Implications for Ireland of the Withdrawal of the UK from the EU in Regard to the Energy Sector

I welcome Mr. Rodney Doyle and Mr. Michael Mahon from EirGrid; Mr. Stephen Wheeler from SSE Ireland; Mr. Denis O'Sullivan from Gas Networks Ireland; and their colleagues who have accompanied them today. The presentations the organisations made to the committee in 2017 were among the most interesting we heard. The potential impact of Brexit on the security of energy supply for the island of Ireland remains one of our greatest concerns.

Members are reminded of the long-standing parliamentary practice to the effect that they should not criticise, comment on or make charges against any person outside the Houses or an official either by name or in such a way as to make him or her identifiable.

By virtue of section 17(2)(l) of the Defamation Act 2009, witnesses are protected by absolute privilege in respect of their evidence to the select committee. If, however, they are directed by it to cease giving evidence on a particular matter and continue to do so, they are entitled thereafter only to qualified privilege in respect of their evidence. They are directed that only evidence connected with the subject matter of these proceedings is to be given and asked to respect the parliamentary practice to the effect that, where possible, they should not criticise or make charges against any person or an entity by name or in such a way as to make him, her or it identifiable.

I invite the witnesses to make their opening statements. We will then take questions and comments from members.

Mr. Rodney Doyle

I thank the Acting Chairman and members of the committee for the opportunity to appear again today to give members an update on our perspective on the impact of Brexit on the electricity system on the island of Ireland. This discussion will also allow us to update the committee on some of the potential solutions it identified in its report of July 2017, which was compiled after we appeared before it.

EirGrid Group is a State-owned transmission system operator on the island of Ireland. We operate the transmission system both in the North, through the System Operator of Northern Ireland, SONI, and in the South. We are charged with developing the high-voltage electricity grid to cater for the demands of society and the economy. We also operate the electricity market on the island of Ireland. In this regard, we work closely with the ESB in the Republic, and with Northern Ireland Electricity Networks, NIE, in the North on delivering that mandate. In addition to ensuring security of supply, we also play an integral role in delivering decarbonisation through the successful integration of ever-increasing levels of renewables into the system.

In the climate action plan published by the Government during the summer, we have been tasked with progressing and delivering on a number of key areas. The most significant of those responsibilities include increasing the level of renewables on the grid to 70%; ensuring an appropriate auction and grid regime is designed to support the development of offshore wind; and a commitment to deliver further electrical interconnection to facilitate Ireland’s target for renewable electricity by 2030, which I will touch on later. Work across these work streams and others has commenced and is making significant progress. The most high-profile of these initiatives is the Celtic interconnector which will link the electrical grids of Ireland and France. It is worth noting that the Celtic interconnector was a potential solution identified by members of this committee in its July 2017 report. My colleague, Mr. Mahon, will now discuss the specifics of the interconnector.

Mr. Michael Mahon

The interconnector that will link Cork and Brittany has been studied for well over a decade now. Its merits are multiple and include facilitating Ireland’s 70% target for the increased use of renewable electricity by 2030, as set out in the climate action plan. It will also increase competition in the electricity market, apply downward pressure on cost, enhance the security of supply for both Irish and French electricity consumers and improve telecommunications between Ireland and France by providing a direct fibre-optic link between both countries. In addition to these benefits, the Celtic interconnector will, crucially, provide Ireland’s only energy connection to an EU member state once the United Kingdom leaves the EU. Last Wednesday, the European Commission announced grant funding to the tune of €530 million for this project. Due to the manner in which the regulatory authorities in Ireland and France profiled the grant application, 65% of the grant will be allocated to Ireland. As such, the overall grant to Ireland will be approximately €345 million, which is a fantastic outcome for both Irish electricity consumers and the broader Irish energy system.

I pay particular tribute to the solid cross-party support the Celtic interconnector project has received to date, in both the Seanad and the Dáil, especially from Senators Noone, Richmond and the entire membership of this committee. The committee's report from July 2017 explicitly stated: "The free-flow of electricity through inter-connectors, particularly through the completion of the Celtic interconnector, should be a priority." The announcement by the European Commission last week has overwhelmingly demonstrated that it shares this priority. EirGrid and its French counterpart, RTE France, look forward to progressing this landmark electricity project and ensuring it is delivered on time by the mid-2020s.

Mr. Rodney Doyle

Another milestone project in the evolution of the overall electricity system on the island of Ireland has been the single electricity market, which has been operating for some 12 years now. In the committee's 2017 report, it prudently called for the maintenance of the single electricity market and the completion of the integrated single electricity market, ISEM, project. I am happy to report that we completed that project and the market has now been significantly advanced. It has been operating successfully under its new arrangements for the past 12 months. While much political discussion has focused on various sectoral aspects of the North-South and east-west relationships in the Brexit negotiations, there has remained a strong and consistent view that the single electricity market should be retained. Operating the electricity market on an all-island basis has been a major success and is a tangible benefit of the peace process. Now that we have transitioned to the integrated single electricity market, we are linked into the European market which resulted in the delivery of even greater efficiencies across the electricity system. The ISEM has brought real efficiencies to how we manage the generation and supply of electricity across the whole island. It helps minimise the price of electricity and ensures we retain cost competitiveness with other economies.

