Speech by Pat Rabbitte TD, Minister for Communications, Energy and Natural Resources to the British-Irish Parliamentary Assembly in Donegal

SPEECH BY PAT RABBITTE TD
Minister for Communications, Energy and Natural Resources

BRITAIN AND IRELAND:
DELIVERING THE BENEFITS OF RENEWABLE ENERGY

British Irish Parliamentary Assembly – 46th Plenary Session
4th March, Letterkenny, Co Donegal

Thank you for your invitation to speak to you this morning, on the opportunity for Britain and Ireland to deliver the benefits of renewable energy.

Among the shared long term challenges to prosperity on our two islands is the need for secure, competitive and sustainable energy. For the last number of years, our cooperation on energy policy has been intensifying, through bilateral meetings at ministerial and official level and through our liaison and cooperation in various EU forums. This cooperation has been guided and given impetus at the highest political level and at the British-Irish Council.

Our cooperation on energy policy is also set in the context of EU legislation on energy market liberalisation, which aims to create single electricity and gas markets in Europe.

Most recently, the Secretary of State for Energy and Climate Change Edward Davey and I signed a Memorandum of Understanding on energy cooperation last month in Dublin. That Memorandum sent a strong signal of our shared interest in developing the opportunity to export Gigawatts of green energy from Ireland to Britain, a win-win for both our countries. Of course a key objective, from an Irish Government perspective, is to realise the potential for investment, jobs and growth.

By way of background, under the 2009 EU Renewables Directive, both our countries must plan to ensure that, between now and 2020, there is a steady, progressive and measurable increase in the amount of renewable energy consumed in our electricity, heat and transport sectors. We have each been assigned binding targets about the proportion of renewable electricity we must produce. The targets are challenging, not least in the British context where the Government foresees increasing tightness in future years, in terms of the ability to meet growing demand, as a fifth of the existing generation capacity in Britain is due to be closed down.

Meanwhile, expert advice suggests that Ireland has the capability to achieve its national targets for renewable electricity from onshore renewable generation alone, with capacity to spare. This means that there is potential for projects of scale onshore that are aimed at export markets. It also means that our offshore wind resource can be developed as an export opportunity.

The EU Directive provides a mechanism whereby renewable energy produced in one country can not only be exported to another but can also be counted towards meeting that other country’s national target. The electricity so exported is subtracted from the renewable output of the exporting state. This would not of course be permitted if the exporter was failing to meet its own binding targets.
 
Up to now, while there has been physical flow of electricity across borders, the renewable value of the electricity remained in the country where it was produced and could not be counted towards another country’s target. Under the Directive, a formal Inter-Governmental Agreement between the two Member States is required, under which the Governments agree that a certain proportion of renewable energy produced in one country is counted in the other.

It is I think worth stressing this point, because it may not be emerging with sufficient clarity from industry-inspired headlines. We are operating here under the terms of a 2009 EU Directive which sets out the ground rules for this exercise. What we are talking about is identifying one or a series of what the Directive refers to as ‘joint projects’. The Directive specifies that it is for the Government on whose territory the project is sited to identify a specific project to the Commission and to specify how much of the energy produced at that project is to be regarded as counting towards meeting the targets in the other country.

Electricity production is of course a commercial operation and we very much expect commercial operators to bid for these projects. But it is for our two Governments to co-operate on the design of what it is we want the market to provide. It may be that none of the products currently on offer will meet our specifications. If so, it will be for the developers to adapt their projects accordingly.

Ireland’s overarching strategic objective is not just to make renewable energy an increasingly significant component of our domestic energy supply by 2020 but also to make it a significant component of our export sector. We have in Ireland a rich and abundant wind and ocean energy potential which I firmly believe can be harvested and exported as a real economic opportunity for this island.

