing with which we are all familiar. It also wants consumers to be allowed to request metering data to be made available to third parties such as energy companies. By 1 January 2015 billing should be accurate and based on actual consumption. The information should be provided for customers free of charge.
On the Council's discussions, while delegations generally support the aim of delivering energy savings through behavioural change, there are concerns about informative billing and the ambition to roll out smart meters. The article comes up against what is commonly called the third package which deals with gas and electricity regulation. It has been the subject of several directives in recent years. A lot of the third package is still being implemented, including by us. We generally support the intent of the article because providing consumers with accurate and timely data is good and to be welcomed. We are also conscious that there are several provisions in the existing article which would impact on the cost benefit analysis the Commission for Energy Regulation has carried out. Ireland is probably ahead of a number of member states in this regard because we have probably the most advanced and accurate cost benefit and trial data as a result of the gas and electricity metering trials conducted by the CER.
The Commission for Energy Regulation has concluded consultations in recent days on the roll-out of electricity and gas smart meters which broadly indicate its decision to proceed with the national roll-out based on the positive results it gained from its analysis to date. It is, ultimately, subject to a Government decision. To give a sense of scale, even if we were to take all the necessary decisions now to proceed with roll-out, it would probably be 2017 or 2018 before there could be a national roll-out. January 2015 is the indicative timetable in the directive, which is far too ambitious based on the current position. A number of member states are further behind us and there is likely to be a change to the implementation date of the article.
As we mentioned, Article 10 is one of the articles which causes significant concern. The Commission is suggesting that by 1 January 2014 member states establish national heating and cooling plans for high efficiency co-generation and district heating systems and that national spatial plans be in line with national heating and cooling plans. There is a lot of detail in the article centred around the fact that new terminal generation installations over 20 MW will have regard to the objective of having combined heat and power systems. Where major installations were being refurbished, their permits would have to have regard to the potential for combined heat and power and district heating.
This is one of the articles which has a long way to run. Revisions to the text are currently under discussion and this will introduce a large number of caveats to a number of the articles as regards cost benefit. They will stipulate that any national heating and cooling plans would be subject to cost-benefit analysis. In my view this is fair and the Commission has indicated it will be in agreement.
As for Ireland's view, given our climatic conditions, our population dispersal and the nature of the majority of industry located here, we have significant concerns about the cost to consumers of the proposals and also practical concerns regarding market competition, priority dispatch - which is referred to in this article - and the electricity market structures which in our view would be disproportionately affected. As I mentioned, as regards refurbished plants or where the permit needs to be updated, the costs associated with retrofitting an existing plant would be extensive, notwithstanding the current exemption conditions which are provided for in Article 10.6 and others. The message from the Department is that many of the existing directives in this area need to work together, in terms of the renewable energy directive and the third packages I have mentioned. The proposal as it stands does not sufficiently acknowledge the existing rights and obligations under other relevant proposals nor how they will react.
With regard to spatial planning, Ireland's climate, geography and population dispersal would all mitigate against having a blanket planning requirement which requires us to assess the potential for district heating and cooling. In our discussions with the Department of the Environment, Community and Local Government it has expressed the strong view that Ireland needs to proceed cautiously in so far as this article is concerned and we must work against creating a legal obligation at EU level.
The related Article 12 deals with transmission and distribution. The Commission proposes that regulators would ensure that network tariffs and regulations provide incentives to network users to implement energy-efficient measures such as smart grids, for example. It proposes that by 30 June 2013, member states would adopt plans to assess the energy efficient potential of infrastructure and identify measures for improvements in network infrastructure. Transmission system operators and distribution system operators would provide priority access and dispatch for high efficiency co-generation.
The broad view at Council is that the role to be given to combined heat and power with regard to both access and dispatch needs further analysis, in particular, in comparison to existing renewable energy sources and the existing CHP directive. In the negotiations thus far, the Commission acknowledges there are challenges and that it would depend on the individual member state to identify a need for and to establish any possible priority ranking. As Mr. O'Connor has mentioned, we are not the experts on the policy and the Commission for Energy Regulation has assisted us in our analysis. The provision of priority dispatch is the one element that would cause us the greatest concern. If everything with high efficiency has priority dispatch then everything has priority dispatch and nothing has priority. Given our own market structure, we would need to look for flexibility and it might also have implications for the single electricity market. We will need to keep a close watch and talk to our UK counterparts as this article progresses in the negotiations.