I am sorry to interrupt but a vote has been called in the Seanad.

Sitting suspended at 3.36 p.m. and resumed at 3.50 p.m.

I apologise for the interruption. The vagaries of democracy.

Mr. Rodney Doyle

That is okay. We support it.

I will pick up from where I was and reiterate the ISEM has brought real efficiencies to how we manage the generation and supply of electricity across the island as a whole. It is helping to keep the price of electricity minimised and ensure that the Irish economy retains cost competitiveness with other economies across the world. From a system operator perspective, I encourage the committee to ensure that the benefits derived from integration of electricity systems North and South is retained no matter what kind of Brexit we end up with. A failure to preserve the success of the single electricity market would have a negative impact on prices in Northern Ireland and Ireland, which we do not want to see happen. We call on the policy makers and negotiators on Brexit to continue their support for the current approach, which would allow us to continue operating a clear model into the future.

We were pleased last week to launch the EirGrid Group strategy for 2020 to 2025. At the heart of this strategy is the continued operation of energy and electricity policy on an all-island basis. It also has at its core the drive to decarbonise our way of living, which is dependent on fossil fuels, and move to one based on sustainable sources of energy.

As the committee assesses the current status of sectoral policy areas, we draw its attention to the success that has been achieved to date from North-South integration of electricity systems. We draw particular attention to the enormous strides that have been made in the area of energy, most importantly the integration of high levels of energy from renewable sources into the system. Any decision to move from this level of energy co-operation due to the fallout from a hard Brexit would only serve to unpick the good work that has been done to date, something that we do not want to see happen. We ask that the committee continue to provide its support and use its voice of influence.

I thank the committee for the opportunity to present and for its members' attention. I would be happy to take questions.

I invite Mr. Wheeler to contribute.

Mr. Stephen Wheeler

I thank the committee for inviting me back to participate in this hearing. I was glad to provide evidence to it in 2017. I commend the committee on its report published subsequent to those sessions.

I am the country lead for SSE in Ireland. SSE plc is a FTSE top 40 company, headquartered in Scotland and active in the Irish market for 11 years. SSE Renewables is proud to be the largest renewable electricity developer on the island of Ireland, with plans for up to three offshore wind farms in the Irish Sea. We are also one of Ireland's largest energy providers, supplying approximately 700,000 customers on the island. Over the past six years, SSE has contributed more than €5 billion to the Irish economy, supporting over 4,700 jobs while contributing to the achievement of Ireland’s energy and climate policy aims.

As the largest company by market capitalisation in the FTSE 100, whose revenues are derived solely from the UK and Ireland, SSE is intractably invested in the UK and Ireland continuing a collaborative and co-operative relationship after the UK formally leaves the EU. In addition, a number of our business activities are organised on an all-island basis.

With that in mind, SSE has undertaken an extensive programme of Brexit readiness. This includes examining our own supply chain and GDPR requirements and communicating with staff on issues such as freedom of movement and driving licence and insurance arrangements. A no-deal Brexit would be a suboptimal outcome for SSE and the energy industry, given the uncertainties it creates for all businesses. However, we do not anticipate Brexit becoming a deterrent to our continued operation and future investment in Ireland.

I will focus on the material issues for our customers and our business across the island. When I last appeared before the committee two years ago, I proposed three principles for the exit negotiations, which were reflected in the report of findings published by the committee. Those principles have not changed, though the circumstances have, in particular the greater threat of a no-deal Brexit. First, the single electricity market on the island of Ireland must be maintained in all Brexit scenarios, both immediately after the UK leaves the EU and into the future. Second, the flows of electricity and gas between countries through interconnection should continue to support energy security and consumers. Third, Ireland’s commitment to tackling climate breakdown must be delivered on.

Taking each in priority order, the combining of the electricity markets in Northern Ireland and Ireland into the SEM has been a success. As the committee found in its 2017 report, the maintenance of the SEM is a key component of the all-island economy. The SEM has improved competition and provided the investment case for the construction of new and cleaner generation, providing the benefits of a larger, integrated electricity market. For customers, these benefits arise in the form of lower costs.

The withdrawal agreement negotiated by Theresa May’s Government allowed for the SEM to be retained intact. A statement by the regulators in Northern Ireland and the Republic of Ireland outlines that, in a no-deal exit, the market would essentially be retained, although one element, namely, day-ahead coupling between the SEM and the UK’s British Electricity Trading and Transmission Arrangements, BETTA, market, would be lost. The loss of day-ahead coupling would be regrettable and would lead to reduced efficiency in flows over the electricity interconnectors. SSE is fully convinced that retaining the rest of the market design and working to replace day-ahead coupling is the best outcome for both Ireland and Northern Ireland. We would, however, consider any reduction in efficiency due to the loss of day-ahead coupling to be minor in comparison to the overall benefits of the SEM.

Protection of the SEM is not only a priority for day one. Its continued existence will rely on ongoing collaboration between authorities in London, Belfast, Dublin and Brussels. Continued North-South co-operation between businesses and other bodies will be vital in enabling this to happen, with complementary frameworks needed to allow all sides to continue to trade and co-operate with one another. We ask these authorities to provide for the maintenance of the SEM immediately following any form of Brexit and on an ongoing basis afterwards. We also ask the Government to work closely within the EU and with counterparts in the UK to ensure that the SEM and the benefits it brings to consumers in Ireland can be protected in all circumstances.

