Ervia (formerly Bord Gáis Éireann) Response Paper. Green Paper on Energy Policy in Ireland 31 July 2014

Transcription

1 Ervia (formerly Bord Gáis Éireann) Response Paper Green Paper on Energy Policy in Ireland 31 July 2014

2 Contents Introduction to Bord Gáis Éireann/Ervia... 3 Executive Summary... 4 Key Themes... 5 Responses to Questions Priority 1 Empowering Energy Citizens: Questions and Policy Options Priority 2 Markets, Regulations and Prices: Questions and Policy Options Priority 3 Planning and Implementing Essential Energy Infrastructure: Questions and Policy Options Priority 4 Ensuring a Balanced and Secure Energy Mix: Questions and Policy Options 29 Priority 5 Putting the Energy System on a Sustainable Basis: Questions and Policy Options Priority 6 Driving Economic Opportunity: Questions and Policy Options Page 2 of 40

3 Introduction to Bord Gáis Éireann/Ervia As a result of the sale of Bord Gáis Energy, Bord Gáis Éireann has been renamed Ervia. This new organisation is changing from an energy company to a multi-utility company with responsibility for the delivery of gas and water infrastructure and services to meet the needs of the Irish economy. Ervia has two operating divisions Bord Gáis Networks and Irish Water. The Bord Gáis Networks (BGN) division, on behalf of Gaslink, operates Ireland s natural gas network and is responsible for the safe, reliable and efficient transportation of Ireland s gas demand (representing 30% 1 of Ireland s primary energy) through the state-owned natural gas network. BGN owns the national distribution pipeline network of approximately 11,000km and the transmission pipeline network of almost 2,500km. The transmission system is linked to the UK and Continental gas markets through two interconnector pipelines with Scotland. Natural gas is available in over 160 population centres in 19 counties throughout the country. In 2012 the network transported 67,900 GWh gas with 79% serving the Irish market and 21% serving Northern Ireland and the Isle of Man. Bord Gáis Networks will change its name to Gas Networks Ireland in late 2014 as a result of the sale of Bord Gáis Energy. In January 2014 Irish Water took over responsibility for the provision of Ireland s public water and waste water services, which previously resided with 34 local authorities. Irish Water is responsible for the supply of drinking water to over 80% of the population via approximately 1,000 separate public water supplies, as well as the collection and treatment of wastewater from over 1,000 separate agglomerations. Irish Water is one of Ireland s largest electricity consumers. 1 _2012_Report.pdf Page 3 of 40

4 Executive Summary Ervia welcomes the opportunity to respond to this Green Paper on Energy Policy in Ireland. Ervia supports the three key Irish and European energy policy pillars - security, sustainability and competitiveness - and recognises the significant challenges that their inter-related nature present for Ireland. We have developed six key themes in our response to this Green Paper summarised below and expanded upon in the Key Themes section and in our responses to the questions raised in the consultation paper. Theme 1 - Gas as a contributor to the three pillars of Irish and European energy policy This theme describes how natural gas contributes to the three Irish and European energy pillars of competitiveness, sustainability and security of supply. Theme 2 The gas network can be an enabler of much more for Ireland This theme describes how the natural gas network (1) can be a key support for the national transport system, (2) is already an integral part of the national electricity system, (3) is already and can become an even greater part of the existing heating system, (4) can support a national renewable heating system and (5) can support a national agricultural policy. Theme 3 - Security of Supply for Gas a robust energy system This theme describes how natural gas and the gas network system provides security to Ireland s energy needs via (1) existing gas infrastructure, (2) access to existing and future sources of gas supply and (3) access to an energy source with pricing that is no less volatile than any other fossil fuel energy source.. Theme 4 - Gas / Electricity Interdependency This theme describes the interdependencies between Ireland s electricity and gas systems. Theme 5 Necessity for gas research and innovation in Ireland This theme highlights the necessity for Ireland to focus on the research and development of next generation technologies for biogas and biofuels. Theme 6 Compressed Natural Gas (CNG) vehicles for Ireland a viable alternative to oil This theme highlights the benefits to Ireland of utilising the existing gas network to roll out CNG as a lower cost and more sustainable transport fuel than oil. Page 4 of 40

5 Key Themes Theme 1 - Gas as a contributor to the three pillars of Irish and European energy policy Oil dominates primary energy supply in Ireland constituting 47% of primary energy supply, with natural gas supplying up to 30%. Figure 1: Ireland's Primary Energy Supply When looked at on a final energy consumption basis, oil represents 57% of national energy consumption, natural gas 16% and electricity 19% respectively. However, surprisingly, much of the energy debate in Ireland centres around electricity. Ireland is more dependent on oil for both primary energy and final consumption than the EU-28 countries. End use of gas in homes, businesses and transport in Ireland is well below the European average and we believe that this needs to increase in order to meet the requirements of the three energy policy pillars. Figure 2: Ireland s Total final Energy Consumption Page 5 of 40

