Energy
The production of energy, while not one of the primary issues discussed since the UK referendum, is an issue that the Committee considers to be extremely important. Ireland’s energy needs are
particularly dependent on the UK to maintain full security of supply through interconnection. At the same time, Northern Ireland has a particular reliance on Ireland for its energy needs and the establishment of the Single Electricity Market has significantly aided cooperation across the island.
In its negotiating document, the Government has highlighted this importance even further:
“Ireland’s energy interconnections to the EU via the UK and heavy reliance on the UK as a source of energy imports raises the possibility of Brexit posing security of supply challenges. Brexit could pose a potential threat to the functioning of the all-island Single Electricity Market, which enables Ireland and Northern Ireland to maximise market efficiencies and ensures security of electricity supply at an affordable cost for consumers.”
Energy was also raised in the all-island sectoral dialogues, with a number of key themes emerging:
All-Island Sectoral Dialogue – Themes
– Risk to the security of energy supply; the negative impact of uncertainty on energy investment decisions; fear of tariffs; and concern over potential divergence of energy and climate policy between the UK and Ireland.
– Importance of investment to reduce reliance on gas and oil and the need to keep energy high on the agenda in the negotiations.
– De-carbonisation and a drive towards energy independence were suggested as potential mitigation strategies.
– Significant concern on the risks to the All-Island Single Electricity Market and there is a need to better communicate its importance to consumers. Horizon 2020 funding important for North/South cooperation on research into renewable energy.
– A number of potential opportunities for Ireland were considered including; exporting clean energy to the U K, becoming more self-sufficient in energy, and as a leader in innovation and research.
The Minister for Communications, Climate Action and Environment, Mr Denis Naughton TD, further underlined these concerns, stating that:
“I think it is fair to say that the energy relationship Ireland has with the UK is unique when compared to other European countries and other sectors. Although other European countries have significant energy relationships with the UK, no country has the level of reliance that Ireland has. Furthermore, when I look across the other sectors of the Irish economy, I also view energy as unique. Many sectors of the Irish economy have high levels of trade with the UK. However, the energy sector has one of the highest levels of interdependence with the UK.”
The statistics relating to Ireland’s energy sector further underline the importance of cooperation between the UK and Ireland.
The Energy Sector in Numbers
– Ireland has increased its production of renewable energy from 5% in 1990 to 44% in 2014.
– As part of the increase in renewable sources, wind power has increased from under 1% of total primary energy production in 1990 to 22% in 2014.
– By contrast, natural gas as a proportion of total energy production has fallen from 54% in 1990 to 6% in 2014.
– For the natural and manufactured gas commodity group in 2016, imports were valued at €719.8 million, while exports were valued at €13.3 million.129
– For the natural and manufactured gas commodity group in 2016, imports of electric current were valued at €14.2 million, while exports were valued at €50 million.
These statistics firstly highlight the significant growth in renewable sources of energy, but also highlight the importance of imports, particularly in the gas sector. There has been a significant drive to decarbonise the Irish energy market, with more emphasis on fuels such as natural gas and renewable sources of energy over fossil fuels. The Sectoral Dialogue highlighted possible opportunities for the export of clean energy and self-sufficiency.
Challenges
The challenges identified for the energy sector pre and post-Brexit include:
– The future of the Single Electricity Market (SEM) and the Integrated Single Electricity Market
(I-SEM);
– Security of Supply;
– The future of interconnection with the UK and possible interconnection with France;
– Prices and consumer impacts for both gas and electricity;
– Opportunities for Ireland, particularly in the renewable energy sector; and
– Obligations Ireland may have to meet as part of the Energy Union.
A number of the challenges discussed in previous chapters are relevant, most notably:
– Challenges regarding trade, infrastructure and particular issues concerning Northern Ireland;
– The potential post-Brexit regulatory divergence; and
– the geographic position of Ireland may necessitate direct interconnection with mainland Europe. The Committee heard this is achievable through the Celtic Interconnector project
(discussed below).
Summary and Potential Solutions
Single Electricity Market
– The maintenance of the SEM and the progression of the I-SEM are key components of the all-island economy.
