Oireachtas Joint and Select Committees
Tuesday, 29 March 2022
Joint Oireachtas Committee on Climate Action
Energy Challenges: Discussion
I have received apologies from Deputies Farrell and Devlin who unfortunately cannot join us.
The purpose of this meeting is to discuss our energy challenges and opportunities. It is the fourth and final meeting in the series we have held over the past few weeks. We have talked about the grid, development of the grid, interconnection, energy storage, which is something we will really get into today, and ancillary services. We looked at demand response in a significant way last week. Today, we will probably get into the storage question a little more. There is an interest among committee members in talking more about liquefied natural gas, LNG. In that regard, we have quite a few witnesses before us. Ms Aoife MacEvilly, chairperson of the Commission for Regulation of Utilities, CRU, is very welcome back. She is joined by Mr. Paul McGowan, commissioner, Mr. Jim Gannon, commissioner, who is also welcome back, Ms Karen Kavanagh, director of economic regulation and compliance, and Mr. John Melvin, director of energy markets and smart metering, who is also very welcome back. Joining us online are Mr. Jerry McEvilly from Friends of the Earth, who is welcome, and Ms Tara Connolly from Global Witness who is in Brussels. I thank Ms Connolly for joining us.
I will read the note on privilege. I remind our witnesses of the long-standing parliamentary practice that they should not criticise or make charges against any person or entity by name or in such a way as to make him, her or it identifiable, or otherwise engage in speech that might be regarded as damaging to the good name of the person or entity. If their statements are potentially defamatory in relation to an identifiable person or entity, I will direct them to discontinue their remarks. It is imperative they comply with any such direction. For the two witnesses who are attending remotely from outside the Leinster House campus, there are limitations to parliamentary privilege. As such, they may not benefit from the same level of immunity from legal proceedings as a witness physically present does.
Members of the committee are reminded of the long-standing parliamentary practice to the effect that they should not comment on, criticise or make charges against a person outside the Houses, or an official, either by name or in such a way as to him or her identifiable. I also remind members that they are only allowed to participate in this meeting if they are physically located on the Leinster House complex. In this regard, I ask all members prior to making their contributions, if they are joining us online, to confirm they are on the grounds of the Leinster House campus.
I ask Ms MacEvilly to make her opening statement.
Ms Aoife MacEvilly:
I may go a little over time, so the Chair can stop me if needed. At our last meeting, on 15 February, we had the opportunity to discuss a number of topics with the committee, including rising energy prices and costs, customer protections, the roll-out of smart meters, security of supply and renewables. Unfortunately, since then, the shocking Russian invasion of Ukraine has intensified the pressure on the EU to reduce reliance on imports of gas from Russia. The CRU has been asked to accelerate deployment of renewable energy and relevant measures under the climate action plan, while ensuring security of supply. We will, of course, do everything in our power to achieve climate action plan targets. At the same time, we have been overseeing implementation of the Government's emergency electricity credit scheme and ramping up consideration of other protections available to support customers as energy prices threaten to further impact household budgets. For this meeting, the committee asked us to address grid capacity development and interconnection, energy storage, ancillary services and demand response.
Our grid infrastructure was traditionally developed to connect large, centralised, largely fossil-fuelled generators to meet residential, commercial and industrial demand, with this demand driven largely by economic growth. In the coming decade, Ireland’s grid infrastructure will also need to accommodate large-scale electrification of heat and transport; the connection of new large-scale generation, storage and system services technologies; the connection of small-scale renewables and more active energy consumers and communities; and investment in distribution, transmission and control systems to allow for more flexible and responsive demand than ever before. This will require significant investment in, and in addition to, our traditional grid infrastructure, alongside new investment in smarter and more digital solutions that will optimise and drive greater efficiencies from the infrastructure we build.
To facilitate this level of development, the CRU issued its price review 5, PR5, determinations in December 2020, providing our network companies with access to the funds necessary to invest over the 2021 to 2025 period. The PR5 determination is a more permissive and agile framework than previous price reviews and allows greater levels of innovation and adaptation as opportunities and challenges arise. It has also provided a significant increase in the overall level of funding accessible to the network companies, with a 35% increase in transmission level capital expenditure to €1.2 billion and an 84% increase in distribution level capital expenditure to €2.8 billion. I refer to the link provided to the committee to an information note on PR5.
The CRU annually approves the publication of the ten-year EirGrid transmission development plan. The consultation on the 2021 to 2030 transmission development plan is currently under way and we invite committee members to review and participate in the consultation. I refer to the link provided to the committee.
Regarding interconnectors, the CRU defines the regulatory framework and the requirements for supporting cost benefit analyses that establish the appropriate balance of risk between project developers and the Irish consumer. Two existing interconnectors connect the single electricity market to the Great Britain market, which are the Moyle interconnector and East-West Interconnector, EWIC. There are also two interconnector projects, Greenlink and Celtic, currently in the development pipeline, with the North-South interconnector now progressing to construction phase. The 500 MW Greenlink interconnector with the UK secured financial close in the last fortnight and is now progressing to construction phase. It is expected to be operational by the end of 2024. The 700 MW Celtic interconnector with France is planning to go to financial close later this year with operations expected before 2027. With our implementation of the new approach to generator connection policy to date, there are renewable generators producing more than 4 GW that could connect to the electricity grid over the coming years. There will be further opportunities to connect renewables to the grid from small-scale up to large onshore and offshore renewable generators.
More generally, with regard to large-scale infrastructure development in Ireland, the CRU notes the significant time it can take for projects to progress through, and beyond, the current statutory processes and surrounding legal frameworks. We were encouraged by the proposed review of the planning process by the Office of the Attorney General and would welcome an acceleration of this process. We note the focus on the simplification and shortening of national permitting processes for energy projects articulated in the recent REPowerEU document statement published by the European Commission.
Energy storage of varying types will play a key role in helping Ireland to decarbonise, supporting security of supply and driving greater value from our network assets and generation portfolio. At large scale, energy storage has the ability to reduce instances of wind and, in future, solar curtailment and constraint, increasing the use of our natural resources and reducing dependency on fossil fuel alternatives.
It can also contribute to mitigating short-term security of supply challenges by supporting generation during peak demand hours. At a smaller scale, it also has the ability to reduce peak demand when deployed at distribution level and behind the meter when combined with on-site generation. As such, energy storage, and the flexibility and resilience it can provide to us, is something that can be delivered at developer, industrial and commercial, and domestic scale.
Currently, 350 MW of battery storage capacity in Ireland has been procured through the system services programme and a further 110 MW through the fixed contract auction. A further 310 MW has been successfully secured in the single electricity market capacity auction held in January. A review of how the contribution of batteries, and batteries of different duration, are evaluated within the capacity auctions is currently under way with a consultation due to be published by the single electricity market committee, SEM, in the near term.
I shall now turn to ancillary services and system services.The success of the DS3 system services programme has enabled the single electricity market to be a world leader in the penetration of renewable electricity on the grid. This work will need to be further advanced to achieve our goals of 80% renewable electricity by 2030. The SEM committee sets out the market mechanisms by which system services are incentivised in the single electricity market. System services were primarily incentivised through a traditional procurement mechanism with services largely provided by large-scale fossil-fuelled facilities. It is anticipated that system services will increasingly be provided by low and zero-carbon technologies such as batteries and synchronous condensers.
Future system services will be procured through an auction mechanism. In March 2021, the SEM committee put in place a framework enabling the transmission system operator, TSO, to carry out auctions for system services under long-term contracts. In this decision, the SEM committee instructed the TSO to begin procurement of inertia services from low-carbon sources. A high-level auction design, covering all timeframes, was published by the SEM committee in August 2021 for consultation. Further detail is to be provided in the coming weeks with the publication of a decision paper anticipated in early April 2022.
There is continued and ongoing review of both the type of system services required and the volumes of these services required, informed by the expertise and knowledge of SONI and EirGrid, arising from their historic use of system services and their prediction of future system services requirements. The Commission for Regulation of Utilities, CRU and SEM committee have also requested EirGrid and SONI to provide greater transparency to the industry by publishing its volume requirements. System services will give EirGrid additional tools to improve its operational dispatch, which will reduce curtailment of renewable generation and reduce costs for customers.
On demand response, by the end of 2021, there was in excess of 550 MW of demand side unit capacity operating in the single electricity market. The SEM committee has recently brought forward a work package in order to examine specific key market incentives for demand side units with the aim of increasing both the level of contracted participants, and also the declared availability and responsiveness of these participants when called upon. Responsive demand can not only support security of supply outcomes but can also contribute to cost savings on the part of customers, and carbon emissions reductions.
At the distribution level, Ireland now has more than 600,000 smart meters installed in homes. We have been updated and that number is now closer to 745,000 smart meters as of today. Customers with smart meters can track and control their usage of energy across day, night and peak periods. Energy suppliers are now offering time-of-use tariffs so that customers can use energy at cheaper, greener times. A significant impact on peak usage could be delivered by harnessing domestic demand flexibility, by encouraging customers to avoid peak periods and using electricity at cheaper times.
In conclusion, the CRU’s role in energy is to maintain security of supply, ensure efficient network delivery and promote competition and innovation in the interests of consumers. Now, more than ever, as we face the challenges posed by the crisis in Ukraine, the CRU remains committed to delivering safe, secure and sustainable supplies of energy for the benefit of customers.
I thank members for their attention, and I and my colleagues are available to answer questions.
Mr. Jerry McEvilly:
I thank the Chairman for the opportunity to present to the committee today on behalf of Friends of the Earth. The committee's focus on energy challenges is welcome and all the more pertinent in light of the horrendous Russian invasion of Ukraine, as well as the necessity to phase out Russian oil and gas, and fossil fuels more broadly. I will start by discussing the framing of energy security and the importance of climate-proofing our energy security response.
I will address risks regarding fossil gas dependency and necessary energy efficiency measures. My written submission contains further recommendations and notes previous research on the Government's energy security review by the Stop Climate Chaos coalition.
My central message is that the Government must immediately progress a policy framework that ends Ireland’s reliance on fossil fuels, and reducing gas demand in particular must be prioritised as both a climate and national security measure. On climate action, our climate obligations necessitate the rapid phase-out of fossil fuels. It is not acceptable for anyone to merely state that fossil methane gas is needed for when the wind does not blow and the sun does not shine. It is evidently the case that gas represents a significant element of Ireland’s fuel mix, but the question is how we can get to a secure zero-carbon system as quickly as possible. When it comes to descriptions of gas as a transition fuel, talk is cheap. As noted by the Sustainable Energy Authority of Ireland, SEAI, in its recent national heat study, a timeline and plan for fossil fuel phase-out must urgently be put in place if we are to reach net-zero emissions by 2050. I strongly recommend the committee examines the SEAI's heat study.
I refer to the Government's ongoing energy security review. Energy security and sustainability must not be treated as mutually exclusive or competing aims. In 2019, when the then Minister, Deputy Richard Bruton, initiated the review it was noted as a review of "security and sustainability of Ireland's energy supply". It is essential that the review actively integrates climate objectives. This means that any consideration of energy infrastructure must start with the question as to how it will support the decarbonisation of the energy system, in accordance with climate targets.
It is striking that much of the commentary on gas security tends to ignore the primary piece of infrastructure, which has guaranteed that security for decades at considerable expense, namely the twinned gas pipeline system linking Ireland, Northern Ireland and the Isle of Man with the GB gas system at Moffat in Scotland. The GB gas market is one of the most developed markets with the majority gas supplies coming from the North Sea. The UK also receives gas imports via liquefied natural gas, LNG, terminals and from the Continent, giving it and by extension Ireland a diversity of gas sources. This secure integration to such a major gas hub greatly mitigates Ireland’s security of supply risks, in comparison with many other European countries. Moreover, only about 4% of UK supplies come from Russia. The UK Government has recently stated it is confident that North Sea supplies, as well as renewables and nuclear, can offset the phase-out of Russian gas.
On fossil gas dependency, a core message for members today is that more gas does not simply equate to more security. Our over-reliance on fossil fuels, in particular gas, is a security risk and it is essential the Oireachtas addresses it as such. The Government introduced a policy statement, which provides for a moratorium on LNG and fracked gas imports pending the outcome of the energy security review. The Minister, Deputy Eamon Ryan, has been clear that he does not believe LNG will be necessary for energy security and the Tánaiste has underlined that the right investment in north Kerry is in renewables and green hydrogen, not LNG. We see no reason for any change in the Government's position.
We note media reports that the energy security review will consider a State-owned terminal, as a commercial terminal is dependent on increased gas demand associated with unsustainable data centre development. However, Friends of the Earth does not consider that Ireland should risk reliance on LNG given our climate obligations, carbon leakage, as well as human rights and environmental impacts. LNG would deepen Ireland’s import dependency and increase exposure to geopolitical disruptions and increasing gas prices. An LNG terminal would take years to be operational and securing shipments during a gas market crunch would not be guaranteed. For these reasons, the committee should examine LNG in detail, including how the current moratorium can be made permanent. The best way for this to be progressed is through further consideration of Deputy Hourigan’s Planning and Development (Liquefied Natural Gas - LNG) (Amendment) Bill and we, therefore, recommend that all parties support a Second Stage vote in favour of the Bill.