Our second priority is that electricity and gas should continue to flow over the interconnectors. Two years ago, I outlined the reasons it was vital that flows of energy between the UK and Ireland continue. As the committee recommended in its 2017 report, the facilitation of seamless interconnection is the preferred solution in all outcomes. Although there may be increased administration, SSE’s expectation is that there will be no barrier in any Brexit scenario to prevent electricity and gas flowing day to day, including in the case of a supply emergency. In addition, tariffs on the flow of electricity and gas are not expected.

As ever, interconnection is one tool in the market, and a combination of it and domestic generation must be provided to ensure that security of supply is assured in all scenarios. New interconnection should be supported by a clear cost-benefit analysis for customers such as that undertaken for the Celtic project between Ireland and France.

When I last appeared before the committee, I noted that the North-South interconnector project was before the courts. While it is encouraging that it has now gone through the planning process in Ireland, the project is still facing delays in Northern Ireland. This project would address impediments to transporting energy within the SEM, whereby the cheapest and greenest electricity cannot always travel to where it is needed, while also facilitating greater security of supply.

SSE supports this important piece of infrastructure and the significant savings it will bring to customers on the island.

When I last spoke to the committee, I advocated that Brexit should not subsume all focus in these upcoming, crucial years. It is welcome that, two years later, such ambitious and necessary plans have been formed to enable Ireland to tackle climate change, providing renewed confidence to renewable investment. The Government’s climate action plan, published this summer, provides a welcome target of 70% of electricity from renewables by 2030. To achieve this target, the plan identifies a need for 3.5 GW of offshore wind energy, as well as a doubling of onshore wind energy to 8 GW. This plan builds upon the clear and ambitious recommendations of both the Citizens’ Assembly and the Oireachtas Joint Committee on Climate Action.

The plan and its targets can provide a green light for renewables investment in Ireland. For this investment to be realised, the actions in the climate action plan must be completed on time. This includes a significant level of facilitative frameworks and consents to deliver grid connections, along with system services to support a higher level of renewables. It also includes a timely implementation of the new renewable electricity support scheme, currently in design by the Department of Communications, Climate Action and Environment. It is critical that any Brexit outcome, including a no-deal exit, does not result in these actions being delayed or a reduction in the outlined ambitions.

Ireland’s offshore sector has had numerous false starts over the past decade. The committee’s 2017 report noted the opportunities which exist for the offshore generation of wind energy. The climate action plan has signalled a clear intention to ensure these developments now begin, setting up processes for offshore leases and connections, as well as route to market. Early offshore projects such as SSE’s Arklow bank can make a significant contribution towards meeting Ireland’s EU emissions targets. It is critical they are facilitated and supported if this transition is to happen this decade.

With the delivery of this increase in renewables, along with the complete phasing out of coal and peat in the first half of the decade, gas will have a critical role to play. High efficiency gas generation will provide the flexibility to support the renewables transition while ensuring security of supply.

It is essential the transition to a low-carbon economy is delivered cost effectively. This needs a strong overarching policy driver. The EU’s emissions trading scheme, ETS, is designed to put a cost on carbon emissions in the electricity sector, as well as for other large demand users. In the case of a no-deal Brexit, the UK including Northern Ireland, will leave the ETS. The UK Government has outlined its intention to substitute the European scheme with a replacement for the coming two years with a view to aligning with the ETS in the future.

Authorities should assess ways to ensure the ETS, and any replacement in Northern Ireland, maintains alignment to the greatest extent possible in order to ensure electricity generators in the single electricity market, SEM, compete on a level playing field. Ireland should also take an active role at EU level in ensuring the EU ETS is on a pathway to delivering a robust carbon price. If this is not achieved, we should consider domestic measures to supplement the scheme.

The increase to carbon tax, as announced in yesterday’s budget, should provide the same overarching signals to solid fuels, heating and transport. We support the announcement and welcome the commitment to use revenues on climate action measures such as improved energy efficiency, as well as in support of a just transition for those particularly impacted.

SSE sees three energy priorities for Ireland as Brexit plays out, namely, maintain the SEM, ensure flows of energy over the interconnectors continue, and deliver on plans for decarbonisation of energy. We believe these three priorities are deliverable, although effort will be required both in the near term and on an ongoing basis. It is our view that the successful fulfilment of these three aims will represent a win-win outcome for consumers in Ireland and the EU as a whole, as well as the UK and particularly in Northern Ireland.

Energy customers want prices to be fair and Ireland requires cost-effective investment in energy infrastructure to decarbonise its economy and maintain security of supply. The imperative and public demand for decarbonisation has never been higher. Brexit, and the potential of a no-deal Brexit, must not distract from the fulfilment of these decarbonisation objectives, along with the continued delivery of cost-effective energy for consumers. It is in that spirit that I have presented these three priorities.

I thank Mr. Wheeler for his opening statement. I call on Mr. Denis O'Sullivan, managing director of Gas Networks Ireland, to make his opening statement.

