Public facilities have long since recognised the critical role that providing a comfortable environment plays, by maintaining appropriate levels of heating, cooling, lighting and air quality within buildings – from hospitals to schools and government offices. At the same time, growing budgetary pressures and rising prices are putting a focus on reducing the cost of providing these services.

These cost and efficiency drivers necessitate the delivery of more energy services for less energy input, at a lower cost – through investment in more efficient technology, more efficient operating practices, improved controls and monitoring and management to ensure sustained benefits are delivered and to take corrective actions when they are not.

The issue of ageing and inefficient energy infrastructure can, in parallel, be a serious concern to many establishments, distracting from their core priority. A partnership with an energy services provider, whose core focus is energy efficiency and guaranteed saving reductions, can deliver these benefits. Partnership would bring security of energy provision with cost, energy and carbon savings through overall efficiencies and improvements in the site’s running costs, allowing a healthcare provider for example to concentrate on their primary goal. To illustrate, the provision of lighting, heating and cooling, while critical, is non-core, and presents an opportunity to outsource delivery.

For success, organisations need the support of energy management professionals who understand that energy efficiency can only be achieved through a full energy cycle approach with delivery know-how. For any site to do this sustainably, they need firstly to take a long-term view of their business, their site and their relationship with the energy and utilities management company they work with, as the required contracts can last anywhere between 5 and 25 years.

Securing the supply of input energies such as oil, natural gas, biomass or electricity is the first and vital step in terms of comfort and care; however, it is not the end goal. These input energies need to be transformed (e.g. converting oil into heat, electricity into cooling etc) into useable forms, distributed (for example hot water through piping networks) and then consumed at the point of customer need (radiators, light fittings etc). Efficiencies and cost savings can be made by focusing on one of these steps. However, it is through the integrated management, measurement, monitoring and targeting of the entire energy process in a co-ordinated, structured approach which delivers the maximum benefits to the establishment.

Dalkia customers benefit from:

• Operational improvements (security, availability and reliability of utilities supply, energy efficiency, risk transfer)

• Cost & financial efficiency

• Carbon reduction

To discuss what your organisation could look at towards achieving sustainable energy efficiency improvements, contact: Tony Doherty, General Manager at Dalkia Energy & Utilities Services, at 07879036270 or email infoni@dalkia.co.uk or info@dalkia.ie

Briefly outline EST’s current work in Northern Ireland:

We provide free and impartial energy saving advice to around 50,000 householders in Northern Ireland each year. In the face of rising fuel prices and last year’s cold winter, the provision of advice and information on the smaller ‘behaviour changes’ is as essential as insulation and helps cut heating and electricity costs. This empowers people to affect change themselves with regards to making their homes warmer and more energy efficient. Early figures from last year would suggest that our advice helped householders in Northern Ireland save over £3 million in fuel and electricity costs.

We continue to act as programme administrator for the Utility Regulator’s Northern Ireland Sustainable Energy Programme, which is a £7 million levy fund, comprising many energy saving schemes.

Clients, such as utility companies, benefit from the provision of data, insight and statistical verification work via our knowledge team.

What innovations lie ahead in energy advice?

Ongoing work to reduce domestic energy consumption through the more traditional channels is still necessary, and are now helping energy related organisations to provide their own bespoke advice to their customers directly, via our Endorsed Advice Service, which has UKAS accreditation. This will support and assist companies to provide the right information best suited to their customers’ needs.

But I suppose the next ‘big thing’ we are looking at involves water efficiency. This hasn’t been fully explored in Northern Ireland and, in particular, the associated savings through efficient hot water use. Approximately a quarter of domestic CO2 emissions and a third of gas bills are attributable to heating water. This would result in a double win; by reducing water consumption at the user end and realising additional energy savings via a reduction in the overall energy consumption of providing clean water and waste-water disposal. The Energy Saving Trust has developed online consumer tools and a commercial water modelling tool to simulate the impacts of retrofitting water saving devices. We are also looking at the provision of behaviour change advice to complement any retrofit activity.

How will charitable status change the organisation?

Charitable status will allow us to be more innovative. We will be able to take the initiative, and respond effectively to the carbon-saving opportunities that may arise through new business, like the Great Britain Green Deal. Our not-for-profit company will continue to deliver substantial government-funded programmes while the wholly owned trading subsidiary will provide an innovative range of services, which businesses and organisations can buy to benefit their customers. Surplus monies earned via the trading subsidiary will be channelled back to the charitable foundation.