On gas-fired generation risks, it is important that we differentiate between security of the electricity system and security of gas supply. This distinction may be evident to everyone here, however, Friends of the Earth is concerned by misleading conflation of these challenges by certain commentators. To put it simply, the sudden arrival of more gas through an LNG terminal tomorrow would not alter current challenges with the electricity system. I hasten to add that the electricity and gas security cannot be entirely divorced either, however, near-term pressures on the electricity system, primarily caused by an aging gas plant, must not be used as an excuse to lock in more gas supplies.
Increasing interdependence of the gas and electricity systems constitutes a security risk. We are not clear on how a proposed new gas plant may be used less, especially given that it is in the interest of certain players to ensure they are used to the maximum extent. Proposed new gas-fired generation is significantly driven by projected major increases in data centres. The MaREI in University College Cork recently highlighted that pausing new data centre connections would avoid the equivalent of 750,000 barrels of oil.
My written statement addresses Gas Networks Ireland's role and stranded asset and moral hazard risks regarding new gas plants. It also addresses the potential for gas-fired generation to crowd out zero-carbon measures. The committee should recommend that the Government address such risks as part of the energy security review.
The Government must focus on energy efficiency measures, as they will permanently enhance our national security, reduce emissions and protect households from rising energy costs. In essence, we need to plug the hole when it comes to energy, not demand a bigger fossil fuel tap. As the International Energy Agency, IEA, has highlighted, the most secure gas molecule is one that is not needed. In other words, avoiding gas dependency and reducing gas demand is the most impactful response.
Friends of the Earth asks that the committee makes proposals. First, the SEAI has already recommended that the phase-out of fossil fuel heating systems must speed up immediately. We recommend a ban on the installation of gas boilers in new homes this year, not next year as noted in the climate action plan. We must go further. No fossil fuel boilers should be installed in renovated buildings by 2025.
Second, in the immediate term, Government plans to support 27,000 energy upgrades should be increased to closer to 100,000, including by temporarily delaying deep retrofit investment if necessary. To ensure that as many households as possible are shielded from the worst effects of the gas crisis this winter, the new 80% grant for attic and cavity wall installation should be increased to 100%, especially for those at risk of or suffering from fuel poverty. Retrofitting targets for local authority and social housing must also increase.
Third, we need to end long-standing Government obstacles to solar panels. The Department of Housing, Local Government and Heritage has failed to progress the necessary updating of planning regulations for solar panels for three years. For the past year, the Minister of State has said that the final step is a necessary public consultation on a strategic environmental assessment. However, the Department has failed to launch the consultation for months and has issued largely the same response for the past year. This knowing failure to progress such a simple measure beggars believe. My written statement addresses other responses, including revising mandates of public bodies, a national winter-ready campaign and revising VAT on energy efficiency materials.
I urge the committee to be clear that energy security and sustainability go hand in hand and are best achieved by cutting fossil fuel use and reducing energy consumption. I do not underestimate the immense challenge. However, if now is not the time for the Oireachtas to demand far-sighted measures to reduce our fossil fuel dependency, then when is? I thank the committee.
Ms Tara Connolly:
I am grateful for the opportunity to participate in the meeting on behalf of Global Witness. For those who are not familiar with us, Global Witness is an environmental and human rights NGO that has been investigating and exposing abuses in extractive industries for the past 25 years. Today, we will focus on climate change and the fossil gas industry. March is not yet over, but we have already seen many broken records and shattered beliefs this year. With the cost of 1 MW hour of fossil gas regularly exceeding €200 on the Dutch title transfer facility, TTF, market, the myth of cheap, abundant fossil gas is over. The climate crisis is causing unprecedented events. Simultaneous heatwaves occurred in the Arctic and Antarctic ten days ago, leaving climate scientists stunned. European peace was brutally shattered when Russian soldiers invaded Ukraine on 24 February. Policymakers no longer have the luxury of tackling one crisis at a time.
There has been renewed debate about the value or merit of an Irish LNG import terminal. Such a terminal would be costly and would probably rely on fracked gas imports or come from countries with poor human rights records, as well as having grave consequences for the global south. LNG terminals are not cheap and they will only become more expensive. Increased costs of raw materials suggest they will be at least one third more expensive than two years ago. Increased interest rates also mean higher capital costs and competition with other countries racing to build similar facilities.
Much of the debate has focused on proposed LNG terminals receiving fast-track planning permission and accessing investment subsidies, particularly due to their status as a project of common interest under EU law. However, this committee should be aware that many projects also require and receive operational aid. One such example is a Croatian terminal off the coast of the island of Krk. In addition to securing public subsidies, it covered 80% of the investment costs. The operators were guaranteed a security of supply levy, essentially an LNG levy, to be placed on gas customers' bills by the Croatian gas grid operator. The levy would cover any shortfall in revenue from the running of the terminal. Given Ireland's access to piped gas from the UK, an Irish LNG terminal would be a last resort.
We can expect very low utilisation rates of such a facility. If Ireland meets its climate targets, fossil gas use should be dropping significantly over the next decade and beyond. Liquefied natural gas, LNG, terminals have an economic lifespan of 30 to 40 years so Irish gas customers or taxpayers could still be paying an LNG levy for the LNG terminal in 2062. According to the Sustainable Energy Authority of Ireland's recent national heat study, the role of fossil gas by 2050 will be marginal if Ireland is to meet its climate targets.
Another cost consideration must be the high and violative price of gas. Ireland's purchasing power on the global gas market is weak. At a global level, Ireland is a small market, representing just over 1% of the EU's gas market. Any contract signed purely for the Irish market would not be on favourable financial terms. I would suggest that this committee include as a recommendation to Government that it sets out the full long-terms costs of the State-owned LNG terminal.
Mr. McEvilly has covered the conflict between Ireland's climate obligations and fossil fuel infrastructure investment, but I would like to add some words on future methane emissions. Even if they do not show up on Ireland's climate balance sheets, methane emissions represent a serious challenge to tackling the climate crisis. Over a 20 year period methane has 80 times the global heating impact of carbon dioxide. The US Environmental Protection Agency's official estimate of leakage rate is 1.4%. Just last week a study revealed that the leakage rate in the second largest shale gas production basin in the US, the Permian Basin, is 9.4% which is more than six times the EPA estimate. There are other wildly varying estimates, depending on the gas basin in question. For this reason, this committee should recommend that the Irish Government enshrines in law the policy against importing shale gas, and the moratorium on fracking in Ireland should also be made permanent.
There are other concerns regarding a European and Irish dash for gas regarding human rights and the global south more broadly. Europe's drive to get off Russian fossil fuels is to be welcomed, but we must be careful that we do not simply switch from buying our fossil fuels from one autocratic petro-state to another. Qatar is a major and growing exporter of LNG and it is very possible that we could import some gas from Qatar through an Irish LNG terminal. The international human rights NGO, Human Rights Watch, has long documented human rights abuses in Qatar. These include the continued abuse and exploitation of Qatar's migrant workforce, the abuse of male guardianship policies, and the disenfranchisement of thousands of Qataris due to their nationality by lineage. More generally, the fate of the global south and the energy crisis has been largely ignored. As already mentioned, LNG supply markets are incredibly tight and will remain so at least until 2030. If China and the EU decide to buy every shipment of LNG available, the global south, including countries like Pakistan and Brazil, will be caught in the economic crossfire and will be unable to secure supplies for their energy needs. Ireland and the rest of the EU have access to far more resources to be able to cut our gas demand this year and in the coming years. We have a moral obligation not to engage in a reckless gas bidding war with China, which would see the global south lose out twice, once in terms of energy access and again in having to endure even more devastating climate impacts.
I will raise one final issue, which is the current reform of the EU's gas market rules. Gas recently overtook coal as the second highest source of carbon emissions in the EU. This revision is Europe's last chance to prepare Europe's gas market for decarbonisation, namely a rapidly declining gas consumption and the uptake of a small amount of renewable hydrogen for use in those sectors where direct electrification is not suitable. This means facilitating the large-scale decommissioning of uneconomic gas infrastructure and some repurposing of new build for hydrogen. Unfortunately, the Commission's proposals do not set out such a framework. Instead, they propose the promotion of hydrogen is the main way to decarbonise the gas grid. They fail to address conflicts of interest created by transmission system operators, TSOs, and distribution system operators, DSOs, sitting at centre of the decision-making process on Europe's gas grids. In contrast, TSOs and DSOs, including Gas Networks Ireland, are lobbying in Brussels to maintain the existing gas grid and to invest even more money and convert it to hydrogen readiness. They also want to be able to charge gas or electricity users for some of the costs of developing hydrogen infrastructure. Meanwhile, EU energy regulators are sceptical about the case for converting pipelines to hydrogen, and a German think tank Agora Energiewende has concluded that gas distribution grids "need to prepare for a disruptive end of their business model".
I hope it is clear why it is not acceptable that governments allowed TSOs and DSOs to maintain and even expand their disproportionate role in the planning of their own networks, given the clear conflict of interests. Europe needs a fully independent and transparent planning process for the future gas grid, one that empowers regulators, local authorities, energy agencies and all of the other relevant stakeholders. Grid operators need to be prepared to adapt to their changing reality and not avoid a conversation about decommissioning by promoting impossible volumes of hydrogen or other low carbon gases.
I thank the members for their attention. I look forward to further discussing these issues with them.
I thank Ms Connolly for her opening statement and all the witnesses for their opening statements. There is a great deal to think about. It is hard to know where to begin when asking questions. Can I get agreement from the committee that members will take only two minutes to ask questions? I will ask our witnesses to be as brief and as succinct as they can be, notwithstanding there is much detail that must be covered and I will give them latitude. Are we agreed on two minutes for asking questions? Agreed.
I invite members to indicate if they wish to contribute and some have already indicated. If I may, I will kick off by with a question about hydrogen. I will put my question first to the regulator. She spoke about storage in her opening statement but not so much about green hydrogen, which is something that has come up significantly in the series of meetings we have had. From our previous meetings with the regulator, she is on record as having stated she sees a role for liquified natural gas, LNG. It seems the conversation around LNG and green hydrogen is changing quite rapidly even within a matter of months, and in the context of the current crisis it is being talked about much more. If I had asked her about it six months or a year ago, she might have said green hydrogen is something around which there is a whole economy to be developed post 2030, but the narrative developing now is that it is something that perhaps can and should be accelerated. What is the regulator's view on that?
The issue was broached last week when representatives of EirGrid appeared before the committee, and it was said then that we will need gas for when we do not have the renewables on the grid and that we will need gas storage. The implication was it would be LNG storage. The question of green hydrogen storage and whether that is an option have not been explored fully. Can we bypass the conventional discussion that LNG is the storage we need and perhaps we can go straight to green hydrogen? I would welcome the regulator's view. I get the sense she might think it is premature to be making plans in that regard but I would argue it is not. We are in a very serious situation with the whole world changing and energy conversations evolving very rapidly. Perhaps we should be talking about expediting that green hydrogen reality.
I will also put the question to Ms Connolly. There are risks associated with green hydrogen as much as regular hydrogen. She might speak to some of those. We have touched on this in the committee previously. We do not want a situation where green hydrogen is being used to reinforce or lock in natural gas. The idea is we would inject green hydrogen, which is great as it is generated with renewable electricity, into the gas grid up to, say, 20%, but that would perhaps, somewhat perversely, prolong the use of natural gas and we do not necessarily want that. Ms Connolly might speak to that also, but I will go first to the regulator.
Ms Aoife MacEvilly:
I will kick off and invite colleagues to come in. The Chairman is right in that it is a very important topic. The context in which we are discussing it has changed dramatically in recent weeks. It is not at all premature to have this discussion. We need to be planning for the future right now. To put our emphasis on gas security in context, even though we have more than 5,000 MW of renewable electricity generation capacity on the system, this morning we were getting as little as 19 MW from that capacity because it happens to be a still and not very windy day. We were reliant primarily on gas generation and coal generation as well as interconnection.
If we want to continue to provide security on days like this, we will need to continue to have dispatchable generation capacity to ensure that the lights stay on. We would like to get rid of that coal generation capacity and the natural replacement, in addition to renewables, is also having dispatchable gas generation backup available on days like this. Sometimes, during the winter it can be weeks like this, where we literally have very little wind power - or in the future solar - on the system.
There is a really important priority associated with ensuring security of gas supply and bolstering security of electricity supply. At the same time, there is an equally, if not more, important driver around decarbonising that gas supply over time. Every piece of investment that we make in our energy infrastructure should be future proofed in line with our decarbonisation aspirations. The focus up to now has been very much on electricity but more and more, the focus is turning to the question of the combination of gas security and sustainability in the longer term.
As we have stated previously, we see a role for green hydrogen, not just in supporting security of supply on this island but also as a potential opportunity for Ireland to be an exporter of renewable energy. We think there is a huge opportunity associated with our vast offshore wind potential alongside the use of green hydrogen. In all of the investment we make we should be considering whether the energy generated could, in the future, be converted to or used for, green hydrogen, and to be able do so as quickly as possible as the market, regulatory framework and supply infrastructure develops around that fuel source.
