Simon Coveney (Cork South Central, Fine Gael)
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Question 6: To ask the Minister for Communications, Energy and Natural Resources his views on whether the €600 million cost of the east-west interconnector represents value for money in terms of construction and completion costs versus similar projects in other parts of Europe; if he is satisfied that the tendering process has ensured this; and if he will make a statement on the matter. [24094/09]

Eamon Ryan (Dublin South, Green Party)
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EirGrid, with the approval of the Government, is developing, on schedule, the east-west interconnector. The Government is fully committed to the cost effective delivery of the interconnector as a key strategic energy infrastructure project.

There are several benefits for the economy, the energy market and consumers from this development. It will enhance security of energy supply by delivering additional capacity to the all-island electricity market and linking it to the United Kingdom, which is, in turn, connected to mainland European markets. It will underpin delivery of Ireland's renewable generation targets by providing additional back-up at times of low wind and enabling the export of wind energy from Ireland at times of high wind generation. It will support further competition in the electricity market and exert downward pressure on prices. It will allow for a diversification of the national fuel mix and supply sources by reducing our dependence on electricity generated from imported natural gas. In addition, it will provide EirGrid, as the system operator, with important back-up and reserve services.

The Government has been advised by EirGrid and the Commission for Energy Regulation, CER, that over the lifetime of the project, these benefits will more than outweigh the development costs. In a strong endorsement by the European Union, Ireland has secured €110 million for the east-west interconnector under the European economic recovery plan. This funding will be an important component of the overall financial package. In making cost comparisons, it should be borne in mind that each electricity interconnector project is a unique development. Interconnectors throughout Europe and elsewhere vary in terms of capacity, length, diversity of terrain and the proportion of the project that is below sea or on land.

The contract for the development of the east-west interconnector was awarded on foot of an open tender process conducted by EirGrid under the regulatory oversight of the CER. Both EirGrid and the CER have advised that the contract price negotiated with the successful bidder represents full value for money in a very competitive process. I am satisfied, on the basis of the comprehensive advice by EirGrid and CER to me and to my Department, that the contract is economically advantageous and that EirGrid is on schedule to deliver the east-west interconnector by 2012.

Simon Coveney (Cork South Central, Fine Gael)
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I agree with the building of an east-west interconnector and one of the scale proposed is necessary. My only question relates to whether we are paying too much for it. I met representatives of the CER and put that question to them. I also requested that they forward to me details relating to the other companies which submitted tenders in respect of this matter. However, I have not yet received such information.

I have been contacted by a number of independent people who are not linked with companies such as Imera and others and who put very convincing arguments to me to the effect that we are paying approximately one third or one quarter above what we should be paying for this item of infrastructure. I welcome the fact the European Commission will probably provide €100 million of the €600 million required for the project. However, that does not excuse the fact that we may be paying too much. We should not be obliged to pay €600 million for a project which should only cost €400 million or €500 million.

The Minister correctly stated that every project is different. However, if one compares this project to others of similar scale and size, one will not find another project that is more expensive. One can list four or five projects that were 25% less expensive than that relating to the east-west interconnector. The Minister has a responsibility in this regard because consumers and businesses, not EirGrid, will be obliged to pay for this project. EirGrid will merely manage the project and facilitate the transfer of money from those who use the interconnector and benefit from it to those who build it.

Has the Minister considered the tendering project? Did he examine the other tenders that were received? What were the prices relating to these tenders and which companies submitted them? Apart from simply taking the word of those who represent the CER and EirGrid, is he satisfied that we are not being overcharged in respect of this project?

Eamon Ryan (Dublin South, Green Party)
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The first point is that it is a hard market in which to buy cables because demand is outstripping supply. In view of the small number of companies producing the relevant technology and the demand therefor, it is extremely difficult to obtain even a booking with a factory to have a cable produced. Transbay Cable in California would have charged $500 million to produce a cable that would have been shorter and would have yielded less power than that which we are developing. There are other examples but the circumstances relating to each is different and is dependent on geography and grid connection upgrades.

Simon Coveney (Cork South Central, Fine Gael)
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The Transbay Cable option would have been cheaper.

Eamon Ryan (Dublin South, Green Party)
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Yes, but the cable would have been shorter and less powerful. This provides some form of benchmark.

We are satisfied that the contract and tendering process was proper and above board. The crucial assessment comes down to what will be the benefits. EirGrid, separate to any of the international companies, carried out such an assessment.

Simon Coveney (Cork South Central, Fine Gael)
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That is not the point.

Eamon Ryan (Dublin South, Green Party)
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It is the point.

Simon Coveney (Cork South Central, Fine Gael)
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It is not the point.

Eamon Ryan (Dublin South, Green Party)
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There will be a benefit of some €66 million to the electricity market in this country per annum.

Simon Coveney (Cork South Central, Fine Gael)
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I agree with that.

Eamon Ryan (Dublin South, Green Party)
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This means the net benefit of the project to the consumer and the electricity market will be extremely positive.

Simon Coveney (Cork South Central, Fine Gael)
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We needed the Luas as well but that also cost too much to build.

Eamon Ryan (Dublin South, Green Party)
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It is difficult to determine what represents the right price. We engaged in a tendering process involving three major, world-renowned companies. Only one of those companies could be successful. I acknowledge it is a seller's rather than a buyer's market. However, we obtained a competitive bid which stands up to international comparison. The benefits to the consumer and the electricity market of this project will far outweigh the costs.