We will remain independent and committed to the provision of impartial advice to householders, whilst continuing to be the public face of energy saving, but now we are able to utilise our know-how to help grow the green economy, assist people out of fuel poverty and remain at the forefront of energy saving in the UK and beyond.

If you would like more information on any of our services, please contact Patrick Thompson, Operations Manager at the Energy Saving Trust patrick.thompson@est.org.uk or call 028 9072 6006

A summary of energy policies advocated by the Assembly parties.

DUP
Enterprise, Trade and Investment Minister: Arlene Foster MLA
Westminster Energy and Climate Change Spokesman: Jeffrey Donaldson MP
Assembly Enterprise, Trade and Investment Spokesman: Robin Newton MLA

The DUP’s 2010 Westminster manifesto supports the 40 per cent target of electricity from renewables, and states that farmers should be assisted in helping government meet this target without increasing the cost of electricity. It commits to expanding incentives for home energy efficiency measures, supporting a substantial increase in the winter fuel payment and establishing Northern Ireland as a global centre for the development of renewables and smart grid technology.

Its 2011 manifesto promises rate relief for businesses investing in energy efficiency, a strategic grid infrastructure development plan and further interconnection with the South and Great Britain. It promises to publish an Offshore Renewable Energy Strategy, a target of 10 per cent of heat consumed coming from renewables by 2020 and a simplified planning process for renewable technology. The DUP supports an extension of the gas network and a province-wide retrofit programme. To combat fuel poverty, it would implement a boiler scrappage scheme, and develop an energy assistance package.

In 2010 Arlene Foster published a Strategic Energy Framework 2010-2020. Her department has also published a draft Offshore Renewable Energy Strategic Action Plan and a Bio-energy Action Plan for 2010-2015. In June the Minister launched a public consultation on extending the natural gas network and her department is also considering a mandatory domestic energy supplier obligation. Common North/South retail market arrangements for gas are expected to be completed by October 2014.

Sinn Féin
Assembly Energy Spokesman: Phil Flanagan MLA
Dáil Communications, Energy and Natural Resources Spokesman: Martin Ferris TD
Seanad Communications, Energy and Natural Resources Spokesman: Trevor Ó Clochartaigh

Sinn Féin’s Westminster manifesto calls for a greater focus on low carbon, energy efficient, affordable housing, with similar high standards applying to all new build and public buildings. The potential of the renewable energy sector needs to be harnessed, and Sinn Féin rejects nuclear energy. Mechanical biological treatment (MBT) of waste and anaerobic digestion combined with combined heat and power (CHP) is the party’s preferred waste-to-energy solution, ruling out incineration. The second North/South interconnector should be built underground and energy infrastructure decentralised through renewables, within the context of an all-Ireland energy strategy.

This year’s Assembly manifesto states the party would establish targets and timetables for the reduction of fuel poverty, develop a long-term renewable energy strategy and provide adequate resources for the Green New Deal.

Commitments in its Dáil manifesto this year include the creation of a green technology firm to manage Ireland’s energy resources. It would provide and fund energy and cost €100 million, with the aim of making Ireland energy independent by 2020.

UUP
Enterprise, Trade and Investment Spokesman: Mike Nesbitt MLA

While the pact between the Ulster Unionist Party and the Conservatives is over, energy commitments in the 2010 joint manifesto remain. It commits to the promotion of low carbon energies such as nuclear, wind, clean coal and biogas. The joint manifesto promises spare capacity in the energy system, an ‘electricity internet’, work to make the Single Electricity Market (SEM) more competitive, the sharing of innovations in smart grid and smart meter technology, and the establishment of an emissions performance standard to limit greenhouse gases from power stations.

A gas storage facility off the coast of Northern Ireland is supported and it is committed to exploring how household energy bills can provide information on moving to the cheapest tariff offered by the supplier and how a customer’s energy usage compares to similar households.

In its Assembly manifesto, the UUP promises incentives to invest in energy saving technologies and says the planning system needed reform to prevent delays with renewable energy projects. It says it would focus on identifying and exploiting sources of renewable energy, including on the public sector estate.

Alliance
Assembly Enterprise, Trade and Investment Spokesman:  Trevor Lunn MLA

Alliance’s 2010 Westminster manifesto proposes incentives through the tax and rating system to encourage energy efficiency. The renewable obligation certificates system needs to be reviewed and a feed-in-tariff system considered. The party seeks further development of the single energy market on the island and development of the new North/South interconnector. It would also increase the winter fuel payment.