The Chairman mentioned storage and there is an opportunity around gas storage facilities. If we were looking at onshore gas storage facilities linked with potential LNG imports, they would be designed for future storage of green hydrogen. In designing at that level, they would also be usable for LNG imports in the interim until we have access to green hydrogen. In other words, if we design a storage facility to accommodate green hydrogen it will also accommodate LNG in the interim. The reason we have emphasised the potential role of LNG in the future is that while we do have access to infrastructure via the twinned pipelines to the UK, it does not give security of supply at the level that is required under EU law or under any strategic view of security for the island of Ireland. That security standard is based around ensuring that if one critical piece of infrastructure is not available for any reason, including a physical interruption or a breakdown, for example, the country should be capable of ensuring security of supply on that day. If a key piece of the infrastructure associated with importing gas from the UK was not available, Ireland does not currently have the ability to ensure security of supply for the country over time. We have options around backup at generation sites but as we said to the committee in July, there are strong reasons to consider LNG import infrastructure in line with or as part of the Government's review of security of supply for Ireland. We simply do not meet the supply standard that is required by the EU at the moment.
The importance of this has been further underlined in recent times. We have all come to realise the importance of secure supplies of energy and of our dependence on gas as a transition fuel for decarbonisation as well as for ensuring security of supply for the island of Ireland. As the Chairman has said, this is all about future proofing the infrastructure and ensuring that we are ready for green hydrogen, perhaps in advance of any timelines that we would have previously thought.
We welcome the EU's approach to accelerating the decarbonisation of gas and the focus on green hydrogen. We are not there yet and we need to be secure in the interim. I invite colleagues to comment further on the issue is they wish.
Mr. John Melvin:
I am possibly only appending to what Ms MacEvilly said. Essentially, it is an infrastructural question. While Great Britain is well supplied by many different supply routes at two points onshore in Scotland, the two pipelines are located adjacent to one another with two different compressor stations. The two pipelines for some parts of the sub-sea route are quite close to one another and in other areas of the sub-sea route they are distant form one another. They have two different landfalls in Ireland. It is an infrastructural question in terms of European legislation. Prior to the United Kingdom leaving the EU, Ireland could satisfy this requirement on what was called a regional basis in accordance with European mandated co-operation between entities. Given that the UK is no longer in the EU, that regional approach is not available to us through the EU structures. It is primarily an infrastructural question. Is there sufficient infrastructure there? If there was an incident that affected both of those pipelines, it could take a significant number of days to repair. That raises the question of the number of days that would involve and how would we supply natural gas to keep the economy going in the meantime.
Ms Aoife MacEvilly:
We used to meet compliance on a regional basis in tandem with the UK. We can no longer do so. Therefore, we are no longer compliant. In fairness, even in advance of the type of scenario my colleague outlined, whereby a key piece of infrastructure might be impacted by an event of some kind which was always a risk for Ireland inc., this has become more pronounced because the Corrib Gas source in recent years has started to decline and we are getting less and less from that source. We are relying more on that single piece of infrastructure effectively in Scotland. That is why it is becoming increasingly important to look at this from a strategic perspective.
Dr. Paul McGowan:
I might add a few points regarding hydrogen. In preparing, for example, to accept blended hydrogen-natural gas onto the system, that may not be a choice we make. It may be a choice that is placed upon us by the composition of gas that we import. Therefore, we need to and have already started examining the safety implications of introducing hydrogen into the natural gas system because we may just end up importing it. What it highlights is the importance of Ireland having a hydrogen strategy, which identifies the sectors we want to decarbonise with hydrogen. There has been some talk internationally and nationally on concentrating on the hard-to-decarbonise sectors, the highly energy intensive sectors, which currently use natural gas. They may or may not be capable of being supplied with hydrogen directly while, for example, it may be the case that local distribution zones on the system can be converted in stages over to hydrogen. I would not say we necessarily must accept that a transition to hydrogen is completely locking-in the use of natural gas. There are means by which hydrogen can be targeted at hard-to-decarbonise sectors but it illustrates the requirement for a strategy around hydrogen.
Ms Tara Connolly:
On the question of hydrogen, the main thing I would see coming from Brussels is a political threat or risk.
The debate around hydrogen was nowhere two years ago but everyone has been talking about it for the past two years and that did not come out of nowhere. We need to be careful.
The idea of a strategy is interesting in terms of settling some of these discussions. Some stakeholders would prefer a broad and vague discussion about hydrogen that leaves everything on the table. I agree with some of the statements that what we need first is an understanding of how much hydrogen we can produce from renewable electricity, because the fact that grid-based electricity in Ireland has so much gas means electrolytic hydrogen has quite a high carbon footprint. It would also help us understand where it will go and the infrastructure implications of that.
What could be a risk is the idea that every single piece of current gas infrastructure in Ireland can and should be converted to using hydrogen when we know there are certain sectors where that is probably not desirable even if it is feasible. For example, in the case of low temperature building heating, there are much better alternatives in terms of cutting demand use, converting to heat pumps and putting in district heating where that can help. District heating can also work off heat pumps. Those are the areas where there needs to be serious discussion about the future of those sort of pipelines. The study I mentioned previously identified that the future hydrogen network would likely be limited to ports and around industrial areas, because they will have the supply coming in, and linking up to where the demand is. Outside that, where there is no large hydrogen demand is where we need to start thinking about the future of those grids.
Regarding the question of blending, hydrogen is a far smaller molecule than gas, so if 5% hydrogen is blended, it only displaces about 1.6% fossil gas, which gives an idea of the savings that are made assuming the hydrogen is zero carbon hydrogen. In terms of efforts to decarbonise, blending is not particularly useful. It can gloss over the question of where we do and do not need our grids for hydrogen in the future and can undermine gas quality issues, which is a concern for those industrial end users. In Brussels, the chemical sector has been quite vocal about its concerns about receiving blended hydrogen such as what it does with blended hydrogen, how it de-blends it and whether it must then store the hydrogen it has extracted. It raises an awful lot of questions. It is not so simple. Regarding the question of us being obliged to accept blended hydrogen, from speaking with the UK energy attaché in Brussels, my understanding is that the UK has been testing blending for quite some time at a very low rate - something like 1% or 2% - but that is definitely a two-way conversation. Regarding the proposal from the Commission, which is talking about a 5% cap, it is something that can be discussed between TSOs and governments, so perhaps this is also something that can be considered rather than just accepting whatever is being sent down the pipeline.
Mr. Jerry McEvilly:
One important consideration is that, in the medium to long term, to align with our climate obligations, gas dependence or gas demand needs to reduce. I appreciate that, in the short to medium term, this is challenging, but in terms of reliance on fossil fuel infrastructure in the medium to long term, this dependence should be decreasing.
In terms of dependence on Moffat, I fully understand where the CRU is coming from. I note that, in terms of infrastructure, it is not only an issue of the impact. Evidently, if Moffat became unavailable, it would have an enormous impact but it is also important to consider the likelihood of this happening and how or why this likelihood would have changed in previous years. Regarding the point about the n-1 standard, in previous years, Ireland met this standard on a regional basis. If I remember correctly, GNI itself raised this issue and noted in the context of revision of relevant EU gas legislation that Ireland should be looking for some form of derogation or exception.
In other words, the UK's exit from the EU should not necessarily result in a shift in Ireland's approach.
Regarding the hydrogen strategy, it is worth considering, and I am sure it will appear before the committee in the future, the SEAI's national heat study. I do not want to speak on behalf of the SEAI but I note one point made in the study, namely, that net zero emission pathways with the lowest cumulative emissions use more electric heating technologies while scenarios focused on hydrogen gas grid have more cumulative emissions so green hydrogen is unlikely to be available at scale until the 2030s whereas electrification technologies are available now, which means that hydrogen plays a smaller role in rapid decarbonisation scenarios than electrification.
I thank the witnesses for their opening statements, which will form part of the report. When we talk about security of supply, cost is important. Having LNG terminals does not mean it is, therefore, an indigenous industry such as offshore renewable wind would be where we have control over the cost and the amount we have. In her opening statement, Ms Connolly went into some detail about the cost to the Irish State not just of the terminal but of the importation that would continue and said that we would have obligations to continue use in some respects. What are witnesses' views on that? It is not giving us the kind of security over our costs relating to energy that some feel it is. Apart from that, there is the cost to local communities. If we think about over-reliance on coal mining in Wales and the people of north Kerry having a new infrastructure that over time should be reducing, it is not the kind of employment people may want for their local communities.
I know a lot of the work with which Ms Connolly is involved concerns climate justice. We have obligations under the Climate Action and Low Carbon Development Act around climate justice. I would like to hear if this is part of the consideration of what type of energy Ireland is using.
Mr. McEvilly spoke about solar panels. It is coming up to a year since our Bill relating to solar panel regulations was passed. Commitments were given by the Minister of State, Deputy Peter Burke, around that. It seems as though there is a lack of emphasis on opening up solar for buildings such as schools and farms. From 1 July 2022, we will be able to sell our energy back to the grid. How important is it to get this done as soon as possible?
Ms Aoife MacEvilly:
Hopefully, from our opening statement, the Senator would have seen that it is really clear we need a lot more energy infrastructure of all kinds on the island of Ireland in order to deliver a secure and sustainable low-carbon future. This includes electricity transmission infrastructure like core upgrades to the system, the North-South interconnector and upgrades in Dublin to accommodate offshore renewables coming on shore. I could go on.
That will also include infrastructure that will ensure secure supplies of energy to Irish consumers. Yes, it is absolutely the case there is a cost associated with all that infrastructure. We already incorporated that on the electricity side in our price review, PR5. When it comes to gas infrastructure and LNG, it can be a little different. It really depends on whether we are going down the route of commercial infrastructure or strategic infrastructure. For example, the Shannon LNG import facility is a commercial operation so it would not increase costs through transmission infrastructure charges for Irish consumers. It is being developed on a commercial basis by a major LNG-----
If I may come in on that, it is not the cost of the infrastructure I am talking about, but the cost of the gas. That is the part people are not aware of. It is not just about the terminal but that it is not giving us control over the cost of the gas that is being imported either.
Ms Aoife MacEvilly:
I thank the Senator for that. She is quite right. There is also a cost associated with imports of supplies. We will face that cost no matter what. If the EU is to reduce its reliance on the import of Russian gas, as it has declared, it will be increasing its import of LNG supplies, which is a global market. LNG supplies tend to be more expensive. At a time when the market is tight and a number of countries or regions, such as Europe or China, may be competing for scarce supplies, it can bid the price up and the LNG suppliers will go to whoever pays the highest price. That is the reality in the commercial world.
We will face that cost anyway because Europe is turning away from piped Russian gas. It is looking to fill gas storage over the course of this summer and every summer with LNG imports to reduce our reliance on Russian gas, so the price at which we import gas as a commodity, which is set on European markets and the UK national balancing point, will rise or continue at elevated heights to ensure we receive that LNG supply. Irrespective of whether Ireland has an import facility or the import facilities for that LNG are based in the UK, Germany or other EU member states, that cost will feed into the tariffs customers ultimately pay. Over time, it may be that the costs equalise for imports depending on the availability of LNG supplies.
Getting back to some of the Senator's other questions, we will face additional costs associated with the delivery of infrastructure where there is a strategic need to deliver core infrastructure in the electricity and gas networks. Where possible, commercial infrastructure delivery should be encouraged. That is the case broadly with the Greenlink project where there is a regulatory cap and floor regime and there is more of commercial money at risk, let us say, in that project. The potential for commercial LNG should also alleviate some of the cost pressure. If we are considering something more like strategic gas storage in the same way we have the National Oil Reserves Agency, NORA, oil storage, that is different again. That would add further cost for consumers or however it is decided by the Government that something like that would be paid for.
Regarding what that means for new infrastructure for local communities, across the energy sector generally, we will have to do a better job of explaining to local communities why we need more energy infrastructure, be it electricity, gas or low carbon. All of this is important for decarbonisation. We will not decarbonise our electricity or energy system without building new infrastructure and that will be across communities, whether it is offshore renewables or additional transmission infrastructure to deliver that electricity or gas or, ultimately, hydrogen infrastructure. We need to do a better job of explaining the rationale for that to communities and, as we have said, look to accelerate some of the planning processes that will help us incorporate community views and deliver quickly, which will also reduce costs.
In terms of solar panels and microgen, they were more for the-----
Before the witness comes in on that, I will have to leave to contribute to another committee meeting, but I will listen to the proceedings later. I thank the witnesses for their contributions and I look forward to hearing the further contributions.
Mr. Jerry McEvilly:
Briefly, on the climate justice point, it is very welcome that the amended climate Act requires the long-term climate strategy and the climate action plan to take climate justice into account and, obviously, the energy security review needs to be aligned with those documents. Also, with regard to-----
Mr. Jerry McEvilly:
Thank you. I was saying that under the Climate Action and Low Carbon Development Act 2015, as amended last year, public bodies are required to have regard to, and to align with, the national climate objective and the climate action plan. That is quite important in terms of obligations on public bodies in considering energy security.
On the Green Party solar Bill last year, that was a welcome development but, to be frank, we have not seen any change in response from the Department of Housing, Local Government and Heritage. I recommend that this committee invite the Minister for Housing, Local Government and Heritage and the Minister of State at the Department of Housing, Local Government and Heritage to meet the committee to address solar specifically. I also note that in terms of ways of reducing fossil fuel demand quickly for this winter UCC MaREI, the Science Foundation Ireland Research Centre for Energy, Climate and Marine, has recommended targeting 250,000 solar photovoltaic, PV, installations on homes, given that it would reduce fossil fuel use.
