Mr. Jim Gannon:

I wish members a good evening and thank them for inviting us to join them today. We are here to discuss future licences and contracts to connect data centres to our energy networks.

In 2018, the Government published its Statement on The Role of Data Centres in Ireland’s Enterprise Strategy. This noted Ireland’s ambition to be a digital economy hot spot in Europe. It also noted the challenges that data centres could pose to the future planning and operation of a sustainable power system, with a focus on electricity networks, and noted that, "A plan-led approach will develop a range of measures to promote regional options for data centre ... [development], minimising the need for additional grid infrastructure."

In July 2022, the Government produced an updated Statement on The Role of Data Centres in Ireland’s Enterprise Strategy. This considered the twin transitions of decarbonisation and digitalisation and their complementarity. The statement sets out principles with the intention of ensuring that the data centre infrastructure that can be accommodated will contribute to our climate and policy ambitions. It notes that the principles "will be reflected in energy, enterprise and planning policy, regulatory and other decisions across Government Departments, local authorities, enterprise development agencies and other public bodies".

We will outline the key areas of activity where we, as energy regulator, are seeking to reflect and implement the aforementioned policy with due regard to Ireland’s Climate Action and Low Carbon Development Act and associated carbon budgets. The CRU is developing an ambitious energy demand strategy in line with our responsibilities under the climate Act and to meet the requirements of the Climate Action Plan 2023. The objectives of the energy demand strategy include increasing energy system flexibility and reducing the carbon intensity of energy demand. The CRU is progressing this at pace to maximise the impact on the carbon budget and is co-ordinating with key relevant Departments and agencies.

This summer, in furtherance of this strategy, the CRU published a call for evidence on phase 1 of the energy demand strategy, with three areas of focus: smart services to encourage greater flexibility among domestic customers and small business customers; demand flexibility and response to incentivise provision of demand response at certain times, and I note a recent ESB Networks, ESBN, consultation on that; and a focus on new demand connections, targeted initially at very large energy users, both electricity and gas, seeking to connect.

As part of this process, in June 2023 the CRU published a call for evidence on large energy user connections. Currently, applications from data centres applying to connect to the electricity network are covered by the CRU direction to system operators, SOs, related to data centre grid connection processing. For data centre connections to the gas network, the Minister for the Environment, Climate and Communications has written to Gas Networks Ireland, GNI, and has received a response outlining GNI’s obligations under the Gas Acts. I will come to that again later.

In quarter 1 of 2023, during the early stages of consideration of the energy demand strategy, the CRU consulted bilaterally with GNI, EirGrid and ESB Networks, with letters then issued in the summer period, on the possibility for interim measures to be put in place enabling the alignment of existing connection arrangements for large energy users to take cognisance of the climate Act and carbon budgets. Concerns were raised by SOs relating to how this might be balanced against existing constraints and-or obligations in legislation and existing policy.

The new CRU review of large energy user connections on both the gas and electricity networks highlights the sectoral emissions ceilings and the Government Statement on the Role of Data Centres in Ireland’s Enterprise Strategy and is intended to identify any current process, regulatory and-or policy barrier to full alignment of large energy user connection approaches taken by the system operators and Ireland’s climate Act and associated carbon budgets. Following the call for evidence, the CRU is now developing a more detailed consultation, which it intends to publish in quarter 4 of 2023. The targeted timeframe for a decision on large energy user connections is quarter 1 of 2024.

The CRU expects this decision to outline the conditions for connecting large energy users, LEUs, to the gas and electricity networks. A number of aspects are being considered as part of this consultation. First, the aim of the review is to provide a pathway for new LEU connections to electricity and gas systems that minimises the impact on national carbon emissions and supports industry and others to decarbonise Ireland’s economic growth. Due to the considerable interaction between gas and electricity networks, the CRU is cognisant that a co-ordinated approach is required for connections to the electricity and gas networks to ensure policies introduced for electricity do not inadvertently lead to an increase in emissions from new gas connections and vice versa.

As part of the review, the CRU is considering criteria such as the requirement for a corporate power purchase agreement, CPPA, for renewable energy.

We note the Climate Change Advisory Council, CCAC’s, recommendation that planning permission for all data centres should require a CPPA for renewable electricity and agree this requirement could be more appropriate as a planning condition for the facility, which would typically be earlier in the development process, rather than as a regulatory condition. We note the recent grant of planning by Fingal County Council for a data centre in Blanchardstown-Mulhuddart that not only requires a CPPA to be in place and attributable to the data centre but also requires that "the amount of electricity generated by the new renewable energy projects shall be equal to or greater than the electricity requirements of the data centres in operation at any given time". That is a very important specification in the planning condition.

