Corporate Renewable PPAs: Are they the solution to high energy prices?
9th November 2016
Investing in renewables
9th November 2016

Energy Ireland: the great debate

The lock-note address given by Professor Cameron Hepburn, director of economics and stability at INET Oxford, stimulated an extremely high calibre debate, involving both other speakers and delegates attending Energy Ireland 2016. The focus of discussion was the role Ireland can play in a global energy market.

Hepburn said the world must reach a net zero carbon emissions status if the COP21 objective of limiting a future global temperature increase to +2°C is to be achieved. He inferred that the significance of this message had not yet sunk in with international leaders and decision-makers. This state of affairs was, non-scientifically, confirmed courtesy of a show of hands called for by Hepburn involving the delegates in attendance. When given three choices of nett carbon reductions that could be achieved in the period up to 2050, a minority of those in attendance opted for the 100 per cent figure.

Hepburn continued: “Hitting the nett zero carbon target is crucially important because of the legacy impact created by the emissions released into the atmosphere since the beginning of the industrial revolution. These are having a cumulative effect, where global warming is concerned. Addressing the environmental impact of global warming is the key challenge facing the world today.

“We have ample energy resources to draw down upon over the coming years. In fact, by 2050 energy will, in all probability, be a very cheap commodity. But the world must wean itself off carbon, if we are going to get to grips with global warming. Adapting new technologies is the only way by which we can do this.”

Hepburn pointed out that the electricity generating sector is first in line to meet the zero carbon challenge. “Oil is currently at $60 per barrel. There is plenty of cheap coal in the world and there is every likelihood that fossil fuels will become ever cheaper, in real terms, during the period ahead.

“I recognise that natural gas can have a role to play as a transition fuel, for the purposes of electricity generation. It is a perfect complement to wind, which is very intermittent in nature. Gas powered generating stations are very efficient, when compared to coal. Time is running out, if the golden age of natural gas is to become a reality.”

The Oxford academic suggested that carbon capture and sequestration has a key role to play within the electricity generation sector moving forward. “But the uptake of the technology is far too slow, if we hope to meet the COP 21 targets,” he added. “Currently, the rate of investment in carbon capture is increasing by 12 per cent per annum. In reality, this figure should be up at 30 per cent. The electricity sector has no option but to get its act together in this regard.”

Stephen Woodhouse, a Director of Pöyry Management Consulting said that the value placed on energy will be a key driver for society as a whole moving forward and this will have implications for the current Emissions Trading Scheme (ETS).

“Society as a whole can afford more expensive forms of energy in the future; but individuals cannot,” he added. “This means that we have to make the markets work appropriately, if we want to achieve the nett carbon emissions target of zero. This aspiration is as relevant to Ireland as it is in other countries around the world. The development of new technologies will be crucially important. We must have them competing against each other in order to deliver the best outcomes.”

He continued: “ETS is not working and this is an issue which the EU must address in a very meaningful way.” Where non ETS sectors are concerned, specifically transport, Woodhouse said that electrification is a key component of the solution moving forward. “But this must be done in a smart way. There are lots of smart technology solutions that can be brought to bear for the transport sector. They must be used,” he stressed.

“Society as a whole can afford more expensive forms of energy in the future but individuals cannot”

Woodhouse foresaw a critical role for regulators in the fast changing energy and electricity markets of the future. “They must act to encourage investor confidence while, at the same time, protecting consumers’ rights,” he suggested.

Professor John FitzGerald, chair of the national expert advisory council on climate change, said that technology can deliver a de-carbonised economy by 2050. “Generating de-carbonised electricity will be key to achieving this objective,” he added.

“But this must be secured by implementing the polluter pays principle. Everyone must pay for the carbon they use. This must include a charge equivalent to the investment which will be required to ensure that the associated emissions are dealt with in ways that will have a zero impact on climate change.”

FitzGerald expressed the view that Ireland’s welfare system must take account of the large variations in people’s financial ability to pay carbon taxes. “But the fundamental principle of ensuring that everyone pays for the carbon they use must be adhered to by future Irish governments,” he said.

Looking to the future, FitzGerald agreed that carbon capture and sequestration will play a key role in allowing Ireland to reach its climate change commitments. However, he was extremely critical of the current ETS scheme.

