Brendan Kenneally (Fianna Fail)

I welcome my friend the Minister of State at the Department of Communications, Marine and Natural Resources, Deputy Browne, and wish him well on his return to the Department. He has built up considerable knowledge of the area from his previous tenure, which he will put to good use.

This issue will become a greater part of our discussions in the future. Today's debate is not only about energy but also about the environment. Management of the environment is crucial to our future in Ireland and also in a world context. Considerable awareness has been garnered on the environment over the past number of years and although steps have been taken in certain countries to make changes, these may not be enough.

Like every other developing country we have become hugely dependent on oil and gas. We must ask ourselves if those sources of energy will always be available in sufficient quantity to serve our needs. We must pursue and develop other sources of energy as there is no point in waiting until supplies of oil and gas begin to run out, or become unavailable through political instability, natural disaster or other crises. We have seen such things happen in the past and paid the price through greatly inflated energy bills. We must commence practical development and further research on solar energy, wind and wave power and hydro sources.

Three key policy issues must be addressed, namely, security of supply, cost competitiveness and environmental responsibility. At present in Ireland the total primary energy requirement is fulfilled mainly from the imports of oil and gas. Only 15% of the country's energy comes from indigenous sources. Natural gas provides 45% of the electricity generation fuel mix, which is much higher than the EU average. While gas may be a relatively clean fuel, we have little or no storage facilities for it, which leaves us exposed to a danger to our security of supply in future emergencies.

Between 1990 and 2004, there was a 65% increase in oil imports to this country and in that same period, the cost of oil rose from $15 a barrel to approximately $65 at present. There is no reason to believe this figure will drop significantly in the near future. In the past OPEC countries increased output to stabilise the price of oil on the world market but this in turn has its own dangers in the faster reduction of reserves, which will hasten a scarcity. Ireland has a very significant wind energy resource, both onshore and offshore. However, in the absence of an economic means of storing the energy and the random and variable availability of wind, its contribution to a continuous electricity supply is limited. At present, this means of generation cannot be regarded as a substitute for thermal plant. However, as new technology is developed, this should change in the future. Despite those drawbacks, wind is the most proven, cheapest and one of the cleanest of available energy technologies.

Security of supply in the future is a major cause for concern. Only one electricity interconnector exists between Northern Ireland and this country, and its transfer capability is restricted. The provision of a second interconnector has been studied and costed. However, there is no indication as to when this might come on-stream. The Minister of State alluded to it coming on-stream in 2012, which is to be welcomed. It is necessary and will bring us further benefits as there is an existing interconnector between Northern Ireland and Scotland.

It is also proposed to provide two interconnectors between Ireland and Wales. This will allow for the future integration, if necessary or desirable, of Ireland into a wider European energy market, as has already happened in the gas industry. Bord Gáis Éireann already has two gas interconnectors to Scotland. In developing renewable energy sources in this country, we are enhancing the security of supply. In addition, renewable energy sources are a substitute for fuel imports.

There is also a possibility, slim though it may be, that by developing our natural energy sources to the limits I outlined, we might become a net contributor to a European grid, with consequent economic benefits for us all. One of the technical difficulties is storage. However, I am sure that this, like many other technical problems of the past, will be solved in the future.

Cost is also an important factor. In a full opening of the electricity market, all customers would be free to choose their suppliers and as more renewable energy resources go into the national grid, this will have the effect of improving choice. A number of independent generators already contribute to the grid, including Viridian, BGE, Airtricity, Aughinish and Tynagh. Hopefully this method of supply will develop further in the future, for as our demand for capacity continues to grow, so too will the need for further generation.

The concept of an all-island market is supported by many of those directly involved in different ways, including the ESB and IBEC. In submissions to the Oireachtas Joint Committee on Communications, Marine and Natural Resources on 2 November 2005, the ESB stated it was committed to integrating the island network by July 2007. This will serve to encourage competition, providing economies of scale, sharing strategic costs and providing greater security.

As I mentioned earlier, we must keep our environmental responsibilities firmly in mind, particularly in regard to greenhouse gas emissions. The greatest generator of greenhouse gases is energy supply, which was growing until recent years, but of late seems to have stabilised. The main contributors here are industry, transport, residential, commercial and agriculture. By agriculture I mean the energy used in that sector. The second biggest contributor to greenhouse gases is the agricultural industry itself. However, the amount attributable to this sector appears to have started to decline. In 2003 for instance, two sectors were responsible for 93% of the greenhouse gas emissions, with 65% attributable to energy and 28% to agriculture. This shows the need for other, cleaner types of energy to be made available.

The renewable energy contribution to the total primary energy requirement was 2.2%. This came mainly from biomass, hydro and wind, with biomass being the largest component. I wish to comment particularly on the importance of bioethanol and biofuels in general and what the future holds. In June 2003, the EU adopted the biofuels directive, setting a target of a 5.75% market share for biofuels in 2010. Last December, the European Commission adopted a biomass action plan, setting out a number of measures to promote biofuels. By December this year, a report will be published on whether the biofuels directive needs to be further strengthened.

