Simon Coveney (Cork South Central, Fine Gael)

That is true.

Fine Gael will not be opposing this Bill and it welcomes its introduction for the very straightforward reason that it believes the east-west interconnector between Ireland and Britain needs to be built as soon as possible. EirGrid is the obvious body to manage this task.

In essence, the legislation is necessary to ensure there will be no further delays regarding this project, which should be completed by now. It has taken too long. The delay is not EirGrid's fault. Approximately eight years ago, the then Minister announced that he supported the concept of an east-west interconnector and that he would invite private sector interests to build it. Over a long period, the State has come to recognise that the private sector did not have either the capacity or interest to complete the project in a manner with which the State would be comfortable. EirGrid is now managing the project and this is positive. My experience of the organisation is that it is highly competent and efficient, although I am somewhat critical of its PR activities in respect of the so-called North-South interconnector and the debate on whether the infrastructure should be underground or over ground. However, this is not related to its ability to get a job done.

As has been stated, the aim of this Bill is, first and foremost, to expand the functions of EirGrid to include construction of an interconnector and the ownership and operation thereof, subject to authorisation by the CER.

The Bill will amend the current Electricity Regulation Act 1999 to clarify the position of interconnectors not owned by the ESB. It will also make it an offence to operate an interconnector without appropriate authorisation by the CER. Additional appropriate powers are being given to the CER in recognition of the fact that, for the first time, a major section of grid infrastructure is being constructed that will not be owned by the ESB or be on the ESB's balance sheet. This is a major departure in itself.

The Bill will provide for the establishment of subsidiaries by EirGrid to increase its statutory borrowing capacity, which is obviously necessary to raise funds for the project in question, and to provide for capital expenditure by EirGrid.

We are facilitating the transition of EirGrid from a management company for an ESB-owned asset to a State company in its own right tasked with managing an asset on behalf of the State that it is to construct and own. Some policy issues arise from this strategic decision. In this regard, we must consider the Government's attitude to and policy on the separation of assets within the ESB and whether it plans to proceed with taking the rest of the grid out of ESB ownership and putting it into the ownership of EirGrid. I remain to be convinced but I believe doing so would make sense, particularly in the context of owning interconnectors. It makes sense in principle for an interconnector to be an extension of the existing grid, which will essentially plug the Irish grid into the British grid and allow a flow in both directions such that power can be purchased or sold, as deemed appropriate.

Strategic issues arise when we accept the principle that ownership of the interconnector is separate from ownership of the grid. There is private interest in building two further east-west interconnectors. Having the ownership of the interconnector between the Irish and British grid in private ownership has potential knock-on effects on security of supply as we would have a private operator who is in it for profit essentially controlling the supply of power coming to and going from the Irish grid. There are some regulatory issues in that regard that need to be explored further. Having said that I am in favour of more interconnection through either the private or public sector. Given the choice my preference would be that the grid in Ireland should be owned and managed by the same body that owns and manages interconnection so that essentially our grid is expanding and plugging into other grids, initially in Britain and hopefully at some stage in the future places like France also.

I wish to talk about the importance if interconnection on three levels, the first of which is security of supply. The present energy discussion is dominated by price and environmental concerns. Security of supply is perhaps more important than those issues. Ireland is in a very vulnerable position should the supply of fuel such as coal, gas and oil dry up or become too expensive. Ireland's energy import dependency is 91%. When this is compared with the UK at just 66% one begins to realise how exposed we are to price fluctuations on world markets or simply a cut-off of supply when only 9% of our fuel is indigenous to Ireland through peat, gas or renewable sources.

Other countries have found solutions to this issue. Most of them have turned to nuclear power generation, for example, to try to reduce their dependency on imported fuel. I do not believe that is an option for Ireland at the moment and I hope it will not be an option in the future. However, obviously we cannot shut our minds entirely to the option as technology advances and as issues relating to nuclear power develop. At the moment the public do not want us to move in that direction and rather want to see an ambitious leadership role being taken by Government and in particular the Minister for Communications, Energy and Natural Resources to roll out renewable energy projects across the country, which is being facilitated by grid studies, grid preparation etc.

The effect of an interconnector on Ireland's security of supply is to give more capacity to plug into other electricity grids thereby making us less reliant on our existing sources of fossil fuels. Not only will we have a backup but we will also have a viable alternative to importing large amounts of fuel. In other words we will be able to import energy directly on the grid as opposed to needing to generate everything here ourselves. We had a market in the Republic of Ireland which developed into an all-island market with some interconnection to Great Britain through Northern Ireland and are now hopefully creating an electricity grid for Ireland and Britain. If we continue to ramp up our interconnection capacity between the two islands, at some stage in the future we could get to what the Minister refers to as regional grid infrastructure whereby the north west of Europe could at some stage develop into a north-west European grid, if one wants to call it that.

That has happened in other countries, for example with the interconnection between Scandinavian countries which is far more ambitious than what we are achieving here. That is necessary as it is recognised across the European Union that our standard sources of fuel for energy are running out. They are certainly running out in the areas from which we have been used to getting a supply. It would be safe to say that within ten years gas supply available for export from European countries will simply run out. The European Union needs to prepare itself for a time when we will be importing all of our gas from Russia, Kazakhstan, the Middle East and so on.