Alliance wants to increase investment in renewable energy and the grid and promote energy efficiency. Reducing energy could be achieved through the creation of business improvement districts. Fuel poverty is highlighted in its 2011 manifesto as a problem requiring targets in a Green New Deal and a review of the fuel poverty strategy.

The party seeks to cut fossil fuel use by 50 per cent over 1990-2020 and the introduction of a Marine Bill to coordinate marine management.

SDLP
Enterprise, Trade and Investment Spokesman:  Alasdair McDonnell MP MLA

The SDLP supports investment in the renewable energy sector and believes it can contribute to the rural economy. Its 2010 manifesto calls for an all-island energy regulator and the introduction of social tariffs on energy provision for older and disabled people.

A new ‘department of energy and sustainability’ should be created, the party believes, and its 2011 Assembly manifesto proposes the insulation of 100,000 homes, retrofitting of more Housing Executive homes, and all-island renewable energy and energy security strategies. It wants to see the scope for price regulation, to incentivise the grid to facilitate wind farm capacity, explored. The party supports a unified gas transmission network and a single gas market by 2015. A green jobs strategy is proposed. The party also wants an action plan to increase renewables in the transport network.

The European energy market is the last large scale market which has not been widely harmonised to date. This is unsurprising due to the vastness of the market and its highly technical nature. The EU Third Energy Package, which is made up of a series of directives and regulations, forms a regulatory framework designed to reinvigorate the integration of the European energy markets for electricity and gas.

Aims and goals

It is hoped that the implementation of the Third Package will go some way to meeting the EU targets for 2020 which aim to secure a 20 per cent reduction in greenhouse gases, a 20 per cent reduction in demand and a 20 per cent energy mix of renewables across Europe.

Additionally, the Third Package aims to safeguard consumer interests and promote market competition by providing consumers with the ability to quickly change suppliers and to prevent discrimination in the use of networks by requiring the separation of transmission system interests from those of supply and generation. It also provides for the functional independence of national regulators, such as the NIAUR and the CER.

The process of large scale integration

The logistical problems associated with such wide scale integration are being tackled through the promotion of regional initiatives. The expectation is that by achieving regional integration in the first instance, the wider process of harmonisation will be accelerated by a coordinated approach to the introduction of network codes for cross border flows of energy.

Locally, regional cooperation is being implemented for electricity through the France-UK-Ireland (FUI) regional initiative and for gas through the North West (NW) regional initiative with the process of integration being overseen by ACER, the new European energy body.

Electricity market interconnection

For electricity, the liberalised market will be provided through increased interconnection, with energy flowing from areas of surplus to deficiency in the most competitive way, resulting in reduced energy costs for consumers and increased security of supply.

Initially, large scale investment in infrastructure will be required with significant additional interconnector capacity needed to ensure the unabated flow of electricity. This is of particular importance given the intention to increase the percentage of renewable generation in the energy mix.

Future network infrastructure must be able to cope with increased levels of intermittent generation with there being a risk of higher levels of curtailment and constraint if necessary upgrades are not made. Associated with this is the need to roll out smart grids to predict and intelligently respond to market demands.

These changes will also be delivered through the introduction of harmonised network codes which will deliver a target market model that will be automatically binding to create unified capacity and congestion management codes.

Issues for the SEM

The island of Ireland has had an all-island electricity market since the introduction of the SEM in November 2007. The SEM market trading arrangements are markedly different from those in the other FUI regions, being based on a gross mandatory pool market with day-ahead gate closure and ex-post pricing. There is currently no physical day-ahead or intra-day trading in the design.

The Third Package target model includes flow based market coupling for day-ahead trading, in which cross-border capacity is made available implicitly by means of energy transactions through power exchanges.

Important features in the SEM market design are incompatible with this day-ahead trading model. For example, there is no firm day-ahead price, the SEM is scheduled and dispatched centrally, it provides for explicit capacity payments and it has longer gate closure times. Also, robust arrangements are required for intra-day trading which is seen as critical for systems with a high proportion of intermittent supply through the use of renewables.

In this regard, transitional market arrangements may be put in place by 2014. Many see a two-phased approach as the fastest way to move to full compliance with the introduction of arrangements for day-ahead and intra-day markets with central dispatch. However, certain specified criteria must be met and demonstrated to ACER before this will be permitted.

Others believe that it may be best to concentrate on putting into place final measures by 2016, when an enduring market design is required under the Third Package obligations.

Common Arrangements for Gas

The completion of the Scotland Northern Ireland Pipeline (SNIP) gave Northern Ireland access to natural gas for the first time. Although a relatively new market, it is likely to undergo significant changes in the short to medium term with the introduction of the Common Arrangements for Gas (CAG) which are intended to provide an all-island market in gas.