Finally, on LNG, one important consideration regarding a private terminal is that the private operator would want to make back its capital investment as soon as possible. However, at the same time, in accordance with our climate obligations gas demand is to be reducing. The concern here is that at the very time gas demand and gas usage are supposed to reduce, an LNG terminal may lock in expensive gas usage. That contradiction must be addressed as well.
Ms Tara Connolly:
On the question of the cost, everything has a cost, but there should be genuine clarity about what the cost is in return for what one is getting. We have the concept of the value of gas security and electricity and the value of lost load. There are quantifiable values one can place on these things and then have an understanding of how much one is willing to pay. That value can be different depending on the different customer. That may also be instructive as to who should be paying for it. If industrial customers are valuing it higher, perhaps they should be paying more.
It would be interesting to see some modelling as to how often we would expect something to happen with the UK interconnectors or how often we expect such an LNG terminal to be used. Most LNG terminals today are built on the back of a 20-year contract, so one is promising to buy gas for 20 years. If one does not sign such a contract, the cost goes up even more. That is the state of the market right now.
What is interesting in the context of this discussion with the UK is that the EU Commission proposed last week to set up a joint task force for gas procurement. If Ireland wants to be part of that, there would be some sort of agreement with gas passing through UK infrastructure. That may be useful for clarifying or cementing any discussions we have the UK around the transmission of gas, if we want to be part of that gas procurement initiative.
Mr. Jim Gannon:
I have a brief comment on the REPowerEU document. Going back to part of Senator O'Reilly's question, two things were notable. One was a very real focus on the deployment of PV at small scale. That is not just residential, but also includes small businesses. We are working with ESB Networks on expanding the accessibility of connections for people above the domestic level to accelerate that deployment. The second piece is specific. The Commission has called on member states to ensure the planning processes recognise renewable infrastructure, grid connections to renewable infrastructure and the backbone, or the underpinning grid behind that, as having overriding public interest or being attributable to the overriding public interest and allying with public safety.
In terms of how we consider those developments in respect of the statutory planning processes, those developments are recognised as a priority. It also speaks to the need Ms MacEvilly outlined. To access and support the renewable resources we need with backup generation and, ultimately, storage down the line of different and decarbonised types, we will need infrastructure. That infrastructure will be in, with and among our communities. Dialogue needs to take place around that.
I thank the witnesses. Most of my questions are for the CRU. The first concerns EU non-compliance. The only reference on the CRU website to Brexit is that trade will be unaffected and gas will continue to flow. Has the EU made contact with the CRU regarding non-compliance on energy security?
On the response the CRU sent to the committee on the Energy Charter Treaty, section 9 of the Electricity Regulation Act states the CRU should advise the Minister of the impact of electricity generation on international agreements. However, the response to the committee stated it was the Minister's responsibility and the CRU would continue to engage in dialogue. Has the CRU advised the Minister on the energy charter treaty or has the Minister sought that advice?
My next question concerns the costs of renewable energy in Ireland, which we know are the highest in the EU. What measures has the CRU taken to reduce the cost of developing renewable energy in Ireland over the past five years? I understand approximately 31.8% of a bill is network charges. We know grid connection charges are a complete outlier when compared with those across the EU. What is the CRU doing to address those costs?
EirGrid representatives came before the committee last week. They seemed to think the auction would bring down the price, which is hard to understand given the cost of steel is going up and is just one element that will affect costs or what will be factored into those auctions. Commercial rates have risen by 200% to 300% for wind farms compared with fossil fuel farms. It is hard to see how auctions will reduce costs. What is the CRU doing to bring down the costs of renewable energy, which will impact on what households pay for electricity?
Mr. Jim Gannon:
We have not advised the Minister or Department about the Energy Charter Treaty. We have not been asked for advice on it. Again, we remain in place and are happy to advise should we be so requested, in line with our obligations under the Electricity Regulation Act.
In terms of the auction process for renewable energy generation, the auction asks and seeks entities to compete against one another. They put together their best commercial proposition and try to win the auction. That involves a downward price pressure.
The cost stack of that then becomes relevant. We need to consider what a wind turbine costs, including the cost of the site, the grid connection and, as the Senator said, the operational costs and what support they might give to or interaction they have with local communities.
We seek to provide as much clarity as possible to auction participants. We sat on a steering group in the Department of the Environment, Climate and Communications to look at the auction. That process would interact with the industry and try to identify areas of risk or uncertainty. For example, in the SEM committee, in particular, there was uncertainty about curtailment and constraint when wind turbines are asked to turn down, and how they might be compensated for that in line with the European directive. This was an uncertainty that might have been bid into in the auctions and for which people would have paid a premium. Over the past number of days, the SEM committee, ourselves and, the other regulatory authorities and independent members have published our decision on that, which provides clarity to wind developers so that they now know what the cost and compensation is likely to be. They can now bid in terms of what they know rather than in an unknown that may include conservatism. That is one example of a response to industry.
In terms of grid connection cost, there is a process in place whereby a renewable energy developer can contest the grid connection and decide to build the grid connection themselves. That process allows a developer to deliver it if it believes it can do so more cost effectively and faster, in certain cases. I will pass over to my colleague, Mr. Melvin, on RES and the cost of renewables.
Mr. John Melvin:
I am afraid I would waste the committee's time. I cannot add to what Mr. Gannon has said. I will go back to the N-1 infrastructure gas standard. We are due to issue an updated report to the European Commission at some point this year. At that point, it will be clear that we no longer meet the regional approach.
Mr. John Melvin:
In the first instance, we will report the current situation. Ms MacEvilly has spoken to strategic need and importance. If we have a system that depends on gas, the N-1 infrastructure standard is a simple standard that does not involve probabilities. It states that if a country has a system, it should be able to withstand the loss of one piece of infrastructure. That is a simple rule that would apply to all sorts of businesses. Any industry that needs two machines would buy a third so that it could withstand the loss of one. In the absence of co-ordinated arrangements with the UK, through the EU, we no longer meet that standard and, therefore, it is an important requirement. Whether one seeks a derogation from it, it still stands that it is an important and well-recognised requirement that industries and economies should look for infrastructure security.
Ms Aoife MacEvilly:
The only thing I would add is that this is the type of issue we expect will be ventilated in the security of supply review being undertaken by the Department. It is ultimately a strategic national policy decision. We will, of course, work to implement any outworkings or recommendations of that review. We will certainly input into the review to underline the importance of ensuring that we have resilience within our gas infrastructure because, as we have said, it is not just important for gas alone but also for electricity. As we electrify heat and transport, it becomes more and more important across the economy to ensure that we have resilience within the infrastructure and supply of gas.
Mr. Jim Gannon:
Another thing that will become increasingly important over the coming years with regard to the cost-effective deployment of renewables is to make sure that where we have renewables deployed they are not behind a grid constraint. One example is where there is a 100 MW wind farm, but the system to which it connects can only get 80 MW.
There are a number of ways of addressing that but the core way is by improving the national transmission grid and then supporting the grid to get to those wind farms in order to make sure we are not unnecessarily turning down or not accepting the power we could be accepting from them. There are other aspects such as co-located storage of batteries, whereby some form of compensation could be provided for that. It is a matter of making sure we have fewer grid constraints as we update the electricity grid.
On that point, one of the witnesses before us last week, Mr. Keating from Shannon Foynes Port, spoke about the 80 GW opportunity as opposed to the 5 GW we are pushing for 2030. He felt strongly that a grid connection should not be a requirement of the offshore procurement process simply because the large international investors do not necessarily want to bring their energy to Ireland - in fact, they do not at all. They want to generate the green hydrogen offshore and then transport it. It seems, therefore, that there are two ways of looking at this. One is satisfying our domestic challenge. At the outset of this series of meetings we were very interested in hearing about the much bigger pan-European or global opportunity that is there. It seems we might need to rethink our offshore wind approach because, especially given the events happening on the other side of Europe at present, there is another crisis as well as the climate crisis on our hands to accelerate this. Can we accelerate that opportunity? Is the regulator thinking about the idea that we need to stop thinking only about 5 GW, even if it is very important, and to start thinking about the much bigger opportunity? The scale of this is vast - I do not pretend for a second that it is not - but the seriousness of the crisis suggests that we should be looking at that. Europe should be looking at how Ireland can help. I do not think we have the capacity to go there ourselves. I am not sure that that message is being communicated to Europe, or I do not get the sense that Europe sees Ireland as an answer to its real and immediate challenge or its medium-term challenge. Does any of the witnesses wish to comment? I am conscious that many others are trying to contribute.
Mr. Jim Gannon:
I will be brief then. As for the present opportunities with ground-mounted offshore wind turbines, which have fixed foundations on the ground, the technology that is developing quite swiftly is floating technology. Many of the floating wind farm developers would look at aligning that with hydrogen generation and green hydrogen generation because the technology pathways and the cost curves appear to line up at about the same time. In Ireland I think we will very quickly come to a point in time when we will have sufficient offshore assets that we will need to export electrons and we will have the ability to store at scale. The question will be whether we export only as electrons through electric cables or whether we also seek to export through molecules, whether hydrogen or ammonia as a derivative of hydrogen. We need to ask ourselves the same question about domestic storage in the longer term. Will that be through electrons of different types - well, storage using electrons - or will it be through hydrogen also? There are therefore two tracks. One is the present opportunity, and we really need to access that opportunity in the short term, and the second is that longer-term possibility whereby we just use different molecules from the ones we use today.
We are jealously regarded by our European peers in respect of the scale of resource we have accessible to us, but we need to access that resource and we need to recognise that we are a long way away from the markets that might ultimately use that resource. The question is how to get the resource there cost-effectively in order that we turn a natural resource into a source of national wealth for Ireland.
I thank the witnesses for their opening statements.
I was concerned last year when the CRU attended a meeting of the committee and would not rule out the future building of LNG terminals or infrastructure of that sort in Ireland. Today it seems there is even stronger advocacy of the building of LNG terminals to ensure energy security. The reason I am concerned is that this comes in the context of the fact that one of the biggest and most stable ice shelves in Antarctica collapsed recently and scientists are recording record temperatures 30°C above average in the Arctic and 40°C above average in Antarctica caused by emissions and an over-reliance on fossil fuels. Yet we hear today that the CRU is advocating the building of LNG infrastructure to ensure energy security, despite the fact that, as Mr. McEvilly stated, we are trying to reduce our reliance on and our use of gas. Therefore, we question the purpose of an LNG terminal into the future. I am concerned about that, especially on the back of our fantastic session last week on the potential of storage, be that battery storage or green hydrogen, and its use to ensure energy security. We had a very good session on what we can do on the demand side, which is a lot. We have had numerous sessions on the enormous potential of renewables, particularly offshore floating wind. The CRU itself mentioned in its opening statement the fact that two more interconnectors are coming online, one of which the regulator expects to be constructed by 2024, which will, I hope, allow a two-way transmission of power, perhaps harnessing our renewable energy. Surely the focus should be on that technology as opposed to the building of LNG infrastructure. I said last week to EirGrid that we are hearing commentary on the reopening of the peat-powered plants and the bogs, which I absolutely disagree with. I hope the CRU would not advocate that.
The other commentary we are hearing is on drilling for gas and oil off the Irish coast. EirGrid would not rule that out. By the time we invest in the technologies and explore for oil and gas off the coast of Ireland, we will have established one of the best offshore renewable systems in the world. Surely, therefore, we should be veering away from the former and focusing on renewable, clean energy. I would like a comment on that, not only from the CRU but also from any of the other witnesses who wish to comment.
Ms Aoife MacEvilly:
We need all of that. We need more renewables, more storage, more interconnection and, particularly, more on the demand side. We need to get rid of the older fossil fuel generators such as oil and coal and definitely peat and we need all of that to happen in a very short period. The scale of change we will facilitate, underpin, drive and deliver over the coming years will be massive. These are not choices between things; it is a matter of all of it at the same time and at pace. I completely agree with everything the Deputy outlined as being really important in the delivery of a high-renewables, low-carbon system. At the same time, we want to get rid of the coal-fired generation. We do not want people talking about reopening peat because that is even more carbon-intensive. We want to get rid of oil-fired generation. In order to still provide security of supply on a day like today, when we have all this wonderful renewable infrastructure but very little delivery from it, the role of gas-fired generation is really important. The key to understanding why we consider that it is worth investing in additional gas generation and gas infrastructure is understanding that that can then be decarbonised.
I hear the concerns that others have raised about how long it might take to do that and the technical challenges associated with it. It sounds to me very much like the debates we had many years ago when we were talking about decarbonising our electricity system. Yes, it is complicated, it is hard, it is expensive and the engineering solutions in some cases need to be developed. We went through all of that to get to 40% renewables in the electricity system. We will go through all of that again, believe me, to get to 80% and beyond. The challenge of decarbonising the gas infrastructure and system is, therefore, not beyond us. Yes, we must ensure security in the transition, but we must ensure and do so in such a way that we are not locking in fossil fuel infrastructure that cannot be further used. We must ensure that we are considering how we would then decarbonise that. We must ensure that any LNG or storage infrastructure can also be used for hydrogen and green hydrogen as we get to the points of the technology and the commercial delivery of those opportunities. I hope that helps.
