Oireachtas Joint and Select Committees
Tuesday, 20 September 2022
Joint Oireachtas Committee on Climate Action
Engagement with the Commission for Regulation of Utilities
Apologies have been received from Deputy Whitmore.
The purpose of today's meeting is to engage with the Commission for Regulation of Utilities, CRU, in the committee's role as oversight of the regulator's work. On behalf of the committee I would like to welcome the following representatives from the CRU: Ms Aoife MacEvilly, chairperson; Dr. Paul McGowan; Mr. John Melvin; who are all welcome back, and Ms Karen Trant, who is welcome.
As is usual before we begin, I will read out the note on privilege. I remind witnesses of the long-standing parliamentary practice whereby 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 regard to an identifiable person or entity, they will be directed to discontinue their remarks. It is imperative they comply with any such direction.
Members 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 make him or her identifiable. I remind members they may participate in this meeting only if they are physically located in the Leinster House complex. In this regard, I ask any member joining us online, prior to making his or her contribution, to confirm that he or she is on the grounds of the Leinster House campus.
I call now on Ms MacEvilly for her opening statement.
Ms Aoife MacEvilly:
We thank the committee for the opportunity to discuss some of the work under way in relation to the strategic priorities within our new strategic plan. I will start by outlining the current priority work we are undertaking to empower and protect consumers.
In light of exceptionally high and volatile wholesale EU gas prices, retail electricity and gas prices are increasing dramatically, thereby putting pressure on all domestic and business customers, many of whom are already struggling to pay. The CRU is deeply concerned about the impact these price increases will have on all customers and particularly on vulnerable customers. We therefore have introduced a new suite of consumer protection measures to be in place for this winter. The decision paper has been provided alongside this paper and in summary, the key measure include: extended debt repayment periods for customers in debt; lower debt repayment on top-ups for customers with financial hardship prepayment meters; customers on financial hardship meters to be put on the most favourable tariff available from their supplier; and extended moratorium periods for disconnections this winter.
We are currently working through the supplier of last resort process for Panda Power customers. There have been three supplier of last resort events in the Irish market this year, through which we have ensured that supply is maintained for some 100,000 affected customers.
The CRU has also just completed overseeing the implementation of the electricity credit scheme, along with the Department of the Environment, Climate and Communications, ESB Networks and suppliers. We are ready to support any future interventions in line with Government decisions.
Some further workstreams to protect costumers include: working with industry to provide the negative public service obligation, PSO, levy to customers as quickly as possible; continuing customer communication campaigns to highlight the importance of registering as a vulnerable customer, to be aware of your rights as an energy customer and to make the best use of the better information and tariff options for customers with smart meters; continuing the roll-out of smart meters and leveraging the benefits of smart services; working with our customer care team to assist customers in distress, and engaging with our Department and other stakeholders to implement market and consumer protection measures arising from the evolving European Commission policy.
We will be stepping up market monitoring activities this winter, focusing on key customer debt and disconnection trends, and have included with this statement some of the latest data in this regard.
Turning to our next strategic priority to drive a low-carbon future, we are working to both increase the level of renewable electricity capacity on our system and to ensure we optimise the use of those renewables, as well as the infrastructure and technologies that support their roll-out, for the benefit of customers and the climate.
We welcome the increased connection of renewables, particularly solar projects, at scale this year, which will deliver significant benefits for consumers. This includes the renewable electricity support scheme, RESS, contribution to the PSO levy rebate.
We are working to enhance the integration of these renewables through the publication of the single electricity market high-level design on system services future arrangements, with further work progressing on the detailed design. The new high-level design allows for a phased approach and enables EirGrid to procure system services in fixed contracts and a layered procurement approach. We welcome EirGrid's publication of its consultation on the low-carbon inertia competition.
One of the key enablers in achieving our 80% renewable electricity target is the delivery of offshore renewables at scale. The CRU is holding consultations on offshore grid connection policy, which will enable developers to bid confidently in the forthcoming offshore renewable electricity support scheme, ORESS, auction. A new CRU division will be established shortly to advance further work, including the regulatory framework for the offshore asset owner and operator and offshore network planning, standards and licensing.
We are concerned about the current gap in offshore safety regulation. International experience suggests that offshore renewables require regulation from a safety perspective. Ideally, a safety-by-design approach to the prevention of major accidents is required. Recognising the ambition in terms of scale and timing that Ireland has for offshore renewables, it is imperative the country implements an appropriate legislative framework in this area at the earliest opportunity, including designation of the body that will assume responsibility for this.
Firm access is an important area for existing and new renewable projects, and a consultation on a new approach will be published shortly. It is important to ensure this is facilitated by accelerated delivery of network infrastructure to provide value for consumers and generators. This is especially the case as ongoing curtailments and the operation of a tight system at a time of high wholesale prices is driving imperfections market charges significantly higher this year. Overall, lengthy planning and permitting processes and delays in delivery of critical energy infrastructure, including generation capacity, transmission and distribution networks, and the North-South interconnector, are adding high costs and increased security of supply risks for Irish consumers as well as delaying the achievement of our decarbonisation obligations.
As an example, Wind Energy Ireland advised us in March last that there were in excess of 1,200 MW worth of wind projects in the planning system, more than 500 MW of which had been in planning since 2020 or before. We were further advised at that time that in excess of 600 MW worth of battery storage was in the planning process. We will need this infrastructure to support security, sustainability and competitiveness for Irish customers.
It is clear that, given the scale of the infrastructure delivery required over the short term, we will need a change in the planning process and the resources allocated to local authorities and An Bord Pleanála to expedite projects through the planning process. We will also require the support of this committee and the Government to ensure delivery. For example, the North-South interconnector, which is vital for security of supply, has not yet commenced construction, despite having full planning permissions in place in Northern Ireland and in the Republic of Ireland.
As we discussed electricity security at length with the committee on 30 August, I will briefly mention gas security in light of the Russia-Ukraine crisis. While Ireland is less dependent on Russian gas than other member states, it is important we play our part this winter and in the following winters by reducing our use of gas and electricity. The CRU is working on a range of such measures, including through our network tariff decision. Our objective to incentivise demand reduction at peak times and times of low renewable generation, which may also cause system stress, is aligned with the new EU proposals on emergency interventions to address high energy prices. Such measures will also support our decarbonisation goals.
As the EU moves away from reliance on Russian gas supplies and develops new supply sources, it is also critical that Ireland enhances our security of gas supply. This is particularly important given the key role of gas in electricity security of supply. We welcome the publication of the Department's energy security review in this regard.
In relation to the CRU's people and organisational capacity, we are currently recruiting to expand our team to address some of the new requirements of the climate action plan and clean energy package while prioritising the use of our resources for the energy crisis in the short term. The CRU notes that the committee has forwarded other topics for discussion and has included, as an appendix, the most recent and relevant historical data concerning domestic customers' debt and disconnections.
We are also happy to discuss the other topics highlighted by members, including demand management and the European response to demand reduction.
I thank Ms MacEvilly for her opening statement. I ask members to indicate, if they have not done so already, if they wish to ask questions. I propose that members have two minutes each to ask questions in the first round. We will have a second and third round as necessary.
I welcome representatives of the Commission for Regulation of Utilities, CRU, and thank them for coming before the committee again. I have a number of questions. First, I welcome the information provided by the CRU in relation to domestic and non-domestic disconnections and the moratorium we have discussed previously at this committee, including the new suite of consumer protection measures that have been introduced until the end of March. This suite of measures is welcome, particularly given it was raised in the media last night as if it did not exist, despite being discussed and welcomed in the Chamber. It is important we reiterate that to give confidence to people who might find themselves in difficulties this winter, notwithstanding anything that might be announced in the budget next week.
I also welcome the work the CRU is doing in rolling out the negative public service obligation, PSO, levy, which was announced by Government some weeks or months ago. This will go some way to alleviating the pressures. The one thing I want to focus on in relation to consumer ability to pay is the view the CRU may have on standing charges. This has been raised in this committee previously. I want to know whether the CRU has the legislative framework with which to address these charges and by address I mean lower. I raise this on behalf of the many constituents who have been in touch with me because it is an increasingly large issue. The variances between suppliers, for instance, can be quite significant. I would welcome the views of the CRU on this issue.
I have two further questions. Should the committee be concerned about the exists from the market particularly by Panda Power and other suppliers. I understand a number of others have exited this year already. Is this something we need to be concerned about? Does the commission know why that exit took place?
Regarding the comments on safety regulation, and of course that is something we should all be concerned about, I am assuming the safety regulation to which the CRU has referred is not included in any legislation either passed by or before the Oireachtas? I refer specifically to regulations that come under the Maritime Area Regulatory Authority, MARA. Does the CRU have knowledge of other jurisdictions within the European Union which have brought regulations in or is there a European example that could be provided to the committee? That would be rather helpful.
Ms Aoife MacEvilly:
I thank the Deputy. I will start and will then hand over to my colleagues. In terms of Panda Power and the supplier of last resort, it is unfortunate for customers that we are losing suppliers in the energy market at the moment. It is a sign of the intense pressure the energy sector is under. We have never had a supplier of last resort event in Ireland prior to this. They can be common. There have been quite a number in the UK over the last number of years and I think in the range of 30 in the last year. We have seen these events happen across Europe because the challenge for suppliers is that they are also facing these really high and volatile energy prices. Suppliers have to go out and spend more money to hedge for their customers, to post collateral to buy gas and electricity. It is putting pressure on a number of the smaller suppliers in the market, Panda Power being the latest one. That is broadly what Panda Power has told us in terms of it decision to exit the market. That is why we have a supplier of last resort process. It is in place through legislation and then through processes we have developed with the network operators and suppliers of last resort to ensure that where this happens there is protection for customers and security of supply in that they will be automatically transferred to a supplier of last resort with no discontinuity in supply.
We have done this to ensure that, where such a situation arises, there is protection for customers and security in their supply, in that they will automatically be transferred to a supplier of last resort with no discontinuity in supply. Overall, it is not good for competition because the more suppliers we have actively competing in various ways and offering different types of products to customers, the better it is for customers. We continue to work with all suppliers in the market. We will continue to ensure that, at the end of this crisis, we will have a competitive market that delivers value and choice for customers.
I might ask Ms Trant to address some of the other points that the Deputy raised, after which Dr. McGowan will discuss the offshore safety regime.
Ms Karen Trant:
We are aware that issues have been raised around the standing charge. We do not have the legal remit to investigate the standing charge. We can ask for information. Any review of the standing charge or the commodity price would effectively be price regulation, but we do not have that remit. We would only do that in the best interests of the consumer, but we do not have the legislative ability to do that right now.