6 Ervia acknowledge that oil has played a key role in the economic development of our country and will continue to play a strong role for future decades. However, in order to reduce our carbon emissions and become more competitive its dominance will have to be reduced over time albeit in a planned and competitive manner. Ervia believe that natural gas will be part of the solution to gradually replace oil, with natural gas itself being supplemented and replaced over time with renewable biogas. Our belief in the future role for gas is supported by recent modelling and expert opinion 2 which indicates that Ireland s energy requirements will be met by a mix of electricity and gas (natural gas and biogas) and not just electricity on its own up to and beyond There is currently little differentiation in Irish energy policy discussions between natural gas and other fossil fuels (in terms of carbon output, benefits, etc.). However The CO 2 produced from burning gas is 20% lower than oil and 60% lower than coal. Gas as the greenest fossil fuel, therefore reduces Green House Gas (GHG) emissions if it displaces coal or oil. Gas is currently cheaper than oil (and forecast to remain so 3 ) and it is less volatile than oil in terms of pricing. Ervia therefore believes that gas contributes greatly towards all three pillars of Irish and European energy policy which are: 1) Competitiveness The Irish Academy of Engineering (IAE) policy advisory published in February calculated that Ireland s energy import costs could potentially be reduced by over 300m each year just by switching from oil to gas in the residential, commercial and industrial sectors: Based on 2011 CSO census data, oil is used for central heating in over 700,000 households in Ireland. 300,000 of these households are in urban areas which have a natural gas network (a third of these are within 20 metres of a gas supply line). Switching these 300,000 houses over to gas heating would immediately reduce the annual heating bill by 700/house/year, as gas is cheaper than oil 4, and would reduce the national energy import bill by over 200m/year. Increasing natural gas penetration in the industrial and commercial sectors to EU averages would save a further 100 million/year on energy import costs. Switching all of these houses and businesses would also result in lower gas tariffs for all consumers (as the fixed costs of the gas network would be spread over greater volumes of gas demand) which would ultimately increase competiveness. 2 uuid/d2e58cf c-8a4f-5739d3cadabe/index.xml?id= Comparisons.pdf Page 6 of 40

7 The IAE policy advisory also states the latest DECC 5 report, issued in October 2012, projects fossil fuel prices up to 2030 under various scenarios. In the base-case scenario, DECC project that the UK wholesale natural gas price will be approximately half that of the oil price between now and 2030 and DECC s other scenarios also project that future wholesale gas prices will be at least 50% below oil prices. Fuel price projections in the IEA World Energy Outlook are very similar to those of DECC with gas prices approximately half of oil prices in all scenarios between now and ) Sustainable Natural gas burns relatively much more cleanly and efficiently than other fossil fuels. It emits less than half the CO 2 emissions of coal, a fifth less CO 2 emissions than oil and negligible sulphur dioxide, nitrogen oxides, mercury and particulate matter relative to other fossil fuels. Natural gas is a flexible, convenient, cost effective fuel suitable for power generation, industrial, commercial, domestic and transport use. Ireland s CO 2 output in 2012 was million tonnes (Mt CO 2 eq) 7 and the target for 2020 is 37.5 million tonnes (Mt CO 2 eq) 8. Converting existing residential and commercial premises, located close to the gas grid, from oil heating to gas heating, coupled with further energy efficiency measures would accelerate the reduction in national CO 2 emissions. A heating efficiency improvement of at least 10% is achievable by switching to a new gas boiler. Gains also result from indirect costs of transporting and storing central heating oils in depots and homes. Although gas is a fossil fuel, it produces 20% less CO 2 than oil. Residential and commercial premises could therefore save an overall 30% in CO 2 emissions by switching from oil to gas heating. 3) Secure Gas supply to Ireland is very secure both in terms of physical infrastructure and supply of the gas itself. When the Corrib gas field starts producing gas in 2015, over 50% of Ireland s gas will come from indigenous sources. Security of supply is discussed in more detail in Theme 5 below. Theme 2 The gas network can be an enabler of much more for Ireland. 5 Department of Energy and Climate Change (DECC) Fossil Fuel Price Projections. October ( us/economics social research/2933 fossil fuel price projections 6 Energy Agency World Energy Outlook 2012 (published 12th November 2012) Page 7 of 40