Mr. Jim Gannon:
I would only add that we are in a position where we are in a transition not just to 2050, but to 2030 as well. A transition is not binary. It is going to take time. As Mr. McEvilly also articulated, what we are trying to do is to balance the short- to medium-term need for natural gas as we transition to a full net decarbonised suite and energy system for both our heat and our electricity services that we use. There are a couple of examples from the past year. The deployment of short-run battery storage, in particular, has gone quite well. The market is almost saturated in that regard in the services required. We are now looking at the incentives being provided for those longer-run batteries that can provide that peak cover. If they provide that peak cover, then they can be charged by different sources overnight and can again provide peak cover during the day. That way, we can start to displace and chew away at that need for fossil fuel back-up, even at that stage. In terms of system services, similarly, last March the same committee, which is comprises CRU Ireland, the utilities regulator and independent members, asked the system operators, SONI and EirGrid, to start exploring, and in fact pursuing, lower carbon system service providers. This involves looking at synchronous condensers, which are low-carbon alternatives to using overnight combined cycle gas turbines, CCGTs, or open cycle gas turbines, OCGTs, that require fossil-fired plants to provide that service. Again, the drive is there on a number of these different tracks to move to a more decarbonised and net-zero carbon as soon as we can, but there is that short- to medium-term challenge. Against that challenge, there are no more licences coming for offshore oil and gas exploration. The Corrib gas field, which was domestic, was at least providing us with gas that was travelling less of a distance in terms of carbon emissions. It was providing us with between 60% and 75% of our domestic gas demand at different stages. That is down to approximately 25% now and, therefore, the dependence on the interconnectors to the UK has increased. I think because that dependence has increased, there is a need to keep open a discussion and dialogue around the alternatives that might be there and to perhaps look to examples and alternatives. The German Government recently said it needed to deploy more LNG. Uniper, the utility in Germany, stated that if it is going to do that, it will design it for hydrogen but will ensure it is able to facilitate LNG in the meantime. We need to start asking ourselves the question of whether these needs are mutually exclusive and if we can find some goal alignment between the two, with a view to bringing them together. If there are engineering ways to do it, we should try to find economic ways of doing it, and accelerate down that pathway.
I get the point regarding the interconnectors and their close proximity. If something happens, we are in jeopardy. It was mentioned that construction will finish on the Greenlink interconnector in 2024 and on the Celtic interconnector in 2027. Surely, by the time they are in place, they will give us the security we need before we go down the route of LNG terminals.
Mr. Jim Gannon:
It helps a lot. Between the existing east-west interconnector, EWIC, and the Moyle interconnector, we might have in the order of 800 MW or 900 MW import capacity.
The Greenlink interconnector is due to provide in excess of 400 MW of import capacity and the Celtic interconnector is due to provide around 700 MW of import capacity; Mr. Melvin can correct me if I am wrong. That will give us the bones of 2 GW or 2,000 MW, or a little bit more than that, but our demand by 2030 could be in excess of certainly 7,000 MW-----
Mr. Jim Gannon:
We would hope so. We will still have periods of significant low wind. Part of what offshore wind offers us, in fact, is extra capacity factor. Onshore, the wind tends to blow less frequently than offshore. The offshore turbines are that bit bigger and can access more wind because they tend to be on more than onshore turbines. That will also help. However, we will still be in a position where, for the majority of our electricity demand, we will need those domestic sources. When the wind does not blow, it becomes, and remains, challenging. However, that is not to say that the other interconnectors could not support in delivering the timeframe.
Mr. John Melvin:
There appears to be a concern that the addition of additional potential supply infrastructure for gas will lead, therefore, to an increased usage or throughput of gas. If a factory needs two machines to make X widgets, and it buys a third machine so that it can continue to make widgets, it does not make more widgets. There is nothing necessarily contradictory in saying that we see a need for more infrastructure or more diverse infrastructure to allow continuity of supply of gas. There is nothing in this that says we, therefore, must use more gas. There is nothing in saying that we need a more diverse and secure supply of gas that will necessarily lead to more use. Everything in the Climate Action Plan 2021 states that we will reach 80% renewables by 2030. The steps in that are designed to reduce the volume of fossil fuel generation. By 2030, when we reach the 80% target, there will still be 20% use of fossil fuels. By 2050, it will be net zero. There appears to be a concern that investing in some way or seeking to have greater security of supply when it comes to gas will necessarily mean greater throughput of gas. The entirety of the climate action plan is driving towards reduced consumption of fossil fuels. It states very clearly that we need to do all the things we can to reduce the consumption of fossil fuels. I want to address the concern that if additional infrastructure is considered necessary to ensure we can continue to supply the fossil fuels we will need over the next period, it does not necessarily drive the-----
There is the point, of course, that the market is designed so that it makes sense to have the capacity that is not necessarily used. It is only used in extreme situations. I do not want to take more of the committee's time; I have hogged it enough. I will go to Ms Connolly and Mr. McEvilly, who wanted to respond to Deputy O'Sullivan's question.
Ms Tara Connolly:
I want to add that it is not guaranteed that an LNG terminal can be turned into a hydrogen terminal. On the RWE project that was mentioned, they are actually building an ammonia import terminal right beside an LNG import terminal. They are going to start studying how this could work together. In Brussels, we have often been told that we should not worry about LNG terminals because they will just be used to import hydrogen. I do not think that they will be used to import hydrogen; that will probably be done with ammonia. That needs to be studied, rather than saying that it will automatically happen. It is not a given. There are also significant questions around the technology and, of course, the cost of building an LNG terminal and five years after that, trying to turn it into an ammonia import terminal. There are questions around the cost implications of that. What happens to the energy security of not having access to the LNG that was considered so crucial? Does the committee believe that there will be a big enough global hydrogen market that we will import significant quantities?
That will provide us with security of supply post-2030. The timelines of all of this are quite important.
On the derogations, I have been working on Brussels energy policy for ten years and I have seen plenty of derogations when they made sense, especially around Brexit. To give one example, in the recently agreed trans-European energy infrastructure regulation, the TEN-E regulation, which is where the projects of common interest, PCI, derives, the Commission proposed not just projects of common interest but a special category of projects of mutual interest with third countries. My understanding is that this was specifically to facilitate infrastructure projects between the UK and Ireland and, therefore, conversation about how the Irish situation can be properly managed within the current context would be worthwhile.
Mr. Jerry McEvilly:
In Friends of the Earth, we are hugely conscious of the fact it is very challenging for all Government authorities, and Ms Connolly has mentioned the difficulty around timelines and the need to ensure security of supply in the short term when there are real, hard, specific, near-term climate obligations at the same time. I would like to emphasise that the context has fundamentally changed with the Russian invasion of Ukraine. It has never been clearer that now is the time to actively prioritise reducing gas demand wherever feasible, and that means actively integrating our climate obligations into our energy planning. I also emphasise that this situation is not going to go away by any stretch of the imagination, and by “this situation” I mean the need to adhere to climate obligations. That is what the Paris Agreement is all about. This pressure is only going to increase, which underlines the need for near-term action.
I would like to raise an example of another concern we have in Friends of the Earth. Some 15 or 20 years ago, it was extremely clear that Ireland needed to move away from peat extraction and the burning of peat in the electricity sector. That did not happen for the best part of 20 years and, suddenly, there was a crunch leading to major pressures on workers and communities in the midlands. We do not want the same situation in the context of moving away from other fossil fuels and, therefore, we need to plan now.
In terms of a diversity of resources potentially not resulting in greater throughput, on the one hand, there is a significant moral hazard risk where the industry or networks would publicly commit to hydrogen, biomethane or carbon capture and storage, CCS, as a future solution but they still continue to expand infrastructure, play up sustainability of their supplies or produce plans that maximise gas reliance, safe in the knowledge that they will not face any consequences if these measures and technologies are not rolled out in time. We find it hard to envisage a situation where significant gas infrastructure is put in place yet that does not apply significant pressure for those gas supplies to be used, thereby increasing emissions.
I do not want to lecture the CRU on network costs and prices but I see that Friends of the Earth and the SEAI have underlined that as more consumers move away from gas usage, it leaves fewer consumers to cover the fixed costs of the network, so they are increasingly paying higher prices, which can then lead to more consumers moving away. This means the push for even more energy efficiency measures and microgeneration is only going to increase. That is a further additional risk worth taking into account.
I thank the witnesses for the presentations, which were fascinating and go to the heart of many of the challenges we are facing. My first question is to the CRU. At the previous hearings, we heard quite trenchant criticism that the market signals now being provided were not allowing us to develop battery storage, demand management approaches, incentivisation of better use of data centres and the spreading of demand, nor were they incentivising the move to go beyond domestic needs for renewables and start to develop our capacity to promote hydrogen generated from excess renewable facilities. Essentially, people were saying that the CRU is still geared in its pricing regime to the old model that it described of large fossil hubs, and there needs to be a more fundamental shift in the market signals than it is securing through its auctions and capacity system service, and so on. What is the CRU view on that? Are we going to see big shifts?
Allied to that, are domestic auctions sufficient to do this? We have heard from others that, for example, the EU could have an interest in seeing some of these developments. Do we need to have something other than market signals by way of shadow prices? Certainly, in the case of offshore energy, the demand was that there would be a very early capacity auction that ring-fenced floating wind energy and that we should not wait for it to be competitive in a marketplace. I know there are different parts of the auction system and the CRU does not run all of them, but that was the thrust and I would be interested to hear its response to that.
I could not agree more with Mr. McEvilly that we have to take a very sharp look at ourselves in terms of a resilient response to the challenges that now confront us. One question I have is whether we should make circular economy strategies within all our sectors a core part of climate action planning. We are quite detached from the fact that 25% of our food is wasted, 90% of our vehicles are single use, we are exporting 75% of our so-called recycled waste, the construction sector only recycles 10% of its waste and we are not recognising the capacity of timber to be used in buildings to dramatically reduce our dependence on fossil fuels. As part of this, do we need to look much more deeply at how we approach this? It seems there is a bit of an ideological hang-up on whether we have an LNG facility, when the elephant in the room is the fact that a lot of our sectors are deeply entrenched in such a way that we are not really shifting them by current policy.
As an allied point, there was strong criticism of housing in the context of solar energy. It seems that some of the problem with the development of solar has been that it has to be approved under environmental regulations, and that is where the delay is currently occurring, rather than in the Department of Housing, Local Government and Heritage itself. Perhaps I am wrong on that but I understood environmental blockages are holding it back, although I do not know if that is justifiable.
Mr. Jim Gannon:
I can start on a couple of those questions and I ask Mr. Melvin to correct me if I get anything wrong. With regard to batteries, more than 300 MW of batteries were secured in the latest auction in January so, in terms of an economic signal being sent, we are getting batteries through the capacity auctions.
We also know that it tends to be easier to deploy batteries in the country. The question we are actively asking ourselves now at the SEM committee relates to derating factors, that is, what utility or service we believe batteries will provide us and how that should be reflected in the auction process. This is really looking at longer-run batteries, for example, and considering what economic signal would be set for them in the upcoming auction, the parameters for which will start to be set towards the third quarter of the year. A work package has started on that at the SEM committee. Again, it is looking at that economic signal in respect of batteries.
As regards demand-side units in the capacity auction, for example, we know we have more than 550 MW of demand-side units with capacity contracts but we tend to have just a little over 150 MW of that 550 MW declared as available to participate. Last year, we had an open consultation, as well as dialogue with industry in the middle of summer. A piece of work was brought forward to the start of the year and has now commenced at the SEM committee between the two regulatory authorities to look at the economic signal and to explore two questions. First, how we can find a way to make people declare themselves available more so we utilise that 550 MW more, and, separately, how we attract more of that type of service because demand-side has a significant service and part to play in delivering some system services but also in delivering that peak shaving that we know we need and will need quite soon.
The first piece, relating to batteries and the derating factors, should be in place to influence the next capacity auction. Separately, the piece in respect of demand-side units is intended to start having an influence in advance of winter. That is the target.
As regards system services, to give a flavour, in March last year we published the high-level design at the SEM committee. Work and consultation with industry was ongoing thereafter in respect of a more detailed auction for system services in the future. We have an ongoing dialogue with EirGrid regarding what system services we will need in future and how that will change as we move from a traditionally fossil-fired fleet to more intermittent resources such as solar and wind, as well as the types of stability, resilience and power quality we need to bring to the system. It is an ongoing dialogue with EirGrid. In the coming weeks, we hope to have a decision from the SEM committee on that auction for system services. That will be the new method by which we send that economic signal to system service providers, whether they be battery or other types of technology or traditional units. What is most important is that it is an auction and people will compete to provide those system services in a cost-effective manner. Separately, what is important as an economic signal is the volume required. The market needs to understand what volume of the different system services will be required and the mechanics of the auction in which it will participate to deliver the most cost-effective outcome for the consumer as we and the transmission service operators, North and South, namely, SONI and EirGrid, get the services they require.
I refer to aspects that we have not covered in respect of batteries, demand-side units and system services. Several activities are ongoing, which started last year and should come to fruition quite soon, across the three different pillars. We work and are in good dialogue with industry on those. Does my erstwhile colleague wish to add anything at this stage?
Mr. Jerry McEvilly:
I thank the Deputy for his questions. First, the circular economy is a key consideration in reducing energy demand. I am conscious of the circular economy Bill that is currently going through the Oireachtas. It very much needs to be prioritised. I am more than happy to link in some of our NGO colleagues who are quite active in this space. As regards the energy sector, one of the main issues we see is waste in how energy is used. Evidently, the most important and first response should be energy-efficiency measures.