Ms Karen Trant:
It is not. Certain conditions would be put in place before it would be regulated again. We can do it with one of the large suppliers, that being, a part of the ESB Group.
For a customer, the standing charge is based on the estimated annual bill and depends on what way the supplier has distributed costs. For example, the supplier might have a higher commodity charge and lower standing charge or a higher standing charge and lower commodity charge. For the customer, the best way to deal with the matter is to go to the switching websites and put in his or her usage figure to see what products suit him or her the best. That is what we are telling customers to do. However, we do not have the ability to investigate the standing charge in that level of detail or to regulate it.
Dr. Paul McGowan:
Regarding the Deputy's question on offshore safety regulation, the best example is the Petroleum Safety Authority Norway, which regulates the safety of offshore hydrocarbon facilities in Norway like we do in Ireland at Corrib and, previously, Kinsale. The Petroleum Safety Authority Norway started a project, based on legislation, in 2020 to determine an appropriate safety regime for offshore renewables.
The matter is being examined more widely across Europe. For example, the Health and Safety Executive in Great Britain has begun work on advising offshore renewable firms as to what a safety regime might look like. It has been interacting with them in advance of legislation being introduced.
We are members of various safety bodies, the most relevant in this case being the North Sea Offshore Authorities Forum, NSOAF, whose members are safety regulators that are involved one way or another in hydrocarbons in the North Sea. The NSOAF has established an offshore renewables safety working group to begin examining best practice.
Currently, we do not have a statute in place that identifies who is responsible for the regulation of this new sector in terms of major accident hazards. Its hazards are different than those in the hydrocarbon sector. Obviously, there are no hydrocarbons involved, but collisions, fires and other hazards can still occur on these installations. As such, it is important that there be a safety regime. Our perspective is that the priority should be to identify and put in place a safety regime and to identify who carries that out. We are agnostic in the latter respect. We have experience from the offshore hydrocarbon sector, so it is something that we would be equipped to do, but a statutory framework would be needed in order for that type of work to begin.
I wish to ask a short follow-on question relating to our discussion on standing charges.
Is the commission aware of other similar regulatory bodies in other jurisdictions that regulate standing charges specifically or is it rather a market-to-market sort of arrangement? Do the witnesses have knowledge of that?
Ms Aoife MacEvilly:
There can be different approaches to this throughout the EU. My understanding is that not every jurisdiction necessarily has a fixed element of the charge. Some go with pure per-unit rates. In Ireland it has been traditional to have a standing charge-type arrangement because networks tend to be a higher proportion of the bill. The UK also tends to have a standing charge arrangement as part of the billing. The regulatory regimes vary from member state to member state. In general, the EU has advocated for no regulation of price. Obviously, different approaches are being taken now given the very high and volatile energy prices. We may not, therefore, be fully up to date on where that is at the moment.
I thank the witnesses very much for their attendance. To pick up on the issue of standing charges, the Minister for Finance stated yesterday that the energy companies must justify those standing charge increases. I raised questions with the Minister previously regarding standing charges and he pointed to the CRU. We heard today from the commission that it does not have responsibility in that regard. To whom exactly are the energy companies accountable for these increases in standing charges? To whom might they justify those increases? That is the first question.
My second question is on the PSO. In its opening statement, the commission stated it is working with industry to provide the negative PSO levy to customers. Is it not the case that 85% of our renewables are under the renewable energy feed-in tariff, REFIT, scheme and 15% are under the renewable electricity support scheme, RESS, with an opportunity to claw back that PSO? Is there any exploration, investigation or pursuit of a clawback with the significant number of renewables on the REFIT scheme because, obviously, that might return?
Separately, has the CRU explored or considered a ban on low usage charges? Has it considered proposals in relation to the cheapest available tariff being available as standard, as opposed to just those vulnerable customers? I acknowledge the CRU provided additional information for the committee. Within any of that, however, is there an assessment of self-disconnection? We hear from agencies that it is a matter of significant concern as we head into this winter. Does the CRU have any evidence? I thank the representatives from the CRU for the update on disconnections more generally.
Ms Aoife MacEvilly:
That sounds about right; I am sorry. The PSO levy rebate is made-up of two elements. One is that it will be clawed back from REFIT suppliers that were overpaid in a previous period. We estimated that the price they would earn on the market would be at a certain level, which, if I recall, was around the €50 per MWh rate. As it turned out, prices started increasing, so they actually earned more from the market in that year because we operate on the basis of estimating. The first part of the PSO clawback is from those REFIT holders that earned more on the market than was estimated at the time. We will, therefore, be taking back those excess revenues because they went beyond what was permitted under their-----
Ms Aoife MacEvilly:
It is a three-year cycle that we look at every single year. When we were setting the PSO levy for this current period, it would have been the full year or two years ago, and we look at this year gone by when we are doing next year's PSO levy.
That is a constant part of the PSO levy calculation cycle. There is an estimation forward and a look back to see what was actually earned and to make sure that nobody earned more than they were entitled to or, indeed, less. There are sometimes corrections in the other direction. Regarding RES, there is a different approach to the payment of support for renewables. It is seen as a two-way contract in which, once the price suppliers earn on the market goes above a certain level, that will automatically be clawed back. That is a feature of the design that has been built into our PSO levy calculations and will be in the future.
Separate from that, the Deputy is probably aware that work is going on at EU level. The new EU regulation I mentioned is where the EU as a whole is looking at setting a reference price for companies that are generating on the market, which are being paid the higher prices but are not facing the higher costs gas generators are. That is referred to as an inframarginal rent cap. Again separate from the PSO levy, assuming that package is implemented or accepted through the EU processes, we will be implementing something of a similar nature in Ireland.
Ms Aoife MacEvilly:
It will also depend on the ultimate design, the details of which are still being ironed out.
We have not considered a ban on low usage charges. Ireland has a high level of low usage, which we understand relates mainly to holiday homes. It is important to note that where people have holiday homes, even where they may not be using a lot of electricity, we support those homes through the provision of electricity networks that are there to ensure there is sufficient power whenever they use those homes. It is right that people pay a fair share towards the cost of networks. From the suppliers' point of view, the low usage charge in some cases relates to the fact they have costs in serving those customers, even when such customers are not necessarily using the charge. We have not looked at that as a specific area of concern at this point.
On the cheapest available tariff being available as standard, we looked at what the best options are. As the Deputy knows, the way competition tends to work for domestic customers is that suppliers have a standard charge and they then offer discounts to attract new customers. They will often offer those same discounts to existing customers who sign up for an additional year or who avail of things such as paying by direct debit or getting paperless bills. We think that is a useful part of competition in the electricity sector. If suppliers are asked to provide those discounts to all customers regardless of whether they have lower costs, such as direct debit or paperless billing, then ultimately everyone is paying the same charge, there is very little competition and everyone is paying a slightly higher charge.
It is really about who we want to protect the most. The people we focused on, through our current consumer protection measures, are vulnerable customers and customers on financial hardship prepayment meters because we believe they are the ones where we need to target the most support. We are also asking suppliers to make it clearer to their existing loyal customers that discounts are available for them, especially if they are willing to commit for an extra year or a period of the suppliers' choice.
We have looked at self-disconnection and tried to get some figures on it. Ms Trant will pick that up.
Ms Karen Trant:
On the evidence, we do not have numbers or figures that could be verified. Normally, this is the case in the prepayment sector. There are various reasons that someone might not vend or put credit into the meter for a period. As a result, it is very difficult to get that kind of information. The sophistication is just not there on the meters. In time we will have smart meter pay-as-you-go options that may be able to give us some more information we can drill down into, but at the minute they does not exist. Some of the more recent meters, say, those from the prepayment providers, are slightly more sophisticated, but they will still do not provide any information that we can verify or stand over. There is anecdotal evidence that people are self-disconnecting. When we deal with the NGOs, they say it is for various reasons. It may be a lifestyle choice or the person may leave the premises. It is something that we will continue to monitor. We will look for information where we can and verify it.
Ms Aoife MacEvilly:
There are two different types of prepay. There is the lifestyle choice prepay, which is offered as a choice, and there are the financial hardship meters. We do survey prepayment customers as part of our annual consumer survey, but that tends to focus on consumer satisfaction. There are reasonably high levels of consumer satisfaction with those products because people like to avoid both bills and the build-up of debt. That is what we are getting from those surveys, rather than granular information on self-disconnection.
Ms Karen Trant:
The energy companies have looked into it. They have stated that there are no long patterns of self-disconnection. There is not any trend that they can pick up on. They have done that work because they can see the information from the meters. There has been very little to indicate that there is a pattern of self-disconnection.
Ms Aoife MacEvilly:
Just because we do not have the data does not mean we do not understand that it is a problem for some customers. It will probably be a challenge increasingly this winter because the rates are higher and customers' credit will last for less time than they would have been used to previously. We are concerned about this. That is why we asked that the customers on the financial hardship meters be on the lowest rate. We have reduced the level of debt repayment on the top-ups in order that the top-ups will last longer. One of the other measures we have introduced relates to gas. Previously, there was a charge if a customer wanted to switch away from using a prepayment meter. We have removed that charge. What we will be saying is that if customers find that they are on this product, it does not suit them and they are in difficulty, they can switch to a non-prepay option free of charge if they are on a financial hardship meter.
Ms Karen Trant:
In normal circumstances, customers would switch. We have a licence and a supplier handbook. They are the two vehicles that we regulate the industry with. There are rules that are set within the supplier handbook around bill transparency. If we saw that there were outliers, we certainly would be asking questions. Getting the information is one thing, but regulating is a different issue.
I thank the witnesses for presenting to us and for their engagement so far. I have two questions; possibly three, if time allows. I would appreciate as quick and succinct answers as possible to the two questions. Reference was made to protecting consumers. That is what I would like to focus on at the outset. At the weekend we saw companies reporting six-monthly profits of almost €400 million.
Consumers, both domestic and business, are experiencing the biggest hikes in energy prices in my memory, if not in living memory but I do not see any recommendations from the CRU on ways to curb or regulate those profits to the benefit of consumers. There are recommendations that will impact energy companies including extending moratorium periods for disconnections and extending debt repayment periods and while these amount to regulation of energy companies, surely we should see recommendations that go further. It is very hard for us to justify the use of six-month profits of around €400 million for future investment in infrastructure. Various arguments have been made in defence of that but we cannot justify it when consumers are at their wits' end, struggling and worried about repayments. I ask the CRU representatives to comment on that. There are no recommendations like capping unit prices or other measures that would have a real impact on consumers' bills. The CRU has a role in protecting consumers and regulating energy companies in that context.
