Chairman, Delegates,
I very much welcome the opportunity to give this opening address to this important Annual Energy Conference. Energy matters and the energy sector in Ireland are coming under particular focus this year due to our occupancy of the EU Presidency role up to the end of June.
We have had a successful Presidency in energy terms, and have hosted three major events in Dublin, the Informal Meeting of EU Energy Ministers, the SET-Plan conference and also the Digital Assembly which is starting in Dublin Castle this morning.
I will address the energy aspects of the Irish Presidency a little later in my speech.
1.Introduction
Firstly, I am glad to put on record that the overall economic backdrop to this conference is more positive than for a number of years. Delegates will be well aware of the economic, fiscal and financial challenges which the Government is addressing following on the financial and economic meltdown which befell the country. The task of restoring stability and growth has been the permanent defining issue on the agenda of the Government since it took office.
It is clear that real progress has been made notwithstanding the economic difficulties confronting our trading partners. Crucially fiscal order and stability has been restored. The Government met its fiscal Targets under the agreement with the Troika and are slightly ahead of target. This means we are on track to exit the bailout agreement at the end of this year and regain our place as an independent sovereign state in the financial markets. Progress has also been made on the restructuring and recapitalisation of our broken banks. But there is more to be done – you can’t fix the economy unless you fix the banks.
The key now is to ensure that the banks which have received such huge injections of taxpayers’ monies play their role in assisting investment, whilst at the same time ensuring that the stability they have gained on the back of taxpayers’ money is retained.
This level of progress has not been easily attained. It has involved difficult decisions. It has also required the diversion of vast amounts of funds, which would otherwise have been available for economic and social investment, into fixing the banking system. It is important that we maintain the momentum towards fiscal and financial stability. This will require continuing fiscal vigilance to ensure we meet our targets and maintain an environment that promotes stable economic growth into the medium term. We must also maintain and indeed build on our recent gains in competitiveness. This will situate us well, as an export oriented economy, to benefit from any sustained pickup in international economic growth.
However, unemployment remains the key economic challenge we face. The generation of sustainable economic growth is a key element in the creation of the jobs we need. It is not however sufficient for the task on its own.
That is why the Government has been proactive, within the funding limits that constrain us, in addressing sectoral policy across the various areas that impact on job creation.
We have strongly promoted labour market activation and training schemes to enable unemployed persons to gain the skills and experience that are required to gain employment in a modern economy.
The Government is also leveraging its own investment programme to support job creation.
Just last week, with my colleagues the Ministers for Finance and for Public Expenditure and Reform as well as the Minister of State at my own Department, we announced the decision of the Government that the €6.4bn remaining in the National Pension Reserve Fund would be transferred to the new Irish Strategic Investment Fund which will have as its central remit, investment on commercial terms which will lead to the creation of sustainable growth and employment.
This announcement complements ongoing investment under the Government’s capital programme. In addition there is a large range of measures set out in the Government’s Action Plan on Jobs.
It is clear that the sectors that will create employment in the future will be very different from those that pertained in the past. The necessary retrenchment in the public finances has meant that public service employment has fallen sharply in recent years.
Employment in the construction sector has collapsed from the levels created on an unsustainable basis and whilst there is undoubted scope for targeted investment to arrest the decline in this sector, we will not see employment at or near the peak levels of earlier years.
This means that we must focus on and invest in new areas. The Communications and Energy areas under my own remit are two such areas. There are exciting prospects for sustainable employment in the Energy sector and in my address this morning I wish to focus on a couple of these new opportunities.
2. Energy Efficiency
I don’t need to tell this audience that implementation of energy efficiency measures creates and retains employment at local level, particularly in the construction sector that has been so badly affected by the building collapse.
Energy Performance Contracting provides a valuable method for developing and implementing comprehensive projects focussed on energy reduction or energy efficiency improvement measures which, especially in these difficult economic times, may not otherwise be possible. The National Energy Services Framework which my Department and the SEAI will shortly launch, will standardise energy performance contracting in Ireland, providing a robust process for establishing investment-ready projects.
Later today, I will announce over 20 exemplar projects that will test the Framework, and will hopefully lead to further jobs and growth in the construction and energy technology sectors.
The Energy Efficiency Fund
The Framework will be underpinned by an Energy Efficiency Fund, to which Government has already committed €35 million in the 2013 Budget as seed capital. The Fund is being established to provide finance to energy efficiency initiatives in the public and private sectors.
The aim is to attract matching funding from the private sector, such that the overall amount available for investment is greater than €70 million.