Although it is still in the development phase, the regulatory authorities on both sides of the border are endeavouring to ensure that CAG is Third Package compliant. The outcome is expected to be a common network code developed to cover all transmission assets in Northern Ireland and the Republic of Ireland with short-term capacity and interruptible capacity products aligned with those network codes.

With regard to Northern Ireland, the fully postalised transmission system regime currently used is likely to change as a result. This regime results in a single tariff being charged to all users at their exit points irrespective of that exit point or the pipeline used. The Third Package requires that tariffs should reflect the actual costs incurred in using the transmission system, so it would appear that an ‘entry-exit’ point design may be adopted.

Further, as capacity on the SNIP is currently only available on an annual basis, it would appear that short term products will be required to be made available to comply with Third Package requirements. These products would be for monthly or daily entry capacities with the methodology used to calculate tariffs likely to follow the Gas Link code to maintain a level of certainly for Irish shippers and to minimise changes from a code perspective.

Our energy future: moving towards compliance

It would appear that there is a great deal of work to be done and it is no secret that the tasks ahead are challenging. However, we should move forward into this new phase of integration with some confidence.

From an electricity perspective, we have successfully integrated two wholesale markets into one before. Although the SEM is not currently compliant, some level of evolution or even revolution, is likely to be accepted by stakeholders.

In relation to gas, CAG provides us with a great opportunity to put in place a Third Package compliant system from its inception, thus providing an all-island gas market which will bring benefits to all.

Alan Bissett is the lead Partner and David Trethowan is an Associate in Arthur Cox’s Projects and Energy Group

Utility Regulator Shane Lynch talks to Owen McQuade about the challenges in regulating the electricity and gas sectors and how the 20 per cent renewable electricity target can be met.

The Utility Regulator’s office has “evolved” to now regulate three utilities: electricity, gas and water.

“There are two ends of the spectrum in terms of how we regulate. One is promoting competition where appropriate and the other is monopoly regulation”, observes Shane Lynch. “There are degrees along that spectrum and, where you land is a judgement call depending on circumstances.”

Lynch believes that even the parts of the energy supply chain where competition can prevail still require a significant amount of regulation on the island “simply because of market size and dominance, in both the wholesale and retail markets and this requires a combination of regulation and promoting competition.”

Price controls

The three utilities are at different stages of evolution, with electricity the most advanced and water the least. In electricity, the market has evolved to the stage where there are a number of competitors in the wholesale market and the retail market and there are now also a number of network operators.

Although there is only one network provider, NIE, there are four other price controls for the sector: SONI (the network operator), SEMO (the Single Electricity Market operator), the Power Procurement Business and, on the supply side, the incumbent supplier Power NI. For the two parts of the supply chain that lend themselves to competition i.e. retail and wholesale, there are still four price controls. “There’s still a fair amount of regulation going on there”, adds Lynch.

In the natural gas sector there are five price controls. There are four gas network companies in Northern Ireland: Mutual Energy (which has no price control). BGE UK (which owns part of the transmission network to the north west); Firmus (which owns the distribution network in the 11 towns) and Phoenix Natural Gas Ltd (which owns the distribution network in Belfast). In the supply part of the supply chain, there is a price control for Phoenix Supply Ltd in Belfast.

Reflecting on the number of price control mechanisms for the energy utilities, Lynch asks the question: “This is where we have evolved to [but] would you have done it this way with a blank sheet of paper?

“For a place the size of Northern Ireland, why do we have three network companies? In the South we just have BGE. Even within those network companies, there are different regulatory models; the mutualisation model for transmission assets but BGE has a debt-equity model for their transition assets.

When asked if he sees scope for rationalisation, he replies: “The assets, apart from Mutual Energy (MEL), are in private ownership. They have property rights to those assets. It’s hard to see how you could do it other than on a voluntary basis.

Having said that, some rationalisation has already happened. The transmission pipeline to Belfast used to be debt-equity financed and in 2006 that was transferred to MEL.

Lynch continues: “What is quite interesting, as we think about the extension of the gas network to the west, is which model should we go with? As we think about those questions with DETI, it’s important to consider the big picture: what do you think this should look like in 10-20 years time?

“If I was to sit down and draw this from scratch, bearing in mind gas is a relatively new market in Northern Ireland, I’m not sure I would have done it this way.” But Lynch acknowledges that “we are where we are and people have property rights and entitlements to those assets.”

