Ireland’s sustainable energy economy

Jim Scheer, Head of the Energy Modelling Group at SEAI, presents the case for focused action to maximise Ireland’s sustainable energy supply chain opportunity.

The imperative to shift to an economy based on sustainable energy technologies and services is rooted in the need to protect our environment. However, it is also becoming increasingly clear that the pursuit of a low-carbon economy can lead to a broad range of benefits, not least a thriving economy.

The Global Commission on the Economy and Climate, comprising former heads of government and finance ministers, and leaders in the fields of economics and business, recently concluded that countries at all levels of income can build lasting economic growth at the same time as reducing the immense risk of climate change.

The global shift to sustainable energy systems already has significant momentum. According to the International Energy Agency (IEA),

$21 trillion (€16.7 trillion) needs to be invested globally in renewable energy, transmission and distribution and energy efficiency to 2035 – around half of the total investment required to meet the world’s growing need for energy.

For countries ahead of the curve on the sustainable energy transition, the benefits are clear. Wind energy is now the cheapest form of new electricity generation in Denmark. The German economy has remained Europe’s largest while at the same time positioning itself as the most energy efficient major economy in the world.

Having led on renewables and efficiency since the 1970s, California has maintained GDP per capita above the US average and saved residents $65 billion on electricity bills, and is the US leader on green jobs. It is clear that investment in this sector is good for the economy, the climate and for citizens.

It is essential that we make a focused and co-ordinated effort to position the Irish sustainable energy sector to capture a piece of these rapidly expanding markets. Exports are our driver of economic growth and both multi-national and national companies have performed strongly in recent years – in sectors such as pharmaceuticals, computer services and notably agriculture. The sustainable energy sector could add its name to this list, and given the long-term ambitions being set globally and at EU level, the potential for a ‘sustainable’ sustainable energy market is real.

Some success is already evident. Between 2010 and 2013, exports of renewable energy technologies increased by over 40 per cent to €64 million, after spiking in 2012 (€115 million). Exports of efficiency-related products increased from over €100 million in 2010 to €164 million in 2013.

Forecasts from Enterprise Ireland indicate continued growth, with exports anticipated to reach over €500 million by 2016.

Our opportunity

So, how well are we currently placed to capture value in these growing domestic and international markets? How do we better position ourselves to capture value in sustainable energy supply chains? What actions are most important?

In order to explore these questions in detail, SEAI in consultation with Enterprise Ireland, IDA Ireland and Forfás, and with the assistance of global sustainability consultants Ricardo-AEA, recently co-ordinated an in-depth look at existing sustainable energy supply chains in Ireland. The analysis covers all major supply side technologies, energy efficiency investments and electricity grid transmission infrastructure.

To home in on the specific opportunities, it is important to understand where investment will occur within the various supply chains, how well placed supply chain actors are to capture that investment and what can be done to improve our capacity to capture a greater share of the investment. In taking a disaggregated view of supply chains – from preliminary project stages, to procurement and materials supply, installation, QA and operations and maintenance – our analysis provides a framework in which highlight strengths and weaknesses in supply chain readiness.

The analysis indicates that we are currently investing between €1.4 billion and €1.6 billion every year on sustainable energy products and services. As we pursue our 2020 targets, these domestic markets will need to grow in coming years. About €1 billion will need to be spent on each of energy efficiency and renewable energy and a further €300 million on the grid to deliver a safe, secure and affordable electricity supply. It is this already significant (and growing) local market that provides a real opportunity for Irish business to build expertise, skills and capacity to enable them to compete internationally.

Whilst of itself this expenditure is already supporting many Irish businesses, improved positioning of local supply chains will enable us to capture more value both here and in international markets.

A 2013 European Commission analysis indicated the EU market for sustainable energy technologies to be in the order of €150 billion annually. Analysis from the IEA indicates a similar level of investment is anticipated in the US – a significant pool of export opportunities for well-prepared companies based in Ireland. Playing to our strengths in specific areas of the supply chain would offer fertile ground for Foreign Direct Investment in the sector.

There are a great many companies already based in Ireland that are reaping significant rewards domestically and exporting their products and services overseas. For example, HDS Energy, a Meath-based engineering company, employs around 50 people in the design, manufacture, installation and commissioning of biomass energy plants and CHP installations.

One of its recent projects involved the delivery of a 15MW biomass boiler at Aurivo (the largest multi-purpose co-operative in the west of Ireland), enabling the replacement of 5.5 million litres of imported oil with around 27,000 tonnes of domestically sourced biomass – cutting Aurivo’s bill by two thirds and abating over 17,000 tonnes of CO2 per year.

Taking wind as a second example, between 30-40 per cent of total expenditure on wind developments are non-turbine (tower and blade) specific. Many Irish companies already occupy various niches in the sector, and are already exporting their products and services worldwide. ServusNet is a software company based in Cork developing O&M and operational intelligence solutions and now provides data analysis on around 1GW of wind turbines in the US. Sepam International (Clonmel) was one of the main engineering contractors on the Greater Gabbard off-shore wind farm in the North Sea, the largest of its kind in the world. Airconmech Ltd (Enniscorthy) designed and installed the cooling system for the 140 Siemens turbines installed in that same development. Targeted development of these and other niches could see a significant return for Ireland, both in the export market and by promoting Ireland as a centre for FDI in these areas.

If we are to maximise the rewards available from the sustainable energy transition a co-ordinated approach to sustainable energy supply chain development in Ireland is required. Cross-government and inter-agency co-operation shown through the collaboration between SEAI, Enterprise Ireland, IDA and Forfás on this study, is essential. A focus on addressing the barriers to supply chain development, many of which are uncovered in the report, will enable us to maximise the benefits to Ireland of the sustainable energy transition.

The full report is available at http://tinyurl.com/ljurwoy