– Guarantee the functionality of the I-SEM by ensuring adequate data protection rules are deemed to apply in the UK.
Interconnectors
– The preferred solution is the facilitation of the seamless interconnection of energy between the EU and the UK as part of the negotiated agreement on the future EU-UK relationship.
– In the event of a hard Brexit, the most prominent solution post-Brexit is the completion of the Celtic Interconnector between Ireland and France, which would reduce Ireland’s reliance on the UK. A transition period may be needed here to ensure the interconnector is completed.
Gas
– Derogations under the European Gas Directive should continue to be available to Ireland post-Brexit.
– While the imposition of a tariff poses no financial risk to Gas Networks Ireland, it may increase the cost to the consumer and negatively impact the competitiveness of gas. A zero tariff at EU level should continue and be included in an EU-UK free trade agreement.
Electricity
– The preferred solution is the maintenance of the SEM and the completion of the I-SEM.
– The free-flow of electricity through inter-connectors, particularly through the completion of the Celtic Interconnector, should be a priority.
– Investment in the Irish market is important and recommitting to Ireland’s energy challenges, including new ways in which to address these challenges, should be explored.
– Due to the falling cost of technology, more opportunities exist for the offshore generation of wind energy.
Security of Supply
– In the case of gas, a voluntary protocol exists between Gas Networks Ireland and National Grid (UK gas network operator) to address emergencies. This needs to be secured postBrexit.
– On the issue of regulatory compliance, Ireland should request a derogation from EU energy legislation post-Brexit to maintain security of gas supply arrangements with the UK.
However, if this is not possible, then the costs and benefits to consumers must be considered in any decisions to build new gas infrastructure.
Single Electricity Market
In relation to the electricity grid, the Committee heard that EirGrid is a fully integrated business, owning its Northern Irish equivalent, SONI. The regulation of the electricity grid is operated cooperatively between the Irish Commission for Energy Regulation and the Northern Irish utility regulator, UREGNI, through the Single Electricity Market Committee.
The Committee heard that there is explicit recognition at both official and political level in Brussels, London and Dublin that the all-island SEM should not be impacted by Brexit and that it has operated very successfully for the past ten years. The Committee heard that the next step for the development of the SEM is the I-SEM, with a connection to the wider European internal energy market.
With particular regard to the SEM, the Committee is also aware of concerns regarding the processing of (citizens’) data between an EU Member State and a non-EU Member State. In a scenario where there is no decision by the European Commission that the UK is considered to provide adequate protection for any data transferred to its jurisdiction, Ireland would be legally obliged to refuse to transfer the personal data to any data processor, e.g. an energy provider, distributor or regulator, in Northern Ireland.134 Should this arise, the establishment of “safe harbour principles” similar to data protection provisions between the EU and the United States would need to be finalised.
Interconnectors
There are currently a number of interconnectors for gas and electricity between Ireland and the United Kingdom. For gas, there are two interconnectors with Scotland that service Ireland, Northern Ireland and the Isle of Man. For electricity, there is an East-West interconnector between north Dublin and north Wales and a second proposed North-South interconnector between Ireland and Northern Ireland.135 The island of Ireland is currently served with a second electricity interconnector at Moyle in Northern Ireland.
On the overall matter of interconnection, the Committee heard that Gas Infrastructure Europe took the view that energy should not be used in any negotiations between Europe and the UK. The Committee heard that there are precedents for interconnection between the EU and third countries, e.g. Poland (EU) and Ukraine / Belarus (non-EU), and that progression of these arrangements depends on how these third countries accept the rules of the internal energy market in Europe.
An option for additional interconnection post-Brexit exists with France, through the construction of the proposed Celtic Interconnector across the Celtic Sea. The Committee heard that while this is likely to be feasible and grant funding made available for the overall project (depending on the criteria involved), the additional capacity offered by the Celtic Interconnector may not be accessible until 2022 at least.
When completed, the Celtic Interconnector is expected to have capacity to support electricity for 450,000 homes. The Committee is satisfied that this is a possible addition for securing Ireland’s energy needs in the event of a hard Brexit. As it will not be available until 2022, a transition period for Ireland may be necessary, in line with specific phasing-in arrangements for Ireland, as discussed in Chapter 2.