Mr. Denis O'Sullivan

I thank the committee for the invitation to outline Gas Networks Ireland’s position on the UK’s withdrawal from the European Union. I am joined by my colleague, Mr. Brian Mullins, head of regulatory affairs.

In June 2017, my colleague, Ms Claire Madden, addressed members of the committee on the likely impacts of Brexit on Ireland’s gas supply. Since then we have progressed several key actions to help provide the necessary assurances that Ireland’s gas supplies will be unaffected by Brexit. Our assessment is based on our experience as the operator of Ireland’s transmission and distribution network, as well as on the significant engagement we have undertaken with stakeholders, including officials in Ireland, the EU, Great Britain and Northern Ireland. Based on our assessment and most up-to-date engagement with all stakeholders, our view is that the UK’s withdrawal from the European Union will not impact on security of gas supply to the island of Ireland.

Before discussing Brexit in greater detail, I will provide some context for the committee. Gas Networks Ireland is the owner and operator of Ireland’s gas network, supplying gas to over 700,000 industrial, commercial and residential customers. Natural gas is of key strategic importance to Ireland, representing 30% of our country's primary energy. Approximately 50% of Ireland’s electricity is powered by natural gas. As the Climate Change Advisory Council recently pointed out, not only is gas important to our economy, it is essential for our transition to a decarbonised economy.

Following Brexit, the physical gas infrastructure linking Ireland to the rest of Europe will not change. Of the three entry points to the Irish gas system, approximately half of our gas is supplied from the indigenous sources in Corrib and Kinsale, with the balance being imported from Moffat in Scotland.

The Irish gas market is heavily interconnected with that of the UK. It should be noted that the supply of gas to Northern Ireland and the Isle of Man is fully reliant on Gas Networks Ireland’s infrastructure. This only underpins the need for continued co-operation between Ireland and the UK regarding gas supplies. There are existing intergovernmental framework agreements in place since 1993 between Ireland and the UK concerning Ireland’s two gas interconnectors. We see this framework continuing to apply post Brexit.

The progress we have made since we last addressed the committee in 2017 allows us to reaffirm our assessment that security of gas supplies will not be impacted by Brexit. First, we have undertaken extensive engagement with key stakeholders in the gas industry, including regulators, other pipeline operators, gas shippers and relevant Departments across the Republic of Ireland, Northern Ireland and Great Britain. Ireland and the UK have successfully operated in a highly connected and interdependent energy system since the early 1990s. Given the interconnected nature of the markets, all relevant parties remain strongly committed to the continued successful operation of the gas interconnectors. It is clear from our engagements that the parties are all committed to ensuring that gas will continue to flow under existing arrangements from Great Britain to Ireland, Northern Ireland and Isle of Man, regardless of the outcome of Brexit.

Second, the UK has transposed all relevant existing EU gas legislation into national law. This essentially means that the status quo will be maintained with the flow of gas between the UK and Ireland, as well maintaining the legal obligations on neighbouring transmission system operators, TSOs, to co-operate with each other regarding gas flows.

Third, measures are in place to ensure the contractual framework governing gas flows from Great Britain to Ireland will remain unchanged post Brexit. We are confident all existing systems and processes governing gas flows and gas trading will remain unchanged following Brexit.

It has been confirmed by both the UK and the EU that a zero tariff will apply to gas flows in the event of a default to World Trade Organization, WTO, tariff rules. On the basis of this progress, Gas Networks Ireland is satisfied there will be no disruption to the daily importation of gas from Great Britain to Ireland, even in the event of a no-deal Brexit.

In the past week, Gas Networks Ireland published its Vision 2050 strategy, which will deliver sustainable additional indigenous gas supply. By 2030, 20% of gas on the network will be indigenously produced renewable gas. By 2050, 50% of our gas will be carbon-neutral comprising renewable gas and hydrogen. This will only reinforce security of supply in the years to come while ensuring Ireland has indigenous and sustainable sources of energy.

Gas Networks Ireland remains committed to continuing our strong relationships with our stakeholders over the coming months and years to ensure there will be minimal, if any, negative impact on all our gas customers as a result of Brexit. While there is the potential for some regulatory divergence in the years ahead, we are confident that given the interconnected nature of our islands and our energy systems, this can be managed. We look forward to the committee’s questions.

I thank all the witnesses for their opening statements.

I might kick things off myself with a few questions. Mr. Wheeler talked about the emissions trading system. I would like to understand the impact in reality of the UK falling outside the emissions trading system. Does that mean Irish companies will not be able to trade with UK companies for a period of two years? What does it actually mean? Mr. Wheeler mentioned that the UK Government will hope to have a replacement scheme but what is going to happen in the two years and how will it impact on the Government's action plan towards achieving our carbon neutrality?

In response to the last speaker from Gas Networks Ireland, I was just wondering about the interaction with liquid natural gas and its importation as opposed to what just comes through the pipelines. How does that form part of the 50% of electricity generated from natural gas? My other general question is what the witnesses think the impact of Brexit will be on the price of energy for business and domestic consumers. Also looking at the period in the interim, if we have a no-deal Brexit, what will that mean in terms of prices? In the period from now to when the Celtic interconnector is operational, what will the landscape look like as regards price for consumers and business?