There are as yet unresolved policy issues, for both us and the British. First, we have to be clear as to the strategic benefit in establishing an export market. Is it better that this country host a series of private projects linked via their own private interconnectors to the UK national grid bypassing our domestic network – effectively off-Wales wind farms that just happen to be sited on Irish soil? Or do we want to integrate these projects into our own national transmission system?

Second, there is the question of State participation. Apart from any other consideration, the State and its agencies are the largest landowners in the country and wind farms need land. But our energy companies are also major participants in the renewable energy market. Should we be growing their participation, with a view to reaping the major commercial benefits that are down the line? Or should we leave this market to be developed by the private sector and simply enjoy rental income?

Third, State participation need not be active: it can instead consist of profit-sharing, perhaps through our taxation system. Whatever we ultimately decide, the commercial exploitation of our wind resources – which, under our Constitution, belong to the people – must be accompanied by a very real commercial return to the people.

The Memorandum of Understanding has triggered detailed analysis of how Irish renewable energy resources, onshore and offshore, might be developed to the mutual benefit of Ireland and the United Kingdom. Trading of renewable energy between the two States must, I believe, seek to achieve more cost efficient uses of resources, drive down deployment costs, be sustainable in the long term and reduce dependence on fossil fuels.

An agreed programme of work is already underway so as to prepare for the Inter-Governmental Agreement. This work programme includes economic analysis, addressing policy and regulatory questions and dealing with grid issues. There are very complex engineering and market issues to be teased out but the ambition is to settle on an Inter-Governmental Agreement in early 2014.

Such a tight timeline is essential if potential projects, which would be selected through an open competitive process, are to start exporting wind energy from Ireland to the United Kingdom by 2020.

For Ireland, there are very clear economic benefits. Significant employment opportunities will arise if we can properly exploit this opportunity. As an example, employment creation arising from a 3 Gigawatt project would be expected to be in the order of 3,000 to 6,000 job years in the construction phase, with the actual number dependent on the construction schedule to 2020. There would be about €1 billion of construction cost spending on Irish civil engineering works over 2 to 3 years. There would also be additional jobs created in the on-going maintenance of turbines over a 20-year operating life. Further employment opportunities would arise if turbines or components were manufactured in Ireland.

All relevant State agencies, particularly in the enterprise area, will have to co-ordinate their activities early in the process to ensure we maximise the employment potential of export projects. This opportunity has already been identified by the Industrial Development Authority of Ireland and Enterprise Ireland in their clean technology growth strategies. There would also be a flow of income to local economies in terms of rates, rent to land owners and local community funds.

There are also potential significant interconnection benefits, enhancing security of supply, allowing for increased intermittent wind generation and facilitating the operation of the single market. 

In terms of costs, some concerns have been expressed about potential amenity and environmental impacts. We all know that securing public acceptance for renewable energy can be a major challenge.

Public acceptance is achieved in part by requiring industry to address and mitigate human, environmental and landscape impacts and to deliver the best possible engineering solutions. It is also achieved in part through transparent planning, construction and licensing procedures.

It is important that industry communicates the local as well as the national socio-economic benefits flowing from investment projects. A recent Irish Government policy statement on the matter acknowledges the need for social acceptance and for project developers to examine appropriate means of building community gain considerations into project planning and budgeting.

Many energy project developers have already done this and industry as a whole should take the lead from best practice. Irish legislation on the planning process for strategic infrastructure, which is now recognised as an exemplar, allows planning authorities to require developers to build or finance local facilities and services that confer a substantial gain on the community.

Any new wind farms will of course be subject to the Planning Acts, including the requirements for public consultation. The Department of the Environment, Community and Local Government is currently undertaking a focussed review of the Wind Energy Development Guidelines. My Department is working closely with them on this.

And it should also not be forgotten that Bord na Móna has large areas of harvested bogs in isolated locations. These offer potentially unobtrusive sites for wind farm development.

On any cost-benefit analysis, therefore, I am convinced that wind energy presents this country with a new mission into the future, one that secures employment and delivers clean energy.