8 Ireland has one of the most modern gas network systems in Europe with much of the high pressure network having been built over the past 15 years including a second subsea pipeline to Scotland and pipelines from Dublin to Galway, from Galway to Mayo, from Dublin to Belfast etc. There are nearly 670,000 (up from 450,000 in 2003) customers connected to the network including power stations, industry, commercial businesses and homes. The existing gas network can readily accept renewable (carbon neutral) biogas onto the system when it comes into production. Biogas can be used for renewable transport, heating or electricity production. As presented at the ESRI/UCC annual conference in June 2014 modelling carried out by UCC shows that on a least cost basis, for Ireland to decarbonise to meet EU targets, indigenous biogas will play a key role up to and beyond 2050 for all sectors. As an example of what can be achieved with the proper supports in place, Germany currently has over 8,000 anaerobic digesters, with over 200 of them injecting renewable biogas directly into the gas network for renewable heating and transport. A plant has also just been built in Germany which converts excess electricity from wind power to methane (the technology is called Power-to-Gas and the gas is marketed as egas 9 ). The gas network therefore brings real value to Ireland both now and into the future as highlighted below: 1) Via the future large scale roll-out of Compressed Natural Gas (CNG) vehicles in Ireland so that the gas network becomes part of the national Irish transport system. Benefits of which include: Compressed Natural Gas 10 (CNG) provides a lower carbon transport fuel. CNG is cheaper than petrol or diesel for transport (subject to excise and taxes applied). Vehicles that operate on CNG can seamlessly operate on BioCNG 11. CNG vehicles are very suitable for trucks, buses, vans fleets and cars. CNG and BioCNG are fully explained in Theme 6. 2) The gas network is presently an integral element of the national electricity system as it provides fuel to the gas-fired power generation plants - which generate up to 47% of Ireland s electricity. Gas-fired power generation plants are also essential in providing flexibility to Eirgrid (the electricity grid operator) to match the volatility and intermittency of wind power. Gas fired CNG is a natural gas which is filled at high pressure into vehicles as an alternative to petrol or diesel. 11 BioCNG is produced from biogas and converted into a fuel at high pressure to power CNG vehicles. Page 8 of 40

9 plants (both Combined Cycle Gas Turbine (CCGT) and Open Cycle Gas Turbine (OCGT) ) provide the most appropriate form of fast response at large scale and at lower CO 2 output compared to coal fired plants (which are relatively inflexible) and oil fired peaking plants (which have much higher CO 2 output per unit of electricity produced). Ireland s gas fired plants proved invaluable during the prolonged cold weather spell in 2010 when there was a higher reliance on gas fired power generation due to reduced wind. 3) The gas network is presently part of the national heating system and its use can be greatly expanded by converting approximately 300,000 oil-heated homes and businesses (which are located in areas which have natural gas) to natural gas fired heating. Natural gas has many advantages over oil: Residential Heating o Much cleaner than oil producing 20% less CO 2 when it is burned. o Currently approximately 24% 12 cheaper than oil for heating. o Customers can pay for gas on a PAYG (Pay-As-You-Go) basis and do not have to expend large amounts up-front to fill a tank thus helping household/families with budgeting in these difficult economic times. o Convenient also available on demand, no need to store or order. Commercial o Cheaper than either oil or Liquid Petroleum Gas (LPG) for heating commercial premises such as hotels, shops, factories, offices etc. o Does not require any bulky storage tanks as for oil or LPG. o Payment post-use thereby aiding cash flow. Industry o Helps industry meet its Emissions Trading Systems (ETS) targets. o A cleaner and cheaper fuel for industrial processes. 4) Using the existing gas network for heating with renewable biogas, the gas network can therefore in the future also become part of the national renewable heating system. As an example of what can be achieved with the proper supports in place, Germany currently has over 8,000 anaerobic digesters, with over 200 of them injecting renewable biogas directly into the gas network for renewable heating and transport. A plant has also just been built in Germany which converts excess electricity from wind power to methane (the technology is called Power-to-Gas and the gas is marketed as egas 13 ). 12 Based on SEAI prices Apr ' Page 9 of 40

10 Biogas is produced in plants by the bacterial degradation of biomass under anaerobic conditions. There are three categories of biomass: (1) substrate of farm origin; (2) waste from private households and municipalities and (3) industrial by-products. The organic substance is converted to biogas by bacteria in several steps in airtight digesters. If biogas is upgraded to biomethane with approximately 98% methane in a biogas treatment plant, the biomethane has the same properties as natural gas. 14 5) Harvest 2020, the Government s strategy for Irish agri-food and fisheries up to 2020 promotes the production of biogas from organic waste and farm products 15. If the gas network can be used to take this biogas to market in the future (for transport and heating) the network would be a support to national agriculture policy. It should be noted that development of our modern gas network has been financed primarily from borrowings from international lenders which will be repaid from future regulated revenues. This infrastructure is owned by the State (via Ervia). The gas network is therefore a piece of key national infrastructure and its utilisation should be maximised in order to deliver full value for Ireland. Lower gas network usage results in higher charges to consumers as the fixed cost (including borrowing costs) are spread over lower volumes. The opposite is also true with higher volumes resulting in lower charges for all. Theme 3 - Security of Supply for Gas a robust energy system. Security of supply has three elements to it: infrastructure, supply of gas and price. 1) Infrastructure Ireland currently has two sub-sea interconnector pipelines to Scotland which provide good security for the import of natural gas from Britain to Ireland. The gas infrastructure in Ireland has proved to be very robust with excellent reliability over the past 38 years since Ervia s (BGÉ s) formation in The Moffat entry point in Scotland is Ireland s only international gas connection point which links the Irish transmission network to the national transmission system of Great Britain, enabling Ireland to import natural gas. A small section of this pipeline, 50km, is however not twinned. Ervia believes that twinning this remaining section of pipeline will significantly improve the infrastructure security of supply given the strategic importance of gas to the Irish economy. Ervia has applied for Project of Common Interest (PCI) grant funding from the European Commission which 14 The Biogas Handbook, Woodhead Publishing Limited, Page 10 of 40