I thank the witnesses for their presentations and their comprehensive reports. They all have their homework done. They seem to be Brexit-ready and to have explored all possible eventualities. There is not going to be a blackout on the night if it happens. My question is more general. All the reports touched on Brexit and climate action, which is our remit for today. If I could leave both of those aside for a second, I would like to ask, in respect of both gas and electricity, with all that is being mooted at the moment and the move towards electric cars and electric heaters in houses to get away from fossil fuels, how we are fixed for supply going forward, Brexit aside.

Ahead of the Celtic interconnector, will we be able to meet demand if we are to start meeting our climate action targets with electric cars and the shift towards electricity? Have we got ample supply if the demand keeps rising? With regard to gas, how are our Kinsale and Corrib resources? What longevity do the witnesses predict from them before we get up and running in the production of biogas or whatever? Have we got ample supply of gas and electricity, Brexit and climate action aside?

On the Celtic interconnector, it is great news that we have the commission grant and that there is €345 million for Ireland. That is a great development and very much to be welcomed. I assume that the Celtic interconnector will give us security of supply and also help with decarbonisation. I presume that is the two-pronged outcome. As a Border person who wants to see every form of North-South co-operation grow, and ultimately grow into a unified State, I am also firmly in support of maintaining the all-island energy market. There is no challenge to that. The North-South interconnector comes into play in a huge way there. I have no intention of going through all the technical issues. There are people who argued that it could be undergrounded efficiently and the witnesses' argument was that this would be difficult from the point of view of bringing in renewables and that of cost. This is not the correct forum to go back over all that and it is not the agenda today. However, I have been led to believe that technologies are evolving all the time. Do the witnesses see technological developments and innovation that might change what they have argued in the past in respect of taking the renewables into the grid and in respect of the overall cost? Is technology moving there? If it were, the inference is obvious in terms of what it would be right to do.

In respect of SSE, I am interested in the whole area of offshore wind farms. They get over a lot of the societal issues and populist difficulties that may arise in certain instances. Where I come from in Cavan, we have had an extraordinarily good relationship with the wind farm and the wind industry. There has not been the popular uprising against them because they were a supplementary income for small farmers in the area through leasing the land for the turbines. It has actually worked very well. There is a good community dividend and there are no issues, thankfully, as of yet. The wave energy would get over any community difficulty. I would be interested to hear a comment on the economics of offshore wind energy. Does SSE see a big future there? Are offshore wind farms ultimately superior and what is the difference? Can we get greater power there? I am interested purely as a layperson. I am sure the people watching would be similarly interested in the contrast between wind farms on land and offshore wind farms. Wave energy is not on the agenda. I have heard it said that the potential for Ireland in wave energy is almost equivalent to what oil was in Norway some years ago. I do not know if that is outside the witnesses' brief but I would interested in a comment on it at any rate.

I wanted to comment on the gas networks. Mr. O'Sullivan will be aware of the good news in Cavan that we are very proud of. I raised it in the Seanad this morning. It concerns Virginia International Logistics, a major haulage company. I am not going to go into this in depth. The company has become the first haulier in Ireland to complete a zero carbon heavy goods vehicle delivery to Europe. The trucks were fuelled by compressed renewable gas, also known as bio compressed natural gas. While we congratulate the Cole family and Virginia International Logistics, Mr. O'Sullivan might comment on the potential of this to become the norm. I would like a comment on the economics around that. Can it become profitable for haulage companies to make that transition? Would they need support in so doing?

Could Mr. O'Sullivan explain to me as a layperson the degree to which the use of gas is decarbonised, the degree to which there is still a carbon footprint in the use of gas and the distinction between this form of gas and the other? It is an interesting area and a relevant one.

I share the Chairman's interest in what all this means for consumers post Brexit in terms of price.

The witnesses are welcome. Their joint presentation has reassured me that business will rise above politics and that Brexit will do whatever Brexit does but business will continue to be transacted across the globe. Their presentation was very welcome. They are not hanging about waiting to see who wins and who loses; they are ensuring the future of their businesses, which is important.

Many institutions in this country are now cross-Border. Under the Good Friday Agreement, we have Waterways Ireland and Gas Networks Ireland and electricity supply moving North and all that. Is there anything that is a pinch-point now for the witnesses that we could work through the provisions of the Good Friday Agreement to get around? I am concerned, as this Brexit process rolls on, that politicians are looking at the macro issue, so to speak, but the witnesses are interested in the micro issues on the ground. If there is anything in that respect that is important to them, they might allude to that.

On the risk to supply, when we talk about interconnectors we are talking about a central point and the risk to supply across all three areas is something that is of concern to me. In 2016, I wrote a piece about the implementation of a border in Ireland following the referendum. I could see no way that we would get by without some sort of border, be it soft or hard. As we draw closer to 31 October, I see that becoming a hard border.

I have spent some time in Northern Ireland and I am concerned about the security aspect of Brexit, the part we all hope will not happen. With single points of supply, interconnectors running across borders and so on, have the witnesses taken on board the security implications of that supply and the infrastructure required? I refer to the policing of it. Do they believe they will need military personnel to manage the infrastructure on the ground or will they bring in private companies to do that for them? I am concerned about that.