Ms Aoife MacEvilly:
The Deputy is referring to the ESB profits that were announced last week. Ironically, that announcement happened in the same week that Panda Power exited the market which highlights the fact we have some suppliers that are unable to continue while other larger companies, including ESB generation and ESB Networks, are making profits. That is why the EU is stepping in with a new package which aims to limit the profits of generators, particularly those that are not facing the higher cost of buying gas on international markets, that is, those generators that have renewables and other technologies within their portfolios that are earning the higher prices but are not facing the higher costs.
We do not have anything in our regulatory toolbox to deal with that. It is being tackled at a broader, EU level-----
I am wondering why that is the case. The EU has recommended a windfall tax on the low-carbon, renewable energy companies. Clearly the EU has seen an opportunity there to intervene in the market. However, there do not seem to be any recommendations from the CRU that would directly impact things like the unit price, which would have a direct impact on utility bills. Why does the CRU not have that regulatory authority?
Ms Aoife MacEvilly:
The proposal to effectively claw back the windfall profits is directly linked to a requirement for member states to use those revenues to support customers and reduce the impact of high bills. That is tackled in the EU set of proposals or draft regulation and we believe that is the right way to approach it. We also note that the Government has suggested taking a windfall profit and providing that benefit to all customers in Ireland and we would support that. There are other means of tackling the issue that the Deputy has raised which are not necessarily for individual regulators to develop but which the EU has said need to be tackled across the Union on a consistent basis. That is where those measures are being developed.
My second question is on security of supply, which the CRU dealt with at the end of its opening statement. Reference is made to the different options around security of supply, including battery storage. Is there an opportunity in the very short term to procure battery storage for public buildings? I am thinking of public hospitals in particular. Cork University Hospital, CUH, has always had a really good approach to energy and has tried to be as sustainable and green as possible but it is still a significant energy user in the Cork region. The hospital would have peak-time levels of usage almost throughout the day. It has been suggested that we could procure battery storage.
That battery storage would be acquired in off-peak times and distributed during peak hours of 6 p.m. to 8 p.m., 5 p.m. to 7 p.m. or whatever it is. I have heard this could be done in a place like Cork University Hospital, CUH, for around €1 million. It sounds like a lot but in terms of preventing potential electricity supply issues during winter, it is something we have to look at. If on a wider scale across the health sector and HSE you can procure battery storage, charge the batteries off peak and distribute them during peak hours, it would take massive pressure off the grid during peak hours. Has that been looked at? Could it be recommended?
Mr. John Melvin:
Under the national emergency security framework, the public sector is being asked to take the lead in many of the responses, and peak reduction is one of the key responses. Also, in the regulation currently making its way through the European Commission formation process, one of the proposals is to seek to procure demand reduction from entities. For example, a university hospital may participate in this and, if it were to win the competition, would be paid for the reduction it provides at peak times. There is a desire for the public sector to take a lead in this and, assuming that regulation makes its way into law, an outcome of that would be a proposal or mechanism whereby people would compete to provide reductions. That could provide the revenues necessary for, in the case the Deputy described, battery storage.
In terms of security of supply, hospitals tend to have backup generation on site. I engaged with HSE representatives last week. They also tend to have backup batteries on sensitive equipment to protect it from voltage surges. Rather than for the purposes the Deputy described, it is for continuity purposes and protection of the equipment.
Dr. Paul McGowan:
The facility exists for battery storage operators to bid into the market under the capacity remuneration mechanism. Hundreds of megawatts of batteries have already been contracted under that mechanism and are in place or being constructed as we speak. The facility is there for such technologies to come into the market and be remunerated for their work.
I will pick up on that question. Is the Deputy saying there should be State support for these institutions to install backup power? I am hearing from the answers that there is no barrier to an institution doing it, but that was not the question I heard.
It is a combination. There should be a State strategy for the provision of battery storage in public buildings. I used hospitals as an example because of the nature of their work. Reducing the temperature to 19°C, etc., will not work in every public building. This technology is there but a big issue is if it costs €1 million, then procurement could take months. We are at the end of September so a strategy and mechanism for expediting the roll-out of such technology is what I am talking about.
Rolling it out in areas where there is a lot of usage, and I mentioned Cork University Hospital being a big user in the Cork area, could take a whole lot of pressure off demand during those peak hours and avoid potential blackouts.
Dr. Paul McGowan:
Batteries are increasingly a very important part of the overall energy landscape in their ability to shave peaks and store excess renewables, and to perhaps use it when the wind is not blowing or the sun does not shine. They are and will be an even more vital part of the energy system as we move forward.
We typically run annual capacity remuneration auctions, but we also run on a T-4 basis, which means four years out from when it is required. We also run T-1 options. Typically, batteries would compete in that because they can actually deliver in that sort of timescale. The mechanisms are there for the batteries and I believe the results show for themselves that hundreds of megawatts of batteries have come onto the system. EirGrid is now looking at how it can use them really intelligently over the peak period. Rather than taking a whole load of two-hour batteries they are daisy-chaining them so they can use them for four hours, that is, putting them into two packs and using for a longer period. They get better value over peak periods out of that.
Absolutely there is a role for batteries. I would say there is a clear route to market for batteries. It would depend on the individual circumstances of the entity that wants to install batteries as to whether it has a commercial case, but there is definitely a route to market for commercial batteries, as is evidenced by the fact that we have now have hundreds of megawatts, and more in the pipeline.
Ms Aoife MacEvilly:
What we call utility-scale batteries are being procured through the capacity mechanism. More and more there is a case for smaller scale batteries, almost domestic and business scale, that would probably require a commercial case related to the individual location or site. People with, for example, solar PV may find that it is more beneficial for them to charge a battery and use it at peak times than it is to export, depending on how they are set up and how their business or their home operates. Again, this is probably more the commercial case for the individual location at that level.
Am I mistaken in saying that the grant for batteries has been withdrawn and there is no longer a grant for batteries? It seems slightly counterintuitive to what the witnesses are saying that it is a very good way of shaving peaks. I believe the domestic grant is gone.
I have a few questions. The point was raised, which we have heard on a number of occasions, on the delay in getting through critical infrastructure. I am interested to hear what specific recommendations the witnesses would have for the committee on how that system can be improved. Where is it falling down? As we set out ambitions, as we have done for offshore and so on, it is a concern if this system continues to fail.
The commission is the regulator. Does it not have more power than it is exercising to get demand management into the system through the entities it regulates? For example, with electric vehicle, EV, charges the commission could seek to move our whole taxi fleet to EVs. The public service vehicle could be much more efficient to run. The commission could promote high utilisation and lower costs compared with each of us having our own car in our driveway and so on. To what extent is the commission leveraging what it could do? Is it leveraging, for example, status yellow weather warnings? If we know that there is going to be cold weather of between 5°C and 7°C tonight with no wind should the commission not be out there saying that now is the time to trigger these changes? Consider smart meters for example. As I understand it, and maybe the witnesses will correct me if I am wrong, smart meters are not being utilised to their full extent because of GDPR objections to utilising them.
Surely in an energy crisis we can find a way to make use of smart meters, of which we now have 1 million - nearly half of all homes - to help us utilise this technology we have put in at very considerable expense. It appears we are not utilising it. I could go on with examples of things we could be trying to do that are relatively low cost and low-hanging fruit. It seems to me that the witnesses are in a pivotal position to tell the regulated entities that they need to adopt this as part of the expectations of what they are doing. It does seem to me that that is not happening.
To go back to Deputy O'Sullivan's point, I could imagine an energy-saving company going into Cork University Hospital - or any other hospital - with an offer, but it would be very hard to expect the hospital to do this given all the things on its plate. Could the CRU not mandate its regulated entities to be such energy-saving companies for some of these areas of opportunity? As I said before on this committee, we should not waste a crisis. Perhaps the CRU is at a pivotal point to make that switch.
Ms Aoife MacEvilly:
On the planning question first of all, it is not necessarily our area of expertise but there are some potential options. The Attorney General had announced a review of the overall planning system and we would welcome the expedition of that. Very specifically, there are EU regulatory requirements for expedited processes for renewable projects, given their importance. For example, there are periods within which the entire planning process - all aspects of environmental permits and so on - must be completed in order to expedite those projects. We welcome seeing that being transposed. More recently, the REPowerEU package last year noted the need to expedite the connection of renewables but also the supporting grid - in other words, the necessary network infrastructure in order to not just build the renewables but connect them effectively into the network so that they can deliver the benefits for customers and that those could be considered in the overriding public interest, which is a particular route and option that could be used to expedite planning. Those are the kinds of areas that we think are worth considering, which are set out in the EU regulatory toolbox and that might support expedited planning processes. We have also called out the need to support the local authorities and An Bord Pleanála to ensure they have sufficient staff, inspectors and other resources to expedite the projects. They are independent agencies that have to go through thorough processes, which they must ensure are robust, but they must have the resources to do it more quickly so that the projects that can be delivered can be delivered more quickly. That is our view on the planning side. It is about process and resources.
In terms of the demand side, generally I agree that we are at the very start of looking at what demand side can deliver. For a system that has an 80% renewables target and, further, would be looking to be a zero-carbon electricity system in time, it is imperative that we optimise demand side as part of our future network. We must change our thinking on how we plan electricity systems and incorporate demand side more effectively.
Ms Aoife MacEvilly:
Yes. We can do more, but the kinds of areas that we have been focusing on are, through the capacity remuneration mechanism, bringing on demand-side units at scale and optimising the benefits of those to the system. Mr. Melvin can talk about the work that we are doing to increase the effectiveness of that through the smart metering programme, exactly as Deputy Bruton says, with time-of-use tariffs, the ability to incentivise-----
Am I correct that this is not being exploited: that we have to ring up ourselves? The consumer has to take the initiative.
This thing which is designed to allow a shift has been put in and now we are waiting for Joe Bloggs to decide he is going to do it. That seems a hopeless approach.
Ms Aoife MacEvilly:
That is the reality for smart meters. It is opt-in. The provision of data is opt-in. Ms Trant will talk about the improvements we are making to data accessibility for customers with smart meters. We are at the start but measures are already in place which we will leverage more to bring this to the forefront of planning. The new EU regulation that I have mentioned calls out the need not just to do more but also mandatory proposals for overall demand reduction, demand reduction at peak and at times of system stress. We consulted on these kinds of measures for our network tariff proposals. Those propose a different approach to how we incentivise that activity. We are reviewing them in light of the EU proposals. Those are the objectives and goals. Does Mr. Melvin want to address demand-side units?