11 has acknowledged the importance of the twinning of the pipeline for the further development of the interconnector system. 2) Supply of gas Ireland is connected to the British gas market which is one of the most open and transparent gas markets in the world. Britain is itself well supplied with gas from a wide range of sources including its own gas fields off the North Sea, gas pipelines with Norway, a gas pipeline to continental Europe via Belgium and a number of Liquified Natural Gas (LNG) gasification terminals which allow Britain to take LNG imports from global markets. The Corrib gas field is expected to start producing gas in 2015 and this indigenous source will supply over 50% of Ireland s total gas requirements thus reducing our national import requirements and residual security of supply risks. The International Energy Agency (IEA) report in May states that the world is poised to enter the Golden Age of Gas as there are vast unconventional gas resources - including shale gas, coalbed methane - sufficient for at least another 250 years. The technologies and know-how exists for the development of these unconventional gases. 3) Price of gas An Irish Academy of Engineers (IAE) policy advisor states the latest DECC 14 report, issued in October 2012, projects fossil fuel prices up to 2030 under various scenarios. In the base-case scenario, DECC project that the UK wholesale natural gas price will be approximately half that of the oil price between now and 2030 and DECC s other scenarios also project that future wholesale gas prices will be at least 50% below oil prices. Fuel price projections in the IEA World Energy Outlook are very similar to those of DECC with gas prices approximately half of oil prices in all scenarios between now and Production of shale gas in the US has drastically reduced its natural gas import requirements. This has meant an oversupply of gas into the market which is keeping the global price of gas low (although there are clearly different regional pricing dynamics at play) and it is expected that this situation will continue for the foreseeable future. Traditionally, long-term gas prices have been linked to oil prices but these linkages are now starting to break down as it is more difficult for power generators to forecast their gas requirements due to the intermittency of wind electricity generation. As such, future increases in oil price will not necessarily result in corresponding increases in gas prices Page 11 of 40

12 The chart below shows the price movements in coal, oil and gas from 2007 to It can be seen that the price of gas has been relatively stable over the past seven years, in particular compared to both coal and oil. Figure 3: Price Movements in Coal, Oil and Gas Since Ervia Theme 4 - Gas / Electricity Interdependency Gas-fired power generation provides the flexibility to allow for intermittent wind power to operate on the system. In 2013, 47% of the gas which flowed through the gas network was used for power generation. Thus the electricity and gas systems are mutually dependent on each other to operate successfully. The EU Third Energy package is driving the European electricity market integration project, which will see Ireland link up with and become part of a single electricity system in Western Europe. This will require significant change to Irish electricity rules and market. Any changes to the Irish electricity market should formally take cognisance of their impact on the gas system and on the Irish gas market. Any changes to the Single Electricity Market (SEM) must be reviewed carefully to determine a balanced and efficient solution that allows for compliance with EU requirements while taking account of the specific characteristics of the Irish market reflecting that one size does not fit all. Theme 5 Necessity for gas research and innovation in Ireland Page 12 of 40

13 Ervia welcomes the planned publication of the national Irish Bioenergy Plan and notes the support for research, development and demonstration into bioenergy. Ireland has significant potential to produce renewable biogas today from a range of sources (including food wastes, slurries, cattle slaughter wastes and surplus grass). Research carried out by University College Cork (UCC) identified that in practical terms up to 7.5% (and up to 33% in total potential terms) 17 of all gas used in Ireland could be supplied from biogas from the above mentioned sources via the development of up to 200 Anaerobic Digester plants. In addition to this, although its utilisation as a biogas feedstock is still in the research phase, aquatic biomass (algae) is one of the biomass types with the highest potential for renewable energy production as well as various industrial applications and a possible future alternative to energy crops 45. Research in Ireland is already being carried out into this high potential biomass fuel source in the Science Foundation Ireland Centre for Marine Renewable Energy Ireland (SFI-MaREI). The potential for producing biogas in Ireland can also grow due to: Increase in agricultural output (subject to the national Harvest 2020 policy). Population growth providing more food waste and sewage sludge. More excess wind generated electricity available (which could be used to produce renewable biogas (egas)). Research into biogas specifically 18 (or renewable fuels generally) is not however listed as one of the 14 national research priority areas in the Forfás report of the Research Prioritisation Steering Group released in March and to which Science Foundation Ireland (SFI) funding is largely targeted. Two of the five strategic goals in the DCENR Strategy for Renewable Energy are fostering research & development in renewables and building a sustainable bioenergy sector. In 2012, the Irish Bioenergy Association (IrBEA), with the support of SEAI, published a report 21 which assessed the socio-economic benefits of developing the bioenergy sector in Ireland up to The study confirmed that there could be substantial economic benefits from the bioenergy sector including 3,600 new permanent jobs. Ervia therefore proposes the establishment of a national research and development centre for future fuels (liquid and gaseous) A gas produced by the breakdown of organic matter in the absence of oxygen F5F788D4207A/0/RenewableEnergyStrategy2012_2020.pdf 21 Page 13 of 40