On that point in particular, I previously mentioned the importance of increasing our retrofitting targets and insulation measures in the context of the Russian situation. The increased funding through the warmer homes scheme is welcome, as is the commitment to develop one-stop shops, but we are concerned that a waiting list of 7,000 households built up for that scheme during the pandemic and the bulk of new investment may only address this backlog and not reach those who are at risk of fuel poverty, including housing assistance payment, HAP, recipients and renters. This was mentioned previously, but a well designed national campaign on getting people's home winter ready would be a low-cost intervention that could deliver significant results. The think tank, E3G, has noted that turning down the flow temperature on condensing boilers could save households up to 8% of their annual costs, while the SFI Research Centre for Energy, Climate and Marine, MaREI, at University College Cork has also highlighted the benefits of reducing central heating temperatures to improve boiler efficiency. Finally, reducing or removing VAT on particular materials and labour for certain energy-efficiency measures would provide a strong signal and should be considered.
On the issue of solar regulations and the lack of progress, I wish it was the case that the only issue was that of progressing the necessary environmental assessment. Our understanding is that the updated regulations have been available for a considerable period - up to one year - but the Department has not progressed the necessary public consultation on that strategic environmental assessment, SEA, for many months. That is the final step and we are unclear on the reason for the delay. I am happy to have further discussions on that.
A general point is that although we in Friends of the Earth are conscious that the CRU is very important, it is not the only authority responsible when it comes to these discussions in respect of energy policy and how the State should be respond. It would be beneficial to also invite in other authorities, including the SEAI. The International Energy Agency has made very good recommendations on reducing fossil fuel use. It would be worthwhile to consider bringing in other State-owned companies on how best to respond to this situation.
I have a couple of questions that are primarily for the CRU. In her opening statement, Ms MacEvilly stated the commission has been asked to accelerate deployment of renewable energy and relevant measures under the climate action plan. I presume that request was made by the Minister or the Department. Where exactly could that deployment be accelerated? I assumed that, in light of the climate crisis we are in, we were doing as much as we could do. I am surprised to hear that there is a buffer. I ask our guests from the CRU to list the specific areas that could be accelerated.
There has been discussion on the period required to transition, ensuring that the lights stay on and that there is a sort of necessary evil of having back-up generation, with gas potentially being part of that jigsaw. I find it quite frustrating is that there is no discussion or acknowledgement of the need to reduce the demand for electricity, particularly in the context of an industry such as data centres that will go from 11% electricity demand to 30% by 2028. It really seems that a blind eye has been turned to that problem and the potential impact data centres will have on our ability to meet that demand. As a result of that, the data centres themselves have locked in the need to have gas as a transition. The Friends of the Earth submission refers to that issue and the fact that rather than implementing a moratorium on data centres or even seeking to examine the potential for renewable storage, demand reduction and-or flexibility, the CRU focused on ensuring data centres had on-site gas generation.
Considering the targets we have to meet, was that a prudent approach? It is obviously not in line with Government policy when it comes to meeting our targets. Will the witnesses comment on that?
Mr. Jim Gannon:
In terms of all of the things we can do to accelerate the deployment of renewables, we have really just been asked to see how we can accelerate the pace of our transition. In the last month, since the invasion of Ukraine, we have started looking at how resources can be redeployed and what we can decide not to do. What can we do that will facilitate security of supply across gas and electricity while also aligning with our carbon reduction needs? I cannot list these measures for the Deputy right now but we would be happy to come back in correspondence on the matter. There is a wide breadth of areas in which we can influence and nudge people and, where possible, we are doing that. I am not trying to dodge the question but, quite honestly, I do not think I could list them now.
Ms Aoife MacEvilly:
We can point to a few areas we are actively investigating, however. One of the areas comes under the REPowerEU statement from the European Commission. If there were opportunities to accelerate the processes around, for example, offshore wind or the deployment of infrastructure to cut down the timeframes for delivery, we would be completely supportive and would work towards them. While this is a non-exhaustive list because, as Mr. Gannon has said, we have not listed these measures, the demand side is very important to us. If we can do more on the demand side and do it quickly, that could have a very significant impact. This is a real opportunity to do so because offering opportunities to customers to shift demand towards lower-cost and greener times will help them to mitigate the impact of the cost increases that are coming down the track for those customers while also helping us to accelerate not just the deployment of renewable generation capacity, but the use of the capacity currently in place at times when we might otherwise be curtailing it. For example, if there are high wind speeds at off-peak times, we might be paying renewable energy generators to turn their output down when we should actually be paying customers to turn their immersion heaters on or run their dishwashers at those times. Those are the kinds of opportunities that present themselves.
As Mr. Gannon mentioned earlier, we are facing very significant costs arising from a lack of delivery of critical grid infrastructure. We need to prioritise some of the key projects that will unlock the value for Irish customers of delivering more from the existing renewables infrastructure we have to hand while also reducing the cost of constraining and curtailing renewable generation. These are not easy projects to deliver. I am referring to things such as the North-South interconnector and digging up a lot of Dublin to deliver enhanced infrastructure that would allow us to bring on offshore wind. We cannot provide for new demand or deliver new generation capacity in Dublin right now because the grid is so locked up. We need to fix that or costs will be increased, opportunities will be reduced and the deployment of infrastructure will be delayed. That is a non-exhaustive list but those are some of the areas we would prioritise.
Mr. Jim Gannon:
Microgeneration is another area in which we have been, and are, actively progressing and accelerating. Another is exploration of the co-location of batteries with wind farms, which I mentioned earlier on. This could tackle security of supply issues, decarbonisation and some power equality issues in the system and allow us to get around some of these infrastructural constraints. I am not ignoring the question on the data centre decision, by the way. I will just ask Dr. McGowan whether he wants to come in before I get to that.
Dr. Paul McGowan:
As the commissioner, Ms MacEvilly, referred to earlier, we now have 744,000 smart meters installed. By the end of this year, we should have more than 1 million, which represents approximately 50% of households. At the moment, people need to opt into a time-of-use tariff. As a nation, we should be looking at whether that is the right model or whether we should have an opt-out model.
We accept that there are issues around data protection that need to be addressed but, given where we are, that is another thing we should be seriously considering.
Before the witnesses move onto the data centre question, because we would not let them away without addressing that one, I presume the CRU is preparing a report or something like that and is looking at a list of things. I would be interested in seeing that exhaustive list. I will pick up on something Mr. Gannon said about redeploying resources. Does the CRU have sufficient resources? I would hope that an organisation like the CRU would have too many resources and that it would be given whatever it requires for us to meet our climate objectives and to progress those really important projects. Is resourcing an issue?
Ms Aoife MacEvilly:
We submitted a new strategy for the current three-year period along with a workforce plan for the CRU that is aligned with Ireland's very significant ambitions, the requirements of the new climate action plan and the urgent need to ensure security of supply. We made a very significant ask of the Department and requested 74 additional staff, an increase of nearly 60% on our current number of staff. I have never been in the position of saying that we have too many resources but we do need more. We need them in areas we have not worked in before. For example, we need a team of dedicated resources to deliver on the kind of ambition we are talking about in respect of offshore renewables. In some of the new areas we have talked about, such as hydrogen, and some that have not been mentioned, such as the regulation of district heating, about which there is some concern, we will require both new legislation to ensure there are no gaps in our functions and new resources to provide expertise we do not currently have.
The last time we were before the committee, we were asked a direct question on the consumer protection and empowerment area and our ability to do the kinds of things Dr. McGowan has mentioned, such as using the smart meters currently in place in a way that both empowers people who want to be actively engaged in delivering on climate action policy and protects customers that may not be in a position to do so. We need to expand our work in that area. We are also looking for additional resources to support security of supply. I could go on.
Mr. Jim Gannon:
That is no problem. The decision on data centres effectively gave the system operators, ESB Networks and EirGrid, a framework by which they should assess new connections. That framework asked them to seek flexibility. That flexibility could be provided by any means. It could mean simply turning down operations or using batteries. In fact, batteries could be used to provide an uninterruptible power supply while also, perhaps, providing service to the grid. It could also mean backup on-site generation. The idea was to look at all of the options available but it was for the data centres themselves to explore what those opportunities might be and to choose which of them to exploit. From discussing the matter with some of the data centre operators, we know that they were certainly looking at batteries. They were telling us that they were considering natural gas for their developments but would consider conversion to hydrogen down the road because their internal environmental, social and governance, ESG, targets require them to have a pathway in place for themselves. The decision was agnostic as to how flexibility was to be provided, although it did seek flexibility and was focused specifically on security of supply.
Should it have been agnostic, however? Should operators not have been directed that they would only get access if they implemented a solution based on renewable energy or batteries? Should we have been giving them the option to develop further on-site gas-fired generation capability?
To add to that, is there not also a question as to whether we should be building such data centres at all? There is the question of the moratorium which we discussed. There were different views across the committee on that issue but it is a fundamental question. Is it wise to allow the energy demand from data centres to go up to the 30% Deputy Whitmore mentioned? Will that make everything a hell of a lot harder? I do not want to suggest that is a simplistic way of looking at it but is there more to it? Is it more complex than that?
Mr. Jim Gannon:
It is a fair question to ask. When we look at emergency response when a peak condition happens in a given winter and things are tight, this is called mandatory demand control. EirGrid will reach towards some of those demands first before it reaches others on the system in a rolling controlled rota load shedding that might be put in place. In terms of demand attenuation, which would be to look at the ramping of data centres or to look at new data centres coming in, that could come into a broader discussion about security of supply, such as the one we are having with the Department at the moment in terms of ramping. Separately, the Department of Enterprise, Trade and Employment is now conducting a review of the Government statement of policy on data centres and enterprise. There are a number of enterprise voices but also a number of energy voices around the table, including the CRU, ESB Networks, EirGrid and others. That broader dialogue around economic contribution, as well as externalities and the costs that might bring, are on the table and will be discussed. It is right that they would be discussed.
I thank the witnesses for their contributions. My questions are largely for the Commission for Regulation of Utilities. Is there an assessed risk of a failure of the Moffat interconnectors? If so, what is it? Has the CRU optioneered alternatives to meet the n-1 standard? I noticed some reports in the Business Posta couple of weeks ago pointing towards the possibility of storage at Kinsale or Corrib, or maybe using Corrib in a different way. Has that possibility been considered and, if so, how? The elephant in the room is to what degree the CRU’s position this morning is an implicit or explicit criticism of successive Governments for their failure to deliver on the renewables potential. The CRU specifically points to the review of the planning system and states it would like that to be expedited. Are there concerns about the capacity of current infrastructure to deliver on the renewables potential? If so, to what degree?
As we have heard from various members, all of this is about managing the transition. The concern I have is that we will make decisions now that will lock us in, meaning we will not meet the targets in the time ahead. To what degree is the CRU bound by the objectives in the climate action plan and its targets? In practice, what does that mean for the CRU in terms of how it assesses, optioneers and considers different potential pathways?
Ms Aoife MacEvilly:
On the gas infrastructure options, we are not aware of an immediate risk of failure at Moffat. There would be a programme of work by Gas Networks Ireland to ensure constantly from a safety and security perspective that that infrastructure is in good condition and maintained to a high standard. Not long ago, we invested in twinning with part of the infrastructure in Scotland to ensure security of supply. Ms Kavanagh will comment on gas price control but we will seek to ensure there is ongoing support to ensure Moffat is kept in good repair. We always have to be prepared for unexpected events and those can range. It can be really bad weather, for example, which reduces supply on the UK market.
The last time that happened was during the “Beast from the East”. It can be infrastructure failures that were unintended, or a ship dropping an anchor on one of the offshore interconnectors. From a security of supply perspective, there is a variety of events for which we must constantly be prepared.
In terms of the alternatives for the N-1 standard I completely agree that we should be optimising the use of infrastructure that is there and can be used. As members are probably aware Kinsale is hydrocarbon-free; it has been decommissioned. At its peak it could have delivered approximately 5% of Irish gas demand, which could contribute to the N-1 standard but would not on its own deliver that. Given that the gas cushion storage has been blown down effectively, it would require new infrastructure and a very significant investment to put the gas back into that storage facility. It might be cheaper to deliver onshore gas infrastructure with import through various routes.
I have also read about using the Corrib field in a different way. I am not sure that has been done or that anyone has spelled out exactly what that means. I would simply point out that it is a commercial operation and at the moment it delivers approximately 25% of our needs. That is declining over time. Even if we stopped using the gas that is there, which is what is being suggested, in order that it is a back-up in the case of a gas emergency, it still would not deliver the complete alternative to Moffat. Again, I have only read those reports in the newspaper.
Ms Karen Kavanagh:
We are currently considering price control 5, PR5, for GNI. As economic regulator we set that revenue envelope over a five-year period and we are looking at setting it from 2023 until 2027. As Ms MacEvilly said, we will consider what the various drivers of costs over that period are. The key things of course are security of supply and safety so they are core elements within that framework. Within that we seek to ensure that those costs would be efficiently incurred throughout the period and we would exercise all levers available to us to make sure that we deliver for consumers in terms of the most efficient cost but they are absolute core constituent elements of that price tag over the period.