I do not want to stray off the Brexit theme but two issues cross my mind. We were talking about carbon tax. There is much debate here about whether carbon tax is the way to go or whether we should offer incentives to encourage people to move away from carbon-generated energy supply. If the witnesses have something to say on that, I would be interested to hear it.

Now that we have an interconnector coming from France, I am sure some people here will be looking at whether electricity is generated through nuclear power stations and the like. Some people will be concerned about that so we might as well be upfront and tell them straight if it is involved.

People refer constantly to electric vehicles and the like. I believe we will have arrived with electric vehicles when I can pull into a petrol station, take out a battery, put in another one and be on my way in three and a half minutes. If I have to sit for two hours while the battery is charging, forget it. For the average long-distance traveller, that will not work. I would be interested to hear the witnesses' views on that.

My key question is the security in all three cases. I know the witnesses have supply coming in, for example, in Wexford, for the wind turbines. How vulnerable are those if we face a terrorist incident in this country again?

Mr. Stephen Wheeler

As the Acting Chairman asked me the first question I will start with the emissions trading system, ETS. It must be remembered that the ETS will continue whether the outcome is a hard or soft Brexit. Ireland will continue to trade in that market. What we will see that is different is that the UK will adopt its own policy. We would look to see that the UK would adopt a policy that is aligned to the European Union ETS. The challenge from a power generation point of view is that, on the island of Ireland, if we have a generator in the South on an ETS and a generator in the North on a UK tax, they are not aligned. They are different. In effect, it becomes cheaper for one side of the Border, whether it is North or South, to emit carbon. On an all-island basis, we would prefer to see an alignment of that. We would prefer to see them equal on both sides of the Border but that is for the UK Government to determine after Brexit. To be clear, I do not believe there will be a major short-term impact in that regard. The Senator asked if we will continue with regard to the climate action plan. In power generation, Ireland has a plan to generate 70% of electricity from renewable sources. The focus now is on delivering that. Whether the UK is in the ETS or outside it does not impact that. We need to be clear about that.

The Senator asked about offshore wind. I have been talking about offshore wind at Oireachtas committees for about ten years. What we have seen in that ten years is a huge improvement in technology. The original machines in the Arklow Bank wind farm, for example, were 4.5 MW or 5 MW machines. In terms of the latest auction that took place in the UK only last week, the results of which have just been published, we are now talking about 12 MW machines. The first wind farm I built in Cavan was 12 MW versus one 12 MW machine now in offshore. The technology advancement in that and the cost reduction in offshore wind now puts offshore wind in poll position to deliver on the scale required for this challenge.

I do not want to take away anything from onshore wind. We are the largest onshore wind operator developer in the country. Onshore wind projects have been hugely successful in the past 15 years. Ireland, in terms of all the different parties, and EirGrid is the industry policy, deserves great credit for the work that has been done on onshore wind but to meet the 70% target, onshore wind projects cannot do that alone. It needs large-scale offshore wind projects to complement that. As a result of the technology advancements and the reduction in price, offshore wind is now a credible option for Ireland to hit its 70% target. Without offshore wind, Ireland will not hit its 70% target by 2030. That is a reality. The key point now is to advance all the strong work mentioned in the climate action plan and deliver on the actions to ensure we get to 2023, 2025, 2027 and, in terms of career milestones, all the way to 2030.

We are talking about involving technologies to support the penetration of renewable energy. We lose sight of this point, and it is a great credit to EirGrid and to the entire industry that we have more than 65% of renewables on the system at any one time. That is ground-breaking and world-leading. The target is that when we get to 70%, that will be up as high as 95%. Ireland deserves huge credit for that when we look at the actual investments and the progress that has been made in our systems and how we have developed renewables across Europe.

The challenge going forward is about the back-up. Renewables now becomes the main power source so instead of gas, coal or peat in the past, it will now be renewables. To back that up, at SSE, we believe the answer is high efficiency combined gas turbines, CGTs, because we believe gas is the transitional fuel. Between now and 2050, and we have to get to zero carbon by 2050, gas will be a key enabler of more renewables and a higher renewables penetration on the system. The challenge then is how we take carbon out of gas. Gas is the lowest emitter of all carbon fuels in terms of what we are burning currently. It is much less than coal and peat. Coal and peat are coming off the system. The timetables for that have been clearly set out. The challenge now is how to decarbonise gas. Gas Networks Ireland has done much work around how we move to potentially green hydrogen, for example. That could become a real element of power generation in the future. The target is to get to 70%. To get to 70%, we need to have back-up and ensured security of supply. That is where high-efficiency CGTs come in, as well as the other advances that are being made in battery technology and other system services.

Will Mr. Wheeler comment on wave energy? I know it is not his brief

Mr. Stephen Wheeler

To be fair, I do not want to do an injustice to wave energy; it is not my brief. I believe the environment is the challenge. It is something we have seen in offshore wind but offshore wind is above the water. Once we go below the water, that environment is incredibly challenging.

Technology advances are coming but they are much slower to come than offshore wind technology. That is the reason offshore wind is the one technology that offers scale.

How is the lack of a North-South interconnector having an impact on this?