Gas Regulation and Prices
The Committee heard that as the UK is transposing all existing EU legislation into UK legislation, then no immediate negative repercussions are anticipated at the moment of Brexit. However, regulatory divergence remains a concern after that, particularly for future legislation that the EU agrees but the UK decides not to implement, or that the UK devises and implements for itself. The Committee heard that under the third European gas directive, derogations are possible, but would need to be sought, and that cross-border requirements under EU gas legislation can already apply to interconnection points with third countries.
In relation to the cost of gas and the potential for increased costs, the Committee heard that the maximum tariff that could be applied to the imports of all gases is 0.7% compared to a zero tariff to gas imports that the EU currently applies. Should a tariff between 0% and 0.7% be applied then this may result in an increased costs for the consumer. Depending on tariffs applied to other fuels, the Committee heard that this could also adversely affect the competitiveness of gas. An increase in the cost of gas could impact attempts to decarbonise the Irish energy sector through the use of natural gas.137 The continuance of a zero tariff by the EU for gas and the inclusion of this in a free trade agreement with the UK would be preferable.
Electricity Regulation and Prices
The Committee heard from Mr Rodney Doyle, representing EirGrid, that any move from the current model would result in an increase to electricity prices both in Ireland and Northern Ireland as it would have a negative impact on competitiveness and security of supply. Maintaining the development of the I-SEM to ensure minimal prices and cost competitiveness is a solution the Government should explore. Achieving the Celtic Interconnector with France would have a further positive impact on prices and the Committee heard that in its absence, prices may be higher, as when operators engage in market coupling, there is the benefit of being linked to the lower price zone of their partners.
There should be a further drive to increase the amount of renewable energy generated in Ireland. The Committee heard of the potential for wave energy and wind energy, with a particular example being the potential for 4.5 GW of electricity to be generated by wind power off the east coast. In the case of wind energy, the Committee further heard that its main challenge is technology and that advances in technology for wind power production far outweigh the advances for wave energy.
Finally, the Committee heard that the falling cost of technology may present a real opportunity for Ireland to produce energy offshore in the future.
Security of Supply
In the case of gas, two issues arise, namely physical security of gas supply and regulatory compliance. The physical infrastructure connecting Ireland and the UK will not change post-Brexit in relation to supply. The Committee heard that Northern Ireland and the Isle of Man’s dependence on Gas Networks Ireland’s infrastructure in turn emphasises the importance of continued cooperation between Ireland and the United Kingdom. A voluntary protocol exists between Gas Networks Ireland and National Grid (the UK network operator) for addressing gas emergencies and the Committee heard that there is no reason for these arrangements to change post-Brexit. They should therefore be protected.
In relation to regulatory compliance, the Committee heard that under Regulation (EU) 994/2010 and a revision due to be approved this year, Member States are required to ensure that in the event of disruption to the single largest piece of gas infrastructure supplying the Member State, the remaining infrastructure is able to satisfy total gas demand on a day of exceptionally high demand.
This is known as the N-1 test.138 Ireland and the UK are grouped for the purposes of this requirement, with the UK capacity able to satisfy Ireland’s required gas demand.
As the UK will no longer be a Member State, an accommodation for Ireland under EU legislation will be required, so Ireland can continue security of supply measures with the UK. Without this, Ireland would be obliged to build significant additional gas network infrastructure. The development of the Shannon (Liquefied Natural Gas) LNG terminal, as well as the use of renewable energy technologies in the gas industry, e.g. the harnessing of bio-gas in the agriculture and food sectors and supplying this gas to the gas network, could provide some part of the solution. However, these solutions are not viable in the short-term.
This Article draws on Seanad Special Select Committee Withdrawal of the United Kingdom from the European Union Brexit: Implications and Potential Solutions June 2017. Irish public sector information is reproduced pursuant to PSI Licence; Conditions of Re-Use of Public Sector Information. The Legal Materials contain Irish Public Sector Information licensed under the Irish Licence which is at http://circulars.gov.ie/pdf/circular/per/2016/12.pdf.