14 Theme 6 Compressed Natural Gas (CNG) vehicles for Ireland a viable alternative to oil Natural gas as a transport fuel is known as Compressed Natural Gas (CNG). CNG is a natural gas which is filled at high pressure into vehicle tanks as an alternative to petrol or diesel. A normal, modified, internal combustion engine is used. CNG is a widely used (and fast-growing) transport fuel internationally. In 2013 the total number of CNG vehicles worldwide stood at 17.7 million across 82 countries, compared with just four million in The total number of gas fuelling stations for vehicles is over 22, It is therefore a mature proven technology. Under legislation expected to be enacted in Europe later this year, the proposed Directive on the deployment of alternative fuels infrastructure, it will be mandatory to construct CNG fuelling stations in Ireland by CNG vehicles would be carbon-neutral when using compressed renewable biogas (which becomes BioCNG), supporting significant emissions reductions. In time, when renewable biogas is produced and injected into the gas network these vehicles will then be able to operate on an indigenous, renewable and carbon-neutral transport fuel. Government strategy for private passenger transport centres on the deployment of over 200,000 Electric Vehicles (EVs) in Ireland by It can be expected that once current issues with EVs (such as battery life, range anxiety, residual value) are resolved there will be more rapid deployment of EVs nationally. However only 50% of oil consumed for transport in Ireland is used by cars 23 so EV deployment will still only address half the oil consumption and associated CO 2 output. A significant portion of the remaining oil consumption in transport is used by larger vehicles such as buses, trucks and vans etc. The payload and range requirements of commercial and fleet transport mean that EVs are generally unsuitable. Ervia believe that at the same time as supporting electrification for cars the State should also strongly support CNG and biofuels for cars and for large captive fleets such as buses, local authority vehicles, delivery trucks etc. The Irish Academy of Engineering (IAE) recent policy advisory on Low-Carbon Transport 24 outlines that while significant strides have been made towards Ireland s transport targets, it is unlikely that Ireland will fully meet the targets unless there is a substantial reallocation of emissions quota or a major change in policy priorities. The advisory gives 15 recommendations, including specific recommendations on the use of CNG as a preferred clean fuel for commercial vehicles operating from fixed depots, while Liquefied Natural Gas (LNG) may be used for 22 NGVA Europe website - Worldwide NGVs and Refuelling Stations Jamie del Álamo ( ) 23 _2012_Report.pdf 24 Page 14 of 40

15 international hauliers using the European blue routes 25 - a road offering several LNG refuelling possibilities for heavy vehicles. Clarity is therefore needed on the future excise status of natural gas as a transport fuel. The IAE policy advisory also recommends that a new, realistic, transport biofuels target be set for 2020 to reflect the potential for biomethane, while recognising the highly uncertain market and regulatory outlook for biodiesel. As outlined in a recent Natural & Bio Gas Vehicle Association (NGVA) presentation 26, consideration needs to be given to fiscal support for CNG and biofuels during the infrastructure build-up phase until a significant market share has been developed. Compressed Natural Gas vehicles statistics in Europe The highest number of CNG vehicles in Europe is currently in Italy with over 845,000 vehicles and nearly 1,000 fuelling stations 27. Historical information on the growth in CNG vehicles shows that since 2000, there has been an annual average growth rate of 10.5% in Europe. Of the 17.7 million CNG vehicles worldwide, Europe now accounts for 1.84 million CNG vehicles (with over 4,100 fuelling stations) 28. Germany, Bulgaria, Sweden and France are the main CNG markets in the EU outside of Italy. The lower emissions profile of natural gas (with 20% less CO 2, 70% less nitrogen oxide, 80% less sulphur dioxide and 99% less particulate matter) make CNG vehicles ideal for use in urban areas where air quality is a key concern. There is an additional benefit of a 10% reduction in noise pollution, relative to diesel. Utility vehicles such as waste collection vehicles are ideally suited to operate on CNG Workshop/Documents/10.%20Maedge%20Promoting%20gas%20in%20transport.pdf 27 NGVA Europe Website; - NGVA and Refuelling systems in Europe Jamie del Álamo ( ) 28 NGVA Europe Website; - NGVA and Refuelling systems in Europe Jamie del Álamo ( ) Page 15 of 40

