Campaigns
Energy Policy- discussion Document 9 March 2006
Power the Future – The Progressive Democrat
Discussion Document on Irish Energy Policy
DeputyFiona O’Malley
March 9th,2006
Royal College of Physicians
6, Kildare St
Dublin 2
Contents
Introduction 3
Global Context 3
Progressive Democrat Proposals 5
Action 1- Promoting the Development of Renewable Energy for Power Generation 5
Action 2- Promoting the use of Renewable Energy for Space and Water Heating 7
Action 3- Production and Utilisation of Biofuels for Transport 9
Action 4- Conservation 10
Action 5- Market Structure Regulatory Regime 12
Action 6- Fossil Fuel Security 14
Action 7 – Research and Development 15
Introduction
In any discussion of Irish energy policy one swiftly becomes aware of a curious paradox, which is that while we are currently more dependent on energy imports than many other countries in the EU, we have the capacity to become much more energy self sufficient than most.
To date, oil and gas exploration off Ireland’s shores has proved disappointing, but the extensive exploration acreage available and our relatively small energy requirements makes the prospect of energy self-sufficiency a realistic option, provided we put in place and implement a planning and regulatory regime which complements our favourable taxation regime. But while the prospects for future oil and gas production are uncertain, if exciting, there is no uncertainty as to our ability to become a major producer of renewable energy and potentially of renewable energy technology, in the future.
This is because Ireland has some of the best wind and wave energy potential anywhere on the planet and an excellent climate for growing biomass. That coupled with our relatively low population density means that not only could we do a great deal to secure our energy needs domestically but we have the potential to create a world class renewable energy industry in Ireland. In other words, to do in effect what we did with IT in the 1990’s i.e. become a world class centre for a cutting edge industry.
Global Context
Internationally energy security is now one of the key issues facing almost every government. Oil and natural gas are together the world’s most important energy resources, accounting for over 60% of total commercial energy production. Yet the OECD countries, together with China and India
·Consume over 65% of the world’s oil and gas output
·Control less than 10% of the world’s oil and gas reserves
In contrast the politically unstable countries in the Middle East and Africa, together with a politically unpredictable Russia control over 75% of both the world’s oil and gas reserves.
Thus the developed and rapidly developing countries of the world will be dependent on sourcing their essential and rapidly increasing oil and gas imports from regions subject to chronic political instability, as overall demand increases and production in the OECD countries declines. As a result the energy needs of the developed and rapidly developing countries will be increasingly exposed to potential disruption to supply and associated price instability, due to potential political developments in the near term and resource constraints in the longer term.
We in Ireland are particularly exposed as;
·Almost 90% of our energy supplies are now imported,imported, the highest level in our history.
·Our oil and natural gas storage capacity, in terms of day’s’ storage, is well below the European norm.
·We are at the extremity of the European gas network
As a result of the increasing mismatch between demand and supply, prices for both oil and gas have risen very sharply in the past two years and there is a significant risk that prices may increase even further in the next few years. While the increase in the cost of oil in Ireland mirrors that in other countries, the increases in gas and electricity prices in Ireland in the past four years exceed those experienced in other European countries. Indeed, industrial electricity prices in Ireland are now amongst the highest in Europe.
In addition under the Kyoto protocol Ireland has agreed to a target of limiting its greenhouse gas emissions to 13% above 1990 levels and faces significant fines, or the costs of purchasing CO2 emission permits, if it fails to do so. Given the rapid growth in the Irish economy and the consequent growth in energy demand and carbon emissions, since 1990, Ireland must seriously address issues of energy efficiency and conservation, as well as the development of alternative sources of energy, if we are to meet our international obligations.