Mr. John Melvin:
We are engaging with the industry on the demand side to remove what are seen to be obstacles to greater participation in the demand-side industry. Removing an obstacle does not necessarily mean that the industry will take the removal of the obstacle as an opportunity to then participate. We cannot mandate industry to participate in the demand-side, in a general sense. All we can do is seek to remove obstacles.
Another aspect of the Deputy's question refers to work under the Sustainable Energy Authority of Ireland, SEAI, more than the CRU. Energy supply companies have obligations under a European directive from 2012 or 2014 to offer energy saving advice and engagement with their end customers. This is done through SEAI's part of the energy sphere rather than us. On the matter of accepting that demand comes and is not expected to be flexible, a significant change is required in the energy industry and among the demand customers. The European regulation that is currently being developed seeks active participation from demand side, both at peak and with reductions in demand next winter, over the whole period and especially at peak periods. We held a consultation on the network tariffs. There are elements which we can address, barriers we can remove and signals which we can send. Active participation has to come from the entities and, under the GDPR rules, it has to come from individuals in their homes, who would seek to participate and use those smart meters.
Ms Karen Trant:
We see smart meters both as an enabler for gathering information across the network but also for the consumer. There have been barriers to engagement from consumers. There is an information gap. Customers do not really know what their consumption is like and they need to be able to see that before they opt to use a smart tariff. One area which will be developed this coming quarter is a data portal and a hub. Customers will have what is called a push-all. Information from smart meters will be pushed to the hub. It will be available to customers so that they can review their consumption. The aim is to have a dashboard and portal in order that customers have an easy, accessible way to see what they are using. We think this will send a signal for people to engage with smart tariffs.
The other area relating to smart meters we are looking at is that ESB Networks is prioritising those with microgen capability. Those who have microgen installed will get smart meters to push that. Once people are aware of their consumption and not afraid to make a choice, they will engage with it. We are also running campaigns. They are digital at the moment, but we will be increasing them to encourage the use of smart meters and smart tariffs. It will take time. We think that once the data hub and data portal are up and running, it will be six to 12 months after that before we see a real uptake in smart tariffs. It is about information; people want information before they make the choice.
There was a point about the GDPR. What we wanted to do there was bring customers with us. We would not be able to mandate that information to transfer. That would be in breach of GDPR rules. A meter point reference number, MPRN, is personal data. Without a customer's agreement, we would not be able to do that. There is no doubt that this has been a sensitive issue. We need to manage that carefully for both customers and the programme. We would prefer that customers would consent and opt to avail of smart tariffs.
-----other than digital? I watch the news and a few other programmes on television. I got a smart meter recently, by the way, and I have not seen anything to encourage me. Sorry, I am jumping in but I just want to follow on.
I regularly see people commenting on a mobile operator that has an ad which has everybody driven cracked because they see it in such a repetitive way. It is not until you reach that point that people will understand.
I thank Ms MacEvilly for her two written responses to the committee. One was on energy demand growth in this country compared with the rest of the EU. It clearly shows that Ireland is a complete outlier in the context of energy growth demand. That was on the argument relating to data centres. The second was on the specifics about data centres and their connections. I really appreciate the answer, but it raises more questions. Rather than focus on that now, I will ask the committee to write back to Ms MacEvilly with my questions because the urgent matter we have to focus on is the energy demand for customers over the winter.
The CRU has made proposals. Considering the scale of the crisis, what the CRU is proposing is a bit piecemeal. That is not to be insulting. It is probably limited, but I want to ask a few question in respect of that limitation. If we acknowledge that there has been a complete failure in the energy market - prices have gone up when they should not have, profits were being made when they should not have been and so on - would the CRU be in a position to demand that over the winter months nobody will be disconnected and that the limited definition of what constitutes vulnerability will not apply? In other words, there should be no disconnection over the winter months and the moratorium should be extended to all household customers and businesses, particularly small businesses.
Would it be possible to extend the moratorium to prepay meters? Would it be possible to just say that people should not be disconnected if they fail to put money in their meters? Would it be possible for that instruction to be given by the CRU to the various companies?
It has come to our attention in the past week that many apartment dwellers live in areas with district heating systems. For some reason, the price per kW/h for gas for these people is at least three times higher than it would be for those of us here. There might be a technical explanation for that but these customers cannot switch. They cannot go onto bonkers.ie and switch around different companies because they live in buildings that are connected to district heating systems. The committee is constantly told that this is the future, that district heating is good for the environment and so on.
However, they are being left in a very difficult position. They cannot switch and are being charged more than anybody else. Can we find some way of putting them on a moratorium? When we look at the figures 250,000 people are in arrears for electricity and 148,000 households are in arrears already for gas bills. So this is a really serious crisis which we know and I argue that not enough is being done and that the extension of the moratorium must apply to everybody. In particular, we must consider what is happening with district heating systems. I am also told that the CRU does not regulate district heating companies. If not, why not? I ask because if there is no regulation then these over-the-top measures are imposed on people who live within them and if they are the future then where are we going?
On the question of vulnerability, we looked up the definition which showed two things. One, is where people are dependent on energy for disability equipment etc. The other day a 78-year-old person told me that she has stopped using her electric chair on her stairs because she is worried about using electricity. So she needs to register as vulnerable but does not realise that and people who use electric chairs, hoists or special equipment for their children think that if they turn on anything they will be in trouble. Dependency is definitely vulnerable. The other definition for vulnerability concerns age, mental health and all the rest. Is it not true to say that the definition for vulnerability could be extended way beyond those two restricted areas given the current crisis?
Lastly, can the CRU instruct all providers to put everybody on the most beneficial tariff rather than limiting it to only the vulnerable? Is it possible for the CRU to ask all of the suppliers to give people all of the most beneficial tariffs, ensure there are no disconnections over the winter and, in particular, let us consider prepaid and district heating?
Ms Aoife MacEvilly:
We will endeavour to answer the Deputy's questions. The Deputy should forward any further question. Understanding more about data centre demand is something that we ourselves also want to put some effort into and we are happy to engage with her on that.
In terms of winter protections, I agree with the Deputy that it is just one small part of what needs to be done to support customers. On its own it might be beneficial but we also need to consider the wider suite of social welfare and other Government supports that will be needed to assist customers in very difficult circumstances this winter.
The Deputy has raised some really good points about the different definitions and I will step through them. First, the most critical group is the vulnerable customers who are reliant on medically assistive devices whether it is assistive living, oxygen condensers or other medical devices. Those customers can never be disconnected for reasons of non-payment. We need to get that message out there because people should absolutely not avoid using assistive technology in their homes because they are afraid of their bill. We need more of those customers registered as vulnerable customers and that is one of the targets of our information campaigns. That is a really important protection and we do not think that enough people are aware of it. Maybe the people who are in those situations might not think of themselves as that vulnerable but their family members might recognise that these are people who would benefit from that protection and should be registered.
As the Deputy correctly pointed out, the next level of vulnerability are those who, because of reasons of age or health, might be particularly vulnerable to disconnection during the winter. What we have done for those people is extend the definition of winter as far as it can go. Can Ms Trant confirm whether it is from October to March?
Ms Aoife MacEvilly:
It is a balance.
We ran with a longer period for a disconnection moratorium during the Covid pandemic because we were in uncharted territory. We got important feedback to the effect that because suppliers were not engaging with customers in a disconnection conversation, if you like, many customers stopped paying and got themselves into considerable difficulty with debt. We are seeing the outcome of that now. Our customer care team is dealing with some difficult cases. It is about balance. Nobody wants disconnections. The process is there not to have a disconnection at the end of it but to have an engaging customer who is still working with the supplier, entering a payment plan or finding an option that helps them to retain their supply. We will monitor that over the winter. That is why we are stepping up our monitoring of what is happening. There have been quite low levels of disconnection since the moratorium for Covid was lifted. We will continue monitoring the situation to try to understand what we are seeing. The worst thing that could happen for customers is that they stop engaging, stop paying and get into a debt situation that is unmanageable for them. That is the balance we are trying to strike.
The Deputy asked about the most beneficial tariff. We focus that protection on customers who are facing financial hardship and using prepayment meters. We focus on vulnerable customers. If that beneficial tariff is extended to everybody, the price will increase for everybody. We want to focus on the customers with the most need.
Ms Aoife MacEvilly:
Suppliers that are attracting new customers offer a discount. They can only afford to offer that discount to a certain number of customers. If they have to offer it to all customers, the level of discount is going to have to drop because the suppliers cannot afford to offer a discount of 30%.
Ms Aoife MacEvilly:
This is where we get into the challenge of distinguishing suppliers, many of which are facing higher costs and struggling to stay in business - and, in some cases, suppliers are not staying in business - from generators, particularly the renewable generators, that are driving profits. Those suppliers and generators are often not the same companies. Some of them are and some are not. That is why we have been trying to be careful to ensure our interventions do not drive suppliers out of businesses because customers need suppliers to be there, buying and providing the energy. At the same time, we are supporting the interventions of the EU Commission in tackling that windfall and recycling it to the benefit of customers. It is a complex picture. That is the balance we have reached.
I will pass to Dr. McGowan on the question about district heating.
Dr. Paul McGowan:
There is no legislative framework in place for the district heating sector in Ireland at the moment. Unlike in the gas and electricity sectors, there is no customer protection framework or economic regulatory framework. Having said that, the climate action plan contains an ambitious target for district heating. In anticipation of that, a steering group has been established. Consideration is being given to what an economic regulatory framework might look like. In the meantime, the elements of the existing renewable energy directive and other legislation at EU level are being transposed and, as part of that, the CRU is being given some functions in the regulation of district heating. Those functions have not kicked in yet so we have no function as of now.
The customers to whom the Deputy has spoken are not gas customers but heat customers. The gas customer is the person who buys the gas and burns it to create the heat that is then sold on. Those customers do not have any consumer protection under the current regulatory framework we operate. The company that buys the gas has protection, and if it has an issue with its contract and feels the supplier has not dealt with it fairly, it can bring a complaint to the CRU. Unfortunately, we have no statutory function in respect of individual houses that buy heat. I hope that will be addressed as part of the new district heating regulatory framework that will be put in place.
I would just like to clarify the fact that they are probably being charged three times as much as the rest per KW hour. That is as a result of what exactly. How does that happen? Is it just because the CRU has no regulation over it and because of that the companies can do what they want?
