Mr. Dermot Nolan:

I will refer to the slide presentation, which may be available to the committee. I hope to talk briefly about the roles and functions of the CER and the impact of renewable energy on electricity costs.

The Commission for Energy Regulation, CER, is Ireland's independent energy regulator. Under European rules the commission is independent of the Government. Its remit includes broad economic and safety functions with regard to energy. It may not be generally known that a significant fraction of our work is in the area of safety issues relating to energy. Dr. Paul McGowan is responsible for the safety division. The commission also deals with economic issues relating to energy. The CER is likely to be appointed as the water regulator. This has been discussed by the Government but no legislation has been published as yet. I can provide members with further information on the role and functions of the commission. The commission website is cer.ie.

I refer to the CER mission statement. In a world in which energy prices and supply are highly volatile, as referred to in the presentation from SEAI, the mission of the CER is to act in the interests of consumers by ensuring that the lights stay on, the gas flows, prices charged are fair and reasonable, the environment is fully protected and energy is supplied safely. These are the five elements of our mission statement.

With regard to the functions of the CER, the commission jointly regulates the wholesale energy market - the electricity generation market - with the North of Ireland. Statutory arrangements are in place in both jurisdictions. Regulation and decisions are made jointly. The energy networks consist of the electricity wires and the gas pipes. Those networks will always be monopolies and CER regulates them directly. We set the prices for those monopolies. The generation market is a competitive market which we do not directly regulate. We set the rules, we issue licences and monitor market players, and we monitor the retail energy sector. All electricity prices and nearly all gas prices are deregulated. We do not set those prices. There is competition between various players, in tune with the EU framework. We work on customer protection issues, providing a complaints resolution process and a customer care section. Customers contact us if they have a complaint with a supplier and we have some statutory powers in that regard.

We also deal with safety regulation. We regulate what we call gas undertakings, which include gas installers, LPG installers and electrical contractors. In the past year we have taken on what we call upstream petroleum safety, which means that we set rules for safety in offshore petroleum exploration. This is a recent new responsibility. Dr. McGowan can speak further about that if needed.

The recent rise in electricity market costs is hugely upsetting. The SEM, single electricity market, operated jointly with the North of Ireland, makes up nearly 60% - it varies from 55% to 60% - of the total electricity cost. The cost of generating electricity is the biggest single cost of electricity. Gas prices are the biggest driver rather than oil or coal prices. Almost 60% of electricity generated in Ireland comes from gas. One of the key points to make is that gas prices affect gas prices. The biggest single effect on electricity prices at the moment is also gas prices. That is the way it will be for a while. However, as more renewable energy is available, that might be less of a factor. We can discuss this later.

The networks are monopolies and they make up 30% to 35% of the entire electricity cost. They are what we call new capital build and interest rates are a big cost driver. There are three residential electricity suppliers and four or five business suppliers. The cost of supply is only 5% or 6% of the total; the main cost is in the wires and the generation. Another component is the public service obligation, PSO, which consists of subsidies paid to certain forms of generation, notably renewables, but also others. We can talk more about this if needs be. It is approximately 3% or 4% of the total but it varies from year to year.

Ireland's fuel generation mix is illustrated on the slide that is currently displayed. The country is currently very carbon-intensive, but the use of renewable energy has increased. Gas use is at about 55% to 60% of the total; coal is about 15% to 16%; peat is at 8%; renewables broadly considered are now close to 20%. The target is to reach 40% renewable electricity generation by 2020. At the moment I emphasise that we are very dependent on gas.

The next slide shows how prices of international fossil fuels have changed over recent years. The price shown in blue is the price of gas. We buy nearly all of our gas from the UK. The price shown in red is the price of oil. Prices went very high in 2008 and then fell. Oil began to recover more quickly while gas took longer, but in the past two years gas prices have risen significantly. In the past year, gas prices have risen by nearly 50%. These are the main drivers of electricity costs. Renewables are a genuine hedge against gas prices. We are very vulnerable to rises in gas prices. This will still be the case in 2020 but less so.

I will ask my colleague Mr. Blaney to speak about renewables.