Therefore it is essential that we formulate and implement energy policies designed to;
·Maximise the exploitation of indigenous energy resources
·Very actively support renewable energy development
·Encourage energy efficiency and conservation
·Make future energy supplies more secure, by developing adequate stocks of imported fuels
·Minimise the overall cost of energy to the economy the future, thus improving our competitive position
Progressive Democrats Proposals
The Progressive Democrats propose a 7 point action plan designed to develop Ireland’s renewable energy supplies, protect the environment, thus fulfilling our obligations under the Kyoto Agreement, secure our fossil fuel supplies, and minimize the overall cost of energy to the economy thus maintaining Ireland’s competitiveness. This plan requires that we promote;
·1.The development of Renewable Energy for Power Generation
·2.The use of Renewable Energy for Space and Water Heating
·3.The production and utilization of Biofuels for Transport
·4.Energy Conservation
·5.Fossil Fuel Exploration, Production and Supply Security
·6.The creation of New Market Structures and Improved Regulation
·7.Research and Development in Energy Technologies of particular importance to Ireland.
Action One - Promoting the Development of Renewable Energy for Power Generation
The Issues
The EU Directive on renewable energy requires that Ireland produce 13.5% of its electricity from renewable sources by 2010, i.e. the RES-E objective. This target, which requires approximately 1100 MW of wind powered generation, will be met in 2010 and indeed could be very substantially exceeded, given that connection applications have been made to ESB National Grid for a further 2000 MW of wind powered generation
Ireland is internationally regarded as having one of the best wind and wave power regimes in the world, and has the additional benefit that much of this resource is close to existing infrastructure, which is not the case in the Highlands
and Islands of Scotland. While the commercial exploitation of wave power is still some way off, wind power has now emerged as a mainstream energy resource. Indeed, in the present relatively low interest rate environment, the cost of wind power from well located onshore sites in Ireland, compares very favourably with the costs of electricity produced from the so called “Best New Entrant” gas fired CCGT plant, as determined by CER for 2006. As a result the commercialisation of wind power in Ireland is now a reality and at the end 2005 generation from wind substantially exceeded that from conventional hydro plants, and wind powered generation accounted for more than 10% of the total generation capacity.
In addition Ireland is recognized as having the best climate in Europe for cellulose production, as both grass and forestry yields per acre in Ireland are substantially above the European norm. That coupled with the introduction of the single farm payment and the competitive difficulties now faced by Irish farmers in finding profitable outlets for traditional farm enterprises has focused attention on the development of energy crops.
Miscanthus (elephant grass) or Short Rotation Coppice (SRC) Willow have been identified as being the most suitable and potentially the most profitable..
While establishment costs for these crops are high the fact that they can be harvested at regular intervals, for twenty years or more and require no fertilizers, herbicides or fungicides make them both commercially attractive and capable of yielding very positive energy balances. They can also be grown successfully on relatively poor pasture land or even cutaway bogs.
Their significance in the context of renewable electricity generation is that they could directly replace peat in the three new midland power stations, as the boilers in those stations were designed for peat or biomass fuels. Their value is that the cost of the CO2 emissions from these stations, at €20+/tonne, is now almost as high as the cost of peat.
Thus substituting biomass for peat would both reduce CO2 emissions and increase the economic benefit of generation in those stations, to the local community, assuming the value of the CO2 credit was passed through to the biomass producer. No increase in electricity prices will be required to achieve this. Given the yields obtained from these crops in Ireland biomass fired generation can both compete with peat fired generation and provide an attractive return to the producer, provided establishment costs are substantially grant aided.
Given our excellent resource base, our highly insecure primary energy supply, our overdependence on natural gas for electricity generation and the competitiveness of wind and potentially biomass for power generation we believe more aggressive targets should be set for generation from renewable resources.
Progressive Democrat Proposals
·That Ireland set a target of having 30% of electricity produced from renewable energy resources by 2015
·The removal of all unnecessary technical restrictions on the development of wind power, through grid development in selected areas and the selection of a thermal plant strategy which facilitates wind power penetration
·The establishment of regulatory and market structures favourable to the accelerated development of wind power
·The removal of the commercial barriers which at present limit the operational benefits of the Moyle Interconnector and its capacity to facilitate the introduction of much higher levels of wind power in Ireland, North and South
·The development of additional gas storage facilities will also be essential, so that the daily swings in gas purchases for power generation, created by fluctuating levels of wind powered generation can be smoothed
·The provision of establishment grants for biomass plantations
Action Two- Promoting the use of Renewable Energy for Space and Water Heating
The Issues
There is a growing desire among ordinary citizens to make a contribution to protecting the environment and renewable energy is a means particularly suited to providing home heating. In addition increased adoption of renewable energy would cut down on consumption of fossil fuels and reduce green house gas emissions.