Dr. Paul McGowan:
I know very little about it because we do not deal directly with these customers because we have statutory function. However, the price of gas on the international market is nearly ten times what it was a few years ago. The input costs of the company that takes the gas, burns it and produces heat have gone way up. I surmise that they are passing that charge onto their heat customers. It is possible that some of these customers of these heat companies have seen huge increases in their gas costs, given the level of gas prices on the international markets.
Dr. Paul McGowan:
I fully acknowledge that. One of the things that we are at pains to point out is that in looking at district heating, we first look at what district heating is and which customers are captured by the definition of district heating. That is an important point that needs to be addressed. Second, those customers should be afforded the level of protection that is equivalent to the sorts of protections that are in place for electricity and gas customers. That is what we advocate for and what we are working towards in our deliberations in establishing a new framework for district heating. However, it just does not exist at this moment.
Is it also the case that all of the people who fall under the categories of vulnerability will never be cut off because they depend on equipment, such as an electric chair, a hoist for their child, etc. Will they never be cut off?
Dr. Paul McGowan:
We do not have a timeframe, but I will say that the target for 2030 is 2.7 TW hours of heat being distributed to customers, which is ambitious. I would imagine that over a short period of months or a small number of years that the whole system would be in place. In the meantime, it is a matter of what the Government wishes to invest into delivering new district heating schemes, some of which are already under way.
In terms of the regulatory framework, it is my expectation that there would be a report available with a recommendation on how this should be looked at before the end of the year.
I will pick up on that. I find it staggering that there is no regulation of district heating because it is not new. We have had district heating systems for decades, going back to social housing schemes. Dr. McGowan is saying that it is clearly not the role of the CRU, which has not been given the powers to regulate. That is something that the Oireachtas should pick up because it seems that if the energy supplier in any scheme goes belly-up and cannot pay the gas prices, then many people could be without heat. They are very vulnerable.
I thank Deputy Bríd Smith and call on Senator Dooley next.
I welcome the regulator once again. I want to concentrate on the issue of security of supply. There was a report on "Morning Ireland" this morning by the political editor, David Murphy, who seems to have access to a freedom of information, FOI, request from the IDA, which showed a level of concern about the inability of some of the data centres to connect to the grid based on a direction from CRU and the impact that had had on the sentiment within foreign direct investment. While we rightly have to concern ourselves with the vulnerability of citizens of the State at every possible opportunity, we also have to ensure that we are in a position to provide gainful employment for people.
Anything like the information that would seem to emanate from that report or through that freedom of information is concerning to me and to many people because it somehow sets a bad image of the country. We have done well at attracting continuous investment from outside and that has benefited our citizens and State.
I have to go back to this issue of the vulnerability and security of supply. It is not personal towards anyone but I wonder if the witnesses have done any analysis of the CRU. Do the witnesses believe the CRU is fit for purpose in light of what has happened? The CRU has the statutory responsibility and it was indicated in the opening statement that it intends to broaden its remit and employ more people. Is it on foot of some analysis the CRU has done that it needs to broaden its work? When something goes wrong, it is easy to have the benefit of hindsight and make judgements, but has the CRU done any critical analysis of how we have ended up in the situation we are in with the way those auctions were run, which we talked about the previous day? We can say there were planning and regulatory issues but did the CRU look into its own heart, procedures and processes? In doing so, will the witnesses talk to us a little bit about that? I do not want to be critical but the way the CRU is constituted, it is answerable to this committee and this committee only. Regardless of whether that is good or bad, it places a certain encumbrance on us in terms of holding the CRU to account. Maybe it would suit us if the CRU was accountable to the Government. Then we could be more critical of it and less critical of ourselves, but we have that responsibility. I want to tease through the idea of the CRU being fit for purpose a bit more. That is not a reflection on any individual but on the overall architecture of what the CRU is. The CRU did not set it up either; it was set out in statute. It would be helpful if the witnesses would like to comment on that.
Ms Aoife MacEvilly:
I appreciate that constructive question. We look at ourselves closely and you have to learn from when things are not going well. You have to make sure you understand where the challenges arose so that you can fix the problems. I will ask Mr. Melvin to talk about the EY report shortly, but one of the things we did was to recognise that we needed not just to expand in numbers to accept new roles and responsibilities but also to increase our internal capacity of challenge and analysis. When we asked for additional staff, it included many new areas like offshore energy generation and the strategic impact of same in anticipation of new functions coming in. We also looked to enhance the numbers and capability we have internally to ensure, from a strategic perspective, we are better fit to look at the enormous challenges that lie ahead of us.
We have a sector that is in incredible transition, with decarbonisation, security of supply and cost challenges all coming to a head. We asked for and were fortunate to receive support for 73 additional staff. Some of those are for the new areas I mentioned but some of them are to enhance our capabilities internally. One of the areas where we want to enhance internal capability includes security of supply. We had potentially become dependent on third parties giving us information and we probably need more of an ability to assess critically and come to views on that information ourselves. That is the area and that would have then been highlighted in the EY report about how to apply critical assessment to some of those challenging issues ahead of us.
Mr. John Melvin:
I thank the Senator for the way he phrased the question. I want to be clear that the security of supply concerns we have predate the Russian invasion of Ukraine and they are not unique. Other entities and countries across Europe see security of supply concerns for entirely different reasons.
France has security of supply concerns with regard to nuclear. Norway has security of supply concerns this year with regard to low water levels for hydro. Finland and Sweden have security of supply concerns linked to nuclear. None of that is to say that the capacity remuneration mechanism, CRM, that we designed was perfectly put in place, perfectly designed or perfectly operated. The point of the EY report was to examine the design and operation of the CRM to see how it might be made better. Clearly that report is in the public domain.
The single electricity market, SEM, committee has a call for evidence whereby we are calling on industry and any participants that wish to respond to respond. It is a comprehensive and thorough external examination of the CRM. I think it is unflinching in its recommendations and in its examination. As the Senator said, no one has hindsight in advance. I think it is a thorough, impartial and unflinching examination.
As for the many complex issues we need to deal with, the last time we were here, the Senator asked about planning permissions as a requirement to enter the capacity auctions. There is a balance to be struck in all these decisions. For example, if there are too many barriers to get into the auctions, people will say there is a barrier to entry and we are keeping out, for example, new entrants. Other people may then say there are not enough pre-qualification requirements. Either way, there is no definite right or wrong answer in advance and balances must be struck.
In any complex mechanism like this capacity remuneration mechanism, people will have different opinions, with some suggesting X and others suggesting Y. It is the job of the regulators, both North and South, in this case the single electricity market committee, to seek to strike those balances. Some of those balances work well and some, with hindsight, could have been done differently. The point of this review is to take stock of where we are now. It is a very thorough review and we welcome anyone's comments on it. If I say any more, I will be repeating myself.
I have met and spoken to a number of new entrants who believe they provided information to the regulator back to 2014 and 2015, which clearly set out the constraints that they saw. I have seen the documentation and it is very clear. The documentation was provided to the CRU. It sets out a very clear pathway to how they might be able to participate and the encumbrances that would prevent them. The documentation that was produced in 2014 and 2015 charted what happened. I go back to what I said the last day about the way in which the criteria allowed the ESB to participate. I have not suggested it did anything wrong. It saw what was in front of it. It cornered a big slice of the market and failed to deliver. I find that hard. I have said this to people in the ESB. I have great regard for what the ESB has done over the years, both internationally and domestically. It is a wonderful company. I find it hard to accept it has failed in such a spectacular way, although I must take its word for it.
Those in the CRU are in a regulatory position and have a different role. The ESB pays its fine and moves things on. The CRU goes back with its T-3 auction and the bid goes from €46,000 or €47,000 per megawatt to €138,000 within a very short period. I believe that warrants deeper investigation by the CRU. In fairness to the witnesses from the CRU, on the last day they asked me to provide the evidence or documentation I had. Sometimes it requires a regulatory authority to put all the bits and bobs together. If it starts to quack like a duck and walk like a duck, maybe it is a duck. Maybe the ESB has not done anything other than play the market as it was, but the market regulator has a responsibility.
I am not trying to apportion blame but it would be helpful if, at some point, we could get all of this out there to say what happened, even if it had not been the intention. Candour would be helpful, and we will be asking the same of the ESB in due course. Many people invested with goodwill to try to be part of those new entrants, and candour would benefit everybody. Many of them lost out and have left the scene, so there are problems there. If the commission could analyse that further, that would be helpful.
Mr. John Melvin:
Page 39 of the EY report carries a case study on the ESB plants that were bid into the T-4 auction for 2022 and 2023. That is laid out there and clear for all to see. Every consultation we carry out attracts differing views from industry. Some entities, as I said earlier, will ask for certain items, while other entities will say they are the wrong items and identify a different approach we should take. Those responses can be seen on our website and we conduct our consultations in public. One could pick any decision we make, look back on it in time and find someone who was against the decision the regulator made; that is almost inevitable.
Nevertheless, a significant number of what I would call non-incumbents have come in through the capacity market, some of which were entities that would have engaged with us. For example, there are new entrants in both the Dublin region and the broader region totalling 1,450 MW of name-plate non-incumbent people. As we spoke about at the previous meeting, we have a market-monitoring unit and if it receives complaints, it will follow up on them. We have to treat any complaints we follow up on with the strictest confidentiality, both for the complainant and for the entity against which the complaint was made. We have received a number of complaints and we are investigating them. That work is under way.
Dr. Paul McGowan:
I might add that regarding letters setting views on the capacity remuneration mechanism during the timeframe the Senator raised, we were at that point going through a complete redesign of the mechanism. We received dozens or even hundreds of items of communication relating to the design of that capacity remuneration mechanism and we analysed all of them. As the Senator will appreciate, we receive a wide variety of views and we try to come up with a design we think is going to work. It is not surprising, therefore, that he will have seen views expressed that were quite trenchant on one side. Equally, however, on the same committee website, he will see a list of all the other letters setting out equally trenchant views on the other side of the argument. That is part of the consultation we go through to try to determine what, on balance, is the best overall design for the capacity remuneration mechanism. As the EY report has identified, perhaps we did not get it 100% right, and now is the time to start looking at that. That is a natural part of the evolution of a market.
I wish to follow up on questions that were asked earlier and I am seeking only "Yes" or "No" answers. In regard to opting in to the smart meters, will the portal be available as a phone app? In Britain and other countries, people can use a tablet or screen to see their usage live. Will it be as accessible as possible? I do not want people to have to log on to websites and key in passwords every time they want to view their usage.
Our guests stated that hundreds of megawatts of batteries are coming onto the system. When I met representatives of Energy Storage Ireland, they stated that the grid would require a software update to facilitate the likes of multi-hour or multi-day batteries.
