Ms Jenny Pyper:

I thank all present for the opportunity to speak to the joint committee. I wish to reinforce Mr. Blaney's comments about the unique nature of the single electricity market and the close co-operation between his team in the Commission for Energy Regulation and mine in the Northern Ireland Utility Regulator. Clearly, the North-South interconnector is a crucial item of infrastructure for both jurisdictions and therefore is a crucial issue for both regulatory authorities. Mr. Blaney has touched on the benefits from an all-island perspective and a key issue obviously concerns improving security of supply. This is a particular issue for Northern Ireland and I will say a little more about that, if I may, when dealing with a subsequent slide. Security of supply is one thing that everyone takes for granted but keeping the lights on and electricity flowing has been cited by the Confederation of British Industry, CBI, the Irish Business and Employers Confederation, IBEC, the Northern Ireland Chamber of Commerce and Industry and the Institute of Directors as the number one issue for businesses and economic development both North and South. Consequently, while it is crucial for the entire island, there is an essential nature to it regarding Northern Ireland, to which I will come on. As for the second key issue regarding renewable power generation, we have seen considerable growth in renewables.

This has been facilitated by the single electricity market. However, the second North-South interconnector is crucial for future development and growth in renewables and the contribution they can make as an efficient generation source.

Mr. Blaney spoke about the efficiency of the market and noted that the costs in terms of constraints were currently of the order of €10 million. To put this in a slightly different context, the overall economic benefits that could flow from a second North-South interconnector could be of the order of €40 million by 2030 or thereabouts. There is a particular locational benefit in Ireland in terms of network reinforcement in the north east.

I do not know whether members can see the slide but it should be clearer in the documents provided in the packs. I will take a moment to quickly explain what it shows. To put it in the simplest way possible, when the red line extending across the graph is crossed, it means essentially that the lights will go out in Northern Ireland. This applies to all points below the red line, whereas all points above the red line indicate we have ample generation to meet our needs. The purple line represents excess generation in the Republic of Ireland. The blue line, which is much closer to the critical red line, represents the position in Northern Ireland. The green-yellow line at the top of the graph represents the overall position on the island. As members will note, this line shows that as we move into the 2020s, there is plenty of generation on the island as a whole. I ask them to focus on the blue line showing the position in Northern Ireland. It indicates that the position is set to become critical in 2021 when a number of generating units are required to close to meet European emission requirements. The graph shows generation in Northern Ireland dipping below the red line in 2021, indicating that security of supply will become critical from that point onwards, despite the fact that we will have plenty of generation on the island in 2021.

A particular problem also arises in the short term for Northern Ireland. As members will note, the blue line dips close to the "lights out" red line from 2016 onwards. At that point, Northern Ireland only has a surplus of approximately 200 MW. If only one of the three large generating units in Northern Ireland experiences a problem which knocks out approximately 50% of its output, generation in Northern Ireland will dip below the red line. The arrow extending from 2016 to 2018 represents additional capacity that Northern Ireland has procured already to ensure we keep the lights on. Consumers in Northern Ireland are, therefore, already committed to paying approximately €10 million per annum from 2016 to 2018, inclusive, to keep the lights on and ensure we have sufficient security of supply during the period when the Moyle interconnector is being repaired. The position moving forward to 2021 becomes much more critical. If the second North-South interconnector is not in place at that point, we will have a very significant problem in the North.

In speaking about this slide, I should apologise for the absence of a crucial bullet point which provides the total project cost of the North-South interconnector, including overhead line, land acquisition, substation and other costs. The total project cost is €286 million, an important number and the one on which we would like members to focus. This figure is subject to regulatory review. Mr. Blaney's office and my office will separately review the Capex expenditure of both EirGrid and the system operator in Northern Ireland to ensure only efficiently incurred expenditure will be allowed.

As we move forward into the new market, there is an assumption that the second North-South interconnector will be in place and its costs will be recovered from consumers.

The final PowerPoint slide represents what is traditionally called the regulators’ trilemma, namely, the three significant issues they always have to balance. These comprise the cost benefits of ensuring security of supply, keeping downward pressure on prices and ensuring long-term sustainability. From a regulatory perspective, the arguments in favour of the North-South interconnector address all three areas. It contributes significantly to improving security of supply, particularly in Northern Ireland, as well as in the long term for the island as a whole. It provides the opportunity to maximise sustainability and renewables on an all-island basis. The second North-South interconnector is also crucial for the market in terms of creating the best possible conditions to drive down prices.

From the perspective of the Commission for Energy Regulation, the Northern Ireland Authority for Utility Regulation and the all-island single electricity market committee, providing the North-South interconnector at the lowest possible cost to consumers is absolutely essential.