Price controls

The Phoenix Natural Gas price control that is out for consultation is a draft determination and a final determination will be made shortly.

In the draft, the Utility Regulator proposed a fairly significant adjustment to the company’s regulatory asset base and it is still reviewing the consultation responses.

“The whole basis of the Phoenix model is it’s a start-up model. There’s quite a bit of capital needed for new business but the build-up of their volume lags. What you have to do is profile their recovery towards the back end, otherwise unit costs would be way too high,” he comments.

In 2006, Phoenix was not meeting the volumes it needed and was allowed to extend the recovery period over a much longer period. It continued to get 7.5 per cent pre-tax real return “which is significantly higher than gas distribution networks in Great Britain, although the gas distribution networks in GB are more mature.”

Phoenix’s actual cost of debt is a bit higher than distribution companies, but not to the same extent that they are allowed WACC (weighted average cost of capital) so the allowed return on equity here is significantly higher in Northern Ireland than in Great Britain.

These issues arise in relation to a gas pipeline to the west: “How do you remunerate an investor for a start-up business?”

When asked whether it is difficult to manage complex discussions with the industry on issues such as WACC and communicate with public stakeholders, he replies: “The regulator’s job is to protect consumers and the legislation gives the regulator quite a bit of judgement. Legislation sets out a number of things we have to have regard to as we go about protecting consumers: security of supply, sustainability, vulnerable customers, etc.”

“I think the legislation is right as it is not entirely prescriptive and leaves an element of judgement based on expertise and experience,” he emphasises.

“Protecting consumers in the long run also means protecting investors. If investors don’t get a reasonable rate of return consummate with the risk they are taking, then they won’t invest. If they don’t invest, then consumers are in trouble. It’s important however that we don’t let investors get excessive rates of return that are inappropriate for the risk they are taking.”

Lynch says he comes across consumers and consumer representatives that will say to him that investors are doing too well: “I’ve heard the expression: ‘The risk is allocated too heavily towards consumers and more risk should be allocated towards investors.’

“If wholesale prices go up, it’s always the consumer that has to bear that and investors seem to be somehow protected. We can allocate more risk to investors but they will then require a higher rate of return and will argue successfully for a higher rate of return.

“The consumer either takes the risk or pays someone else to take the risk.”

An example Lynch gives is the Mutual Energy model where the consumer takes all of the risk and therefore the investors (which in this case are 100 per cent debt investors) get a very low rate of return, because they are taking next to no risk.

“We currently have the Moyle interconnector out of service. The consumer is taking the entire risk on that; the consequential cost of the outage on wholesale prices and the cost of repair. If that was a “merchant” generating business, they currently would be losing market revenues,” he explains.

“The difference comes down to: what risks do consumers wish to take or should they take? Our job is to ensure that we create a stable regulatory environment that is predictable.”

The Utility Regulator has published a draft policy paper on network price controls as Lynch thought it was necessary “because we have expanded and our policies are not necessarily the same across all three utilities.”

Lynch adds: “Ultimately, the key objective is to be clear to industry and investors so they know where we stand and that delivers more transparency and predictability.”

Draft Programme for Government

The draft Programme for Government is committed to having 20 per cent of electricity from renewable energy by the end of 2015. The Strategic Energy Framework had a target of 40 per cent by 2020.

“The regulator’s role in contributing to meeting that target is quite significant and so is DETI’s,” he notes.

Lynch sees the target being met by a combination of market response to incentives and regulatory and policy action. “DETI will set certain incentives or subsides and the market will either respond to that or not.”

What matters to a developer is the certainty of their revenue stream. One aspect is the subsidies and the other is what they can get for their energy. All investors on the SEM are realising that the sector is heading towards a regional electricity market.

In relation to wind generation, which requires network development, the Regulator facilitates through their approvals for network development and connection policy.

The network development proposals are put to the Utility Regulator by NIE as part of a price control submission. The Regulator asks three questions:

• Why do you want to do this investment? What do consumers get for the money?
• Is the price you are proposing value for money? How does it benchmark with other distribution companies?
• How is the risk being allocated?

The risks are performance risk (e.g. we may not be able to connect as much wind as we thought for this level of reinforcement of the network), schedule risk (will we get it done in the timeline that company is proposing?), and cost risk (will the project cost more than the company has suggested and, if so, who pays?)

“As a project developer at one point in my career, those are the questions a board would have asked me if I had put a proposal in front of them. And, like most developers, eight out of 10 of your proposals were rejected,” he reflects.

“Regulators act as a surrogate for competition in monopoly investments so we have to ask the same questions that a board would ask in a competitive market.”