Mr. Jim Gannon:
Ms MacEvilly noted the infrastructure challenge that is ahead of us. In the previous price review, PR4, which covered the period from 2016 to 2020, there was an underspend of €200 million or a little in excess of that by the transmission system operator and the transmission asset owner in building infrastructure in Ireland that could resolve some of these constraints and that could support the deployment of more renewables. However, Ireland did meet its renewable energy target or at least met 40% in 2020, although the calculation is a little more complex than that. It does not take away from the massive challenge we face where in PR5, which is the electricity framework that provides the TSO and DSO with the funding over the next five years, we have given an extra 35% for the transmission capital expenditure, CapEx, and we have given an extra 84% for the distribution CapEx. That is a huge amount of investment. That is a lot of wires and substations that need to be put in place to facilitate the deployment of renewable infrastructure, including the type of low-carbon technologies such as batteries and sequence condensers, and it will also help to provide and accommodate the flexibility that we want to happen with regard to residential, SMEs and industrial consumers. That investment is required. Physical infrastructure is going to be needed. What we were trying to get across is that we welcomed the proposed review by the Attorney General. We think it would be good. It would also be good if it could be expedited. We again note that the Commission is calling on member states to ensure that planning, construction and operation of plants for the provision of energy from renewable resources and the supporting grid infrastructure is considered to be in the overriding public interest.
That is very significant in terms of our planning processes, how infrastructure projects are developed and how we have regard to them in the permitting processes, especially where sensitivities around special areas of conservation, SAC, special protection areas, SPA, and other protections need to be taken into account.
I just reinforce the fact that there is a challenge to both unlock some of the constraints Ms MacEvilly mentioned to get better value out of what we have and to facilitate the renewables deployment we need, in addition to other technologies that will make sure we get the best value out of those renewables and infrastructure. A large plan of construction needs to be implemented. It is to move from the strategy, proposition and plan stage to the construction stage that we need now. We need to move things to those planning processes. We should ask the questions of the planning processes, but move them through and start building some of this infrastructure and have that dialogue with society that outlines why we need these things and why there is a net benefit and explains the underlying climatological and social reasons why we need to deliver this infrastructure, which is needed.
Mr. Jerry McEvilly:
I fully agree with what Mr. Gannon said around the absolute importance of ramping up our renewables development. That has been self-evident for some time. Obviously, the more that is rolled out and the greater levels of renewable electricity that are reached, the less usage there will be of gas. I am also hugely conscious that this needs to respect environmental obligations. We need to bring communities with us and include them in the decision-making process. I do not particularly want to dwell too much further on the Moffat situation. I would just note, and it is something others will be very much aware of, that Northern Ireland and the Isle of Man also received gas supplies from that infrastructure. There is a voluntary protocol in place for dealing with gas emergencies. It is also important that any Irish assessment takes into account the UK’s assessment of security of gas supply. I recall in previous years the UK's business department did not highlight any significant issues with gas supplies from Britain to Northern Ireland or Ireland.
Lastly, it is very important that the SEAI’s national heat study analysis is taken into account. Its main decarbonisation scenario, which supports achievement of our carbon budgets, essentially shows fossil gas use halving this decade and halving again in the 2030s, so that it is almost entirely phased out in the 2040s. This underlines that we need gas demand to reduce now, not in ten years. That also means that fossil fuel supplies must be phased out to ensure we meet climate obligations and that gas lock-in is prevented.
Mr. McEvilly mentioned the SEAI's heat study a few times. We will have the SEAI representatives before the committee next week. That is certainly something we can explore further with them.
Deputy Smith was indicating but I think she has dropped off the call. I call Senator Higgins.
It has been a very interesting debate. I was looking back to the CRU’s mandate, which is to protect the public interest in water, energy and energy safety. There is so much talk about the market, market factors, market encouragements and stimulus, that the core role in the public interest and safety seems to kind of perhaps slip away a little bit. At a very fundamental level we know that accelerating climate change is unsafe, not just for the public in Ireland, but more widely. What concerns has the CRU regarding the acceleration of climate change and its impact on public safety?
I would be interested in Ms Connolly’s comments on that as well, especially on the issue of methane. We have heard concerns, and Ms Connolly mentioned methane as a potential accelerant. I would like to hear about the impact fracked and shale gas may have on climate change and its acceleration.
We have heard that we need to do everything. However, in fact, when we do everything, what tends to happen is we do more of the same, when in fact we know we need to do less of the same. Prioritisation is very important. We had the EU taxonomy debate, which was meant to be about prioritising different kinds of energy. I am concerned when we hear about repurposing gas infrastructure being something that comes expensively on the table. That redirects potential energy focus away from things such as prioritising the development of green hydrogen. I would like to hear comments on the need perhaps for a green hydrogen strategy, as opposed to a hydrogen strategy that may contain green hydrogen or pipes that may or could carry green hydrogen. This is where thought the question around public versus private infrastructure is very important. Of course if it is private, one hopes that they might move to green hydrogen, but they may not. Whereas if it is public, one is looking at that issue of being able to have the control to say, “only green hydrogen”. Again, that is the problem if we invest heavily in things like pipelines that may only carry green hydrogen. We need to separate that. We also need to look at ammonia, specifically, as well as solar, as was mentioned.
In terms of the lock-in, I would like to hear a bit more on what analysis has been done of the dangers of lock-in if we continue investing in gas infrastructure, both in terms of the contracts, which I believe were mentioned, and also in terms of the Energy Charter Treaty. I would just suggest that regardless of whether the Minister asks the opinion of the CRU, if the CRU is going to give opinions, as it has today, on where investment should go in the next ten to 20 years, it actually has a responsibility to have risk-proofed those recommendations, that advice and those considerations in terms the Energy Charter Treaty and how difficult it might make it to change policy positions in three or five years.
My last point-----
----is very important in terms of coal. On the issue of demand reduction by 2030, it seems like the plan is for demand to continue to increase until 2030 overall. I am not talking about surge management in terms of demand, but in demand reduction overall. On coal, the Cerrejón mine in Colombia we know has huge human rights issues, but it seems that now, as we move away from Russian coal, there be a redirect to that coal. Of course, there is a public duty on equality and human rights that applies to the CRU-----
Ms Aoife MacEvilly:
I will answer briefly and then hand over. First of all, we are absolutely focused on our core mission of protecting the public interest in water, energy and energy safety. Our commitment to climate action is core to our strategic plan. It is one of our four key priorities, along with security of supply, protecting and empowering customers and, indeed, developing our own organisation.
We are not looking at doing more of the same. Most of what we have talked about today is about how we bring some of these very new technologies into play. We talked about demand-side storage and new infrastructure, which will all deliver a very different, low-carbon energy system and future for the next generations. We are prioritising that work. In response to Deputy Whitmore’s question, we outlined some of the areas that we think should be prioritised at the moment. We absolutely believe, and have stated every time we come before this committee, that a green hydrogen strategy for Ireland would be not just useful, but essential at this point.
In general, on the question of public versus private infrastructure, we have a long-standing commitment in Ireland to State ownership of energy network infrastructure, which we believe supports sustained investment within that infrastructure. However, potential competition can deliver solutions to the problems we face at least cost through innovation.
We have seen that happen through auctions where instead of saying we want a certain number of generators located in certain locations, we can say "help us solve this problem of capacity or system services" and industry can come forward with least-cost solutions. We believe this can be equally assigned through incentives around transition in the gas sector as well. I might hand over to others to address some of the questions.
Mr. Jim Gannon:
There is probably a grouping of advices and thoughts we have around the market itself, which is a state aid-approved market that is perhaps halfway or just over halfway into its state aid approval - it is there or thereabouts. Those are then parameters through which we can tweak changes we make within the regulatory framework.
In terms of national policy and national policy change, we follow national policy. We do not set it so in that regard, questions around the Energy Charter Treaty are best considered by those have entered into the treaty but also make policy and plan the long-term policy we follow as a regulatory function.
In terms of the market, I do not believe there are any parameters in place that would dictate where any of the primary fuels are sourced, be they oil, gas or coal. The single electricity market procures electricity as cost effectively as possible for the consumer and introduces competition in that regard but the-----
Ms Aoife MacEvilly:
I am not sure we fully have the answer to the Senator's question. If we are looking at banning imports from certain sources for whatever reason, be it human rights, methane emissions or other standards, it is an EU rather than an Irish competence. Ireland Inc. cannot ban imports from particular locations. That is something that must be addressed at an EU level-----
Senator Higgins mentioned fracked gas. In her opening statement, Ms Connolly was very clear that fracked gas can be just as bad as coal in terms of its climate impact. Does the CRU have a view on this? If it is advocating for LNG, and there is a considerable risk that the source of LNG could be fracked, are we not then putting ourselves in a position where we are actually contributing to climate change to the same degree as we would be if we were burning coal, although those emissions would not be accounted for in Ireland's figures? They would be overseas, be it in Pennsylvania, Texas or wherever the shale gas would be mined.
Dr. Paul McGowan:
Forgive me if I repeat myself. I go back to something I said in a previous appearance before this committee. When we talk about LNG, we are talking about gas security of supply and ensuring we have a secure transition to a zero-carbon future. This is the context within which we talk about LNG. We want a debate on the role of LNG in how Ireland secures its energy future and to be clear about what it is we would be saying if Ireland decided to have no LNG. We think it is very important that we have this debate so that the role of LNG is considered. I have also said in the past, and I still hold to it, that we need to separate the relationship between having LNG and importing fracked gas.
I cannot sit here today and tell the committee I can guarantee that, if we have an LNG terminal, there will be no fracked gas in Ireland, but neither can I say we are not already importing fracked gas via the Moffat interconnectors because it is being imported into an LNG terminal in Great Britain. I cannot give the committee that guarantee, but when we talk about LNG, we are talking about security of supply. The debate about how Ireland might address the issue of whether we wish to opt for fracked gas is a separate one. We are not advocating for fracked gas. We are advocating for security of gas supplies recognising we are predominantly a renewables and gas system for the foreseeable future until we get rid of fossil fuels.
Officials appeared before this committee a few months ago and we spoke about how, at European level, efforts are being made to make the distinction between fracked and conventional LNG, which is welcome. Deputy Cronin is joining us from her office.
Ms Tara Connolly:
I think I can come in quickly. I reiterate that the life cycle carbon emissions do not just involve the fracking of the gas but also the embodied energy and carbon from cooling down that gas, shipping it across the Atlantic and regasifying it. Europe had the chance to get a handle on this through a methane regulation that is under debate. Unfortunately, the proposal that emerged from the Commission last December did not include any robust measures on imported energy. Given Europe imports 90% of its energy, this leaves us with very few tools to address this problem. There is a global methane pledge but it remains to be seen how valuable that will be.
Regarding where we are likely to get it from, last year, the US became the largest exporter of gas, primarily through LNG, so it is very likely it would come from there. Admittedly, there could be some coming in to UK LNG terminals. The question is whether us building an LNG terminal would encourage increased production in the US because that is a conversation happening there where it is being argued the US needs to ramp up to save Europe and Europe needs US gas. The question of how we build an LNG terminal without a 20-year contract with a supplier arises because that is normally what it wants.
I covered human rights in my opening statement. It is a question of whether we are jumping from the frying pan into the fire. It is a shame the last time Russia invaded Ukraine in 2014, we did not use that opportunity to accelerate away. We would be in a much better position than we are now. Economics obviously stood in the way of that. Gas is always going to be cheaper than LNG. Very little was done and eight years were wasted. At the time, NGOs were really pushing for a much higher renewable energy target and energy savings target, which are on the table eight years later. There are no great options in terms of LNG imports either in terms of sources or volume. I again underline that we are in an incredibly tight global LNG market. There are serious concerns across civil society across Europe that decision-makers, governments and the Commission are focusing far too much on securing additional supplies over trying rapidly to accelerate the phasing out of gas demand. That is the best way for us to ensure energy security. Those with the least ability to pay will end up not just having to pay more but not being able to afford it at all.
Regarding green hydrogen, it is important to underline that 99% of hydrogen in Europe is produced from fossil fuels. We cannot underestimate the challenge of simply decarbonising that existing production, which is why I have been trying to emphasise that the scale is a challenge and, therefore, regarding conversations around just putting hydrogen into all of the existing gas infrastructure and having hydrogen heat our homes, I do not think this is even desirable. I would not like to have to pay for a hydrogen boiler or a hydrogen car. We really need to have a serious conversation about what happens to that gas infrastructure that will not be needed in a future with far fewer volumes of gas flooding into our residential sectors in particular.
My first question is for Ms Connolly and follows up on that. In her presentation she spoke about the fugitive leak of methane in the US and the need for us to watch the shale aspect of any LNG import and use. While we are very good at ticking boxes on commitments and even achievements, without putting source and impact into context, we will have a job trying to communicate this to others. How ready does she think we are to address the universality of our responsibility to source and not just emissions?
I also have a question for the CRU. Dr. McGowan mentioned smart meters, opt-in, opt-out, people who have smart meters using electricity off-peak when it is cheaper and so forth. People on low incomes live in the same timelines as everybody else, but people who are suffering from energy poverty are an ever-increasing demographic. I am interested to hear him talk about what he mentioned earlier.