The prevalence of one off housing in rural Ireland, the continued rapid addition to this housing stock and the favourable climate for biomass production in Ireland means that the opportunity exists to replace oil fired heating in many of these homes with fully automated biomass fired heating systems, as has been very successfully done in Austria.
These systems use either wood pellets or wood chips, depending on the size of the installation and are attractive on sites where there is sufficient space to accommodate the relatively bulky biomass fuel store. As wood pellets are better suited to smaller installations and as the availability of sawdust for pellet production in Ireland is limited, because of our limited existing woodland, further research is needed to develop heating systems for smaller buildings based on utilizing SRC Willow or Miscanthus.
Furthermore as a result of the Governments decentralization programme many new offices are being developed in areas outside the major cities which could be heated by renewable energy sources fuels and this would be even more economic in premises with a year round heating requirement, such as hospitals, hotels or prisons.
Progressive Democrat Proposals
The Progressive Democrats propose to promote the utilization of renewable energy, for space and water heating, in Ireland by;
·By offering full VAT rebates on alternative energy equipment in the home e.g. solar panels, wood fuel heating systems etc
·By offering Grant Aid for renewable energy systems to at least match levels in Northern Ireland
·By ensuring that those responsible for the design / commissioning of all new state funded buildings are required to consider renewable heating options in their technical and financial evaluation
·By ensuring that for the purposes of obtaining planning permission, one-off rural houses which are heated using renewable energy means are given a preference in obtaining planning permission
Action Three – Production and Utilisation of Biofuels for Transport
The Issues
The EU Biofuels Directives set a “reference value” of 2% use of biofuels for transport by 2005 and 5.75% by 2010. The 2005 target has clearly been missed in Ireland but the difficulties in the sugar beet industry create a clear
opportunity for farmers to switch from sugarbeet production to oil seed rape production.
If the 35,000 ha of land traditionally used for sugarbeet was switched to rape oil production it would yield approximately 62,500 tonnes of rape oil, which could replace 3% of our diesel requirements or 2% of total transport fuel requirements. Expanding the area under rape to 70,000 ha, which equates to 17.5% of the total tillage area, would permit us to achieve the EU Directive target by 2010. But it is also believed to represent the practical limit for oil seed rape production, given rotational requirements.
But the critical importance of having supplies of liquid fuels available for transport in the future demands that even further measures are adopted and it is notable that the Swedish Government recently set an ambitious target of having an oil free economy by 2015. Fortunately there have recently been very significant advances in the science of converting cellulose to sugar and thence to ethanol. While the technology is still predominantly at laboratory bench scale, commercial production facilities are now under construction.
Given the development of a number of world class biotechnology companies in Ireland and the emphasis now placed on research in this field, these advances and Ireland’s suitability for cellulose production make it essential that we direct research in the biochemistry and bioengineering fields towards the energy sector as well as the pharmaceutical sector..
Thus, at a time when the outlook for pasture based farming enterprises is poor and long established manufacturing industries are closing or relocating to lower cost economies, the development of large scale ethanol production facilities, based on cellulose, could represent a new vision for rural Ireland. The scale of what could be involved is indicated by the fact that all our current petrol needs could potentially be replaced by ethanol if 500,000-750,000 ha of existing pasture was devoted to producing Miscanthus or SRC willow.
Progressive Democrat Proposals
The Progressive Democrats propose to promote the production and utilization of biofuels in the transport sector;
·By exempting vegetable oils from hydrocarbon excise duties
·By providing tax relief for the conversion of diesel powered vehicles to run on vegetable oil
·By requiring oil refiners and oil importers to provide processing and blending facilities to enable vegetable oils to be incorporated into Diesel Engine Road Vehicle (DERV) fuel.