16 Ireland s future energy solution to 2050 key role for Gas Ervia firmly believes that natural gas and Ireland s gas network will continue to play a vital role in delivering all three energy policy pillars up to 2050 and beyond and believe that there is real merit in focussing more strongly on the heat and transport sectors as areas to drive progress towards Ireland s energy policy goals. This view was borne out by at the recent annual conference of the Economic Social Research Institute (ESRI) and University College Cork (UCC) in June where national modelling carried out by UCC shows that on a least cost basis, for Ireland to decarbonise to meet EU targets, that gas (both natural and renewable) will play a key role up to and beyond 2050 for all sectors including electricity generation, transport and heating. Ireland currently uses: 1. Primarily wind, coal and natural gas for electricity generation. 2. Primarily oil and natural gas for (thermal) heating and 3. Almost exclusively oil for transport. Ervia believe a much more sustainable, competitive and secure solution for the future is to move towards: 1. Wind and natural gas for electricity generation and phase out reliance on coal which is highly polluting. 2. Natural gas and electricity for heating and phase out reliance on oil which is both more polluting and more expensive than the alternatives and, 3. Combination of electricity, gas (both natural gas and biogas, a gas produced by the breakdown of organic matter in the absence of oxygen), biofuels and oil for transport thus reducing the reliance on oil. Ervia, through BGN and Irish Water, will work to minimise energy and water consumption and will work towards developing integrated policies to address this. Page 16 of 40

17 Responses to Questions Priority 1 Empowering Energy Citizens: Questions and Policy Options 1. How can we encourage citizens to be part of our transition to future energy paths and the policymaking process that goes with it? Given the scale of changes needed, what are the right mechanisms to engage citizens (e.g. would energy citizen impact assessments for energy policy decisions or transition from written consultations to interactive workshops with interested stakeholders be more effective)? Ervia believes that citizen engagement in shaping and implementation of energy policies is a key element of participatory democracy. International best practice shows that the following principles are key to engaging with citizens: Education - provision of accessible, understandable information and the unbiased framing of policy issues. Active participation - through the establishment of working groups and workshops. Reporting - policy consultations and decisions should include the public s shared priorities. Support - ongoing involvement through feedback, monitoring and evaluation. Ervia firmly believes in education as a key driver to encourage citizens to be part of the transition to future energy paths and the associated policymaking process. From an Ervia perspective the following areas are where education can support Ireland in meeting its energy policy targets: 1. There are currently approximately 300,000 homes located in urban areas where natural gas is available but which are heated with oil. Educating homeowners on the benefits of natural gas compared to oil and providing the supports to help those people convert their boilers from oil to gas would help Ireland reduce its carbon output and would also significantly reduce the heating costs for those homeowners. Ervia would support a targeted education programme for those 300,000 homeowners and residents. 2. CNG education once Government support for CNG is in place, SEAI should raise awareness of CNG information and grants through the Renewable Transport section 31 on the SEAI website. See Theme 6 for further details on CNG. 3. Irish Water, the national water utility, and a subsidiary of Ervia, is one of Ireland s largest electricity users. Electricity is used extensively for pumping water and for operating electric motors in treatment plants. A reduction in water consumption will lead to reductions in electricity demand. We should therefore be promoting the conservation of water. 29 Source Source Page 17 of 40

18 The first step in encouraging consumers to conserve water would be by providing information on their actual water consumption, which Irish Water will do when it starts billing its customers for water at the end of this year. Irish Water plan to conduct a national campaign to inform and encourage consumers regarding the benefits of water conservation. Educating the schoolchildren of Ireland on the need to conserve water and how water can be conserved through the Irish Water An Taisce Green Schools partnership is a key programme in this regard. 2. What formal and informal mechanisms could be used to enhance citizen engagement with regulatory and policy decisions and how should they be structured? (e.g. should there be greater use of consumer panels?) Consumer panels are tried and tested in other jurisdictions. Ervia is supportive of a stronger role for consumer panels in future regulatory and policy decisions in Ireland and can envisage future regulatory requirements to demonstrate consumer interaction regarding customer benefits as part of regulated price control processes. 3. How can we increase the rate of home retrofit radically? What can Government do to encourage citizens to undertake ambitious home upgrades in large numbers? Are there particular barriers that need to be overcome, such as lack of finance, information, and skilled professionals? Access to finance is one of the key barriers to home retrofitting. One of the measures to make homes more energy efficient would be to encourage large scale conversions of oil boilers to gas boilers for home heating. This would reduce both the carbon output from these homes as well as the annual heating costs. An option to consider is the inclusion of part or all of the cost of the oil to gas conversion into the Regulated Asset Base (RAB) for the gas network similar to the way that the cost of the gas connection is treated. This would need to be subject to a cost benefit analysis. 4. How can we raise awareness of the scale of the energy challenges facing us and the ways that citizens can be part of collective solutions? What can we do to improve citizens access to energy information? Through Government initiatives Ireland s citizens have access to a wealth of energy information. However many of the messages are delivered at a national level and so citizens may not feel a part of the solution. One suggestion is to follow the Sustainable Energy Across the Common Space (SEACS) example 32, to develop year-long community energy and environment campaigns, for villages/small towns around the country, with the aim to raise awareness of the energy challenges and encourage energy savings, through measuring energy consumption before and after the campaigns. Communities would be encouraged to be actively involved in the campaign and each community energy consumption reduction could be tracked, with the greatest percentage reduction receiving funding to put in place a permanent energy conservation solution in their community. Energy education at primary and secondary level has been very effective and this should be continued through energy and water conservation awareness Page 18 of 40

