Noel Dempsey (Meath, Fianna Fail)

I thank the Whips for organising this debate so soon after the publication of the Green Paper. I think it is important that we have such a discussion in this House and perhaps, towards the end of the consultation period, it may be opportune to discuss the matter further. There have been many policy papers and a great deal of analysis of the Irish energy sector in recent years. Following consultation, the Government published a Green Paper on sustainable energy in 1999 which set out the framework for sustainable energy strategies. This framework has served as a solid basis for energy policy, notably regarding renewables. Seven years on, there have been significant worldwide developments in energy. The Government's new Green Paper sets out the energy challenges in light of those developments. The Green Paper is set against a global and EU backdrop of high energy demand, volatile oil and gas prices and environmental challenges. It is also set in the context of the specific challenges facing Irish energy policy.

The Government attaches the highest significance to energy policy. There is almost no other policy area which is so fundamental to the economy and society. We have crucial decisions to make in terms of energy policy options for the country into the future. The new energy policy framework will meet the national goals of ensuring safe and secure energy supplies, a sustainable energy future and competitive markets for Irish consumers and business. Previously held assumptions about security of supply and costs must now be seriously challenged. Those challenges are being confronted globally and by the European Union, as well as by Ireland. Addressing these challenges requires an integrated approach across Government. Cohesive thinking by Departments and agencies will be the hallmark of energy policy from here on, as outlined in the Green Paper.

The Green Paper underlines the imperative for energy policy to address the three pillars of energy policy in a fully integrated way. Those three pillars — security of supply, sustainability and competitiveness — are mutually reinforcing. It is in that context that we have set out the vision for 2020. By 2020, Ireland will have met the challenge of security of energy supply through integration and interconnection, a diverse fuel supply regime, world class energy storage facilities, enhanced infrastructure and robust emergency planning and expanded oil and gas strategic reserves.

More integration and interconnection with other markets is crucial. This will deliver increased security of supply as well as positive competitive effects for the benefit of consumers. It will also support the renewable energy agenda. There will be enhanced electricity interconnection with Northern Ireland and the development of a new electricity interconnector. Further interconnection, possibly with the European mainland, will be under way or in place by 2020. This will add to our security of supply while increasing our competitiveness. The all-island energy market project is the logical first step towards creating a regional market with Britain and in due course with Europe.

The single electricity market will be completed in 2007. It will have the capacity to deliver the conditions needed to promote an efficient and secure electricity market that contributes positively to competitiveness and it will also boost our security of supply. Increasing our fuel diversity is another way to ensure security of supply. Long-term high dependency on piped natural gas from distant suppliers will result in increased exposure to price volatility and interruption of supply. We have already witnessed a period of sustained global price increases for oil and gas and we are currently witnessing a period of volatility, with prices seesawing on the global market.

By 2020, a much changed fuel mix in our electricity, transport and other sectors should be the norm. To achieve this, key actions will include using clean-coal technology, co-firing peat with biomass and significantly expanding renewable energy production to reach the 30% target. Renewable energy is a key to sustainability and we have emphasised it in terms of meeting our environmental obligations, which is extremely important. Renewable energy is also a key to ensuring future security of supply. We must tackle energy demand itself through systematic energy efficiency strategies.

The Green Paper envisages an ambitious target of having 30% of electricity produced by renewable energy by 2020. There has been a fair amount of comment on this target. Some believe it is too conservative while others argue about the significant technical and competitive cost challenges it will pose. However, I believe we struck the right balance and have set the bar high. We are backing up realistic ambition with concrete measures.

One feature of the Green Paper which has not been subject to much comment is the fact that instead of allowing a full 30-year period to pass before we produce another Green Paper, White Paper or policy document on energy, we will be able to review the existing Green Paper, White Paper or policy document every five years. If targets need to be changed or increased because of significant technological advances in some of the areas we are outlining, this can and will be done.

There is a distinct possibility of our being able to raise targets in the area of ocean energy technology. It is the stated aim of the Government to ensure the best commercial ocean energy technology will be Irish. Our ocean energy strategy is aimed at positioning us at the cutting edge of development in this area.

Biofuels and biomass will play a major role by 2020. This is underpinned by the new bioenergy strategy which is being led by the ministerial task force. Through greater energy efficiency, individuals and businesses have the power to contribute to the 2020 vision. This will mean a change in behaviour and attitudes to achieve a 20% reduction in energy demand by 2020, as outlined in the Green Paper.

I recently launched the national energy efficiency campaign, Power of One, which will extend well beyond encouraging behavioural change. It is a multifaceted campaign. Setting higher standards, regulating for change and, where necessary, incentivising such change will be part of the agenda to secure increased energy efficiency. The campaign will also target individual sectors. I and other Members believe very strongly that the public sector, for example, must set the pace and lead by example. The national priority being afforded to energy efficiency is in line with EU policy in this area.