It is envisioned that the Fund will finance two main types of energy efficiency projects in public and commercial sectors, Energy Performance Contracts (EPCs) where funding is lent to an Energy Services Company ("ESCO"), and direct lending to the client company.
While the exemplar projects will feed into this Fund, funding will also be available for other projects with verifiable energy savings. A fund manager will be appointed shortly, and I would encourage you to consider applying to the Fund if you are aware of potential projects.
Better Energy Financing (formerly known as PAYS)
I’m sure that many of you are wondering about progress on Better Energy Financing (formerly known as Pay-As-You-Save), which proposes that the current suite of Exchequer funded grants for energy efficiency measures will be replaced by a new financing scheme open to households and commercial operators.
This scheme will allow consumers to secure upfront financing for energy efficiency upgrades, the repayment of which will be funded from savings on their energy bills generated from the retrofit.
While we will be moving away from Exchequer grants once the Better Energy Financing scheme is up and running, in the interim, Better Energy Homes grant supports will continue to be funded by my Department.
A public consultation will be undertaken by the Better Energy Financing team very shortly. We’ve drawn on the necessary experience and knowledge of the Irish energy sector to inform our next steps towards these market-based financing mechanisms, and many here today have contributed significantly towards the development of this project. I would ask that you continue to provide the benefit of your expertise in commenting on the consultation when available.
I say this because I don’t think we should underestimate the challenges in delivering a loan based domestic retrofit scheme in the coming years. The impact of the economic step-down on demand for the current Better Energy Grants scheme has been quite remarkable. We will need to be creative to convince the next cohort of home owners to make the investment in energy efficiency.
3.Renewable Energy Export Opportunities for Ireland
Ireland has an excellent, largely untapped, wind resource which could be developed as well for export. 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.
You will be aware that in January Ed Davey, the UK Secretary for Energy & Climate Change, and I signed a Memorandum of Understanding on energy cooperation. That Memorandum sent a strong signal of our shared interest in developing the opportunity to export Gigawatts of green energy from Ireland to Britain. 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 Ireland and the United Kingdom 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.
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.
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 some 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 developers to adapt their projects accordingly.
An agreed programme of work is well 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.
For Ireland, there are very clear potential 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.
Such a project would involve 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.
More generally, the shift towards renewable energy and related technologies promises to bring many benefits. There will be opportunities to develop new products across the areas of information technology, remote communications and software. Irish universities are well positioned in this sector. In the near future, we may see Irish-designed products managing everything from control of energy in the home to management of wind farms and ensuring energy on the grid is optimised. With its natural energy resources and strong capabilities in areas such as engineering and ICT, Ireland is well positioned to profit from this opportunity.
In terms of costs, understandable 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.
4.Oil Refining in Ireland
I’d like to touch this morning also on the topical issue of oil refining in Ireland. While significant efforts are underway to improve energy efficiency and increase renewable energy, imported oil still comprises some 60% of total final energy consumption in Ireland and it is clear that oil will continue to play a pivotal role in the medium term to longer term. Security of oil supply is therefore of central importance to the Irish economy and society.
Ireland’s only refinery in Whitegate, Cork, supplies 25 to 30% of our oil needs with the remainder imported in product form from neighbouring markets. In light of ongoing rationalisations in the EU refining sector and the expiry of Whitegate’s refining obligation in 2016, the Government has recently considered the findings of a report That the Department commissioned on the strategic case for oil refining requirements on the island of Ireland.
Among the important findings of this report are:
·An operating refinery provides an alternative source of product supply versus complete reliance on product imports and therefore provides flexibility in security of supply. It also adds value to economy and provides employment
·The existing import facilities on the Island of Ireland taken as a whole, offer a sound and robust infrastructure that would provide comfortable alternatives in the event of a serious disruption at any of the six principal oil ports. They could also supply the total oil demand in the absence of the operation of Whitegate as either a refinery or a terminal.
Following consideration of this report and evolving IEA and EU work on the refining sector, the Government has concluded that the presence of an operational refinery on the island of Ireland enhances the options available to the State in the event of an oil supply disruption, and as such the continued operation of the Whitegate Refinery on a commercial basis is desirable.
In light of this, the Government has agreed that my Department should liaise with the Irish oil industry and appropriate public bodies to determine available policy options that might facilitate the commercial future of refining in Ireland. I will revert to Government for further consideration of these options in due course.
The Refining Report, which I will publish on my Departmental website shortly, demonstrates that the improved motorway network and the robust capacity at Irish ports has enhanced oil security in recent years.