·By investigating whether a floor price could be established for growers of oil seed rape in Ireland
·By the provision of establishment grants for biomass plantations
·By funding research into the conversion of cellulose to ethanol, with particular emphasis on species particularly suitable for Ireland and promoting research co-operation with other countries interested in the same species
·By encouraging Bord na Mona (which already has proven competence in materials management) to enter the biofuels business, initially by supplying power stations while developing their competence in liquid fuels technology
Action Four- Conservation
The Issues
Conservation and energy efficiency must form a critical element of any successful energy policy. In the past conservation strategies focused on reducing industrial energy use and improved insulation in commercial and residential buildings. Now the focus must be on minimizing the total energy input for heating and cooling buildings (where energy demand will double between 1990 and 2010 and transport (where fuel demand is expected to treble in the same period).
The increased energy demand for the heating and cooling of buildings is a result of the building boom which has added considerably to the housing and commercial sector stock of buildings. Other factors such as the introduction of air conditioning for commercial premises, and the much greater use of electrical appliances of all kinds have also contributed to demand.
The growth in the demand for diesel has been driven by growth in the numbers of heavy goods vehicles due to rapid economic growth and the open nature of the Irish economy, rather than by the switch to diesel cars as happened in the UK and continental Europe. The growth in the demand for petrol has been driven by the growth in the numbers at work, increased commuting times due to high property prices and congestion.
Improvements in fuel efficiency have been more than offset by increased car size as Irish people have traded up to larger and more energy intensive models.
The completion of the National Motorway Project and the investments in Public Transport outlined in the “Transport 21” initiative will have a major impact in reducing congestion and thus improving fuel efficiency and in giving commuters the opportunity to use public transport and leave their cars at home. However more can and should be done.
Progressive Democrats Proposals
Minimising the total energy input for Buildings
The Progressive Democrats propose;
·Government as one of the largest property owners and managers in the country must be an exemplar in the conservation and energy efficiency matching best international standards
·Introducing the energy equivalent of the NCT for all commercial buildings over 5,000sq meters to ensure that heating and cooling systems are operating effectively and at optimum levels
·The rapid adoption and implementation of the EU Directive 2002/91/EC of the 16 December 2002 (Energy Performance of Buildings)
Transport
The Progressive Democrats propose;
·The development of new bus services in the new commuting areas, by promoting competition and new entrants to the market.
·Scrapping the present means of computing VRT and motor tax and replacing it with a system based on the fuel efficiency of the vehicle being registered or taxed.
Action Five - Market Structure Regulatory Regime
The Issues
In 1999 Ireland had some of the cheapest electricity prices in the EU. By May 2005, Ireland had the highest pre-tax price for electricity amongst the EU 15, according to a report by Accenture. Indeed between 1999 and Jan 2005 Irish electricity prices rose by 40%.
This was due in part to
·Our increasing dependence on imported natural gas for power generation and the increase in wholesale natural gas costs in Britain, from 12p/therm in 1999 to 30p/therm in 2005 and a projected 44p/therm in 2006.
·A sharp increase in world coal prices in 2004, due to surging Chinese imports, though prices have since fallen back somewhat.
·The level of investment being incurred in the rehabilitation of ESB’s rural distribution network.
But it was also due to market failure as;
·A competitive electricity market did not develop as anticipated
·Considerable costs were incurred in putting in place the structures and systems designed to facilitate a competitive market
This was due to a combination of the;
·Failure, at EU level, to recognise that the market structure envisaged in EU Directives 96/92/EC and 2003/54/EC on the ‘Common Rules for the Internal Market’ are inappropriate for relatively small and essentially electrically isolated markets, such as those in Ireland, Cyprus and Malta.
·The different regulatory and market opening regimes obtaining on both sides of the border in Ireland.
As a result
·New entrants were reluctant to invest in new generation capacity, unless underpinned by long term contracts from Power Procurers.
