Gas, wind, and energy efficiency is where it’s at according to the International Energy Agency (IEA) review of Irish energy policy. The Energy Institute agrees and goes a step further and asserts that oil matters: for future competitiveness, our energy security, and economic growth.
The Energy Institute was one of 40 organisations visited by the IEA team in the course of their recent review of Irish energy policy published in July of this year. The review is supportive of government renewable energy policy and draws attention to the growing importance of gas for energy security and the implications for gas infrastructure.
On energy infrastructure, the Institute believes that delays such as we have experienced with Corrib and with the North/South high tension electricity link not alone cost the consumer but are damaging Ireland’s reputation – impacting for example on the prospects for oil and gas exploration.
While the ongoing and future benefits of Corrib have been independently assessed and publicised, up to June of this year[1], no government spokesman or agency had put a cost on the delay or drawn attention to the full scale of the losses and to who has carried them. The list is long and it begins with the Irish consumer who has had to pay higher gas prices, the government revenue forgone and the developers of the project who have borne massive cost over-runs and delays.
While all of this may be history its effects are not. Who, given this legacy, would risk investing in hydrocarbon exploration and production (E&P) in Ireland? On the evidence from the Atlantic Margin licensing round of 2011, the answer is, no oil company with pockets deep enough to prospect and develop in the deep waters off our western coast.
The Institute believes that until current legacy issues are properly addressed Ireland will continue to incur a risk premium on investment that translates into reduced E&P activity and higher costs for consumers’ thereby damaging competitiveness and growth.
The IEA review gives a succinct, coherent and valuable account of Irish Energy policy and its critique offers several sets of nuanced recommendations for action. Among the principal recommendations are the need to improve i) the security of gas supply and ii) the consent process for critical energy infrastructure. At this time of national crisis it is vital that the Government fully explores and embraces the resolution of the issues implied.
The Institute believes that the potential for a vibrant oil and gas sector is underexploited and that in an era of high oil prices it is very much in our interest to fully explore the potential of indigenous resources. It is clear from the “shared goals” to which Ireland and all IEA member countries are committed that this is to be achieved in co-operation with all stakeholders.
Irish energy policy has successfully created an active and entrepreneurial wind industry, focussed in the early years on community and small commercial developments, then on regions and now has its sights set on export markets. None of this would have been possible without a strong lead from government, the participation of local authorities and land owners, and the awareness of finance providers. The Irish wind energy story starts with the marketing of wind as a natural resource by the Renewable Energy Information Office (an early public private partnership initiative of SEAI) and continues with an affordable level of public subsidy while holding out the prospect of export growth driven by UK demand for renewable energy to meet its international obligations.
Like all successful policy interventions it has consequences – negative consequences if gas prices were to soften; positive consequences were the opposite to materialise. However, one inescapable consequence is the requirement for electricity interconnection to GB system and flexible gas plant in Ireland to compensate for the variable nature of the wind resource. In a high wind penetration scenario such as that projected for 2020 where up to 3,500MW of wind capacity is deployed the need for flexible plant and hence the security of gas supplies becomes paramount.
Aside from renewable energy, natural gas is the energy source with the lowest CO2 intensity. For that and the additional reasons of convenience, price and conversion efficiency it has become the fossil fuel of choice for electricity generation, most heating and potentially for some forms of transport.
The rapid development of the shale gas industry in the United States has taken many by surprise and dramatically reduced the price of inland gas with run-on consequences for oil prices. As a result the US is now more competitive and enjoying an investment boom; the US bound cargoes of the liquefied natural gas (LNG) trade have been diverted towards Europe and the Far East, but so far without much impact on prices. Interest in Poland has been strong and already there is a significant amount of trialling underway in the United Kingdom.
In the wake of what has happened in the US the economic case is gaining ground in Europe and security of supply is an important consideration for all and especially the former eastern block countries. On the 7th September the EU released three studies on the economic, greenhouse gas and environmental risks.
Irish energy policy is rightly driven by long term environmental and energy security objectives and it is with these goals in mind that the current support is focussed on i) renewable energy deployment and ii) energy efficiency and iii) R&D to assist the growth and integration of RE and EE. The IEA has emphasised the need for enabling infrastructure and of securing public support for its provision. The Institute believes that all of this will be accomplished more effectively if there is a wider understanding of the trade-offs involved in a mature and fit-for-purpose energy policy. Energy policy with its inherent tensions and their pragmatic resolution needs to be actively promoted by Government if it is to be appreciated and owned by a wider public.
More gas, better infrastructure and higher efficiency can combine to deliver affordable and cleaner energy services. The chain starts with government enabling E&P and it ends with a responsible service industry intent on bring quality services to end users who need to be efficiency aware and enabled if they are to have more affordable comfort with less energy consumption and lower CO2 emissions.
There is every possibility that, with the right policies and the determination to see them through effectively, we could like Denmark and Norway continue to be strongly committed to sustainable energy while aspiring to an indigenous oil and gas industry to make a profitable contribution to Europe’s security of supply between now and 2050.
The openness which characterises the Irish economy has served us well; even now in our hour of need it continues to support growth in the ICT, Pharma and food sectors while providing opportunity at home and abroad for our underemployed. An energy policy that seeks to optimise the potential of all our resources is what we need right now.
We cannot wish our oil dependence away; we must learn to live with it and, if possible, leverage the wider EU dependence on oil to carve out a sustainable future. Gas, wind and energy efficiency are all within reach. A discovery of more gas and a measure of oil could be transformative.
A robust enabling framework for the independently financed development of our hydro-carbon potential to complement that of wind would be a policy triumph.
[1] Minister Rabbitte revealed that the true cost of the delays experienced was closer to €2bn and that immense reputational damage had been done to Ireland abroad.
