Mr. Stephen Wheeler:

I thank the Chairman and members of the committee for inviting me to participate in today’s meeting of the special select committee. I am the managing director of SSE Ireland and I am joined by Ms Marian Troy, director of corporate affairs. SSE Ireland is the second largest energy utility on the island of Ireland, supplying more than 800,000 customers and employing more than 800 staff on the island. We generate renewable and conventional energy from 26 wind farms and four conventional stations. The company is in the process of constructing Ireland's largest wind farm, Galway wind park, with our partners, Coillte.

Over the past six years, SSE has contributed more than €5 billion to the economy, supporting more than 4,700 jobs. SSE is intractably invested in the UK and Ireland and will continue to have a collaborative and co-operative relationship after the UK formally leaves the EU. SSE is the largest company by market capitalisation in the FTSE 100 whose revenues are derived solely from the UK and Ireland.

SSE did not take a position on the European Union referendum prior to the vote, believing it to be a matter for the people of the United Kingdom. We understand that managing political and regulatory change is part of our role as an energy company to provide the energy people need in a reliable and sustainable way. We believe, however, that it is important to gather stakeholder views and perspectives on the Brexit process. In that respect, we welcome today's session and the Brexit civic dialogue on energy held by the Minister for Communications, Climate Action and Environment, Deputy Denis Naughten, in February last. Continued engagement will serve us well during the Brexit negotiations and beyond.

I will focus on the material issues for our customers, business and employees across the island of Ireland. Energy customers want prices to be fair and Ireland requires cost-effective investments in energy infrastructure to decarbonise our economy and maintain security of supply. As we proceed, we should not lose sight of these overarching aims.

Our industry is subject to a range of European Union rules and regulations, many of which have wider application than the energy sector. At this stage, none of us knows exactly what will be outcome of the negotiations. With this in mind, rather than plotting out every possible scenario or examining every legal provision relating to energy, we argue that the following three principles should be prioritised in the exit negotiations. First, the single electricity market on the island of Ireland should be maintained and the integrated single electricity market project completed. Second, the flows of electricity and gas between countries through interconnection should continue to support energy security. Third, Ireland must recommit to meeting its energy challenges and thereby provide policy certainty to investors.

The combining of the Northern Ireland and Ireland electricity markets into the single electricity market or SEM has been a success. It was the first project of its kind to operate with dual currency and across multiple jurisdictions. The SEM has improved competition and the investment case for the construction of new and cleaner generation, as well as optimising the achievement of renewable targets. Put simply, there are benefits of larger, integrated electricity markets, whether this is across the island or across Europe.

For customers, the benefits take the form of lower costs and increased security of supply. Under EU policy, markets are progressively coupling in order to remove barriers to trade and enable efficient free flow of energy across Europe. The integrated single electricity market project, ISEM, takes this step for our market. SSE believes ISEM is desirable with or without Brexit and will deliver benefits for customers. We ask the Governments in the Republic of Ireland and Northern Ireland to do what they can, within their own powers, to provide for the maintenance of the single electricity market and completion of the ISEM project, the introduction of which was a product of domestic legislation in the first instance. The single electricity market and ISEM are supported by all sides in the Brexit negotiations. Policy makers and industry stakeholders such as SSE must follow the negotiations and regulatory developments carefully and find solutions to remove barriers that may be encountered on exit or in the future.

Our second priority is security of supply. We seek to ensure gas and electricity will continue to flow through the interconnectors. As set out in the Government’s Brexit priorities, approximately 88% of Ireland’s energy needs are met by supplies from abroad, much of them from the United Kingdom. Ireland imports approximately 40% of the gas it uses from Great Britain, a figure which has decreased markedly since the Corrib gas field was brought into operation. The figure is to increase to an estimated 85% by 2025 as the Corrib gas field is exhausted. Gas makes up a large part of the resources used in electricity generation, circa 50% in 2016.

Ireland's gas imports come through the interconnection with Scotland. The United Kingdom produces gas and also imports through interconnectors from other EU member states and Norway, as well as importing liquefied natural gas from further afield. Depending on market conditions, the United Kingdom exports gas to continental Europe. Therefore, maintaining the flow of gas between Great Britain and the European Union is mutually beneficial to all concerned in the negotiations, none more so than Ireland. If the United Kingdom was to continue to participate in EU security of gas supply arrangements post-Brexit, this would have obvious benefits for Ireland, as, in particular, the current rules for sharing resources in a supply emergency would be maintained. The United Kingdom and Ireland have long had bilateral security of gas supply agreements to ensure gas will continue to flow and they should be reaffirmed, if necessary.