Article 14 deals with energy services. The Commission objective is to promote the energy services market and to include measures such as a public list of energy service providers and what services they offer; model contracts for energy performance contracting in the public sector in particular; the dissemination of energy service information to consumers. This article is generally supported by most member states and there is nothing to cause us particular concern. We welcome moves towards the development of model contracts for the public sector in particular and we are very keen to progress this policy.
Article 15 promotes energy efficiency by the removal of existing regulatory barriers such as split incentives. This is of particular interest in the rental market where there is no real onus on either the tenant or the owner to introduce or push for better cavity wall insulation or other measures to ensure energy efficiency. The article also provides for a reduction in the legal and administrative barriers as regards public purchasing. The article will allow the public sector and the local authorities a greater degree of flexibility with their budgeting. It recognises that if they are moving towards employing energy performance contracting or ESCOs, the savings gained in this practice would be reinvested by those bodies. We support this article.
Articles 17 and 18 deal with delegated acts. I will alert the committee that the Commission is looking to adopt delegated acts with regard to areas such as the obligation schemes and the mutual recognition of same which I mentioned earlier, cost-benefit analysis and the various cost-benefit analysis schemes, CBAs, that will need to be put in place for a range of articles in this proposal and harmonised efficiency reference values. It is proposed that the delegation will be conferred on the Commission for an indeterminate period of time, but this may be revoked by either the parliament or the Council of Ministers. This is to reflect the fact that the trend in Europe is that powers are allocated to the Commission to adopt delegated acts. We are familiar with this trend in the eco-design and energy labelling directives which were recently transposed. I sound a note of caution as regards the delegation and the power which the Commission wishes.
Article 19 is the review and monitoring arrangement which will apply. By 30 April each year, member states will report progress towards their national efficiency targets and those reports may form part of the national reform programme which has been introduced under broader EU requirements and on which the Department of Foreign Affairs and Trade and the Department of the Taoiseach will be the lead Departments. Depending on what is contained in the progress reports from member states, the Commission may then issue recommendations to member states and ultimately may go down the route of mandatory targets.
Delegations at the Council discussion had reservations about the timing of certain reporting obligations and in particular, the availability of reliable statistical data. In the case of a number of member states, their energy agencies are tasked with gathering the data and in the case of Ireland, the Sustainable Energy Authority of Ireland gathers information on energy forecasting. We need to be careful with regard to the timing. The Department has made the point about the numerous reporting obligations under various existing EU directives and also the national reform programme obligations. We would urge the Commission to harmonise and streamline the reporting requirements on member states as much as possible. The timing with regard to our national energy statistics is a problem in that they are generally not available until November of the following year. For example, the 2010 energy balance is only just now being finalised and published. This is a problem shared by several member states. If the April time line is retained, we would only be able to produce the high-level estimates for the current year in April of that year.
The Polish Presidency has been discussing this issue since July and it has been examined extensively by the working group. The group held two technical workshops, on the obligation schemes and the combined heat and power elements of the directive, in October, followed by bilateral meetings with all member states in November. The Presidency circulated a revised text in early October setting out the current status of the discussions, which has been a very useful input to the debate. Based on that revised text, the bilateral meetings that have taken place and written comments from various member states in the interim, we expect a further revised text in the next week or ten days. That will give us a better sense of where we currently stand.
A Council of Ministers meeting took place in November at which a progress report on the directive discussions was presented by the Presidency. It is noteworthy that the Commissioner for Energy, Mr. Oettinger, reiterated to his colleagues that further progress must be made if we are to reach our 2020 targets. As I said, we are currently at about 10%. The Commission reiterated the two-pronged approach at this meeting. There is the overall binding national target to be adopted, with some flexibility for member states, but if we are not on track in two or three years time, when this is revised, we can expect binding instruments to follow thereafter.
Looking ahead to next year, the Danish Presidency, which commences on 1 January 2012, has set out its broad priorities as relating to economic growth, climate, energy, justice and budgetary matters. Specifically on the energy side, the energy efficiency directive is probably its number one priority, followed closely by an energy infrastructure regulation, Council conclusions on the energy roadmap to 2050, which is part of a suite of documents published by the Commission this year, and a regulation on the safety of offshore drilling.
The first working group meeting under the Danish Presidency will take place on 10 January. It has indicated an intensive six-month programme of work, with approximately six meetings per month planned. This directive will be top of the pile, in order to inject momentum into the discussions. We would expect the Danish to seek significant progress on this dossier by June. Whether we will achieve political agreement within that timeframe remains to be seen; it may well fall to the Cypriot Presidency to secure such agreement. That is assuming a high level of agreement as we move from here.