This year will be a defining one for the energy sector – and the threat of hefty fines for missing EU targets has focused minds, writes Simon Rowe
We could be building up a new export opportunity to rival our own resources of agrifood and tourism
With the Government in a race against time to avoid a potential €360m fine from the EU for failing to hit renewables targets, 2017 looks set to be a defining year for the country’s energy sector.
If Ireland fails to meet a binding target of generating 16pc of energy from wind, solar, biomass and other renewable sources within three years, a penalty of up to €120m will be imposed by the EU for every 1pc the State falls below target.
The clock is ticking down to the 2020 deadline and Minister for Climate Action Denis Naughten is under pressure to implement policies to help avoid or reduce the potential bill facing Irish taxpayers.
Ireland is only halfway towards meeting its targets, with just 8.6pc of energy consumption derived from renewables.
Even in a best-case scenario, experts predict the State will fall short by 3pc, leading to a significant bill.
Minister Naughten has pinned his hopes on three major policy initiatives set to be rolled out in the coming months: a Renewable Heat Incentive scheme for industry; new planning guidelines on onshore windfarms that will likely benefit the capital intensive offshore wind industry; and a new support scheme for renewable electricity.
Ireland is committed to meeting 40pc of electricity demand from renewable resources, 12pc renewables in the heating sector and 10pc in transport by 2020.
But just 22.7pc of the 40pc electricity target has been achieved to date, just 6.6pc of the 12pc heat target has been reached, and only 5.2pc of the 10pc renewable energy transport target has been met.
And even if Ireland gets close to reaching its 2020 targets, the EU plans to move the goalposts again by increasing the EU-wide renewables target to 27pc by 2030, with even greater fines proposed for breaches. The fines, which are set to be applied at a daily rate of €25,000, will then ratchet up at an ever more rapid pace.
The European Commission has highlighted the country’s laggard status by ranking Ireland 23rd out of 28 member states for renewable energy.
Ireland is ranked just ahead of the UK on 8.2pc and Belgium on 7.3pc, with Luxembourg on the bottom rung with 5pc. Sweden uses the most renewable energy at 54.1pc.
Critics of the Government’s strategy on renewable electricity blame Ireland for having relied too heavily on onshore wind to reach its targets.
Today, more than 250 windfarms power Irish businesses and communities across the all-Ireland energy market. Their total capacity now exceeds 3GW, enough to power almost two million homes. Just over 20pc of our electricity is now generated by wind energy.
However, local opposition to onshore wind farms has spiked to such a degree that an estimated two-thirds of new windfarm projects are hampered by court wrangles.
Three wind farm developments in Clare, Offaly and Wexford are facing legal challenges in three separate High Court cases that are currently ongoing.
But without new onshore windfarms coming on stream in the next three years, the pressure for energy will grow even more intense as the economy grows, and as the IDA becomes more successful at attracting energy guzzling data centres to Ireland.
Ireland is already home to a large cluster of data centres, including Google, Microsoft, Amazon and Apple.
Proponents of offshore wind energy argue that this renewable resource has the capacity to generate far more electricity than its onshore counterpart and has less physical impact on scenery, avoiding many of the problems that have bedevilled onshore windfarms.
Another key argument, which chimes with IDA policy on data centres, is that offshore wind- farms will attract investment from multinationals with deeper pockets. Corporate giants such as Denmark’s DONG Energy, which is investing £5bn in six regional offshore windfarms in the east Irish Sea, have the funds necessary to drive rapid expansion in what is a capital intensive sector.
“Ireland has the third-largest offshore wind resource in Europe, after Britain and Norway,” said Brian Britton, managing director of Oriel Windfarm. “And when you look at what other countries are doing, we are not developing this resource.”
Backed by Glen Dimplex founder Martin Naughton, Oriel has a “shovel-ready” plan to build a 330MW windfarm 22km off the coast of Dundalk. Britton, who is chairman of the National Offshore Wind Association, said offshore energy could be the future equivalent of Ireland’s “tech and pharma success story”.