In addition, in her opening statement Ms MacEvilly said: "We note the focus on the simplification and shortening of national permitting processes for energy projects articulated in the recent REPowerEU document statement published by the European Commission." There are serious delays in our planning process. She referred to engaging with communities. Does she agree that all the evidence shows that early and proper consultation with communities, alongside the selling to those communities of the community benefit, would help reduce the number of objections? Second, would she agree that when addressing planning delays, what is needed is a properly resourced An Bord Pleanála, with statutory deadlines, proper community consultation and dedicated planning resources? She spoke about resources earlier and An Bord Pleanála needs them too.
Mr. McEvilly spoke about solar panels. The point he made about solar panels is critical and must be addressed urgently. However, it must be done correctly as well. Planning for solar energy has to be right and timely.
I have loads of questions.
Dr. Paul McGowan:
I will respond on smart meters. I was talking about the relationship between opt-in and opt-out in the context of what we might do differently to improve the reduction in demand which would assist overall towards the reduction in the need for fossil fuel and acceleration towards renewable energy integration into the system. Obviously, part of any assessment of making a change like that looks at the impact it has on various consumer types but, as a basic measure, there is no doubt that asking people to do this but giving them the option not to will see a higher uptake. That in itself would assist in demand reduction, which overall would assist in the transition.
With regard to communities, and my colleagues might also comment, we have said previously many times that the role of communities and the need to ensure communities are part of and are brought into the transition is key. That includes being part of the planning process, but also public acceptance of the need for infrastructure and for these different technologies in different locations is paramount. There is no single answer to this but part of it is engagement through the planning process and people being active. We are talking about active communities building their own wind turbines, batteries or hybrids and people being active consumers by putting in their own batteries, solar panels and so forth.
Without community buy-in there is a risk to a successful transition, so it is fundamental. It is fundamental not just to the planning process, but to the entire transition.
Mr. Jim Gannon:
I will not repeat too much of what Dr. McGowan has said. Early and high-quality dialogue is very important for the delivery of infrastructure projects on a project basis, to speak to the community about need, options, alternatives and about the ultimate infrastructure that will go in place. Early and quality dialogue is very important. That means very clear, open and transparent communication.
Separately, the other dialogue I was discussing was an open dialogue with society about the fact that to transition to a place where we will have a decarbonised Ireland, where people can share in the value that this brings to us through smart meters and the different things we have mentioned today, people need to understand that it will require infrastructure delivery and infrastructure investment. Part of that is through understanding that to have a decarbonised television or car the electricity needs to be brought from the wind turbines, solar panels and batteries to the person's home and the person's community, and that this is something the person can participate in now. We might forward to the committee some of the consultation we performed last year on active consumers and communities. It would be useful for the committee to see our thoughts and reflections on the European directives in that regard. However, it must be an ongoing dialogue, and it must continue and be very open and transparent. We need infrastructure to unlock what we have, and what we have is an absolute surfeit of wind resource and a reasonably good solar resource. Between those two, if we exploit the right technologies and bring the right finance to it, we should get to a much better place.
Ms Aoife MacEvilly:
I can only comment that if it is the case that multibillion euro critical projects for climate mitigation are being held up through a lack of resources, that is something that should be addressed as a matter of priority. However, we are not familiar enough with An Bord Pleanála to know what and where the resources are that it needs.
Ms Tara Connolly:
Now is a unique moment of high public sentiment and support for a shift away from fossil fuels. I am not belittling the challenges when one gets down to the details. When I was on the board of SEAI about 11 years ago, an issue of constant discussion was how to get the projects built when there is local opposition not only to the wind turbines but also to the grid infrastructure. That is why NGOs pushed for those provisions that were referred in the renewables directive for active energy citizens and communities so people would be able to participate actively in, and directly benefit from, the energy transition. People today are recognising even more strongly the linkages between the fossil fuel industry, the climate crisis, energy poverty, local community destruction and horrific aggression, as we have seen.
There is huge support across Europe for strong measures to be taken to accelerate us away not just from Russian fossil fuels but all fossil fuels. In Germany, the government is resisting calls and is revealing how beholden it is to heavy industry. There is a ferocious row in that country now over its reaction, an unwillingness and blocking of a broader European acceleration away from Russian gas. There are strong public debates and strong public sentiment on these issues across Europe. We have also seen that, of course, in the reaction to the influx of refugees.
Unfortunately, other refugees may not have been so privileged to benefit from a similar reaction. It should not be left to individuals to do these things on their own. I am fortunate enough to have been able to afford to own a house large enough to house some Ukrainian refugees here. I have been able to renovate a 100-year-old house to disconnect from the gas grid and put in a heat pump. That is because I had access to knowledge through the one-stop shop here in Brussels and access to sufficient resources. That is not the same for everyone. It is important to make the ability to move away as accessible as possible.
I am mindful of the impact on those who are not yet in position to move away, as Mr. McEvilly mentioned. What happens to those who are left stuck on the gas grid? We need conversations on accelerated depreciation. These are all really important parts of having a just transition away from fossil fuels. In summary, there has never been as strong an understanding of the many interlocking crises caused by our continued reliance on fossil fuels as there is today. It is up to decision makers to seize this moment and really accelerate the process.
Mr. Jerry McEvilly:
The comments from the CRU on community buy-in are really positive. The importance of engaging early in the process, particularly with more vulnerable communities and stakeholders, is really important. This is where Ireland's low levels of microgeneration of solar and community energy need to be taken into account. We need to look at why that is the case and what blockages exist.
EirGrid went through a very positive public engagement process in the last year as part of the development of its new strategy. It went through a series of different forums, consultations and discussions with different stakeholders, including a type of citizens' assembly that it created. It was a very progressive process. Other Departments and public bodies should consider a similar process. Friends of the Earth will be running a series of events in the next few years to engage with citizens on energy transition. We would be happy to present to the committee on that. We have not yet started the events but we will be running them soon.
The Russian invasion and increasing gas prices put an entirely different slant on public acceptance and buy-in. I very much agree with Ms Connolly's point on accessibility. In the medium term, Friends of the Earth is very concerned that we may end up with essentially a two-tier energy and heating sector where higher income households and industry are able to take progressive measures to reduce their reliance on expensive fossil gas and invest in energy efficiency, microgeneration and demand response, while lower income households, farms and SMEs are left to struggle in older buildings dependent on increasingly expensive oil and gas.
While I appreciate this is not the CRU's responsibility, this is where a package of incentives and regulations, even going beyond the national retrofit scheme, is really needed. That means increasing investment still further in energy upgrades, legislation to prevent fossil fuel boilers, expanded training schemes for installers and really ensuring a ruthless focus on supporting more vulnerable households and communities.
Everybody has had the opportunity to ask questions. I know two members are keen to come back in. I will ask them briefly how much time they need because I will take it together if it is short. I will call Senator Boylan first.
I wish to return to the n-1 conversation we had earlier. I understand that Britain and Ireland entered into bilateral agreements in 1996 and 1998, the transportation agreement and the connected systems agreement. The EU then recognised them under regulation 2010/994. Is Mr. Melvin saying that we no longer conform with the n-1 standard at a regional level because of Brexit even though these bilateral agreements cannot be changed or undermined because both parties to those bilateral agreements have a veto?
Does regulation 2010/994 still stand?
Some 740,000 smart meters have been installed. Has any analysis been done as to how much electricity they are saving and thereby reducing costs for consumers? What are the potential savings? Who is doing the analysis on that? Is it available?
Mr. John Melvin:
On the connected systems agreements, a number of agreements were put in place at the time of both the first interconnector and the second interconnector between Britain and Ireland. Those agreements tend to cover flows in normal commercial operations. The gas security of supply regulation 2010/994 introduced the n-1 infrastructure requirement. Part of that allowed the requirements to be met on a regional basis. Simply as a matter of law, given the UK is no longer the EU, we cannot use that aspect of the law as written. We would be reporting that we do not meet the n-1 standard. None of that changes the connected systems agreements. Many agreements are in place between the TSOs in Ireland, Northern Ireland and Great Britain. There is a treaty in place between the Governments of the UK and Ireland. None of those have changed; they predated the 2010 legislation. However, as the UK has left the EU, we will be reporting that we do not meet the n-1 standard because we are not in a region with the UK.
However, it is only on that basis. It is not that there has been an increase in risk to our security, because these bilateral agreements stand. The only change is in terms of Brexit. Previously the CRU did not believe Brexit would have any impact on trade or gas flows; these bilateral agreements still stand. Therefore, it is just a technicality in the EU that we are not now a region. It is not that there has been any increased risk.
Mr. John Melvin:
The European Parliament introduced the legislation requiring member states to meet the n-1 criterion. That is EU law. That was introduced when the UK was part of the EU. Put simply, as the UK is no longer part of the EU and that law still stands, we do not meet the n-1 standard. The presence or absence of connected systems agreements does not change the fact that under the particular regulation, we can no longer report that we meet the n-1 criterion on a regional basis.
Ms Aoife MacEvilly:
It is not simply a technical matter. It is a matter of strategic national importance that we are critically reliant on a single point of failure. That is what the n-1 standard is all about. We do not want a single point of failure on a critical system in any context. In recent years, because Corrib is in decline, because Kinsale has closed and because no new licences are being given for offshore exploration and production, we are actually turning back to being increasingly dependent on this critical piece of infrastructure, this single point of failure. At the same time, we are getting rid of peat, coal and oil in our power generation mix and so we are basically becoming a renewable and gas-only power system. It is a lower carbon approach to delivering electricity. Of course, with the electrification of heating and transport, electricity is increasingly important. Having that single point of failure on the system, regardless of the legal framework around it, represents a strategic risk for Ireland.
Dr. Paul McGowan:
Some of my colleagues may wish to add to what I have to say. Regarding the uptake, many smart meters have been installed but it is really only over the past few months that suppliers have been introducing products such as time-of-use tariffs for customers. It is too early to say what the uptake is. Since there is an opt-in arrangement, the uptake is in all likelihood lower than it would be if there were an opt-out arrangement. I believe the percentage of people with a smart meter who have availed of a time-of-use tariff is low. That is why there could be an opportunity associated with demand attenuation or demand reduction if there were an opt-out. More data will be available once smart metering is rolled out more broadly and more data on behavioural change are available from customers who have opted in to the system.
Dr. Paul McGowan:
We have not got a specific plan right now as to what analysis we will be carrying out. However, when we did the original cost–benefit analysis of the national smart-metering programme, it was based on the idea that many people would be making a small change. We will be determining whether the aims have been achieved. However, we do not have a specific package of work that has to be done by a specific date at this point. I could not give the Deputy anything on that but it is a matter that we will be considering.
Ms Aoife MacEvilly:
We switched from an opt-out model to an opt-in model because of the new GDPR requirements. Essentially, the opt-out model requires the transmission of data without the customer giving consent in advance. It is a question of whether a matter of critical national priority — I refer not only to the urgency of security of supply but also to the urgency of tackling climate change and the cost crisis — would carry sufficient weight to enable us to make a decision of our own volition or whether legislation would be required. That is a matter we would have to consider, but it is worth considering.
Mr. John Melvin:
Based on the customer behaviour trial, customers who used time-of-use electricity tariffs moved something like 8% of their demand in the peak times away from those times — in other words, away from the more expensive times to the less expensive times. Customers also used something in the order of 2% less across the whole year just by having better information on when electricity was being used. Those two figures are from memory. I hope I have them the right way around. If they are not, we will correct them. They reflect the magnitude at the time based on the prices at the time.
It would be interesting to get more information on that. Internationally, we are way behind when it comes to this management mechanism. I would imagine that there are quite successful examples available internationally. It will be interesting to see whether the commission gathers more data or information on that.
Ms Tara Connolly:
I wish to underline something because much of the discussion has been about decisions that have to take place in Ireland. European processes in Brussels can sometimes feel far away but I urge the committee to pay attention to the European gas market reform that is taking place. It is really our last chance to put in place the framework we need to phase out gas. Unfortunately, significant conflicts of interest have been reconfirmed in the recently revised TEN-E regulation on transmission system operators, TSOs, and distribution system operators, DSOs.
We need to empower regulators, other market actors, communities and the public to engage in local heat planning. This is under another regulation - the energy efficiency directive - but gas market reform needs to reflect everything else that is happening in terms of electrification, increased energy savings and the necessary changes in the gas market, particularly gas infrastructure. Some focus on this in terms of continuing the debate on reform until at least the end of this year, if not longer, would be welcome.
I thank Ms Connolly. As it is 2 p.m., I thank the witnesses for appearing before us. It has only been four or five weeks since the regulator last appeared before us, so we appreciate the officials for attending again so soon after that and for answering members' questions, which were thorough and probing. We appreciate the efforts the officials made to answer those questions.
I thank the witnesses who joined us online, namely, Mr. McEvilly and Ms Connolly. Does Mr. McEvilly wish to contribute again? I see he has raised his hand.
Mr. Jerry McEvilly:
I do. I just remembered a quick but important point. I am conscious that the Government's energy security review is ongoing and I know that the committee is writing a report, but it would be excellent if the committee could take account of some of the issues and recommendations discussed at this meeting and submit those to the Department to make an input into the Government's analysis.
We will be putting together a report. If the timeframe requires us to submit interim recommendations before we finish it, we will do so.
I thank Mr. McEvilly and Ms Connolly for joining us today. It was an eye-opening discussion. We will seek to capture in our report many of the points that were made by them, members and the regulator. That will not be an easy task by any means because it is a complex area.