With electricity prices increasing and older ESB plants about to be closed, we should be concentrating on finding new sources of power, writes Eamon Ryan.
The Government's Green Paper on energy is due to be published within days. According to leaked reports it will include a recommendation for three or four ESB plants to be sold or shut down, to allow for competition in the market. The focus will no doubt be on the issue of public versus private ownership, but the big question is where will our future supplies come from.
A Deloitte & Touche report on the electricity market, which has remained unpublished for almost a year, has put the Government in an uncomfortable position. It calls for a radical break-up of the ESB, arguing that this would reduce the price of electricity by making it easier for competitors to enter the market.
This presents the Government with a difficult decision. It is unlikely to want a confrontation with ESB unions before the next election and at the same time it wants to be seen to be doing something about rising prices.
It now seems the Government is not going to go ahead with such radical surgery but will instead demand the sale or shutdown of a number of older ESB plants at Great Island, Marina, the North Wall and Poolbeg. These are known as "mid merit" plants, which cater for the main daytime electricity demands and therefore tend to set the market price of electricity. They account for some 1,500 megawatts (MW) out of our current total generating capacity of 5,500MW. A decision to close them is helped by the fact that they are coming to the end of their working lives as they are all between 35- and 55-years-old.
Electricity demand is growing by some 6 per cent per annum - this alone would require the equivalent of a new Ardnacrusha power plant to be opened every six months. Peak demand for electricity was 2,000MW in 1983, by 1995 it hit 3,000MW, in 2001 it crossed the 4,000MW barrier and this winter it is likely to reach 5,000MW.
The power supply crisis has been made worse because the same ageing ESB plants have a substandard performance record. The international standard for power plant availability is 90 per cent, but in Ireland the figure is below 80 per cent. This has pushed the price of electricity up.
Switching on their kettles at teatime over recent winters, the public may not have been aware that we have been perilously close to running out of power. The Government hopes that the creation of an all-island energy market, combined with the sale or shutdown of the ESB plants, will bring in new market competitors, which will bring down prices. However, such an outcome is by no means certain.
Kieran O'Brien, the former head of ESB Networks, told an Oireachtas committee that we were stranded between two policies of trying to introduce competition and trying to maintain the status quo.
He argued that even if the ESB market share went down to 40 per cent it could still effectively dominate the market, thereby discouraging new entrants.
This problem is exasperated by the fact that the ESB still owns the assets of the transmission grid company. This may make other investors fearful that there is not a level playing field. The small size of the market also discourages larger international competitors. While Bord Gáis and Viridian have committed to new power stations, other smaller players have exited the market. Even if we can attract new operators, our problems are not over.
All the new stations are likely to use gas which already accounts for 50 per cent of our power generation. If all these older oil-fired stations are replaced with gas, we will be ever more reliant on this highly insecure and expensive fuel supply.
At the moment almost all our gas comes from the North Sea, where production peaked several years ago and where volumes are now falling dramatically. Last year the UK came close to not having enough gas to meet its own needs - if it faces real shortages we cannot expect to get the gas we need.
Because of this supply problem the price of electricity generated by gas is now set at 8.6 cent per kilowatt hour, which is way above the 5.7 cent per kilowatt hour for wind energy. In effect, wind power is currently subsidising gas-powered electricity in the Irish market. We will increase our wind supplies to meet the 30 per cent renewable target that the Government will set in the Green Paper. However, we now need to look beyond that target.
The Swedish government has recently committed to developing new biomass power plants to supply the equivalent of three nuclear power plants by 2020. We have under-utilised forestry resources in this country and should apply the same strategy here. We should also lead the way in new wave and tidal technologies.More than anything else, however, we need to go on a crash course of energy efficiency. We need to reduce the electricity we use rather than chasing our tail by trying to meet ever increasing demand.
The publication of the new Green Paper will be a landmark event in a state which has had no formal energy policy. In the absence of real leadership, the Irish consumer has been left to carry the burden of ever higher fossil fuel energy prices. We need an energy policy where energy efficiency and renewable resources are given top priority. That, and not the public versus private ownership debate, should be the key focus of the Green Paper.
Eamon Ryan TD is Green Party energy spokesman