The Lisbon reform treaty makes it clear that the European Union is preparing itself for that eventuality. For Ireland's sake I hope we will be able to negotiate collectively as a Union on issues such as gas supply in particular because of the gas line infrastructure across the European Union. Otherwise we will see companies like Gazprom being able to flex huge political muscle with countries in the European Union. In that scenario a small country like Ireland would not have the influence it needs to get a good deal on affordable gas for Ireland. Given our reliance on the importation of gas we are very vulnerable to that kind of scenario which is why I encourage the Minister to review gas storage issues, including LPG storage. He should consider existing resources such as empty gas fields that could potentially be used to store gas purely for security of supply reasons. From speaking to representatives of Bord Gáis I understand that if our gas supply coming from abroad, which is nearly all of it — some still comes from the Kinsale gas field, were to be cut off we would have approximately four days of supply. That is a very vulnerable position and needs to be addressed even if it costs the State some money to do so.

I have made my point about energy security and the need for us to be part of a much wider grid, which would put us in a much stronger position. The next area relates to price competitiveness for energy. I held this portfolio approximately six years ago. Prior to me being given this brief Ireland had been struggling to open our energy generation business to competition. We have had some limited success in this regard in terms of increased efficiency, increased customer choice and a reduction in prices. Interconnection will automatically open up the possibility of importing energy to provide competition for energy generators in Ireland.

The cost of electricity in the UK over the past five years has consistently been between 8% and 15% cheaper, depending when the measurement was made, than in Ireland. As long as interconnection comes at an affordable price, it makes sense for us to import excess energy from the UK grid to Ireland, when appropriate. If nothing else, this will introduce competition to the Irish electricity market and may help drive down prices and increase choice and services for businesses and households.

I will put the situation starkly. A business that seeks to set up in an English speaking country in the European Union will consider Ireland and Britain. The latest figures show that the cost per 100 KW hours is €11.50 in Dublin and €9.50 in Manchester. The difference between the two is 18%. My figures are from 2007; there may be more recent figures that are different due to exchange rates but changes due to exchange rates do not reflect anything proactive that we have done. Prices in Ireland and Britain should be levelled out; this is already happening in the all-island market but I hope it goes further if we continue to build interconnection capacity from an east-west perspective.

Regarding environmental sustainability and renewable energy, when many people speak of Ireland's capacity to produce renewable energy they often limit their vision of what can be achieved on the basis of our energy needs on this island. The Republic of Ireland's total usage of power comes to between 5,000 and 6,000 MW. People make calculations loosely, based on the percentage of the market that can be provided by renewable sources such as wind power, wave power, tidal energy, biomass, bioenergy, bio-fuels and so on. We should not limit our thinking in this way and, to be fair to the Minister, he does not do this.

The electricity grid study the Minister launched some months ago presented different portfolios for Ireland's energy mix. The most ambitious one is portfolio 6, which has 8,000 MW coming from wind energy, but it is automatically dismissed as not achievable. Portfolio 5, the next most ambitious, has about 6,000 MW potentially coming from wind energy and this is what we are aiming for. This indicates what the Irish grid can manage in terms of wind power coming onto the grid in an intermittent way, without substantial storage capacity, which would allow it to be held and used at peak power times, and without substantial interconnection capacity.

If we look at this in a more ambitious way we could say that Ireland should not be limited in terms of how much energy it can produce from renewable sources. Instead we should see this area as one in which Ireland has a natural competitive advantage because of average and net wind speeds here and wave and tidal resources. Ireland should be a green fuel source for other parts of Europe and the only way this can be achieved is through ambitious interconnection projects. That is why I encourage the Minister and EirGrid to get this job done as quickly as possible. He should also encourage the private sector interconnection projects that have been proposed to proceed as soon as possible. The Minister could also examine the possibility of direct interconnection with countries like France, rather than rely on going through the British grid to access the mainland European grid.

It is true that, in terms of EirGrid's management, many megawatts coming onto the grid from wind sources present something of a nightmare scenario. Wind turbines provide power approximately 35% of the time in Ireland and approximately 30% of the time in most other places in Europe, sometimes even less. Often power provided by a wind turbine is not needed because it comes at 2 a.m. or 4 a.m. when there is already plenty of capacity on the grid. From an Irish perspective wind power is the most advanced source of renewable energy but the problem is that it is also the most inconsistent. Consistency could be provided by the kind of massive scale Eddie O'Connor refers to when he speaks of an offshore European wind-powered electricity grid, which, in my view, represents magnificent thinking in terms of ambition; the number crunchers will tell us whether it is viable. It is our job to be ambitious, be ideas people and try to find solutions to an energy crisis that is looming globally, in Europe and in Ireland. From this point of view we must be ambitious in the areas we know can work.

In terms of the Irish marketplace and the Irish grid, the only way we can build wind projects on the scale proposed and in the pipeline is to invest more significantly in finding solutions to energy storage. We must be able to capture the energy that comes from a wind turbine at 3 a.m. and store it through the use of hydrogen or batteries. We could even pump water uphill so that it can flow down during peak periods, as is done at Turlough Hill. We must find effective methods of storage and examine large-scale storage projects that can be linked to the kind of wind energy ambition that now exists.

I have a significant concern and this is as appropriate time as ever to mention it to the Minister. Under the Gate 3 process of giving grid connections to wind energy projects less than 2,000 MW will be given out and this applies to quite a lot of projects. However, some 8,500 MW of wind projects seek connection through Gate 3. More than 6,500 MW of wind projects are in the pipeline. Some of these projects are onshore and others offshore, comprising farmers, consortia and large businesses, all of which have heavily invested in securing planning permissions and consultants to examine costings of construction and connection to the grid. In the current scenario, they have no chance of getting a grid connection until 2020. Even if we reach the Minister's target, seen by many as ambitious, of 4,000 MW to 5,000 MW wind-energy generation by 2020, there are still these projects across the country which will never get a grid connection.

What does one say to a consortium, excited about the possibilities of wind-energy production, which has spent €300,000 on planning permission and consultants' reports on construction and grid connection when one knows with the Gate 3 phase they do not have a chance?

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