19 The National Smart Metering Programme will address the issue of the provision of information on energy usage to customers in real-time in their home on a display unit as a core element of its proposed design which was developed and subject to public consultation during The design aims to ensure that customers are facilitated with easy access to the detailed energy consumption information which smart meters will produce. Bord Gáis Networks (BGN), as the gas Distribution System Operator, supports empowering customers to make informed choices regarding their gas consumption based on detailed information regarding current and historic usage. As the primary stakeholder responsible for development of the gas smart metering solution, BGN will endeavour to ensure that this intent is carried forward to the implementation stage of the programme and that the smart metering solution delivered will facilitate detailed gas consumption being made available to end-customers. The final decision regarding the roll-out of smart meters should be subject to a robust cost/benefit analysis. 5. How have other countries effectively engaged citizens in infrastructural development, and which innovative or interesting approaches could be helpful in Ireland? Ireland ratified the UNECE Convention on Access to Information, Public Participation in Decision-making and Access to Justice in Environmental Matters, commonly referred to as the Aarhus Convention in June The provisions of the Aarhus Convention are broken down into three pillars: access to information, public participation in decision-making and access to justice. Ervia is committed to working with the Department of the Environment, Community and Local Government (DECLG) in implementing the pillars throughout Ervia. BGN has been proactive in its approach to citizen engagement whilst developing key national infrastructure. BGN s experience has shown that a proactive, professional and empathetic approach is the most effective way to engage citizens. BGN has been operating in Ireland for over 35 years and has constructed a national distribution pipeline network of circa 11,000km and a transmission pipeline network of circa 2,500km through rural and urban areas. BGN has achieved success in delivery of projects through development of strategic relationships and real meaningful engagement with local people from an early stage in every project. These relationships are critical in order to operate successfully and continually provide a safe, secure and robust gas network for the citizens of Ireland. BGN is committed to effective and meaningful stakeholder engagement and: Encourages active involvement of stakeholders. Ensures stakeholders have the opportunity to have a say. Understands and responds to stakeholder needs and concerns with considered and timely responses. Engages respectfully with stakeholders and expects the same in return. Evaluates and improves engagement with stakeholders on an ongoing basis. BGN also works closely with external bodies and is affiliated with Business in the Community Ireland. We have demonstrated our commitment to stakeholder management which saw the 33 Page 19 of 40

20 publication in conjunction with other organisations of the Stakeholder Engagement Report 34, published in December The public report, which is the first of its kind in Ireland, shares and documents company experiences and provides practical advice on stakeholder engagement for the benefit of other companies and development agencies. Some innovative approaches on citizen engagement that have proved successful in other countries include Transopoly 35 which is similar to a board game where the purpose is to encourage public participation in regional transportation planning by clarifying risks, benefits and costs. A similar approach could be taken to engaging the public in identifying risks, benefits and costs for energy projects. 6. Is there further scope for switching in the Irish retail electricity and gas markets to enable customers to avail of alternative price and product opportunities, or do the numbers indicate that Irish switching has plateaued? If there is indeed further scope for switching for consumer benefit, are there barriers that need to be overcome, such as availability of information or consumer difficulties with the switching process? Ervia, through its subsidiary Gaslink, put systems in place when the gas markets opened up to competition to allow for gas consumers to seamlessly switch their supplier. In 2013 alone, Gaslink facilitated 117,000 gas customers to switch suppliers and to date has facilitated nearly 500,000 individual Change of Supplier (CoS) transactions. Switching is driven by the retail market rather than the network operators and Ireland has one of the most active switching markets globally 36 and ranked 4 th in the World Rankings for switching in Is micro-generation the most cost-efficient solution to decarbonising home energy, and who should bear the costs of any associated support scheme consumers, taxpayers or industry? Micro-generation can generally be broken down into four categories: Micro-wind-turbine. Photovoltaic panels (also known as solar electric panels). Micro-hydro (scaled down version of hydro-electricity station). Micro-CHP (fuelled by biofuels, natural gas combustion or fuel cells). At present in Ireland, none of these technologies are commercially viable without subsidies or support. These technologies can however, in the long term, play a key part in the development of smart grids to locate, in particular, electricity generation technologies close to the demand for the electricity. This will reduce electricity transmission losses and utilise local resources (wind, biomass, hydro) where it is available. In our current constrained economic environment Ervia believe that Ireland should wait until these technologies become more commercially viable (without significant state subsidies) Page 20 of 40

21 8. What is needed to ensure that smart meters enable greater consumer empowerment in the Irish energy market? Are there steps that should be taken to allow smart meters to play the fullest role in enabling greater consumer empowerment in the Irish energy market, in particular in relation to behavioural change, aside from CER s ongoing preparations for the national smart meter rollout programme, and its associated regulatory decisions? BGN has actively participated with CER and other stakeholders in the development of the High Level Design for Smart Metering. We believe that the design which has been proposed by CER will add to customer empowerment regarding their energy decisions. As before, this empowerment will primarily be derived from the rich information which will become available to customers through various channels - their bill, web access and in-home access to a visual display unit. The availability of detailed information on actual energy consumption will enable customers to change their energy consumption behaviour and achieve efficiencies and savings. Smart meters will also streamline processes such as changing energy supplier. In addition smart meters will make it possible for customers to switch between post-pay and pre-pay methods of bill payment without the costly step of changing meters. However, the final decision regarding the roll-out of smart meters should be subject to a robust cost/benefit analysis. Page 21 of 40