I am also pleased to say that the National Oil Reserves Agency, NORA, has made excellent progress in rebalancing its strategic oil stockholding. In 2008, only 46% of NORA’s stocks were held in Ireland, with the remainder held abroad or in the form of stock tickets. Since then, NORA has worked diligently to increase its access to storage on the island of Ireland and has opened three new strategic oil storage facilities in Kilroot, Co Antrim, Ringsend, Dublin and Tarbert, Co. Kerry.
As a result, by April this year, over 70% of Irish strategic oil stocks are held as physical stocks on the island of Ireland and our dependence on stock tickets has been effectively eliminated. I want to commend the NORA team for their excellent work, which I am convinced has considerably enhanced Irish oil security.
We are all agreed that the mitigation of energy poverty is an extremely complex issue, in particular due to the present constrained economic climate here and indeed Europe wide. The simple truth is that it affects people all across our society.
Everyone should be able to afford to heat and power their homes to adequate levels. This is a fundamental principle of the Affordable Energy Strategy that was published in November 2011. Providing energy efficiency improvements to homes in, or at risk of, energy poverty, results in multiple benefits to recipients, including enhanced energy affordability, tangible health improvements and overall wellbeing.
The Government remains concerned at any increase in electricity and gas prices and the burden this places on households and businesses that are already under significant pressure from the economic downturn.
Unfortunately electricity and gas costs in Ireland are influenced by various drivers, the most significant of which are outside our control. The unfortunate reality is that there is limited scope for protecting Ireland from external energy price shocks.
Nevertheless, I and my Government colleagues are particularly concerned at the increased level of domestic disconnections over recent years. While the Government remains firmly committed to the principal of increasing competition as the best means of exerting downward pressure on prices, I believe that we must redouble our efforts and explore all possible avenues to tackle this problem.
In this regard I believe that all stakeholders can and should play a part in developing enduring solutions. In this regard I endorse the work of CER and suppliers in engaging with and developing workable solutions with customers and where disconnection is an instrument of last resort.
A Successful Irish Presidency from an energy policy point of view.
I believe this audience is very familiar also with our work in the Presidency. We achieved all our objectives, including on very complex files such as e-ID and trust services and on the ILUC proposals on land use change.
On energy matters, early agreement with the European Parliament on the Safety of Offshore Oil and Gas Operations Directive was reached.
In addition, Council Conclusions were adopted on the European Commission’s Communication on the Internal Energy Market, and a Progress report on the draft Directive on indirect land-use change (ILUC) was presented at the June Energy Council.
The EU Commission’s Communication on Energy Technologies and Innovation, which was presented at the SET Plan Conference in Dublin in May 2013, was the subject of a major policy debate among Energy Ministers at the June Energy Council. In addition, the April Informal meeting of EU Energy Ministers provoked very stimulating discussions on a variety of energy policy matters, and there was a joint lunch with Environment Ministers on the Commission’s Green Paper on a 2030 Framework for Energy and Climate Policies.
I am satisfied that the Presidency was a success in the telecommunications and energy sectors. We have worked proactively to ensure that the discussions at the two Energy Councils informed the discussions held on energy at the European Council. In a similar fashion, the outcome of the European Council discussions fed into the deliberations among Energy Ministers at the June Energy Council in Luxembourg.
I look forward to presentation by the Commission before the end of 2013 of an analysis of the composition and drivers of energy prices and costs in Member States, focussing in particular on the impact on households, SMEs and energy intensive industries, including looking more widely at the Union's global competitiveness.
I also await with interest the Commission’s expected guidance on efficient and cost-effective support schemes for renewable energies and on ensuring adequate generation capacity.
Mindful of the energy policy related conclusions reached at the May European Council, the Irish Presidency will continue to work closely with the European Institutions and the incoming Lithuanian and Greek Presidencies to ensure a streamlined transition from July onwards, in terms of facilitating ongoing discussion of important energy policy issues and progressing of individual legislative and non-legislative files.
Finally, I would like to conclude by saying that I look forward to working with all stakeholders in the energy sector and in the economy as we deliver on the challenges for energy policy over the coming years.
My Department is currently working on the development of a new White Paper on Energy to be published in 2014 and which will take account of the seismic developments since 2007 both nationally and in the European Union. Successfully delivering the very many energy policy challenges is critical to sustainable growth and jobs and critical to recovery. The new Energy Policy Framework will be informed by consultation with key stakeholders. I intend, in that Framework, to set out the challenges and highlight the opportunities for Ireland in charting our own Roadmap to a sustainable energy future in the interests of the economy and society.
Thank you.