Has that happened? In Britain, energy batteries of that size are displacing gas-powered generation.
Mr. John Melvin:
Batteries are still being dispatched through a non-automated system in the control room. That is one of many pieces of software changes and upgrades that are scheduled. Each one is complex and is released in what is called a drop where we take five, six or seven significant pieces of software changes, test them with market participants and then drop them into the market. Such drops can happen once or twice per year, so it could be some time before there is a more automated system. However, the batteries are being dispatched. In fact, the batteries currently on the system are being dispatched for the next period in a way that generally maximises their availability during the peak time or security of supply concerns.
Does Mr. Melvin not believe that it should be prioritised? It was flagged with us by Energy Storage Ireland as a barrier to incentivising those who want to enter the Irish market to supply battery storage and large-scale batteries.
Mr. John Melvin:
Yes. As one of the many pieces of the complicated piece of software that has to be considered over the next period of time, batteries can be dispatched and are being dispatched. It is labour intensive on the side of the grid-scale developer and on the side of the system operator. There are many competing elements of the software that need to be upgraded. For grid-scale operators, the incremental cost of the manual intervention is likely to be small in the context of the overall investment.
Deputy Bríd Smith asked about data centres and demand. Has Gas Networks Ireland, GNI, been in contact with the CRU about the former's concerns? Much of the focus has been on grid connection. From looking at the graph using GNI's data, though, there is exponential growth in gas demand by data centres. The concern is that, if we are not controlling that stream, the centres' other option is diesel generation, which would blow our carbon budget out of the water. Has GNI flagged these concerns with the commission and what action is CRU taking on them? To reduce our dependency on gas as part of the EU's solidarity with Ukraine's war effort, we have signed up to a 15% demand reduction.
Ms Aoife MacEvilly:
We are engaging with GNI on this issue. It flagged to us that, from the time that we put in place the new connection policy on the electricity network, which would have precluded many new projects from signing up to the electricity network, it started seeing increased requests for data centre connections to the gas network on the basis that data centres would operate their own gas-fired generation on site. GNI flagged to us that this could create a much higher demand profile on the gas network. We are engaging with it on what the best way of managing that is. We are in the middle of what is called a price control, namely, the five-year network review. We are in the middle of planning what is needed in terms of investment over the next five years. We will clearly prioritise for GNI that new generation facilities that will provide security of supply to all customers on the island must be prioritised in terms of gas network capacity. With GNI, we are also examining the implications of the new Government statement on data centres.
I cannot remember the wording but a concern was raised around islanded data centres, which is what we are referring to here. We are looking at how that might be addressed.
Most importantly, our focus is first on security of supply. We need the capacity for gas generation. Second, we also need to look at the implications for the carbon sectoral emissions limits. There is a point at which we have to look at what impact demand is having on those sectoral emissions limits. There is a bit more work to be done but we are engaging with GNI on that.
I will ask two very short questions. The other issue is around demand reduction. I have looked at what other European countries have done. In Germany, they have asked for LED billboards to be turned off and their usage reduced to six hours per day. The NGO in Britain, Adfree Cities, said that LED billboards can be the equivalent of from four up to 33 households, depending on the size and colour of the advertisement. Is that something at which CRU could be looking to address our demand reduction? Given that we have pressure on the grid at certain times, should it be part of it that those billboards go off, say, for example, between 5 p.m. and 7 p.m. and 7 a.m. and 9 a.m. just to relieve pressure on the grid? Is that something the CRU would consider?
We have seen two electricity suppliers go out of the market. Electric Ireland generally follows then as the supplier of last demand. It is trying to plan ahead. It has to buy gas; it has a set number of customers and is doing that forward planning. Iberdrola left the market with no gas reserves or anything and that affected 35,000 customers. Electric Ireland had to then pick up the slack and go out into the market to buy gas. Panda Power now has in the region of 60,000, 70,000 or 80,000 customers. If more of these companies are going to go to the wall, what sort of stress testing are we putting in place that will not negatively impact on Electric Ireland providing the best possible value to customers, but also for those customers of last resort?
Ms Aoife MacEvilly:
In terms of demand reduction measures, there is a mix throughout the EU at the moment of mandatory demand reduction measures and voluntary or market-based demand reduction measures. We are probably more focused on the voluntary or market-based demand reductions as a regulator. Those are the kinds of areas we have been tackling through what we are looking at through network tariffs. ESB Networks Beat the Peak scheme, for instance, which we think could really incentivise customers around reducing peak demand. Most what we are looking at is sort of market-based or voluntary incentivisation.
The energy security emergency group, ESEG, of which we are part, is looking more at what additional mandatory measures could be implemented. Those initially, at least, focus on the public sector. We will be participating in that ourselves. There is a real opportunity for the public sector to demonstrate leadership as well. As a public sector as a whole we have already demonstrated that we can reduce demand. We should generally look at all the other measures at which other member states are looking. I do not know if any assessment has been done around the scale of savings for things like the measures the Senator called out. We are all going to be called on this winter and, unfortunately, possibly into next winter at least, to do the maximum possible to reduce overall demand, peak demand and demand at times of system stress.
Ms Karen Trant:
The ESB is designated by legislation as the supplier of last resort. The Senator is correct; it is an expensive process to acquire new customers at the moment when a company has not planned for them. Panda Power has somewhere in the range of 40,000 domestic electricity customers and a smaller number of gas customers in the region of approximately 9,000.
There is a period of time for customers to switch, which we think is really important. What we plan is an orderly exit rather than a disorderedly exit where a supplier just goes out of business overnight. That is really not the scenario we want.
We are engaging with the suppliers. There is no indication that another supplier will follow. That is no guarantee. Suppliers are being pushed at present, especially the smaller ones. The cost of acquiring those new customers at today's prices is high. There is no mechanism for recovery yet. We are looking at that with the suppliers of last resort but, again, the way to do that is to either socialise it across all the other electricity customers or find another mechanism to do it. We are looking at that and it is something that has been raised. We are also engaging with all the suppliers to understand their outlook for the next six to 18 months and potentially to stress test around that. There are no indications at present but that is no guarantee.
Could the CRU look at certain companies to get recovery? For example, Iberdrola is a very profitable huge company in the Iberian peninsula, Spain in particular. Is the option to look at such companies on the table? Iberdrola walked away and left many employees out of work, in addition to leaving Electric Ireland to pick up the slack in respect of its 30,000 customers.
That leads to my next question. I will return to Ms MacEvilly's response regarding the notion that putting people on the best tariff for them will increase the price, if everybody is on the best tariff. That is what she said earlier. How do we then ensure that everybody is on the best tariff, if she is saying that we cannot put everybody on such a tariff because it will increase the price? That earlier response does not stack up because the CRU's entire remit, under response 22 in the framework, is to ensure that customers are on the best tariff. How does Ms MacEvilly address that point? Is she saying that if everybody is on the best tariff, even if they select it themselves, we will see a price increase?
Ms Aoife MacEvilly:
When people refer to the best tariff, they are usually talking about the deepest discount available for switching customers and customers who sign up for particular packages and years. If everybody is switched to those packages, the money available from the supplier to support the discounts has to be spread over a larger pool of people. In any given year, a supplier will offer discounts to attract new customers. Those discounts are paid for by the supplier. It those discounts are allocated across the entire set of customers, those discounts will automatically be at a lower level for the entire-----
Ms Aoife MacEvilly:
This is where our approach is to empower customers to make the best choices for their particular set of circumstances. That can vary according to a customer's own preferences. The most basic offer in the past was based on whether customers preferred direct debit or pay as you go, which are prepay-type choices. Did they like paperless bills or did they prefer to get a bill? Those were fairly basic options that customers could choose from as the best choice for themselves.
We will increasingly see customers thinking about time-of-use tariffs and specific tariffs that have been developed to support EV charging off-peak.
We will see tariffs that are designed around microgen export and tariffs that are designed for different sets of circumstances. Our approach is not to say that one size fits all and that everybody has the same needs and the same preferences but rather to give customers better information and better support, and more confidence to go out there, look around at what is available from the various suppliers and pick the option that is best for them. That is what we mean then by the best choice for a customer.
Ms Aoife MacEvilly:
We have done research which suggests that customers are also interested in low-carbon options as well as cheaper options. There can be demographic differences between the customers whose preferences are around the lower carbon options. I do not think it is fair to say that the cost is the only issue for customers. Customers have a range of preferences. Some customers like pay-as-you-go options because it avoids large bills. We see that in our customer surveys. However, I would not say that is the best approach for every customer. We see some customers who want green tariffs and the ability to export microgen, but that is not the best option for all customers. That is why our preference is to support customers in making the best choice for themselves. That will be different across a range of households. Every family and business is different. The main concern we have is that, at the moment, customers may be lacking information or confidence. We have done a lot of behavioural research on the barriers preventing customers from making the choices that will benefit them most. We are trying to remove those barriers and to give customers the information and confidence.
I still have concerns in relation to that, because I think the complexity of it is the thing that stops people moving and choosing a tariff. For the most part, they just want to know what is cheapest. Ultimately, that is what most people who contact me want to know. I was concerned at a statement that was made earlier, which was that we are just at the start of the work in relation to smart meters. It is due for implementation by quarter 4 of this year, and the CRU is the lead organisation on that. Is it on target to have all of this smart metering, these apps and so on and so forth, implemented on time? If there are 1 million people with smart meters, is the CRU confident those 1 million people will have the information they need to be able to choose the best tariff by the end of this year?
Except that, with respect, the CRU is the regulator, and we already know those websites have existed for a long time and people still are not choosing the best tariff for them. The point concerns the work that CRU does itself.
Ms Karen Trant:
The hub and the portal will be a key for customers. There are 1 million smart meters with a lot of information that has to be transferred over onto the hub. Those on smart tariffs will know their usage, but the rest of that cohort will not. It will take time. The plan has a six-month timeline. If we take from November into early next year, that is when the 1 million customers should be able to go onto the hub and the portal and gain access to their usage. It will be 2024 before the full roll-out of the other piece will have happened. The technology is also changing. There are more sophisticated meters that are going to go to customers, which will provide better information they will be able to use. The work is on target. The information piece is critical. We want people to be able to access it. They will be able to access it from November onwards, but it will not happen in 24 hours. There will be a period of time before it is rolled out.
On the security of supply, we have already discussed the failed auction in 2019 a number of times and the recognition there were potentially some issues with how that auction was carried out. If I recall correctly, the last time the CRU was in, there was discussion of doing a review or an investigation into what happened.
Notwithstanding the review that was published yesterday that said there are no major concerns around energy security, if we had that extra energy supply we would not have any concerns at this stage. What is the status of that investigation or review?