The published call for evidence also explores the potential of moving to a requirement for real-time zero carbon demand. To facilitate this, hourly emissions monitoring and reporting would be a key enabler. ESBN is engaging with the Sustainable Energy Authority of Ireland, SEAI, on this, which will form an element of the ESB national networks local connections programme, and the CRU will continue to support the delivery of this capability and engage with system operators as part of that process. The call for evidence also considers the role of on-site generation and storage. We note that some large demand connections may require on-site backup generation, both for operational reasons and under the current CRU direction for connection. This can assist with security of supply concerns on the grid. Where on-site backup is a requirement, it may be worth exploring what conditions could be put in place through planning conditions or environmental licensing that would typically provide an earlier signal in the development process to ensure this backup generation is low or carbon neutral, for example, batteries, green hydrogen in the future, biomethane, hydro-treated vegetable oil, HVO, or alternative fuels. The CRU is exploring other means of achieving this, including through its own regulatory measures, as part of the large energy users, LEUs, connection policy review.

In July, the CRU consulted on proposals for price control five, PC5, which will set the revenues that Gas Networks Ireland, GNI, collects from its customers up to September 2027. The consultation proposed an incentive to ensure GNI would consider and adapt its business to have regard more clearly to the climate Act, carbon budgets and broader decarbonisation policy. Following feedback from stakeholders, the CRU is now minded to strengthen this incentive further, linking it to, for example, acting on the energy demand strategy. While not directly related to the review of large energy user connections, in line with the CRU’s new regulatory role in district heating, the CRU supports the CCAC’s proposal that the planning process should ensure data centres and other LEUs build in heat export capability, where practicable, at the time of construction to facilitate future district heating networks.

A letter recently forwarded from the CCAC recommends that:

CRU should direct GNI not to sign any more contracts to connect data centres to the gas network where the data centre would be powered mainly by on-site fossil fuel generation under section 10A of the Gas Act, to reflect the Government statement. If there is a legislative barrier the Government should take immediate action to revise the Gas Act in line with national policy and the principles set out in the Government statement.

The CRU understands that GNI has paused processing islanded data centre applications in line with both the ministerial direction mentioned earlier and the Government statement on the role of data centres in Ireland’s enterprise strategy. In parallel and as noted above, the CRU is exploring more enduring options to align future LEU connections with the climate policy through the call for evidence outlined above. This exercise and any subsequent decision may identify the need for amendments to existing legislation to implement recommendations.

The CRU notes its strategic objectives are fully aligned with the national climate objective, with one of its strategic priorities being to drive a low-carbon future. The objectives associated with this priority are to design and implement regulatory frameworks that deliver transformational change, to enable high levels of renewable integration through market design and development, and to ensure markets enable participation in the transition by all customers. The CRU is carrying out its functions with a view to enabling decarbonisation of the energy system. However, the CRU’s early engagement on specific initiatives, including the call for evidence on large energy user connections, suggests there remains a lack of clarity on the extent to which each public body is expected to, or is empowered to, play a role. The CRU therefore welcomes the call from the CCAC for the Government to "review and revise the legal mandate of relevant State agencies and public bodies to ensure these are consistent with delivering the climate action plan measures as well as the legislated carbon budgets".

The CRU also notes the recent publication of the recast energy efficiency directive which more than doubles the annual energy savings obligation by 2028, making it binding for EU countries to collectively ensure an additional 11.7% reduction in energy consumption by 2030 compared with the 2020 reference scenario projections. Alongside Ireland’s carbon budgets, this will likely increase the need for Ireland to examine the scenarios for our continued economic growth and to consider how we ensure economic growth is decoupled from carbon and energy intensity where possible and to reflect on which sectors will share the burden and opportunities arising from these policy obligations.

Finally, as an appendix to our opening statement and in furtherance of an update in our letter provided on Monday, we note an error in the figures provided on arrears to the committee. The figure on non-domestic gas arrears and the percentage of non-domestic gas arrears was provided in error, where a figure of 15,501 was provided and a percentage of 56% was provided. We forwarded an update to those figures earlier today to the joint committee prior to this meeting. The 15,501 figure is in fact 8,007 and the percentage figure of 56% is in fact 29%, so that was a mistake we made. I apologise for that. We always try to make information available quickly and clearly and clarify any ambiguity in the information we provide. We understand how it was provided and how the error was made and will make significant efforts not to have that happen again. Apologies to the committee from myself.

This concludes our opening statement and we are happy to take questions.