With the European Council calling for a single EU gas and electricity market by 2014, ANN O’DEA looks at the implications for Ireland’s renewable energy sector.
"Nations that lead the world in clean energy technology will lead the global economy of the 21st century."
These were the words of US President Barack Obama in his ‘Winning the Future’ speech, in January of this year. It is a reflection of the growing importance attached internationally to sources of clean energy, as oil and gas prices look set to continue their rise. It is a reality that has been recognised by successive governments in Ireland in recent times, although aspects of our energy policy on renewables were called into question last week by John FitzGerald of the Economic and Social Research Institute (ESRI) in his new report, A Review of Ireland’s Energy Policy.
"The economic backdrop for energy policy has changed dramatically as a result of the current recession and some of the important assumptions that underpinned the 2007 Government White Paper on energy policy are out of date," said FitzGerald, who has also called for a review of Ireland’s support scheme for renewable energy.
He argues that the current renewable energy feed-in tariff (REFIT) support scheme for long-play renewable technologies, such as offshore wind and wave and tidal generation should be ended, but says the scheme should remain in place for onshore wind power.
Owen Lewis is CEO of the Sustainable Energy Authority of Ireland. He points out that much of FitzGerald’s report is very positive on our renewables development to date, and that his call for a review of certain policies is fair.
"Certainly that review needs to be done," says Lewis. "Policies need to be reviewed in relation to recent changes and fall-off in economic development, and a review of the 2007 white paper is due in any case. I’m sure we’ll see that happen in coming months."
Any debate on policy should not distract from the potential presented by our renewable energy sector. Last month, the Irish Wind Energy Association (IWEA) stated that Ireland could be exporting as much renewable energy as it uses by 2020. IWEA’s chief executive Michael Walsh said that if generation capacity is met, we could export up to 5,000MW of renewable energy generation in 10 years, generating an annual export value of more than €2bn for Ireland.
It is a proposition that appears all the more attractive as we move towards a single European energy market. On 4 February, the European Council held its first energy meeting in Brussels, where it called for greater efforts to modernise and expand the EU’s energy infrastructure, and to connect member state networks. The meeting concluded that the EU should have a single gas and electricity market by 2014.
"It was the first time the heads of government in the EU spent a significant part of their regular meeting focused on the topic of energy, and one of the key political declarations coming out of that was a resolution to bring about a single European market in energy," says Lewis.
He concedes that the timescale of 2014 may be ambitious.
"But whether it’s 2014 or 2016, the resolution is there, and that has huge implications for us and the opportunities for Ireland to be a source of clean energy – particularly clean electricity for northwestern Europe.
"Remember, many of our neighbouring countries will find it much more difficult to deploy clean energy compared with ourselves," continues Lewis. "We have this extraordinary resource, the best wind energy in Europe and the best offshore resources in the world off our west coast. With our relatively low population density it gives us opportunities to be the place where part of Europe meets its clean energy needs most efficiently.
"To put it in very simple terms, if a wind turbine in Ireland can deliver maybe twice what the same turbine in Germany will deliver, we need to look at how can we bring about an economic situation where it makes sense for the German investment to be made in Ireland, and that clean electricity delivered to Germany."
The work of Eirgrid
It is in this context that the formation of a European grid is key, says Lewis. "Eirgrid is working with its sister transmission system operators in Europe in designing this. The interconnectors really are very important, and Eirgrid is confident in delivering the east/west interconnector on schedule in 2012."
Valerie Lawlor is a partner at McCann FitzGerald, with expertise in the energy sector, advising significant energy industry players on energy market projects, transactions and regulatory issues.
"In terms of the possibility of our becoming a net exporter or producer of wind, the degree to which that is likely to come to pass will be a function of the degree to which we manage to physically interconnect Ireland to Europe and, at a commercial level, the degree to which we manage to converge the wholesale markets for electricity, either with the UK or at a European level. But certainly there isn’t any limit to what we can do from a resource perspective."
Of course, while the aspiration to become a net exporter of renewable energy is an appealing one, meeting Ireland’s own energy needs is the first priority. Paul Lynam is CEO of Siemens in Ireland, and he sees the environmental challenges we face as an opportunity we ignore at our peril.
"Look at the opportunities associated with energy and renewables, Ireland today imports 90pc of its hydrocarbon raw material, the equivalent of €6bn, so there’s a €6bn budget there that we should be able to access and drive the economy internally rather than import these energy sources."
He also points to recent research by Siemens on the possible impact of high oil prices.
"We believe that because of Ireland’s small open economy, it would have a significant negative impact if oil prices peak in the future," he says. "We believe that up to 7.5pc of GDP could be impacted by that, so producing our own energy was probably never so important as now."
"I think as anyone who went to school in Ireland in the Seventies will recollect, we were all told Ireland had no natural resources, but this has transpired to be quite untrue," says Lawlor. "Our single most significant natural resource is wind."
On our road to recovery, any review of Ireland’s energy policy will need to take close account of this green energy advantage.
Ireland’s business leaders will gather at the second annual Business & Leadership Green Economy Briefing from 8am on Tuesday, 31 May 2011 at the Four Seasons Hotel, Dublin.