On research and development, by 2020 we will see a vibrant Irish energy research sector and a significantly ramped-up energy research capability. That research capability will reflect an energy research policy aligned with wider energy and sectoral policies. Our energy research effort will be strongly focused on the renewables areas as well as innovative approaches to infrastructure and grid challenges. This is fully reflected in the Government's Strategy for Science Technology and Innovation 2006-2013.

We need a stable and transparent, regulatory and investment market framework underpinned by infrastructure technology. This will enable the energy sector to be competitive and support a high-growth economy and inclusive society. High global energy costs are now a fact of life. The current volatility in oil and gas prices does not herald a long-term return to low prices, as underlined by recent decisions by OPEC. A large proportion of the higher prices experienced in Ireland is currently explicable by our fuel mix and the existing structural constraints of the market, including its size and the fact we are not interconnected. The current volatility does not help medium-term to long-term planning either.

These factors limit our ability to manage or mitigate future energy price increases. Our focus in the Green Paper, therefore, must be on addressing controllable costs. One option for dealing with controllable costs relates to the funding of strategic energy infrastructure. The scope for funding strategic energy infrastructure initiatives in the national development plan is highlighted as an issue for consideration in the Green Paper. I will be interested in the views of Deputies thereon.

By 2020, the Irish energy market must be characterised by its having a number of players and a light-handed regulatory regime. We commissioned Deloitte & Touche, in the context of preparing the Green Paper, to undertake a review of the electricity sector to provide us with comprehensive, in-depth analysis of institutional arrangements and market structures. Its report was published at the same time as the Green Paper. Deloitte & Touche confirmed that the size of the Irish market is a significant factor, as is the perceived and actual dominance of ESB arising from its ownership of a large and diverse portfolio of plant and from its ability to set prices. The report states that, without changing the current structure, we will continue to face difficulties in attracting new entrants to develop competition and choice for consumers. The market will evolve slowly without competitive downward pressure on prices. As I made clear at the launch of the Green Paper, this scenario is not in the interest of market players or consumers, nor is it in the interest of the ESB. It is certainly not in the interest of economic competitiveness.

The Deloitte & Touche report is a useful contribution to the energy debate and provides much useful analysis of the electricity sector. It informed the Green Paper and was of great help in this regard. It makes a number of specific recommendations, one of which is to fragment the ESB. The Government recognises the fundamental role played by the ESB in economic and social development and the strategic value of maintaining it as a strong and commercially viable company, particularly in the context I have outlined. The Government does not favour the fragmentation of the ESB for the very simple reason that it would not reduce prices and could endanger security of supply and economic competitiveness. Deloitte & Touche acknowledges that the creation of a number of smaller companies from the existing ESB would take very substantial time and resources. It would also, it has to be said, be costly.

However, significant investment in power generation is needed. This presents us with the opportunity to break out of the current cycle and deliver more competition, more innovation and more choice. Structural reform is necessary in the interests of the market, the consumer and the ESB, and we intend to deliver that reform. The need for rationalisation of the ESB power generation portfolio is part of that window of opportunity. We need a radical repositioning of ESB power generation in its own interest and in support of a competitive electricity market. The introduction of a single all-island electricity market next year is a key context.

Increased competition in generation will act as a catalyst for improvements in operation and maintenance costs, productivity, availability, flexibility and innovation. The Green Paper suggests the creation of a landbank, giving access to suitable generation sites in Ireland for new entrants. This would remove a significant barrier to new entry and has been used successfully elsewhere to encourage new entry. The Deloitte & Touche report laid considerable emphasis on the benefits of such an approach and I agree with it. I have already had initial discussions with ESB and CER. The Irish market is not very attractive for someone coming in to try to put a power generation plant on a greenfield site, where the extra costs involved in strengthening a grid would be prohibitive. That is why the use of the landbank and its availability for new entrants to the market is crucially important.

The launch of the Green Paper opens a two-month period of consultation. It is a tight timeframe but we intend to use the interval productively — including direct dialogue with all key stakeholders. Informed by the outcome of the consultation process, we will finalise the energy White Paper early in the new year.

The policy choices and targets set out in the Green Paper provide a coherent basis on which to position the Irish energy sector. I believe that we have set ambitious aspirations, which will be underpinned by concrete action. We will build in regular review and benchmarking to take account of developments over the years ahead. By 2020, Ireland will be a sustainable, secure, efficient, affordable and competitive all-island energy market, supporting environmental, economic and social policy objectives. The market will have secure and reliable supplies, competitive prices and more diverse energy sources underpinned by robust interconnection, optimum infrastructure and ambitious technology investment.

The Green Paper is a proposed blueprint for building that sustainable energy future and I commend it to the House.

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