I will return to the issue of security of supply. This issue is of increasing concern for this country, as the share of imported fuel grows, which it inevitably it will over the coming 25 years. There are security risks in many energy sectors. In the case of gas, the trans-eastern European pipelines are continually under threat from local terrorist attack. Such risks are greatest in oil, because our import share is highest in this fuel and our greatest dependence is on a few regions of the world. Oil is also the fuel which will be hit first by scarcity and involves the greatest economic risk as there are few large-scale alternatives to its use in the transport sector in particular. It is essential for us to promote those alternatives which exist. Liquid biofuels are common today and are the only direct alternative to oil use in road transport.

In tackling the problem of climate change, it is important for all sectors of society to make a contribution. However, the transport sector has found it rather difficult to find ways of reducing greenhouse gas emissions. Once again, biofuels are more or less "the only game in town" for road transport, at least in the short term, alongside the car-makers' voluntary agreement to reduce new car CO2 emissions.

We must work hard to develop other measures in the transport sector, such as rebalancing in favour of more environmentally-friendly modes or measures in the area of transport energy efficiency. One avenue to explore in more depth is the role of public authorities as consumers. In this respect, Cork City Council and at least one other local authority have given a major lead in beginning to convert their fleets, 250 vehicles in the case of Cork, to use only rapeseed oil as fuel. According to a recent newspaper report, a pilot project began in 2003, with 17 of the council's vehicles converted to run on rapeseed oil grown and processed in County Wicklow. It only cost €23,000 to convert the vehicles from fossil-based fuels and the council now intends to convert its entire fleet to the new system when it puts out tenders for fleet renewal in 2007. It will cost between €500,000 and €750,000.

One drawback is that vegetable fuels are still more expensive than diesel or petrol. On the plus side, they produce no noxious emissions and are a completely renewable resource. A slight drawback, the report suggested, is a "chipper-like" smell from the exhaust which some drivers complain about. That is a small price to pay for a cleaner environment and a healthier balance of payments. I have no doubt that as the popularity of the fuel grows, technology to make it even cleaner will emerge and it will be up to the Government's excise policies to make it cheaper and more attractive.

The EU recently proposed a directive on clean vehicles which requests a minimum of 25% of annual procurement of heavy-duty vehicles of less polluting and more energy-efficient vehicles. Once implemented, these new rules should also help in promoting the use of biofuels. One of the most obvious fleets to target is that of buses, both under the banner of CIE and also in the private sector. It is always a source of wonder to me why buses serving provincial towns do not switch off their engines when waiting at bus stops, sometimes for long periods. School buses waiting for their passengers in the evening are a particular case in point and it also applies to longer distance buses which must wait for a scheduled departure from town stops. It is an unnecessary contribution to pollution and a waste of expensive fuel in large engines.

For the reasons stated above and also because of the new opportunities offered to Irish industry and to farmers, I believe that increased use of biofuels must play a key role in Irish energy policy. Achieving the targets set in the biofuels directive will not be easy and will need a sustained effort on all sides. The European Union must put in place a policy framework that will give long-term confidence to firms considering investment in biofuel technology.

They must re-examine technical obstacles to the greater use of biofuels and implement a balanced trade framework, particularly for ethanol, so domestic producers and those in least-developed countries, as well as the tropical sugar cane producers, benefit from the developing European biofuel markets.

Industries, especially the vehicle and oil industries, will need to find ways to incorporate all kinds of biofuels — bioethanol as well as biodiesel. Crucially, there is also a need for research to accelerate the development of new biofuel production techniques capable of drawing on a wider range of raw materials.

I welcome the recent budget announcement that Ireland should set an initial target of 2% of the fuel market to be taken up by biofuels by 2008 and that we should achieve this through targeted excise relief measures. The level of excise relief will start at €20 million in 2006, will be increased to €35 million in 2007 and to €50 million in each of the following three years. This relief, when fully operational, is expected to support the production in Ireland of 163 million litres of biofuel every year. This is 20 times the current level of biofuel that is excise relieved. There are clear benefits to this initiative. The environment will benefit in terms of a reduction in CO2 emissions. It will enhance security of supply of fuels and create jobs and outlets for agricultural production. It is estimated that it could ultimately give rise to hundreds of extra full-time jobs in the State.

More and more land has been set aside under EU rules each year. We are now seeing the demise of the sugar industry with the loss of growing potential in sugar beet. Perhaps it is time, both strategically and in conjunction with the reduction in farm produce, to look seriously at the biofuel market and seek to develop it among a farming community which generally does not like to see the land lying idle.

Guarantee of fuel supplies in the future has always been precarious due to the factors I mentioned earlier, not least political instability. Add to that, the huge demand which has been created by the development of the Chinese economy and others which will rise in the Third World, we must look at the alternatives. We owe it to the people to have foreseen future difficulties and to be able to guarantee fuel supply going forward. It is one of the more pressing, although less obvious problems, we face and it is our clear responsibility to respond promptly and effectively.