“Carbon has become far too cheap… many stakeholders are re-investing in coal as an energy source and turning their backs on renewables”

“It is not working because carbon has become far too cheap. In light of this many stakeholders are re-investing in coal as an energy source and turning their backs on renewables. What we need, moving forward, is a scheme that puts a minimum floor price in place for carbon. This, in turn, will make coal powered electricity generating plants less economic and should, quite quickly, lead to their shut down.”

FitzGerald commented that putting a floor price in place for carbon is good news for the Irish economy. “Proportionately, the increase in carbon price will have less of an impact here in Ireland because of our recent investment in gas powered generating capacity,” he explained. “Any future scheme to put a price on carbon must be enacted with equal measure across the EU as a whole. It is also important that moves to introduce a carbon pricing in Ireland are not dogged by the public backlash that accompanied the introduction of water charges.”

FitzGerald continued: “Over the next number of years the cost of solar panels will come down to make their use a commercial option for significant numbers of Irish households wishing to mitigate the cost of their energy bills and, at the same time, reduce their carbon foot print.

“Just like wind, the sun is an intermittent energy resource. Come night time these consumers will need to rely on the electricity available from the national grid if they want to light and heat their homes. However this, in turn, raises the question: who actually pays to ensure that the infrastructure of the national grid is maintained?

“Yes, there is an overarching need to bring grid connection costs down but 
I also believe it is important for Ireland to ensure that the maintenance and development costs directly associated with the national grid are not directed towards poorer consumers in a disproportionate manner. These are the people who could not afford to install these new technologies in the first place and are more reliant on the electricity provided nationally. Issues such as this will add to the complexity of the work undertaken by regulators over the coming years.”

Factoring-in the impact of greenhouse emissions from agriculture was a theme touched on throughout the debate. Garrett Blaney, Chairman of the Commission for Energy Regulation (CER), said that farming was the elephant in the room.

“Agri-food is a crucial component of the Irish economy,” he said. “The industry must meet its climate change obligations. Producing food sustainably is a key requirement for the industry moving forward.

“The reality is that cattle produce large quantities of greenhouse gases. As a consequence, the industry must invest heavily so as to ensure that our dairy, beef and lamb are produced in the most effective way possible.”

Ervia’s Brendan Murphy touched on the feasibility of further developing nuclear power options in the future. “Nuclear could well be an option when it comes to powering the world’s shipping fleets of tomorrow. The technology is already proven, where submarines are concerned,” he said. “The marine sector represents the world’s eighth largest user of energy.”

All the speakers endorsed the potential for carbon capture and storage (CCS) in Ireland. It was made clear that CCS has the potential to capture approximately 90 per cent of the carbon dioxide produced when fossil fuels are burnt, preventing it from entering the atmosphere. Moreover, CCS has potential to help reduce emissions from electricity generation and in heavy industries where there may be few or no other options for reducing CO2 emissions.

However, due to the very large scale of research, development and demonstration required to prove the viability of this set of technologies, Ireland will most likely seek to utilise this CCS after it has been commercialised in other locations.

There was a lengthy discussion on the wide range of energy options that will be available to Irish consumers and industry over the coming decades.

“One down side to this will be the very complicated regulatory systems that will be required to make sure it all comes together on an equitable basis,” said Blaney. “CER is Ireland’s independent energy and water regulator, established almost 20 years ago. Since then its powers and functions have expanded to include a wide range of economic, customer protection and safety responsibilities in energy. There is no doubt this brief will be further developed as new sources of energy and associated technologies come on stream during the period ahead.”

All of the speakers were of the view that the COP 21 agreements, signed in Paris, represent landmark decisions, in terms of countries around the world confronting the global warming challenge. There was general agreement that Ireland is now moving in the right direction as it gets to grips with the level of its own greenhouse gas emissions.

However significant doubt was expressed as to whether the country would meet its 2020 and 2035 emissions targets, across the various ETS and non-ETS sectors. If these are not achieved, then the country would leave itself vulnerable to very large fines, meted out by the EU.

There was a general welcome for the commitments given by Energy Minister Denis Naughten, who had given the keynote address to the conference earlier in the day.