22 Priority 2 Markets, Regulations and Prices: Questions and Policy Options 9. Given the success of Government policy on increasing competition to create downward pressure on prices, are the extent and effectiveness of competition and of competitive behaviour, in both the electricity and gas markets (wholesale and retail), sufficient, and are there any strengthening measures required, at regulatory and/or Government level? Ervia believes that a lot has been done in the past decade to put in place competitive gas and electricity markets. From a gas perspective, BGN has been actively involved in facilitating market processes that have resulted in nearly 500,000 individual Change of Supplier (CoS) transactions from a population of circa 670,000 gas points. Ervia would support any policy initiative that seeks to ease the burden of energy costs (like the successful roll out of nearly 100,000 Pay As You Go (or Prepayment) meters in the gas market). Ervia would support the efforts of policy makers to tackle the rising problem of customers who move from one supplier to another in order to avoid paying for their gas or electricity. Policy needs to protect the industry from this behaviour and introduce fair play and ensure that those who use gas or electricity pay for it and that others are not forced to cross-subsidise those who do not pay. 10. Is the regulator strongly enough positioned and resourced financially and in terms of human resources to deliver its regulatory decision-making and advice roles as set in its legislation, and thereby to contribute to the achievement of energy policy outcomes and regulatory certainty and stability in the Irish market? Ervia agrees that it is necessary for the regulator to be adequately resourced to carry out its functions in order to ensure that it continues to remains independent, well established and transparent. The addition of water regulation as a responsibility of the Commission for Energy Regulation (CER) highlights the need for the CER to be properly resourced. The regulator has provided a clear and stable environment that has allowed utilities: Implement efficiency gains and increases in productivity to reduce costs. Access to international debt markets, meaning that significant network expansion and improvements have not required exchequer funding. Make the necessary investments to ensure modern, sustainable and efficient energy and water networks. Deliver high standards of customer service. The importance of this independent regulatory regime can be seen from the weighting placed on it by ratings agencies. For example, Moody s, a leading provider of credit ratings, places the same weight (40%) on the regulatory regime as it does on the financial metrics of the individual network company. Ireland s regulatory regime is Aa rated by Moody s, the same rating as is applied to Ofgem in the UK, which is widely recognised as one of Europe s leading National Regulatory Authorities (NRAs). Ervia believe there should be periodic reviews to ensure the regulator has the resources required to fulfil its functions. Page 22 of 40

23 11. Is CER s legislative remit appropriate for the purpose of regulatory certainty and stability? Ervia believe that the CER s legislative remit is appropriate and that it is important that its independence is protected to allow it implement its strategies and obligations in a way that does not lead to any unnecessary uncertainty. As mentioned previously the gas industry and in particular the financial markets require and indeed reward stable regulatory policy and its implementation. This has served Ireland s gas infrastructure investments well in the past and every effort should be made to protect this going forward. The addition of water regulation as a responsibility of the Commission for Energy Regulation (CER) highlights the need for the CER to have adequate independence to ensure that regulation works well and protects investors and to avoid any knock-on effect on energy utilities. 12. Aside from the market integration initiatives as set out above and currently being worked on (the SEM 2016 project and EU electricity and gas code development and implementation), what should be Ireland s long-term approach to, and strategy for, electricity and gas market integration for the period after 2016, and how can appropriate governance at regulator and Member State level be provided for in the post-2016 market? What further actions can be taken at Government or regulator level to ensure that Ireland benefits from the EU internal energy market in gas and electricity? For Ireland, balance needs to be carefully considered between EU compliance on one hand and the costs/benefits/competition impacts on the other. Fixed costs of compliance have a much bigger impact on Irish customers than on those of larger EU countries (who have a greater population to absorb the costs). Ireland should recognise that one size does not fit all and that pragmatic ways should be sought to deliver ongoing EU compliance with EU energy policy. Many of the initiatives if not carefully managed could lead to unnecessary costs being put on Irish customers with little or no associated benefits 37. We believe that continued integration with the Great Britain (GB) gas market is very important as Irish gas liquidity/pricing is driven by the GB markets, and also because the GB gas infrastructure is an important safeguard for Ireland s gas network. 13. Given the length of time since the establishment of the regulatory framework for CER, and the extent of additions to the CER functions since then, how should a review of the regulatory framework and/or CER s mandate best be conducted? The Action Plan for Jobs commits to the inclusion of a regulatory mandate review as part of the Green Paper process.12 In light of the implications of the market integration challenge for all players in the period up to 2016, should this review be partial or full? If a partial review is envisaged, should it be limited to how the regulatory framework and/or CER enable consumer understanding and citizen empowerment? Section3.3 Page 23 of 40