The third National Energy Awareness Week, which was launched yesterday, emphasises the importance of energy as a vital element of all economic activity and as a major part of the disposable income of most Irish households.
The average Irish household spends approximately £2,000 per annum on energy products, while energy costs have a direct impact on jobs because of their importance in terms of overall competitiveness.
Irish energy production and supply has historically been led by the state sector. However, driven by the EU's liberalisation of electricity and gas markets, this is about to change. Under the EU directive on the liberalisation of electricity markets, by the year 2000 approximately 28 per cent of Irish electricity consumers will have the option to buy electricity from independent generators rather than the ESB.
One of the first events of Energy Awareness Week 1997 is the launch of a competition designed to encourage private sector participants into the electricity generating market. The competition focuses on the area of combined heat and power production (CHP).
The £1 million scheme aims to encourage independent power producers to enter the electricity generating market and should result in up to £20 million of private sector investment. CHP stations are amongst the most efficient ways of generating electricity as they save fuel and reduce carbon dioxide emissions. Through the efficient use of the heat generated in the process, a CHP plant can convert approximately 75 per cent to 80 per cent of the energy content of the fuel used into useful energy. This compares with the conventional electricity production systems which typically convert 30 per cent to 40 per cent.
A 1997 European assessment indicated that within the next decade CHP may grow to cover approximately one-third or more of European power generation. If this potential is realised it would imply reduction of carbon dioxide emissions in the region of 9 per cent to 13 per cent of total EU emissions from fossil fuel combustion.
While the potential for CHP in Ireland is lower than that in other parts of the Union due to the current extent of the gas network, it could still form a significant part of Ireland's carbon dioxide abatement strategy in the context of the upcoming Kyoto discussion on global warming. Irish industry is keen to play a responsible role in addressing the challenge of climate change and CHP plants are an excellent example of how a pragmatic approach to this issue can help both industrial competitiveness and environmental concerns.
It is because of these twin concerns that IBEC has sought EU and Government funding for this new technology. In addition experience points to enhanced competitive advantage accruing to firms which have invested in CHP. Companies such as Dairygold, which have been ahead of their rivals in making such an investment, have gained a clear first mover advantage.
However, the development of a fully competitive market in electricity and the potential success of the CHP competition hinges on the signals emerging from the government in regard to the future structure of the Irish electricity market. IBEC is seriously concerned at the considerable barriers to private sector participation in the Irish electricity market which were highlighted in a study commissioned by the Confederation from international electricity experts, London Economics. Chief among these concerns is the regulatory vacuum which currently exists in relation to the Irish energy market. Private sector entry to this area is likely to be restrained by the current uncertainty in relation to the future direction of the market. This may lead to possible supply shortages because unless there is some guarantee of regulatory stability, international and local investors are unlikely to wish to risk an investment in the energy market. This would be a disastrous position for the economy as a whole but in particular for Irish energy-intensive industries which are already suffering a serious competitive disadvantage against companies in the UK and the US where electricity prices for large consumers are between 15 per cent and 30 per cent lower. The special conditions attached to the scheme being launched today may give some comfort to private sector participants who wish to invest in electricity generating technology. However, it is critical that the innovative thinking of the Department in regard to the competition launched today be extended rapidly to the discussions in relation to the future of the overall Irish electricity market.
Rosemary Steen is assistant director of Trade and Industry Affairs at IBEC. She is also secretary of the IBEC Energy Policy Committee.
