Mr. Peter O'Shea:

I am joined by Dr. Fergal McNamara, who has broad experience of energy policy in Ireland, Great Britain and wider Europe. I am delighted to appear before the committee again and to share with it our perspectives on the Bill. Specifically, I will outline the ESB's record in facilitating and supporting microgeneration to date; draw attention to the EU’s clean energy package, which is expected to be Irish law by June 2021 and sets out the future regulatory framework for microgeneration; give our observations on the Bill; and make some concluding comments.

The ESB has played a important role in facilitating microgeneration to date and launched a pilot programme in 2009 to kick-start the sector. We have two business units that play distinct roles, namely, ESB Networks, which is responsible for the wires, and Electric Ireland, which is responsible for retail sales. ESB Networks constructs and operates the distribution network to serve all 2.3 million customers in Ireland, regardless of their supplier. It determines the appropriate technical standards for equipment and puts in place the necessary commercial and safety procedures to enable the connection and operation of microgenerators. ESB Networks plays two roles, the first of which is connecting microgenerators to the networks. The connection is free of charge, including of incremental charge for the export component. The other role is providing and installing the import and export metering capability required to measure the exported generation, as well as collecting and processing those data. As part of the pilot to kick-start the microgeneration sector, ESB Networks had a special microgeneration export tariff in place for five years, paying 10 cent for each kilowatt hour of exported electricity.

On the other side of our business, Electric Ireland is responsible for retailing electricity to end-use customers and, to that end, purchases wholesale electricity from a variety of sources, including microgenerators. As part of a pilot, Electric Ireland also pays a tariff of 9 cent per kilowatt hour for exported microgeneration. I believe that Electric Ireland is the only supplier in the marketplace to have offered such a tariff for microgenerators. Approximately 700 microgenerators now avail of this microgeneration scheme tariff.

I turn to the EU's clean energy package, which sets out the regulatory framework for microgenerators, although it uses the broader headline of renewable self-consumers. It is required to be law in Ireland by June 2021. It establishes a right for all renewable self-consumers to sell excess production of renewable electricity. The law provides that member states shall ensure that renewable self-consumers, individually or through aggregators, are entitled to generate renewable energy, including for their own consumption, and store and sell their excess production of renewable electricity, including through renewable power purchase agreements, electricity suppliers and peer-to-peer trading arrangements. The package goes on to give these renewable self-consumers the right to the market value of their electricity sold into the grid, which is a positive development. We believe that the framework set out in the clean energy package is sensible as it sets out the rights of customers to self-generate and have market access to sell any excess. The latter concept is well known to electricity markets and is often referred to as "spill".

We welcome the Bill insofar as it provides a supportive environment for microgeneration, thereby engaging customers and citizens in the energy transition, the importance of which we recognise. The ESB supports putting in place all the measures required to provide market access to microgeneration, as contemplated by the clean energy package, and we will address these measures presently. We note, however, a proposal in the Bill to place a target on electricity suppliers to source not less than 5% of their requirements from microgeneration. We do not support an arbitrary target and we believe it should be reconsidered.

Microgeneration has a role to play and, in ESB’s view, it is primarily to offset the import and purchases by householders of electricity from the grid. The appropriate amount of microgeneration will be established naturally over time if proper wholesale market access is arranged. That level could be 5%, or higher or lower, depending on supply and demand. It is important to bear in mind that there are many other sources of renewable electricity and technologies and that microgeneration is one of the highest priced sources, according to data from the Sustainable Energy Authority of Ireland.

I will clarify the comments in our written submission. The data set indicates that microgeneration in the form of domestic rooftop solar is two and a half times, or 150%, more expensive than large onshore, not offshore, as mentioned in the paper. It is actually 70% more expensive than offshore and 25% more expensive than small-scale onshore. The unintended consequences of intervention to set targets are well read and must be paid by someone - in this case, potentially other electricity customers, which would be a transfer. Subsidising microgenerated electricity exports above the wholesale market rate by establishing a volume obligation could lead to homeowners installing oversize rooftop photovoltaic panels to simply harvest the subsidy, something that has happened in other jurisdictions.

In terms of measures that need to be taken in order to arrange market access and to prepare for the regulatory framework set out in the clean energy package, CEP, the following points need to be addressed. The first is about definition, namely, what a microgenerator is. It is important that we consider and agree an appropriate definition of the term "microgeneration" and our written submission expands on the technical issues around this. The CEP uses the broader term "renewable self-consumption" rather than microgeneration and it also includes other categorisations. With regard to the Bill, we, therefore, observe that the term "microgeneration" needs to be defined specifying the technologies and the electrical power parameters and taking note of the language and new categories in the CEP. Second, in terms of metering, we need to measure the electricity exported. ESB Networks will provide import-export metering at a regulated cost in the ordinary course. In this context, it is interesting to note that smart meters will provide such import and export capability and that a national roll-out of smart meters is planned to commence in the third quarter of 2019. Third, we need a mechanism to pay market value to microgeneration. The most practical means by which microgenerators, who, for the most part, will be domestic customers, can access the market would be for a supplier to provide a "flow-through" tariff, which transmits the market price directly. Of course, variations on this are possible, for example, average prices by time of day etc., and can be a matter between suppliers and customers. In this context, it is noteworthy that the CEP also requires member states to ensure that such tariffs are made available. Finally, settlement processes are required. The microgenerator sells electricity to the supplier, who purchases that electricity. The meters installed measure the quantity in each market time period, which is currently a half-hour period. This takes place across the entire country for every period of the year for every installation. There are advanced systems in place already in the electricity market but processes to cater for all this domestic microgeneration will be required to be integrated into the wholesale market.

The ESB is working to lead the change to a low-carbon future. Decarbonisation of the electricity system and the electrification of heat and transport are the keys to achieving a zero-carbon society and economy by 2050. We welcome the Microgeneration Support Scheme Bill 2017 insofar as it will enable and engage citizens directly in the energy transition in an appropriate, sustainable and cost-effective manner. We agree that microgeneration has an important role to play in terms of this transition to a low-carbon society but we are not in favour of the volume obligation being placed on suppliers contemplated in the current Bill. We believe this would likely result in an inappropriate subsidy for exported microgeneration. Instead, we believe the focus should be on providing market access for microgeneration and we have outlined some of the issues that need to be addressed.