I am the current chairman of the Sustainable Energy Association. I run a small renewable energy business called Allied Solar Limited, which is based in Coolock. I am interested in a number of small renewable energy technologies, including small wind, heat pumps, biomass and solar technologies. As my expertise is in solar technology, most of this presentation will focus on that. The same principles apply across the other technologies.
I will give the committee some background information about the Sustainable Energy Association. It was established approximately 18 months ago to represent the renewable energy sector in Ireland. It is a conduit of communication between governmental bodies, including such bodies in Northern Ireland, and installers and suppliers.
I propose to speak about three topics — the benefit of green-collar jobs to the economy, the banana skins for the industry and the ideas that will help the industry to grow. Approximately 80% of the cost of each renewable energy solution stays in Ireland. Depending on the sector, some raw materials, such as wood pellet boilers and solar panels, have to be imported. In Ireland, the cost of importing such materials is generally a small fraction of overall installation costs, which comprise the cost of distribution, warehousing, wholesale sales, local sales, delivery, administration and the actual installation. The benefit of this work is spread throughout the economy. It does not just benefit one geographical area. The work is undertaken by local tradesmen, whose expenditure benefits local economies. Kingspan Thermomax, Glen Dimplex and Potterton Myson are among the companies that are manufacturing in Ireland for the export market. This sector is likely to experience significant growth as energy prices rise.
I wish to speak about the banana skins for the industry. The effect of poor-quality installations that do not perform is by far the biggest threat for the industry. If this happens, the industry will get a bad name and will stay small. When Portugal and Greece embarked on solar water heating programmes just after the oil shock of the 1970s, Greece maintained and enforced installation standards, but Portugal was not as stringent. Today, less than 1% of Portuguese homes use solar energy, whereas 30% of Greek homes are equipped with solar panels. To date, Sustainable Energy Ireland has done an excellent job on installation standards. The stop-start nature of the provision of grants is the second most serious banana skin. If the industry is to survive into 2010, it is imperative that the current grant levels are maintained. Any reduction in grant aid should be gradual, planned and irreversible. It should not start until oil prices increase.
I will give an example of how things should not be done. In March of this year, Sustainable Energy Ireland announced the introduction of a new home installation grant and invited suitable companies to join the register. As a result, companies that had full order books suddenly found that all their orders were cancelled by customers who decided to wait to get the new grant. The companies in question had no work during the two months it took for the scheme to be rolled out.
Let me outline some initiatives that could help the industry. A VAT rate of 0% on improved products installed by approved installers should be supported. It would be counter-productive to allow any so-called renewable energy product with a green badge to suddenly benefit from a VAT rate of 0% because we need equipment to be approved. Carbon taxes should be supported. Even low values based on international carbon prices give an important market signal. Building the energy rating component into existing or future property taxes at commercial rates would further encourage energy efficiency and renewable energy expenditure. A business expansion scheme should be adopted to include new renewable energy companies. Zero-interest business loans, such as those pertaining to the UK Carbon Trust scheme, should be available. There should be decent feed-in tariff levels. The levels in Ireland at present are too low.
Offering a VAT rate of 0% on approved products installed by an approved installer has a number of advantages. It is technology neutral; it can be rolled out quickly for new technology or products without effecting budgets; it is easy to implement; and it serves as a significant incentive to installers to keep standards high because their being removed from the list would mean they would be subject to a major price disadvantage.
A carbon tax of €20 per tonne adds approximately 5.5 cent to the cost of 1 litre of home heating oil or diesel but would give an excellent signal in terms of the likely rise in the cost of energy.
With regard to property taxes, commercial rates could be reduced if a good BER rating were achieved. This would encourage BER assessment and energy-efficiency improvements. If a domestic property tax were introduced, a sliding discount based on the BER level achieved would be very helpful and would send an important signal to the market.
At present, the business expansion scheme is focused on expert-led goods and services in specific industries. Since renewable energy offsets emissions from imported fossil fuels, expanding the business expansion scheme to include companies in both the provision of and support for renewable energy technologies would help Ireland's balance of payments.
The UK Carbon Trust is now lending enterprises as much as £400,000 or as little as £3,000 in interest-free unsecured loans. Loans are repaid over a period of up to four years and many of the borrowers have found their energy savings are higher than the repayments.
With regard to feed-in tariffs, the current level is 19 cent per kilowatt hour for the first 3,000 units. This is still too low to encourage widespread uptake of electricity-producing technologies such as small wind turbines and photovoltaics. In the United Kingdom, the rates are 36 p per kilowatt hour for small photovoltaic systems up to 4 kW and 28 p per kilowatt hour for systems up to 10 KW. There is a rate of 23 p per kilowatt hour for small wind turbines between 1.5 kW and 15 kW but payback on a good windy site at such a rate would take approximately five years.
Oil production peaked in July 2008 and we are on the downward slope. We will, therefore, have high oil prices in the future. If the committee members have any ideas as to what to introduce in this regard, we would like them to talk to us about them.
As with many sectors in the economy, ours is finding it very difficult to do business at present. Customers are worried about money for the next year and are not easy to convince when faced with payback periods of five years and more. My business has experienced a downturn of approximately 40% by comparison with last year. We are at a level where we must choose between deferring wages and paying for stock. Having spoken to other colleagues in the industry, I note we are more or less all in the same boat. Our focus, now, is on surviving 2009. Are there any questions?
