Ossian Smyth (Dún Laoghaire, Green Party) | Oireachtas source

There is a fundamental difference in the way the pricing of fossil fuel energy and renewable energy is arrived at. As the Senator knows, oil, gas and coal are traded on international markets and we are subject to the vagaries of those markets. Often they are sourced from highly unstable regions in the world, as we are reminded, whether it is the Middle East or Russia. This has led to great variability and frequent energy crises and shocks. Although people criticise renewable energy for being linked with the variability of the weather, in fact there is huge variability in fossil fuels. The fundamentals of renewable energy are that once the capital cost has been paid, there is a very low cost of generation with no fuel to costs to add to it. Therefore, it is a very different situation.

Given the unprecedented rise in electricity and gas prices, reducing the burden of energy costs on consumers is a matter of serious concern to the Government. The Government is very aware that recent electricity and gas price increases caused by international conditions, including the ongoing conflict in Ukraine, are putting increasing pressure on consumers and businesses, particularly those in a more vulnerable economic condition. It is important to recognise that these price increases are not caused by Government or regulatory decisions, as price regulation in this sector ended many years ago. Suppliers compete with each other on price and set their own prices accordingly, as one would expect in a competitive, commercial, liberalised market. It is important to point out that all European markets are experiencing these price increases. While Ireland has its own specific circumstances, the rise in energy costs is not unique to us.

The most immediate factor affecting electricity prices in Ireland is the upward trend in international gas prices, which has brought them to an unprecedented high. In Europe, wholesale natural gas prices have been on an upward curve since the second half of 2020, for a variety of international reasons. Current indications are that these higher prices will continue at a significantly higher level for the foreseeable future, particularly given the unprovoked Russian invasion of Ukraine. Higher gas prices feed directly through to retail electricity prices, as the wholesale price of electricity correlates strongly with the price of gas, as this is the primary fossil fuel used for electricity generation.

As well as the package of measures that the Government recently announced to combat the increases in the cost of living, it is a fact that the increased roll-out of renewable energy will, in the longer term, reduce Ireland's susceptibility to spikes in international fuel prices. The Government is committed to ensuring that by 2030 up to 80% of our electricity will come from renewable sources. This renewable energy will help protect us from fluctuations in gas prices caused by global supply and trade issues, thereby increasing our energy security.

The key actions to reduce the cost of renewable energy are highlighted in the Climate Action Plan 2021, but I will highlight a few of them now. The RESS, which supports the roll-out of renewable electricity, held its first auction for onshore winds and solar projects in 20201, with 63 projects currently progressing towards generation. The RESS 2 auction qualification process has begun, with the auction scheduled to take place in May 2022, which will deliver a major increase in renewable electricity generation by the end of 2024. A RESS 3 onshore auction is also under development, with an auction due to take place next year. The Department is also finalising the terms and conditions on the first of three planned offshore auctions this decade for the RESS to deliver 5 GW of offshore wind by 2030. All of these RESS auctions are competitive, ensuring that generators are competing on price. When the wholesale price is higher than the bid price submitted by the generators, they will give the difference back to consumers through the public service obligation, PSO, levy. This, in effect, helps insulate electricity customers from price shocks and will help give greater certainty to bill payers in coming years.

The operation of the clean export guarantee, CEG, tariff represents the first phase of a comprehensive enabling framework for micro and small-scale generators in Ireland that allows them to receive payment from their electricity supplier for all excess renewable electricity they export to the grid, which reflects the market value of the electricity. On 15 February this year, the Minister for the Environment, Climate and Communications signed the regulations that transpose Articles 21 and 22 of the recast renewable energy directive, which brought these articles into force. These regulations mean the clean export guarantee tariff is now available for new and existing micro and small-scale generators.

The micro-generation support scheme, MSS, approved by the Government on 21 December 2021, provides capital grants for new domestic, and will provide grants for new small non-domestic, solar photovoltaic, PV, installations. Larger businesses, including farms, that install new larger installations can avail of a clean export premium tariff which will provide a fixed tariff for 15 years for electricity exported to the grid in conjunction with the clean export guarantee. The scheme design will be published very shortly. However, the phased introduction of supports commenced in February, with the transition of the existing Sustainable Energy Authority of Ireland, SEAI, domestic solar PV grant scheme into the MSS. Furthermore, a tax disregard of €200 was introduced in budget 2021 in respect of personal income received by households which sell residual renewable electricity they generate back to the grid.

The Climate Action Plan 2021 also commits to the development of a support scheme for small-scale generators, that is, above 50 kW but smaller than those supported by the RESS, which will be progressed in 2022 and is expected to become available in 2023. This scheme will enable larger businesses, farms and community projects to maximise their participation in the energy transition.