Mr. Garrett Blaney:

Much of the content has been covered already by Dr. Motherway, so I will not labour the point on the various issues he raised. We support the opinions he presented to the committee. The target for Ireland to obtain 16% of its energy from renewable sources by 2020 is binding. This includes energy all across the economy - not just the electricity sector but also transport and heating. The largest slice of that 16% obligation sits on the electricity sector because the biggest changes can be made in that sector. The 40% target for electricity generation from renewables by 2020 will contribute to the delivery of the overall 16% target.

The next slide shows the position of Ireland relative to the rest of Europe and how the target compares with the rest of Europe. The target of 40% is probably not strange in a European context. Quite a few member states have higher targets than Ireland.

Ireland is different in that it relies mainly on wind energy to deliver on that target. Some 37% of the overall capacity will be delivered by onshore wind. As the SEAI stated this morning, Ireland has a comparative advantage in this regard in that onshore wind energy can be delivered at a much lower cost than it can be elsewhere in Europe because of the significant wind resource we have on the island. In Europe, there is much more reliance on photovoltaic generation. I refer to the use of solar panels to create electricity directly from the sun. Traditionally, the cost has been quite high in Europe in this regard. When we talk to other regulators in Europe, we note there are significant challenges associated with the additional costs associated with photovoltaic generation. Ireland has benefited from not having had the high cost subsidies. We have had much lower cost subsidies through wind. This has been significantly to our advantage by comparison with comparable nations across Europe.

The next slide shows our progress in the growth of renewables. There has been steady progress yearly. I will not say that there have been no challenges as significant challenges arise when delivering on the targets. Networks comprise some of the challenges. The absorption by the system of the amount of wind energy in question gives rise to certain challenges. We have had continuing success regarding delivery, however, and this is recognised at European level. When we talk to other regulators, we note our credibility has been significantly enhanced because we have delivered on renewables. Our activity is not aspirational and has been demonstrated on the ground, as is evident from the facts and figures.

We have set out the various subsidy prices for the various sources of technology. As one can see from the slide, high-volume wind results in the price that is by far the lowest, at €68 per megawatt hour. This is the floor price. There are higher subsidies for other technologies. A much lower volume of these is used in terms of the delivery of the target. One must consider biomass and small-scale hydroelectricity generation. Some members mentioned the latter form of generation.

Onshore wind is by far the largest component in terms of having resources available at the lowest cost. From our perspective, which involves meeting targets at the lowest cost for consumers, there is a clear logic to using as much onshore wind as possible because of the cost advantage Ireland has in this area.

I will talk a little about the impact this has on wholesale prices. Mr. Brian Motherway alluded to this when he spoke to the committee. What happens when a wind farm has a large output in a windy half hour? The wind-generated energy displaces fossil fuel energy on the system. Those fossil fuels are set to price for the wholesale at that time. As the fossil fuel generators are displaced, the wholesale price is reduced. We have seen this demonstrated in a number of studies. It is self-evident that the more wind energy there is in the system, the lower the wholesale price. Obviously, if it is windy at a very expensive time, such as the evening peak, the benefit is much greater. If it is windy in the middle of the night, when generation is much less costly, the benefit is reduced.

It is also self-evident that, as gas prices rise and more expensive plant is displaced, the value of wind is greater to the system. If the prices are lower at that point, the value is lower. The value of renewables to the system is very much dependent on the alternative price from fossil fuels. This is an important dynamic in terms of the value of renewables to the system in Ireland.

We mentioned a number of studies that examined this effect and the other costs. While there is a cost benefit in terms of the wholesale price, there are some incremental costs incurred in terms of the networks and the cost of delivery of networks to meet the targets. There are also impacts in respect of the operation of the system.

As the SEAI representatives said, we are currently working with various parties, including the ESRI and the SEAI. This work is being led by the Department. We are working to try to have a definitive study.

The next slide shows the results of our own study. It is slightly out of date and I attach some health warnings to the figures, which may not now be exact. The study clearly shows that as fuel prices rise, the value of renewables in Ireland is significantly greater. If fossil fuel prices were much lower – one could debate the likelihood – the value of renewables would be reduced. However, it does provide a hedge, such that the risk of higher prices to consumers is protected by having a significant component of energy generated from renewable sources.

Let me refer briefly to the challenge to networks posed by the delivery of renewables. A map of wind resources in Ireland shows that the best resources are on the west coast, particularly the north west. Typically, this has not been an area with very significant network resources. EirGrid, the company responsible for the planning of networks, has a significant programme in place called GRID25 to ensure networks will be enhanced and upgraded to allow sufficient networks to achieve the targets at a reasonable cost to consumers.

There have been significant and ongoing challenges associated with planning. There are growing concerns over public acceptance of the grid. It is important that the message be clearer that if we want to deliver on our renewables targets, we must have a network that can absorb renewable energy at a reasonable price. This is an ongoing challenge. The network companies are working hard. The regulator incentivises the system to ensure that they can deliver on their targets in a timely and cost-effective manner.

Since Ireland is a leader in terms of having high levels of wind penetration into the system, achieving a target of 37% or 40% on the system is more likely than in most of the rest of the world. This poses challenges for the system operator. At present, only 50% of the energy accepted at any point can be wind generated. We have set out a programme with the operators to increase this capacity to 75%. In order to do so, significant technological changes are required. A significant amount of innovation is also required. We cannot follow others in this regard; we will have to be a world leader in terms of having this amount of wind generation in the system. EirGrid and ESB Networks are ready for the challenge. We have certainly incentivised them in respect of price control and oversight to ensure they deliver in this area. There is a significant technological challenge but an opportunity arises for Ireland in terms of its being an innovator in determining what new technologies could absorb the required amount of wind energy into the system.

Mr. Motherway referred to smart grids. We will talk briefly about smart meters and the need to change the way consumers consume electricity in the home. It is important that we, as a nation, move from being a follower to being a leader.

My last slide refers not only to smart grids but also to the need for changes in the way consumers consume energy. We heard the debate on energy efficiency and its importance. It is not just a question of consuming less energy but of when we consume energy. If we can consume less energy when there are high prices or large amounts of fossil-fuel energy and more energy when there are more renewable resources, cheaper wholesale prices and more sustainable sources of generation, it will help not only to develop the renewables industry but also to reduce the cost to consumers. Obviously, the latter is a key consideration for us.

I am sure members will be aware of the challenge faced by consumers in paying bills at this time. Approximately one in ten consumers is struggling to pay his bills at present. We have a helpline that consumers can telephone directly with complaints, problems with suppliers and challenges that arise when paying bills. The difficulties that arise prey hard on us as we regulate the industry. It is very important that the renewables targets are met at a reasonable cost and that the best innovators and brains in the country are used to achieve this in a manner that works for consumers.