Mr. Michael Mahon

I can speak to interconnection and try to address a couple of the questions. The primary focus is to try to reuse existing infrastructure. As the Senator alluded to earlier, innovation is a key part of this and we spent much time over the past number of years looking at all the different technologies to maximise existing infrastructure. There are various solutions involving the upgrading of existing lines or using new technology to try to maximise the power we can send down the various different lines already around the country. That work is currently taking place and those projects have been set up.

Is there any indication there could be a good outcome in terms of public concerns?

Mr. Michael Mahon

Much progress has been made on that. As Mr. Wheeler alluded to earlier, the climate action plan is focused on a target of 70% renewable electricity generation by 2030. That means that at some point, for much of the year we need to use a 95% renewables electricity system on the grid as a back-up supply. That is a major step change. EirGrid launched a new strategy a couple of weeks ago and we need to transform the entire electricity grid to be able to cater for all those new generators that will come on-stream. We are set up to deal with the large-scale generation systems around Ireland but we need to connect onshore wind, offshore wind and solar power. To achieve the 70% target, we are looking at bringing on an additional 10,000 MW of generation. That is a large step change that needs onshore and offshore wind, as well as solar power. If we do not bring them all on-stream between now and 2030, we will not achieve the aims of the climate action plan. It is very simple means. There must be new infrastructure and the pinch point or challenge for us may be related to public engagement and getting permission and agreement to build the infrastructure. It is absolutely key.

The interconnector to France is a key element in this and security of supply is a central part of the process. When we have many forms of renewable energy, there is also the possibility to export that renewable generation to France and support the economy here. At a time of very low wind, for example, we also need the benefit of the electricity supply from France to provide back-up. There is also the possibility of back-up from high-efficiency gas generation as well. The Celtic interconnector is central to the strategy, as is the North-South interconnector. Getting to the point where we build those two key projects is absolutely essential to us. Any other interconnection that may be possible between France or the United Kingdom would be a key infrastructure project, and that is where we will need much help and engagement. It is about getting through the challenges we have and building those large-scale infrastructure projects over the next number of years.

Mr. Rodney Doyle

I can touch on the price element of Brexit. Mr. Wheeler touched on the idea that post Brexit he will continue to run his business and we expect that all the participants in the electricity market. There is great support North and South from both regulatory authorities and departments on the energy side. The all-island single electricity committee, which governs the electricity market, has also supported the idea of the continuation of the single electricity market. The certainty of that market in a post-Brexit environment will provide certainty to those generating electricity, those supplying it and price follow-through.

There will be an impact from Brexit but we do not expect it to have a significant impact on consumers. We also expect that in the weeks and months straight after Brexit, the generators who trade in the electricity market will find ways of trading with their colleagues in Britain as they transform how they trade in a Brexit environment. That will lead to further efficiencies. At the same time we will look at the structures of the market and continue to evolve it, and if required, push it further to provide more efficiency. The structures will be there to provide the certainty needed for price stability. Certainty leads to stability and we are concentrating on providing a clear market that people can understand and in which they can trade.

Mr. Denis O'Sullivan

The first question related to LNG and its impact on power generation. Currently, Ireland does not have liquefied natural gas facilities and, therefore, it does not have an impact. I do not see an impact either in a post-Brexit scenario unless LNG facilities are constructed in Ireland. I am aware two private companies are certainly investigating the potential to develop LNG facilities in Ireland. Until those facilities are in place, LNG will not have an impact on power generation. As an aside, we have two interconnectors with the United Kingdom that operate in parallel. They have little or no capacity constraint and there is sufficient capacity in them to deliver 100% of Ireland's electricity requirements if that was the case. We came very close to that in summer 2018, with more than 90% of electricity being produced from gas. Other areas are supplied by gas, including heat and industry.

I agree with the previous speaker that from a gas perspective, I do not foresee any impact on pricing in a no-deal Brexit scenario. As I mentioned in my opening statement, we are reassured by shippers, network operators and through the work we have done with our counterparts with the United Kingdom. This relates to the mechanisms in place, the platform for booking capacity and the idea that how trading of gas operates will continue in the same way. The risk relates to a significant economic shock arising from Brexit. From a gas perspective, if that materialised it would not have an impact on pricing. We can go back to 2008, when we had a serious economic shock, and there was no significant impact on energy pricing in general, and there was certainly no impact on gas pricing.

Senator Paul Daly asked if we can meet demand and we can do so in a post-Brexit scenario for reasons similar to those I have outlined. The same mechanism operating today for gas will operate post Brexit and gas supplies will come into the country. The Kinsale gas field is at end of life and we expect it to stop producing next year. The volumes it is producing now are quite small. The Corrib gas field, as I mentioned earlier, is under 50% of our current supply and that will decline over the next ten to 15 years. At the end of that period, we will be fully reliant on the interconnectors to supply our requirements for gas unless there is a further indigenous source of gas put in place.

In my opening statement I touched on the work we are doing to mitigate a position where we would be 100% dependent on imported gas. That will happen through the development of alternatives, such as renewable gas and hydrogen through electrolysis, which is taking excess renewable electricity and converting it to hydrogen. We see a bright future in that but it will require the co-operation of several bodies to come together and make that happen, as was mentioned.

