Putting a price on policies

ESRI research professor John FitzGerald believes that Ireland’s energy relationship with others must be at the heart of policy.

“The big issue,” says John FitzGerald of the forthcoming energy policy framework “is how we interact with the rest of the world, in particular Great Britain, interconnection and the European market, and how we ensure Ireland’s interests within that context.”

Such interaction contains pitfalls. Take the UK Government’s decision to introduce a carbon floor price in April 2013. Britain may produce fewer carbon emissions as a consequence. Yet with the floor price coming into effect in Northern Ireland, expediting the closure of fossil fuel power generation, electricity prices and emissions might consequently increase in the Republic.

Interconnection with Great Britain is another example. Oil-fired and coal-fired plants are due to close in the UK by 2016, and the majority of nuclear plants by 2022. Probable electricity price increases in Great Britain (due to the subsequent drop in supply) could be replicated in Ireland. This would happen despite Irish taxpayers having paid for interconnection. Irish electricity producers may benefit, but the taxpayers won’t, he says.

FitzGerald believes that the rules on management of the interconnector “is where you probably have some insurance” against such exposure. If the price is different in the two markets and suppliers can gain from this “it is possible for the interconnector owner, that is the people of Ireland, to charge a price which would allow them to share on those arbitrage gains.” This would ensure that “not all the gains would go to the producer.”

Conversely, if Irish consumers benefit from cheaper electricity imports, British consumers would “get a share” of the benefit.

“It may not be possible to insulate ourselves,” he says on the repercussions of sudden British energy policy changes. “It’s an issue then of taking it up at an EU level. If policy is incoherent in not protecting the European environment but damaging other countries it is possible to take up such issues.”

Ireland’s vulnerability raises the question of “what long-term strategy on interconnection should be,” he states. “If the British market was going to remain isolated indefinitely it raises the issue as to whether you should interconnect to some other market rather than putting all your eggs in one basket.” The head of the ESRI’s Energy Policy Research Centre says that no one has properly modelled the north-west European electricity market.

Another area FitzGerald would like to see addressed in the Government’s new energy policy framework (2012-2030) is the rate of smart technology roll-out after 2020 (e.g. electric vehicles). Ireland’s policy on exporting renewables must also be addressed. Exporters must pay the cost of facilitating it, he believes, not the public.

EU policy

EU energy policy has its own questions to answer, according to FitzGerald. “It is questionable whether having policies on energy efficiency, on renewables and on emissions is a sensible way to go forward,” he states.

“If you have a policy on emissions which says the price [of carbon] will be say €40 a tonne in 2020, and €80 a tonne in 2030 and you stick to that and you ramp up, do you need a renewables policy as well?” he asks.

Setting a single carbon price across Europe and a policy targeting greenhouse gas emissions “rather than a whole series of whole different sub-targets would make more sense.”

FitzGerald accepts that the EU “may want additional policies” in areas where market failures occur. Furthermore, “the EU means well, it’s better to have some policy than none.”

He states: “My concern is that some of these policies could turn out to be very inefficient and expensive.” EU policy should be “more orientated towards price and less towards targets.”

A harmonised EU carbon tax, as the European Commission attempted to introduce in 1992, is a good idea, he says.

At domestic policy level, while FitzGerald doesn’t advocate price supports for offshore wind (with onshore being produced cheaply) or wave energy, he does favour a limited research budget for offshore energy. This should be funded through taxation rather than energy prices, he states.

Bioenergy differs: “I think bioenergy merits more attention and in some ways it has more potential.” FitzGerald believes that beef farmers in some areas could “make more out of growing biomass.” With potential in niche areas, he believes that it too deserves an allocated research budget. If it is economic to provide price supports “well then look at it, but don’t dash into a subsidy scheme where it’s not yet at a production stage.”

Public support

Central to Ireland’s ambition for renewables is winning public support for energy projects, both grid and wind related. “If you look at gas, the gas pipeline has been laid by Bord Gáis across the country, through Mayo to Rossport, and there hasn’t been a peep out of anybody,” he says.

This happened “because they actually knew how to interact with the local community and did so.” He believes that lessons can be learned.

“Overhead cables are more difficult” to gain public support. “It is massively in the public interest that they’re built,” he argues. “You have a consultation process, you have a discussion and once you’ve made the decision you do it.”

He believes that policy makers need to think about whether there is “a better way, at limited cost, of getting buy-in from the local community or from the farmers who are involved”.

During 1999-2000, FitzGerald chaired a group that produced a strategy on intensifying wind energy deployment. It proposed that areas be deemed suitable or unsuitable for wind turbines, and that planning law deals with applications on such terms.

“You’ve got to decide will it significantly negatively impact on the community; how many people; and if it’s a low impact is it an unreasonable objection,” he states of individual projects. “And the planning system has got to set down guidelines and then stick to them.”

However, FitzGerald believes that the planning system has dealt “relatively well” with wind turbine developments.

John FitzGerald on renewables

· Price support for onshore wind but not offshore wind or wave

· No state subsidy for faciliting wind exports

· Government-funded research budgets for offshore wind and bioenergy

· Planning reform regarding wind energy projects: areas categorised as suitable or unsuitable

· One carbon price across the EU; a target for emissions but not renewables

· An EU carbon tax