Jimmy Deenihan (Kerry North, Fine Gael)
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Question 137: To ask the Minister for Communications, Marine and Natural Resources if he is satisfied that sufficient generating capacity exists to ensure the continuity of supply and the integrity of Eirgrid for the foreseeable future; if sufficient surplus supply exists to cater for all eventualities; and if he will make a statement on the matter. [38793/06]

Joe Costello (Dublin Central, Labour)
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Question 147: To ask the Minister for Communications, Marine and Natural Resources his views on the fact that worries are being expressed that Ireland's electricity generation capacity will be inadequate from 2008/2009 onwards; the steps he may be taking to ensure that sufficient generation will be brought on stream from 2007 to ensure energy security here; if there will be a tight supply demand balance in winter 2006; if there have been amber or red alerts in the electricity system in the past year; and if he will make a statement on the matter. [38825/06]

Noel Dempsey (Meath, Fianna Fail)
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I propose to take Questions Nos. 137 and 147 together.

The economy and society overall require that energy supply meets the demands of Irish consumers, and industry, at all times. The Commission for Energy Regulation (CER), has broad statutory functions in relation to security of electricity supply in line with EU Directives. It is the duty of the CER to monitor the security of supply of electricity and to take such measures as it considers necessary to protect security of supply. In particular, the CER can host a competition to acquire the necessary generation or it can direct the Transmission System Operator, ESB or any licensed undertaking to put in place any arrangements that the CER considers necessary to protect security of supply.

EirGrid's statutory role, as the independent Transmission System Operator, is to deliver quality connection, transmission and market services to generators, suppliers and customers utilising the high voltage electricity system, and to put in place the grid infrastructure required to support the economy. In fulfilling this role, EirGrid is required to develop, maintain and operate a safe, secure, reliable, economical and efficient transmission system.

In co-operation with EirGrid, the CER carries out extensive ongoing monitoring to identify any factors affecting security of supply at an early stage so that any necessary measures can be taken.

In line with international norms, the generation system in Ireland is designed, planned and monitored such that it meets a standard which requires it to meet all reasonable demands for supply. This is designed to ensure that, in designing the system, the appropriate balance is met between protecting security of supply and the cost of building and running the system.

At my request, CER and Eirgrid have been briefing myself and my Department on a regular basis on the prognosis for winter 06/07 and generation adequacy in the medium term. The CER advises me that it is satisfied the generation system is currently adequate to meet demand, and provides a sufficient margin to meet the security standard. The CER has also advised that there is sufficient capacity and arrangements in place to provide for demand to be met in the short term.

The CER is taking measures to facilitate the development of the system such that it remains adequate to maintain that security standard. Security of supply will be enhanced in the longer term with the development of additional electric interconnection and the development of the Single Electricity, and the resulting all-island approach to security of supply.

With regard to existing generation capacity, the most recent advice to me from CER and EirGrid is that generation adequacy in terms of the supply — demand balance will be manageable up to 2009 provided however that projections by generation companies regarding performance and availability are met and that planned new generation capacity comes on stream to schedule. Eirgrid will shortly publish its Generation Adequacy Review 2007-2013 which will set out its assessment of supply-demand over the period.

System alerts are indicators issued by the EirGrid, as the independent TSO, to power station operators so as to encourage conservative operational practices at times of lower than usual spare generating capacity. The CER advises that the occurrence of any alerts on the system is contingent on both the level of demand over the winter, which will be determined, in part, by the weather, and the availability of plant to meet that demand. Similar to recent winters, during times of peak demand, the Commission anticipates that there may be times when alerts will be initiated in order to signal the appropriate actions for generators.

I am advised by the CER and EirGrid that up to 16 November this year, there have been 19 amber alerts and no red alerts issued. For comparison, in 2005, there were 46 amber alerts and 1 red alert issued. While I have been assured by the CER and EirGrid that there has been no occasion this year when electricity supply to customers was affected by a capacity shortfall, I am advised that they are considering additional measures that can be put in place to minimise the occurrence of instances where alerts are called for.

The Government is also concerned to ensure that adequate provision is also made to encourage the development of an electricity portfolio, which can support and complement the ambitious targets which we have now set for renewable growth. Decisions in this regard by the CER, EirGrid and the Government will be informed by the need to ensure capacity and competition in the generation sector while reflecting the overriding consideration of security of supply.

Phil Hogan (Carlow-Kilkenny, Fine Gael)
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Question 139: To ask the Minister for Communications, Marine and Natural Resources his preferred options to generate competition in the electricity industry with particular reference to the need to deliver the benefits of competition to the consumer in the form of reduced energy costs; and if he will make a statement on the matter. [38750/06]

Noel Dempsey (Meath, Fianna Fail)
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The Government's Green Paper on Energy Policy outlines future directions for energy policy based on the three pillars of:

security of supply;

environmental sustainability and;

economic competitiveness.

Ireland's continued economic growth and competitiveness depends on a reliable and competitively priced energy supply. The competitiveness of Irish energy supply requires action on a number of fronts including:

effectively liberalising gas and electricity sectors by implementing energy market mechanisms, and

enabling competition by reforming institutional arrangements and market structure.

The introduction of the Single Electricity Market (SEM) in 2007, is a key policy imperative which will enhance scale and encourage new entrants.

The continued liberalisation of the electricity and gas markets will also further enhance competition. This includes the full opening of the natural gas market to augment the fully open and contestable electricity market. This is provided for in the Energy (Miscellaneous Provisions) Bill 2006.

In relation to reforming institutional arrangements and market structure, the Government has stated its commitment to the retention of a strong commercially viable ESB and the retention of certain strategic electricity assets, including networks and certain generation assets, in State ownership.

I am on the record as stating that the Government does not in any circumstances favour the fragmentation of the ESB. I believe such a move would not reduce prices, but could in fact increase them and endanger security of supply and competitiveness. The need however for structural change within the electricity sector and for ESB itself is clearly articulated in the Green Paper.

Enhanced competition in generation will act as a catalyst for improvements in operation and maintenance costs, productivity, availability, flexibility and innovation. As part of action to mitigate ESB's dominance in mid-merit price-setting I am also giving consideration to the option of creating a 'landbank' of suitable sites, to offer a predictable pattern of access to suitable generation sites in Ireland for new entrants to this market. This would remove a significant barrier to new entry and has been used successfully elsewhere to encourage new entry.