Mr. Fintan Slye:

I might start with the questions on the interconnector. As the committee will be aware, in 2012 we completed the east-west interconnector, a 500 MW link to Wales from Ireland, which has been in commercial operation since then. We are investigating further interconnection. That is part of our overall remit and mandate. The one that is most advanced that we are looking at is an interconnector to France. We are working with our colleagues the French transmission system operator, RTE, on evaluating that. We have done an initial analysis of it to see whether it stacks up from an economic perspective and it does. It appears to work and we have commissioned a seabed survey which will take place over two years. The first half took place last summer, the second half will be completed this summer. That largely informs the cost of building it. Once one knows what is on the seabed one can better estimate the cost. This will lead us to a detailed rigorous cost benefit analysis of that project in the first half of next year with a decision as to whether, at that point, to bring it to the next stage of development in association with the French.

In terms of interconnectors and their effect on electricity prices and electricity flows I will look first at the east-west interconnector. About nine months after it was in operation at the end of the first calendar year, we conducted a retrospective analysis as to effect on electricity prices. We found that the existence of the interconnector and the ability to move power over it had reduced wholesale electricity prices by 9% from what they would have been had the interconnector not been in place. That was due largely to power moving from the UK into Ireland. The typical profile of the interconnector for a large part of the time since it has come into operation is that cheaper power comes from the UK into Ireland; its cheaper base load power being nuclear gas traded over the interconnector and into Ireland brings down wholesale prices. When it is very windy in Ireland the flow tends to go the other way as we have a surplus and sell that excess energy to the UK.

In looking at an interconnector with France, obviously for it to go ahead it would have to be a 50:50 joint venture with the French. It needs to work both overall but also for each country individually. It needs to make sense for Irish consumers to make an investment of that level in an interconnector. In looking at the cost benefit analysis of the interconnector we have to ensure it stacks up overall. The French will look at it from a French perspective and we will look at it from an Irish perspective. In broad terms the way it pans out, similar to the UK interconnector to an extent, is that at times of relatively low renewable generation across Ireland and the UK, French based nuclear power which is largely nuclear would flow into Ireland and have the effect of depressing electricity prices at a wholesale level. At times when it was relatively windy, the flow of large amounts of renewable resources on these islands reverses and is sold into the UK. Obviously, that is a very broad generalisation of what would happen on those interconnectors over time. The French electricity system is quite different from that of the UK electricity system hence the diversity in the two sources works quite well.

The French electricity system is dominated by nuclear power, which has a relatively low incremental cost of production. It is also relatively inflexible, so that works in terms of interconnecting and getting cheap electricity.