Lynch adds that to get to 20 per cent renewable on wind only, NIE is proposing that that can be done with a modest level of investment, perhaps less than £100 million,” and by “beefing up the existing assets.” That does not include new build on the 275 kV transmission network.

He predicts: “On the face of it, that seems achievable at a reasonable cost. It is a challenge but we would be quite optimistic that the 20 per cent target can be met. After that, there are bigger questions. To get us from 20 to 40 per cent on wind, you are talking about [almost] another billion.

“The regulator will see it as a much bigger question to sign off on because of the scale of the investment and the impact that would have on tariffs.”

The renewable scene is constantly developing and he expects that by that time offshore may have developed further. In conclusion Lynch remarks: “We would want to see the competing options: what other ways are there to skin that cat?”

Northern Ireland has a key part to play in exploiting Ireland’s offshore renewables opportunity, according to NOW Ireland Secretary Brian Britton. NOW Ireland (the National Offshore Wind Association of Ireland) was set up in 2007 to promote the industry.

At present, the island has one offshore wind farm on Arklow Bank (25MW), a joint partnership between Airtricity and GE Energy and 2,670 MW capacity in shovel-ready projects in existing project areas. A further 5,000 MW could be released in the Irish Sea zone.

Britton emphasises that all stakeholders need to work together i.e. developers, supply chain, regulators, TSO, the Northern Ireland Executive and the Irish Government.

“I think the opportunity starts within Northern Ireland,” he told agendaNi. “Then you’ve got to open it out to the Republic of Ireland and the island of Ireland working together, with the massive resource it has, and then co-operation with our counterparts in GB. And then Ireland [and the] UK can lead the way to develop the renewables sector in Europe.”

He sensed “a little bit more foresight” in Northern Ireland than the Republic, proven by Dong’s announcement investment at Belfast Harbour.

“We would be very encouraged by the way Northern Ireland has come from behind the South to actually attract in industry: more than the South has done to date,” he added.

Existing planned projects could generate over €8 billion in investment and 20,000 jobs across the island, with the jobs figure rising to over 50,000 if the full potential was realised.

The offshore wind supply chain for the Irish Sea is worth around €60 billion, with another €300 billion in the rest of Europe.

Ireland potentially has the best offshore wind resource in the world, and its seas experience some of Europe’s strongest winds. Britton sees offshore wind as a key driver for meeting Ireland’s renewable energy targets, but industry sources warn that this will be “difficult if not impossible” in the current planning and grid environment.

An economy analysis published by Indecon in September 2008 indicated a primary net direct benefit for Ireland of up to €1.7 billion over 2012-2027. Extra quantifiable indirect benefits totalled €2.1 billion, including the merit order effect, employment, carbon fines saved and reduced emissions.

Britton expects that electricity demand and fuel prices will return to their high 2008 levels by 2015, when offshore projects are up and running.

The offshore renewable energy feed-in tariff (REFIT) was announced by the Irish Government in 2008 (at €140 per MWh) but has yet to be implemented. NOW Ireland sees this as the most critical investment signal and is lobbying for action by government, especially as offshore renewables can transform Ireland into a net energy exporter.

According to the association, Ireland can replace almost €6 billion in energy imports with up to €10 billion in renewable energy exports, thus also ensuring the island’s energy security.

Ireland is already involved in the sector’s supply chain, through development companies, project delivery management, port facilities and marine services e.g. diving companies, work boats, forecasting and engineering and environmental services.

To deliver the opportunity, Britton emphasises that Ireland must develop a positive mindset, look beyond its shores for the opportunity, ensure that national policies support industry objectives, create the right market mechanism (linking Ireland, Great Britain and Europe), and “be the leaders of the change Ireland wants and needs.”

Kingspan Telemetry Solutions

Kingspan Environmental is the market leader in oil measurement technologies. The Kingspan Telemetry portfolio comprises of the SonicSignalman which is an easily installed one piece unit that uses technology to sense the level of fuel or liquid in the tank and communicates this data via GPRS mobile networks and the internet to any web enabled computer terminal. SonicSignalman readings are received into your depot, office or personal or work computer, giving you visibility on what is happening in your tank.

Our SonicSignalman GSM telemetry solution offers many benefits for householders, housing associations, government departments, the private sector and utility companies.