“We could be building up a new export opportunity to rival our own indigenous resources of agrifood and tourism. And that should be the long-term aim that we have because we have that resource and there is no reason why we couldn’t be supplying that energy into Europe. FDI in terms of tech and pharma may not last forever, so we should be looking to offshore wind energy.” However, since the Government decided in 2012 to abandon subvention for offshore wind and focus instead on onshore, the wind has been taken out of the sails of the offshore sector.
At present there are five companies involved in developing offshore wind energy projects in Ireland, including Oriel Windfarm, SSE Renewables Codling Wind Park, Dublin Array and Fuinneamh Sceirde Teoranta.
But the only offshore wind farm constructed is the first phase of the Arklow Bank project, a 500MW project operated by SSE, the parent company of Airtricity. It will be capable of meeting the green electricity demands of over half a million homes.
Full consent has been given for the Codling Park wind farm on Codling Bank on the east coast, between Greystones and Wicklow.
The project is backed by the family of property developer Johnny Ronan and Norwegian billionaire Fred Olsen.
The Dublin Array project, which is being developed on the Kish and Bray Banks between Dublin and Wicklow, has a potential capacity of at least 520MW. Industry insiders say the offshore projects are stalled awaiting a ministerial signature on leases and a State-approved tariff agreement. Such delays are deterring foreign multinationals from seizing Ireland’s offshore opportunity, said Britton.
And without price supports for offshore wind and solar energy, the future of Ireland’s future energy sector is on standby.
Brexit has thrown another big spanner in the works for Ireland’s energy sector, making a bad situation even worse.
Less than a decade since Dublin and Belfast joined forces to form a single electricity market, bolstering the security of the entire island’s energy supply, Brexit is putting that at risk.
Although the British government’s 12-point Brexit White Paper emphasised the need to avoid disrupting the Irish power market, there are concerns that the planned €286m North-South electricity interconnector could be scuppered.
There is also uncertainty about the security of supply in a post-Brexit world for an island that largely relies on its bigger British neighbour for oil, gas and electricity.
Ireland is still heavily reliant on fossil fuels, the bulk of it imported. Ireland imports 85pc of our energy, at a cost of €5.7bn, or about €15m every day. About 97pc of imports are fossil fuels; oil (56pc), natural gas (31pc), and coal (10pc), according to the Sustainable Energy Authority of Ireland. The remainder is electricity (2pc), and biofuels (1pc).
The largest fuel used in our indigenous energy production is still peat — a high carbon-emitting fuel — at 47pc, followed by renewable energy sources at 44pc. The country still relies on three peat-fired power stations for 8.8pc of its electricity requirements. State-owned Bord na Mona, Ireland’s biggest peat producer, has vowed to cease peat extraction from existing bogs by 2030 and is transitioning to a sustainable business based on biomass, wind and solar energy.
The farming sector, the single biggest contributor to C02 emissions, is obviously very keen to jump on the renewables boom too.
More than 20,000 acres of land owned by Irish farmers are now believed to be under some form of a solar energy contract as solar energy development companies are chasing the lucrative rural renewables market.
Gas Networks Ireland is in talks with 12 separate farming entities, including one potential co-op in Claremorris, with a view to establishing digesters and purification plants to capture gas from slurry and pump it directly into the national gas network.
“The potential is that 20pc of the gas demand in Ireland could be met by renewable gas by 2030. This could be easily ramped up from feedstocks that are already close to the gas network,” said Denis O’Sullivan, commercial director of Gas Networks Ireland.
There is another bright light on the horizon for the energy sector, say experts.
The recently launched Celtic Interconnector project between Ireland and France will allay fears over supply security and possible import levies on UK fuels post-Brexit.
The project will see EirGrid work with French electricity provider Réseau de Transport d’Électricité to develop a potential electricity connection, using cables — 600km long, of which the offshore element would comprise approximately 500km — that would run under the sea. The project would have a capacity of approximately 700 megawatts (MW), enough to power 450,000 households.
A final decision as to whether or not to proceed with construction of the project won’t be taken until 2020 at the earliest.
But if successful, it will enable Ireland to be less reliant on its electricity interconnection to Britain, a market which is facing an impending capacity shortage itself.