Mr. John Melvin:
We hired EY Consultants to conduct a review of the capacity remuneration mechanism, CRM, its design and its operation since it went into place. Following the auction in 2019 some 500 MW of capacity that was awarded did not proceed in the end. The report is published on the Single Electricity Market, SEM, committee website and there is a call from the SEM committee for any evidence or comments that any parties might have on that. It is an unflinching examination of the design and operation of the CRM thus far. That is out there. Industry bodies were consulted on the report as it went out, as were the regulators, North and South, and the Department. It is a substantial document with clear recommendations. The SEM committee published its initial views on some of those recommendations and issued a call for comment which closes some time in October. Some of the recommendations are already under way or in process. In terms of the report itself on the auction, it is out there and comments are welcome. The SEM committee will issue a response to any comments received.
I am afraid I have forgotten the second part of the question-----
Mr. John Melvin:
Yes. The SEM committee has a team called the market monitoring unit which monitors the market in its own right. It is also the entity to which any complaints are directed. Any complaints that are received are treated in the strictest confidence, both in terms of the complainants and the entity against which the complaint is made. We have received a number of complaints regarding aspects of the operation of the CRM over a number of years and investigations are under way but I cannot really say much in regard to those at this point.
I thank the CRU for its presentation. There is a lot of talk about empowering and protecting consumers and customers. It appears that there are lots of measures to help people to pay for energy but there are very few measures to reduce the cost. A constituent of mine sent me a copy of a bill yesterday for over €400. He is in receipt of disability benefit and has already cut back as much as he possibly can. How does the CRU hope to empower him to reduce his bills when he does not even know the CRU exists?
On security of supply, is the CRU liaising with the HSE with regard to vulnerable customers? Ireland has the highest rate of chronic obstructive pulmonary disease, COPD, in the OECD. It is really important to ensure there are no huge variations in temperature for COPD patients because such variations can cause their airways to close. We also have the highest rate of hospitalisation of COPD patients. I am also concerned about people who rely on hoists and dialysis machines. Has the CRU increased its level of interaction with the HSE around identifying vulnerable customers? As already discussed, lots of those customers do not know that they are technically in the vulnerable customer category.
On standing charges, Ms Trant mentioned that the CRU does not have the legislation and it is not under its remit. Have the witnesses discussed this with the Minister for the Environment, Climate and Communications to try to get it under their remit and see if legislation is needed, what legislation is already in place and if we could get on with that? People would expect the CRU to be across standing charges and that such charges would have to be negotiated with it. That is the crux of the problem. This is the climate committee. The only reason it exists is because we are in a climate crisis. Suppliers are increasing standing charges in order to offset energy reduction because the increasing price will be a reduction in the amount of energy people consume. It is vital that the Minister addresses that. It shows the problem we have in facing the climate crisis under our current economic model. It is only for profit. We should never have sold the shares we sold in ESB. It should not be for profit anymore. We cannot just keep consuming. That is me making a statement after asking the witnesses a question. What do they tell that OAP on disability? How will they empower him?
Ms Aoife MacEvilly:
We understand this will be really challenging for many customers like the one the Deputy outlined, and for many families and businesses. This is a real challenge for this winter and, unfortunately, probably for longer, given the high prices we are seeing. We have put in place some customer protections which, as I mentioned earlier, are one part of the jigsaw that needs to be put in place to support customers during this period. Another part is being addressed by the European Commission in its new regulation whereby the windfall gains of some generators in the market should be taken and distributed for the benefit of customers paying higher prices. That is an important measure.
We are not party to it, but we understand that the Government is looking at a cost-of-living package to support customers. We will work with it and with industry, as we did in the distribution of the electricity credit earlier this year, on any measures appropriate to the energy sector.
We would reflect on the ESRI report earlier this year looking at the best ways to target customers most in need, which probably include the person the Deputy spoke to earlier, in terms of their ability to manage costs through this winter. Some pieces of the jigsaw are not in our space but we will do whatever we can. I acknowledge this will be really difficult.
Ms Aoife MacEvilly:
We have a new communications campaign. Before now we had communications campaigns which were largely social media-based but we are putting much more money into above-the-line advertising on radio and national newspapers. We are really trying to get that message out there. The Deputy is right. We have called out the fact that there are not enough customers registered as vulnerable customers. They are not aware of the protections in place for them. We want more customers to be registered. We are asking suppliers to reach out again. They reach out to their customer base periodically.
Ms Aoife MacEvilly:
No, we do not necessarily talk directly to the HSE. It is difficult to link up. It is one of the challenges generally. Suppliers see a meter point registration number which may not relate to the people living in that house or their various needs. It requires the people to put themselves forward and say they want to be registered as a vulnerable customer.
Ms Aoife MacEvilly:
I do not believe we have talked to the Minister about legislation in that space. As I said, in general the EU regulation under which we tend to operate has been about moving away from price regulation. I should be clear that the commission does have a role in setting the network charges that are charged to suppliers but we do not have a role in how exactly those charges are passed on to customers, any more than the unit rate charge either. That is set by competitive markets and we do not have a role in regulating those charges. We have not sought to gain new powers in that area.
Yes, just to get that information out there. People are very nervous and particularly older people who always like to pay their bills. They pay their way and do not like to borrow. Some of them would find themselves disconnected and dying of the cold and still being charged a standing charge after that. I do not know what is around us.
I have a few questions building on the questions asked by Deputy Cronin. I have another set of questions on the energy demand piece.
On the standing charges and the moving away from price regulation, I believe it is pretty clear that the position in the European Union is no longer about moving away from price regulation but is about much more hands-on measures on price caps and thresholds. This is clearly what we are seeing right now from the EU. In that regard, the standing charges piece seems to be absolutely central. The point was made previously by Senator O'Reilly and others about why we do not have the lowest cost of default. The witness mentioned that some prefer lower carbon options but now we know that the renewable energy or the lowest carbon options will be the lowest cost options. It is not just a matter of preference. We have a collective public priority to move towards the lowest carbon option and that also happens to be the lowest cost. Why would we not put a requirement in for the lowest cost and the lowest carbon option in that regard? This is around the transition from gas. I am really surprised to see the key role of gas in security of supply when we know that gas has this huge price volatility. I am aware that there is an emergency measure for gas because many people in Ireland are on gas heating, but we should look specifically at how we are helping people to transition away from that more volatile and more expensive fuel of gas and at supporting people more actively, not to just to choose, but to be supported into moving towards lower carbon options, be that individually or collectively with district heating.
I note that the EU directive is not just around giving back to customers. We do not want to end up with just another subsidy to fossil fuel companies. It is about channelling it to those who need it most. It may well be that those levies put on those companies, and on gas in particular with its huge profits, may be directed into supporting people proactively to make a transition to cheaper low carbon, which is something that people may not be able to do on their own. That might need to be fully funded by the State. I am thinking in particular of collective users.
On the standing charges issue, in all of this talk of smart meters and hubs it strikes me that first of all we need to be realistic that 42% of people in Ireland lack basic digital skills and will not be going online to deal with these issues. If the standing charges are allowed to increase regardless of use it completely undercuts such measures. It is not just bad in the context of energy shortages and the poverty impact this will have on people; it is also very impactful around the transition to low carbon. It seems that it is counter indicated with transition to energy reduction if the standing charges go up in any way.
In that regard, Ms MacEvilly might comment on the low-usage standing charge for those who have extremely low energy usage. The fact is that was removed, but as I understand it, from May, the standing charge for those with very low energy usage went up. They were effectively penalised, as they are no longer getting the benefit of being a low energy user. Could Ms MacEvilly comment on standing charges and how credible it is to talk about smart metering if it all gets undermined by a standing charge increase? There is a need for a far more hands-on approach to address the price thresholds and the transition to lower carbon options. I have a different set of questions, but I will group them.
Ms Aoife MacEvilly:
On the standing charges, first, where homes are connected to the network there are costs associated with providing those network services to those customers, which must be recovered. Some of those costs exist even if the customers are using very little electricity, because it is a holiday home or because they upgraded their home to A-rated status or whatever else, or they are using solar photovoltaic, PV, during the day for their electricity but they still require additional electricity at peak times. There is a basis for having a standing charge. It is a socialisation of costs, which ensures that everybody pays their way and that customers who can afford to invest in upgrading their home are not being subsidised by customers who cannot afford to do so. We do think there is a basis for having a standing charge. It is a fixed cost, if one likes, associated with serving customers. Some of the concerns Senator Higgins raises are about whether the standing charge becomes such a high portion of the bill that it perhaps disincentivises those who are trying to reduce their energy costs. That is perhaps something we will examine when we look periodically at the component costs of a typical customer's bill. We look at the extent to which there are fixed costs, unit charges, the PSO levy and VAT. All of that changes over time. It is a good point to look at that and see if after the current round of price increases over time there is a dramatic change in the proportion of fixed costs versus unit costs that would give rise to concerns about disincentivising reduced usage. That is valid and is something that we will continue to monitor.
It strikes me as more of an emergency concern as well. It is quite pressing. I do not think this is a long-term piece. We have seen standing charges jump massively at a time when profits have gone up massively. With respect, I do not think that the standing charges costs have gone up so massively for the companies. It seems to be something that requires market intervention rather than a wait-and-see approach.
Ms Aoife MacEvilly:
Unfortunately, the network charges have increased. Senator Higgins is aware we are currently consulting on new network charges in electricity, which include the cost of the temporary emergency generation. Those costs are increasing also. We have taken steps as much as we can to reduce the impact on customers. We have taken the decision to rebalance €50 million away from domestic customers to the large users.
We also looked at what we could do to mitigate cost inflation on gas as well. We took a number of steps, which are outlined in the network charges paper for gas. Unfortunately, we are seeing those gas network charges increase, but not as much as the electricity network charges are increasing. It is the case that there are increased costs associated with networks at the moment.
Turning to the role of gas in security of supply, the Senator will be aware that the Department has published its review of security of supply, which covers electricity and gas, and that reinforces the important role that gas-fired generation plays, in particular as we move away from fuels like coal and oil which emit more carbon.
Gas emits less carbon. The technology for gas-fired generation is more flexible-----
I asked something different. I was concerned that the witnesses talked about gas for all customers. How is the CRU supporting both domestic and larger customers to move away from gas and towards renewables, given the price volatility relating to gas? I accept that many people rely on gas, but we know that the price of gas is extremely volatile. What is the exit? I asked about the lowest cost and the lowest carbon. Why not make that the default? Those who want something different, such as a higher cost and higher carbon, could request it if they need to.