The Government has commissioned consultants to look at the structure of the electricity market in Ireland. The Progressive Democrats await with interest the publication of their report which we believe is imminent. As a matter of principle the Progressive Democrats believe that competition is superior to regulation and would be supportive of any measures which would lead to greater competition in the Irish Market. Without wishing to prejudge the contents of the Consultants report the Progressive Democrats believe that the creation of an all-Ireland market, and the creation of a regional market in electricity between the UK and Ireland will ensure greater competition and benefit consumers.
Progressive Democrat Proposals
The Progressive Democrats purpose that;
·The development of an all island market is accelerated
·The development of a regional market in electricity between the UK and Ireland.
Action Six- Fossil Fuel Security
The Issues
In the period 1980-2010 Ireland’s primary energy requirements will have more than doubled. Solid fuel use is projected to have increased by 70%, despite a very considerable decline in house coal use. Oil demand is projected to double between 1990 and 2010, primarily due to a more than threefold growth in transport fuel demand. Natural gas demand has expanded very rapidly and in 2010 over 60% of total gas demand will be for power generation.
Natural Gas is the least secure of Ireland’s primary energy source. Ireland is dependent on imports for over 85% of its gas supplies. All of our imports come through a single connection point in Scotland and our gas storage capacity, which is equivalent to 15 days demand, is amongst the lowest in Europe.
In the absence of further indigenous gas production, over 90% of Ireland’s energy requirements would be met by imports by 2010, which would represent the highest level of energy import dependency in our history.
Progressive Democrat Proposals
The Progressive Democrats propose;
·The rapid development of the Corrib Gas Field which has the potential to supply 50% of Ireland’s gas needs and 15% of Ireland’s total energy needs. The Progressive Democrats fully support the current efforts of the mediator to find a just and equitable solution to this issue
·That the potential of newly emerging exploration technology to identify the presence of hydrocarbons, without the need for exploration drilling be fully exploited
·That oil stocks held in Ireland be increased from approximately 45 days at present to the 90 days required under EU Directives and IEA Agreements
·To investigate whether there are any constraints on the extent to which natural gas fired power stations could continue to operate on oil products, should natural gas supplies be interrupted
·Developing additional gas storage capacity, either at the Kinsale complex or by the development of Liquefied Natural Gas (LNG) import and storage facilities.
Action Seven- Research and Development
The Issues
In almost every area of industrial endeavor Ireland is a technology taker. Given the resources of wind and wave energy potential that we possess, the renewable energy industry is one area where we could in fact become technology leaders. We have the potential to do in renewable energy what we did in the ICT sector and become a world centre in the research development and exploitation of renewable energy technology. Internationally many firms now recognize the importance of research into renewable energy. For example GE has pledged to invest $1.5bn annually up from $700m by 2010.
Progressive Democrat Proposals
In order to do so the Progressive Democrats believe;
·That the research and education functions of Sustainable Energy Ireland are split apart and that the focus on research includes more ambitious projects. Given the strategic importance of Research and Development in this area research funding should be increased significantly.
·That IDA Ireland should be mandated to encourage multi-nationals to locate Renewable Energy Research and Development facilities in Ireland.
·Special short term energy contracts should be issued for renewable research projects i.e. five years at a significantly higher rate of return than standard contracts
·Particular emphasis should be placed on aspects of particular significance in Ireland, including wind power system integration issues, wave power development, biofuel production and utilisation.
Nuclear Energy
No serious energy policy could ignore the question of Nuclear Energy; however the Progressive Democrats do not believe that the Nuclear option is the correct option for Ireland. There are two basic reasons for this belief;
·Irelands wind power and potentially wave power resources are such that the adoption of nuclear energy is unnecessary, given the advances that have been made in the technologies for harnessing these resources in the past twenty five years
·The cost of developing nuclear energy in Ireland would be disproportionately high, given our lack of nuclear infrastructure, our high construction cost environment and the considerable opposition to nuclear power in Ireland, which would make the completion of any project uncertain and its cost estimation almost impossible. In addition plutonium is a finite resource. While the cost of disposing safely of nuclear waste is considerable.