Multiple benefits for many sectors:

• Central procurement – Facilitates better oil buying power by enabling the user or manager to see the quantity of fuel in the tank population;

• Energy management and building performance – Core energy management facility by providing oil usage rate information;

• Health and safety – Reduces the need to climb on tanks to dip for levels and avoids having to install hand rails and permanent ladders etc;

• Stock reconciliation and end-of-year accounting – Flash update on working stock which is accurate to one day;

• Fuel management – Allows management of fuel and traceability of small amounts;

• Logistics – Optimise delivery costs by delivering maximum capacity only when fuel is needed and reduce panic buying and run out in bad weather.

Pay-as-you-go-oil Solution

Kingspan Environmental recently welcomed the opportunity to work with Minister McCausland and his department to further develop the Fuelserv pay-as-you-go oil solution for vulnerable households. This unique technology will allow oil from tanks to be released to boilers on a pay-as-you-go basis, helping those most in need to budget and benefit from the savings gained by those buying in larger quantities. The pilot scheme to tackle fuel poverty will begin early 2012 in partnership with Carillion Energy Services.

Control of Pollution (Oil Storage) Regulations (Northern Ireland) 2010

For those of you managing one or multiple fuel storage tanks we would like to highlight the control of Pollution (Oil Storage) Regulations (Northern Ireland) 2010 which came into force on 20 March 2011. Enforced by The Northern Ireland Environment Agency, these regulations were introduced to promote better oil storage and to minimise the risks of oil being lost to the environment by installing a bunded oil tank (doubled walled tank). These regulations have applied to all new tanks in commercial and public sector properties from 20 September 2011 and will apply to existing tanks within

50 metres of a water course in these sectors by 20 March 2013. Remaining oil storage tanks will have to be bunded by 31 December 2015.

Kingspan Environmental has a Oil Storage Technical Helpline to help you with any advice you may need 0800 345 7178.

If you are interested in the telemetry or oil storage solutions that Kingspan Environmental has to offer then please contact our Business Development Department on 028 3836 4415 or email ciara.murphy@kingspanenv.com

“A property company” is the best way to sum up the Crown Estate, according to Dermott Grimson. As Head of External Affairs for a unique organisation, he is increasingly involved in preparing the seabed for renewable development. The Glaswegian explains that “like any other property owner, we want to invest in our property in order to make the most of our assets and help others make something of the asset too.” Profits have totalled £1.9 billion over the last 10 years.

It generates money from property held by the Crown and its annual surplus goes to the UK Government. The Crown Estate portfolio includes virtually the whole seabed out to the 12-mile territorial limit, and it has rights to explore and exploit the natural resources of the continental shelf. However, the body is waiting for a diplomatic agreement on who owns the seabed off Northern Ireland. An answer is needed before leasing starts.

Under the Government of Ireland Act 1920, Northern Ireland was defined as the island’s six north-eastern counties. However, the Act did not set its maritime limits. As the territory of counties ends at the low water mark, the seabed off Antrim, Down and County Londonderry may technically not be part of Northern Ireland.

Article 2 in the Irish Constitution originally stated that the national territory consisted of “the whole island of Ireland, its islands and the territorial seas.” It currently gives no territorial definition. Talks are continuing between the Foreign and Commonwealth Office and Irish Department of Foreign Affairs.

“It’s not a dispute,” he comments. “There have been very fruitful discussions with colleagues in the Republic of Ireland so it’s just a matter of making sure we can get it right.”

The Crown Estate will be able to grant lease options to developers in Northern Irish waters but the Northern Ireland Executive will have the final say, as the consenting authority.

Offshore renewables have “advanced quite considerably” in recent years. He notes that Ernst & Young has consistently named the UK as the most attractive country for offshore wind development “so we see that as a strong signal that investors are interested.”

Successful bidders for Round 3 sites off Great Britain have been announced and he expects construction to start once Westminster finalises its renewables obligation banding review (consultation closes on 12 January) and publishes an offshore renewables roadmap.

The offshore renewables industry needs “long-term certainty” and he hears “encouraging” noises from the UK Government. However, to him, the real big issue is cost: “Unless the industry can get its cost down to £100 per MWh, it’s difficult to see all that’s on the stocks being delivered.”

An industry-led Offshore Wind Cost Reduction Task Force was announced in October and will report back to UK and devolved ministers in spring 2012. To feed into that work, the Crown Estate is undertaking a large research project into cost reduction, which it hopes to publish by the end of 2011.

More work needs to be done on understanding the levelised costs of offshore wind (compared to nuclear, gas or coal CCS) and he adds the sector will “undoubtedly … be an important part of the energy mix.”