To respond to Senator O'Reilly's query on Virginia Transport, I am very familiar with it and we are working in partnership with it to provide compressed natural gas infrastructure. Virginia Transport is proposing to build a new station on which we are working with it. The certified renewable gas it bought from the UK was delivered through the gas network. This is a huge opportunity. We opened a large compressed natural gas station in Dublin Port last year and another will open on the M7 motorway in the coming weeks. Several others are in development. This is at an early stage but we will roll out the infrastructure.

Initially, these stations will operate on natural gas, which will give an immediate 20% reduction on emissions over the use of diesel in these vehicles. They do not have a range issue. Refuelling a compressed natural gas truck takes three to four minutes, which is the same time it takes to refuel a diesel truck. The real opportunity here is to transition from natural gas to renewable gas. We have not sought supports or subsidies for this. I believe supports are required for the haulage industry and the bus sector to cover the cost of transitioning fleets and should be introduced. The task force on low-emission vehicles is looking at introducing supports where companies have incurred costs in taking the initiative to move to lower emission vehicles or emission neutral vehicles whereby they would get the same incentives as exist for electric cars and so on.

Senator O'Reilly also asked about the carbon footprint of introducing these measures. The gas network has a low carbon footprint as it is, with 100% renewable gas. This year, for the first time, we introduced some renewable gas on the network and we hope to increase this. The climate action plan calls for targets and mechanisms to be put in place to facilitate it. Our goal is to have a carbon-neutral gas network by 2050. There is a pathway to it and we have already started on it. We have commenced the roll-out of compressed natural gas and the injection of renewable gas onto the network.

There are other technologies that are complementary to the electricity sector, such as carbon capture and storage. Recently, we signed a memorandum of understanding with Equinor in Norway to investigate jointly the potential of capturing carbon from power generation plants and storing that carbon. In other words, in its simplest terms, this means taking the energy out of the gas and putting the carbon back where the gas came from. This technology also facilitates the production of hydrogen, which we see coming to the fore probably towards the latter part of the next decade and into 2030 and being a significant contributor. Overall, our ambition is to become a carbon-neutral gas network by 2050.

With regard to security of supply, the interconnectors we have with the UK are extremely robust. They have been there since 1993 and we have not had a single outage on them - touch wood. The fact we completed a twinning of the last section of pipeline in Scotland last year gives two completely independent interconnectors with Scotland and puts us in a very robust position in terms of security of supply. Having that said, any new forms of gas coming on the network outside of those interconnectors will enhance security of supply and possibly bring more competition into the market, which is always welcome.

I do not think there is a security issue. We are very much interdependent with the UK, particularly with regard to Northern Ireland systems. Natural gas flows into Northern Ireland initially via our network in Scotland and then through the Scotland and Northern Ireland interconnector. Because it is a single pipe, the backup for this interconnector is the South-North pipeline from the Republic of Ireland to Northern Ireland. This means gas would be flowing from the Republic of Ireland into Northern Ireland. The mechanisms for all his are in place. I cannot comment on potential terrorist activities but from a practical point of view, the normal working of the gas network is what we will see in a post-Brexit scenario.

Would it be fair to assume that all three organisations have at least engaged with the security forces? One of the things an unstable political situation may cause, and we have already seen some of it in Derry with the shooting of a journalist, is a rise in dissident behaviour. One way to cripple a country is to hit energy supplies. I want the public to be satisfied that at least the companies have engaged with security forces. It is something of which we are all aware; I am not drawing it down on top of them and far be it from me to do so. It is something we must be aware of, however.

Mr. Denis O'Sullivan

It is certainly an interesting point and the answer is absolutely yes. We engage on a regular basis and we run through various scenarios of potential incidents happening. Because we operate in Scotland, Northern Ireland and the Republic of Ireland, we interact with all the security forces in those jurisdictions. There is also a Government task force on this very subject of which we are all part. It meets on a regular basis and we go through various potential scenarios. In so far as we can pre-empt and plan for these things those plans are in place.

Ms Marian Troy

Carbon tax and increasing costs for consumers were mentioned, as was the debate between penalising and incentivising customers. In truth, what we have at present is probably a bit of a mix of both. We are heartened to hear the increased carbon tax revenues will be recycled to help customers to reduce their bills because showing people the avenues by which they can reduce their carbon consumption is the real way we will decarbonise.

We are very heartened by how the Citizens' Assembly was supportive of the carbon tax measure and decarbonisation. With the Sustainable Energy Authority of Ireland we have been working with our suppliers to engage with customers on insulating homes, upgrading boilers and so on. A number of suppliers are involved in providing microgeneration facilities to customers, including ourselves. The new smart metering projects will give customers more control. The ethos is that these tools will allow them to reduce their carbon consumption. There is probably a job for all of us to communicate that this is the behavioural change these policy instruments are designed to drive.

A question was asked about cross-Border agencies and how the Good Friday Agreement has created this framework. We see in the single electricity market that the structures we have created are what have enabled the market of which we are all supportive. To answer the question as to what politicians can do to help on this, it is to remain committed to it and the various policy instruments that support it, such as carbon pricing.

A vote has been called in the Seanad, which is more timely on this occasion. I thank the witnesses for taking the time to engage with the committee and update us. We appreciate them sharing their thoughts. It all feeds into the ongoing situation that is Brexit.

The select committee adjourned at 4.50 p.m. until 2 p.m. on Wednesday, 23 October 2019.