This renewable electricity export project is underway in a general environment of urgent change and re-orientation. In Britain and Ireland – and across Europe – we recognise an urgent need for investment in new energy infrastructure. First, investment in national networks will underpin economic development, as well as renewable energy. Second, investment in interconnection and smart grids will critically underpin the single European energy market and enhance security of supply, as well as enabling trade in renewable energy.

Investment in infrastructure is critical if we are to achieve the most ambitious of our energy objectives: completing the Internal Energy Market in both electricity and gas. The European Council has endorsed the goal of achieving a single integrated energy market by 2014. Ireland has a two year derogation from this target: we have already achieved a well-functioning single all-island electricity market and now we must redesign that market – while preserving I hope its better attributes – so as to enable us to interact with our European neighbours.

This is a major strategic challenge for Ireland. We need to preserve the important features of our existing gas and electricity markets, while maximising the benefits which integration can bring for Irish consumers and the energy sector itself.

Of course, the market will not expand overnight, to include every European customer. The size of the real functioning market will be determined by the capacity of interconnection. 

Some very fundamental issues need to be addressed before this can become a reality. There are technical issues to do both with the need to align fundamentally different market models and to overcome current interconnector capacity constraints.

If these issues are dealt with, then direct interconnection not just with Britain but with the European mainland becomes a real possibility. Greater interconnection will enable, but not necessarily guarantee, a gradual greater integration with the UK and France – and perhaps even further. When such trading becomes a reality, relative prices will then influence which way the flows will go – whether we become a net importer or exporter of electricity.

If and when we get the interconnection infrastructure then, in that massively enlarged market, domestic Irish undertakings will be very small players indeed. And there are therefore high level policy issues about the strategic positioning of Irish utilities – public and private – in preparation for competition in a market of that size. We must confront the challenge of what such changes in the market would mean for Irish companies, so as to ensure as best we can that there remains an indigenous Irish energy sector.

In conclusion, there are many challenges to developing the economic relationship between Ireland and Britain. But none of these challenges would as great as if there was to be a material change in the nature of Britain’s trading relationship with the European Union as a whole.

Continuing EU membership is a matter for British politicians and British voters. But the issue also concerns our shared future. The Irish Government has made no secret of its view that the EU is stronger with Britain as part of it. We want to see the UK remain – and remain central – to the European Union.

At Downing Street last year the Taoiseach and the Prime Minister confirmed that we are in both capitals firm supporters of the Single Market. In his more recent Bloomberg speech Mr Cameron asserted that: “At the core of the European Union must be, as it is now, the Single Market. Britain is at the heart of that Single Market, and must remain so.”

He also said – and I have to agree with him – that “when the Single Market remains incomplete, in services, energy and digital – the very sectors that are the engines of a modern economy – it is only half the success it could be.”

The Prime Minister confirmed that completing the Single Market should be our driving mission. And he stressed that continued access to the Single Market is vital for British businesses and British jobs.

In that speech, Mr Cameron set out what seems to me to be a compelling case for the UK’s continuing and active membership of the EU. This is very welcome. Like all Member States, the UK gains from its membership of the Union: it also makes a valued contribution and, I believe, the EU is stronger for having it on board.

Both our governments share this desire to complete the Single Market and we both believe that the Single Market should in particular take advantage of digital opportunities, reflecting the growing importance of online commerce and trade, should open up services markets and should establish a genuine, efficient and effective internal market in energy.

Ireland’s energy policy remains firmly set in the European and global context. It is also about developing the British-Irish economic space to our mutual benefit. In relation to the renewable energy export project, there is as I’ve said much work to be done over the coming year. Key questions to be answered include the amount of power to be procured; what support mechanisms will be in place; how will the benefits be shared; and so on.

I am confident that these matters can be addressed and agreed. I look forward to participating in your discussion.

Thank you.