On electricity interconnection, the Moyle and east-west interconnectors give Ireland flexibility to take advantage of lower prices elsewhere and optimise management of renewable energy generation. They provide additional comfort that security of supply can be maintained in case of emergency. SSE believes the flow through the interconnectors must be maintained and that any additional interconnection should be considered by way of a thorough cost-benefit analysis.

As the North-South interconnector project is before the courts, I will not discuss it at length. I note that the project would address impediments to transporting energy supplies within the single electricity market, as the cheapest electricity supplies cannot always travel to where they are needed. Northern Ireland faces generation shortages in the early 2020s if the North-South interconnector is not delivered. SSE supports the provision of this important piece of infrastructure, given the more than €20 million in savings it will bring to customers on the island.

My third and final point is that the Government must recommit to addressing Ireland’s energy challenges. Brexit should not subsume all of the focus in the upcoming, crucial years. There is a need for a clear, long-term and robust energy policy in Ireland to deliver affordable, secure and sustainable energy supplies. As set out in the energy White Paper, the needs of the empowered energy citizen are paramount in this respect.

About 25% of the electricity we generate is from renewable sources; we need to get to a figure of 40% by 2020 and set our ambitions for 2030 and 2050. A vision has been set out in the White Paper and 2030 renewable energy targets are under discussion at European level. SSE would like to see progress on the more detailed policies required to implement this vision. We know that the Minister for Communications, Climate Action and Environment, Deputy Denis Naughten, and his Department are working on a scheme to support renewable energy project development. As it takes a number of years to deliver such projects, we encourage a speedy conclusion in order that companies such as ours can continue to invest to deliver a decarbonised economy for the island of Ireland.

As for the technology mix, Ireland should continue to build its world-leading ability to deliver and operate onshore wind energy projects. It is the most cost-effective way for it to decarbonise its electricity supply. There is significant potential for projects with a low impact on communities to be developed in consultation and co-operation with them. Ireland must also begin to build capacity in the generation of offshore wind energy which offers huge potential. It has wind power capacity of approximately 2,600 MW and it is estimated by EirGrid that around 5,000 MW will be required to maintain our 40% target by the mid-2020s and that is without considering meeting Ireland’s upcoming 2030 target which will only be achieved by advancing in all areas, including the development of onshore and offshore wind energy projects.

We know that Ireland’s renewable energy credentials have been a factor in attracting foreign direct investment, as well as in creating jobs and reducing dependency on imports, but there is the capacity to do more. We must also ensure investment is encouraged in the provision of flexible infrastructure to complement renewable energy generation through schemes such as the DS3 programme. We must be careful that investments or policies made now do not lock in the use of high carbon technologies. Furthermore, electrifying the heat and transport sectors provides a means to decarbonise them and the move towards smart technologies will enable the consumer to flex consumption to reduce their carbon footprint and the price they pay. Ireland can be an example for the rest of the world in how to integrate high levels of renewables with the electricity system. We have the necessary skills and industry clusters to create a world-leading innovation hub in this area. We now need holistic policy measures to maximise the benefits of our energy transition. It is essential that the transition to a low-carbon economy is delivered cost effectively; the customer must be central in decision-making. Decarbonisation needs a strong overarching policy driver. The European Union’s emissions trading scheme, ETS, has been designed to be just that, although it is not delivering the price signals to support decarbonisation. Ireland should take an active role at EU level in ensuring the ETS is on a pathway to delivering a robust carbon price. If this is not achieved, Ireland should consider introducing domestic measures to supplement the scheme.

SSE sees three energy priorities as the Brexit process plays out: maintaining the single electricity market and completing the ISEM project; ensuring flows of energy through the interconnectors; and the need to double-down in meeting Ireland's energy challenges. Irrespective of the wider UK-EU relationship, as networked industries that are vital to the functioning of our economies and communities across the United Kingdom and the European Union, it makes sense for both to retain closely linked electricity and gas markets and wider co-operation in the energy sector. Energy customers want prices to be fair, while Ireland requires cost-effective investment in energy infrastructure to decarbonise its economy and maintain security of supply. As Brexit proceeds, we should not lose sight of these overarching aims. It is in that spirit that I have presented these three priorities.