Ms Aoife MacEvilly:
I am not sure it is clear, at the moment, that the lowest cost is also the lowest carbon. It will take some time, as we invest significantly, to upgrade our network infrastructure to build more renewable capacity before we see the full benefits of increased low-carbon supply in the system. Time-of-use tariffs are a good way to provide that benefit to customers. There are lower charges overnight, because one is effectively supporting renewables that might run at night which might otherwise be curtailed because there is not enough demand. Options such as moving consumption to off-peak times deliver lower costs for lower carbon.
I am sorry. We discussed those measures at great length. I was looking at people who are trying to shift suppliers and who are dependent on gas at the moment. How could we use some of the levies that will be placed on gas to facilitate the transition? It is fine. I am happy. I had a separate question.
I promise I will be brief. I have two questions that I did not get to earlier. Some information the witnesses provided relates to arrears and the electricity market with the caveat that we are going into the winter period, so it will become more difficult for people. That seems to be fairly static, but it is not the same for domestic gas customers. The witnesses mentioned that they have provided that. Will they elaborate on what measures the CRU is taking for domestic gas customers to make sure that we will not see people disconnected from their heating over the winter months?
The witnesses referred to targeting customers who are most in need. We know that Traveller households pay a particularly large proportion of their income towards their energy needs. Many Travellers did not receive the energy credit because of the shared MPRN. That was flagged with the Minister at a select committee meeting. Is the CRU engaging with the Department and local authorities to make sure, particularly now that we know there will probably be three credits, that those who are the most in need in the Traveller community, namely, those living on halting sites, will benefit from the electricity credit?
Given the trajectory, it is quite a large increase. Do we need more bespoke measures, particularly for gas customers? It might be something equivalent to the credit but just so there is something extra there because, as we know, it is gas that is inflating all of the prices, and people are relying on it heat and then there is the electricity as well. Is it of concern to the regulator, given the growth in it, that it might need a set of measures particular to domestic gas households?
Ms Karen Trant:
The Government has not announced anything on that. We would certainly monitor disconnections and the arrears to see if there is a pattern there. If something is needed for gas customers, then yes, absolutely. We certainly do not want any disconnections or gas customers running into difficulty. Again our message to people is to engage with their supplier and make sure their supplier is aware of their circumstances. It should be a customer-led rather than a supplier-led approach in dealing with the customer, which has happened in the past.
The issue around Travellers and halting sites was something that came up during the last round of credits, and that was because some of the halting sites might be run by the local authority and therefore the local authority is actually the customer and is in control of the credit. My understanding is that there will be a mechanism to reach out to those halting sites. It is not something the networks can see but it is definitely something we will be able to approach. We sit on the electricity security supply emergency groups and this is something that has come up. We are engaging with the NGOs and the Department of the Environment, Climate and Communications is also looking at this to ensure the credits reach the particular cohort of vulnerable customers who could be missed.
Is the CRU advocating for a backdated payment? In some cases the halting sites got no payment but in others it was divided up among the number of mobile homes because it was a single MPRN. They were getting €200 but actually the families were getting about €7 off their bill. I am just flagging that there is a multitude of different issues but it meant they all lost out on the full benefit of the €200. Will they get retrospective payment because they lost out last year?
Ms Karen Trant:
It is a case of one MPRN, one credit. That is just how the mechanism works. That information has not come our way. If that is the case, we can work with the various agencies to make sure it does not happen or at least the local authorities are able to distribute that in an equitable way.
I will ask a question that is not really on the agenda but the timing of the meeting, coming the day after the energy security review was published, is excellent. Have the witnesses anything to say on it? Would they rather not say anything on the energy security review? I am sure they were consulted in the process of putting it together.
Dr. Paul McGowan:
No, I am happy to speak about the energy security review. The only point I would make is that it was only just published so we have not got fully formed views on it yet. We will be responding to the review. We welcome that it has put forward a package of measures. There are many sensible measures proposed there.
Some measures are individual and some are in packages. When we talk about energy security, which I would separate from the security supply work that is going on at the moment, we are talking about whether we will have enough gas security to support the transition up to 2030 and beyond. The review is asking the right questions, and some of the solutions it is coming forward with are sensible. We welcome the review and will respond.
There was a discussion about reflection and looking back at areas. In some of the written pieces from the CRU on the ongoing data centre discussions, I noticed there were multiple references to EirGrid but almost no reference to the review the CRU conducted that considered the options of doing nothing and a moratorium on data centres until the demand can be safely and securely facilitated by the network, and then the subsequent connection measures. I say this in the context that we were told, the time we met EirGrid and the CRU, that a 9% increase in electricity demand over five years was not an outlier, but I know from the information we have been given since that it is an outlier, and it seems the average in most EU countries is an overall net growth of zero percent. There has been either flat or declining energy usage in most countries, so effectively zero percent growth in electricity demand is the norm, whereas Ireland has had a 9% increase in electricity demand for the same period. The figures for the same five-year period show a 265% increase in the electricity demand from data centres.
In the current context where we are having literally to consider measures such as keeping the lights off or reducing the use of lights, has the CRU reflected on the decision not to apply the reasonable standard of having a moratorium until the demand can be safety and securely facilitated by the network and instead to go with a couple of connection measures? On the decision the CRU made not to limit the expansion of electricity demand by data centres but to look instead at connection measures, will the delegation comment on two of them in particular? One is the question of backup generators and the extent to which they rely on fossil fuels. We know, for example, that two of the new data centres that have been given planning permission have diesel backup generators. Perhaps the witnesses could comment on the danger of locking in that in terms of backup generation, which is fossil fuel-based generation happening in data centres that are being built and ones that are newly proposed to be built.
The CRU mentioned the ability of data centres to provide flexibility in their demand by reducing consumption. I would like to clarify what is meant by that. Are we saying the data centres must reduce demand at peak times and they can be required to do so? Is it, as mentioned here, something they could be requested to do or is it, and I was quite concerned by the reference to this earlier, the idea of procurement auctions around demand reduction? Is the suggestion we would have to bid for companies to reduce their energy demand? I was very concerned about the suggestion, which seemed to be, and I hope I got this wrong, that a hospital might bid for energy reduction bonuses or payments against other companies. We certainly should not have a situation where for-profit companies can choose not to reduce energy where hospitals are effectively being told they should seek to reduce their energy costs and so forth by bidding for demand reduction. Either Deputy O'Sullivan or Deputy Leddin made the very sensible suggestion that surely we should just pay for battery power in our public and essential services rather than have them going into a demand reduction procurement market. Is that where the CRU sees data centres going?
I want to be clear as to whether that reduction of demand from data centres is a hard power we can exercise. Are our guests suggesting they may choose to participate in a demand reduction procurement market?
Ms Aoife MacEvilly:
On the question about the demand trajectories, we note that in the security of supply report published yesterday by the Minister there are similar graphs for electricity and gas demand that show Ireland is on a different trajectory to the rest of Europe in respect of the growth in demand for electricity and gas. The EU is a big place and there may be other countries where demand is growing and still other countries where demand is decreasing. However, we are on a different trajectory to the overall average.
The Senator asked about data centres. In the new data centre connection policy, we looked for on-site back-up generation. We are completely open to that being a combination of on-site renewables and battery storage, which might work in some cases. As a part of the new approach to carbon sectoral emission limits, that is something we start to look to in order to understand their impact on future growth in this kind of space because it is-----
Ms Aoife MacEvilly:
That was the published decision. The focus of that decision was very much on security of supply. The other options around flexible demand support security of supply but would also be a lower carbon solution. Sometimes data centres refer to it as chasing the wind or following the sun. Some of these large global operators have data centres at multiple sites across the globe. Therefore, at times of low renewables or at peak times in Ireland, they could switch the processing capacity and the electricity demand or load to locations that have high renewables at that particular time. That is attractive. Of concern to us is that in the responses we have received to our consultation on the network charges, the indication from some of the sector is that while this is a future option, it may not necessarily be available this winter. There is some concern in our minds about whether it will be available. We need to understand that better.
On the procurement for demand-side services, we were considering an approach in our network tariff whereby people would be charged and could avoid the charge by reducing their use at specific times. The EU regulation on emergency measures and supportive energy prices sets out a different approach whereby customers should be incentivised in the manner the Senator described. In other words, they would compete to earn money to reduce their use. I am simply repeating what is in the regulation. That approach must be implemented on a non-discriminatory basis. It would tend to argue against the approach we were looking at and argues for a different approach that still targets the same benefits. We are pleased to see that as part of the package. However, perhaps we need to reflect on the approach we are taking to ensure it aligns with the EU requirements. I do not think that necessarily rules out the idea that there could be other options to support essential services to get batteries on site. If that were a policy decision that the Government was to take, there may be other ways of incentivising them. I am not sure that hospitals are best positioned to bid to reduce use. What we want to do for hospitals is to ensure they have continuous supply. That is why they are on the priority list for any of the emergency measures. Perhaps a different approach is required for them.
To be clear, has the CRU reflected on the decision not to suspend the increase in demand for data centre energy until it could be safely and securely facilitated by the network? That was the second option, which was not chosen. As I understand it, this does not relate simply to the day-to-day. The discussions were around what conditions would be attached to connections and to requests for connections. It would have been within the remit of the CRU to have, for example, a conditionality around requirements for energy usage or reductions. There is therefore no hard power that requires data centres to reduce their energy use. The option was not chosen to make an obligation to comply with such requests a condition of having access to the grid. Is that correct? Has there been any reflection on that given, as the CRU has said, the disappointing information that is coming through on foot of the CRU not going with the moratorium two years ago, when that was one of the options available to it?
Ms Aoife MacEvilly:
We will be reflecting first on the new Government statement on data centres because that implements or introduces some different concepts or approaches. We will be reflecting on that and we will be engaging with the system operators on that. This will include, as I think one of the Senators referenced, the gas side of the of the equation as well. We will reflect on that and we also get updated reports on a regular basis - I think quarterly - from EirGrid and ESB networks on the implementation of the new approach. Can Ms Trant remind me whether we signalled that there would be a review on that in any case?
As somebody who submitted all of those points when the CRU was conducting the review, as many others did also, it is unfortunate that we are the situation we are in now, where we do not have any hard measures. That is regrettable.
I thank Senator Higgins. That is all for today. I thank our guests today for coming in again so soon after they appeared before the committee just a few weeks ago. Hopefully it will be more than a few weeks before we have them in again. I will adjourn the meeting now until our next private session, which will be later in the week at 3:30 p.m. on Thursday, 22 September 2022.