Grimson is encouraged by Northern Ireland’s willingness to look beyond just what’s happening immediately off its shores. Indeed, he welcomes Harland and Wolff and Dong Energy’s development in Belfast Harbour, which will support the West of Duddon Sands wind farm (389MW). Construction is expected to start in early summer 2013 and expected to be fully completed in 2014.

UK and EU competition law prohibit two main types of anti-competitive activity: (i) arrangements between two or more undertakings which have the object or effect of preventing, restricting or distorting competition and which appreciably affect trade in the UK or the EU; and (ii) abuse of a dominant position in a market by one or more undertakings.

Investigation and enforcement of competition law

The Utility Regulator has concurrent powers with the Office of Fair Trading to investigate and take enforcement action in relation to suspected infringements of UK and EU competition law. These powers include the ability to give directions to bring an infringement to an end, accept binding commitments and impose financial penalties up to 10 per cent of worldwide turnover. To date, the Utility Regulator has not exercised its competition powers.

The UK Government has proposed a reform of competition enforcement which will involve the creation of a single Competition and Markets Authority (CMA). Proposals include giving the CMA sole competition law powers in the regulated sectors or at least encouraging a more proactive use of competition powers in these sectors. At European level, the energy sector continues to be on top of the European Commission’s agenda with a number of important cases in recent years.

Application of competition law in the energy sector

In the UK, the highest penalty to date for an abuse of dominance was imposed by Ofgem in October 2004. Ofgem fined National Grid £41.6 million (reduced to £30 million on appeal) for entering into long-term contracts with energy suppliers to supply and maintain gas meters. These contracts restricted the rate at which suppliers were able to replace National Grid’s meters with cheaper and more advanced meters from rival operators.

A more recent case involving long-term supply contracts involved EDF SA, the French electricity supplier

The Commission believed that EDF was abusing its dominant market position for the supply of electricity to large industrial customers through the use of long-term electricity supply contracts. EDF undertook not to conclude any new contracts which exceed five years in duration and to offer large industrial customers non-exclusive contracts.

Another recent case is E.ON, where the Commission was concerned that E.ON had abused its dominant market position for the supply of gas in Germany by reserving to itself almost the entire capacity at key entry points into the gas network. As a result, E.ON undertook to release pipeline capacity to enable other companies to compete on the German gas transmission market.

Does regulatory supervision shield companies from competition law?

In 2010, the European Court of Justice (ECJ) delivered an important judgment with potential consequences for the energy sector5. The ECJ confirmed the decision of the European Commission that Deutsche Telekom had abused its dominant position by charging competitors prices for network access services that were higher than the retail prices which Deutsche Telekom’s end-users were charged. Deutsche Telekom was fined €12.6 million. The ECJ held that, even though Deutsche Telekom’s prices were subject to regulatory supervision, it was left with sufficient freedom to end the abuse. The Commission had therefore been entitled to find an infringement of Article 102.

What does this mean for energy companies active in Northern Ireland?

Deutsche Telekom is an important judgment for all regulated sectors as it makes clear that decisions of national regulators do not shield dominant companies from the application of competition law. In Northern Ireland, it means that energy companies remain responsible for their actions under UK and EU competition law, even if their activities or prices are approved by the Utility Regulator. Moreover, even if a network is independently owned (e.g. NIE), pricing abuses contrary to UK and EU competition law may still occur (e.g. predatory or excessive pricing).

Energy companies should therefore ensure that their activities are fully compatible with applicable competition law.

Dorit McCann, Associate

EU, Competition and Regulation

T: 028 9034 8816

E: dorit.mccann@carson-mcdowell.com

Gas production companies need to be transparent, according to incoming American Gas Association President Ronald W Jibson. The Questar Corporation CEO told agendaNi that producers need to be willing to show what their frack method is: “They all have their own recipe and they need to be open about what’s in that frack load and then maybe change that.” Gibson believes that “if there are harmful products there, they [the producers] may need to change that,” and that producers need to work with environmentalists to resolve the debate.

Environmentalists remain unconvinced. For Friends of the Earth’s activism co-ordinator, Niall Bakewell, “getting it wrong just once, for such a porous and connected waterway that you have throughout Ireland, is just too big a risk to take.”

Fracking (hydraulic fracturing) is a method of extracting fossil fuels from rock. In extracting shale gas, it is conducted from a wellbore drilled into reservoir rock formations by forcing up to 10 million gallons of fluid between 5,000-10,000 feet below ground.

Australian company Tamboran was granted a five year licence from 1 April 2011 from DETI to explore and potentially drill for gas in Fermanagh. While Arlene Foster and the DUP support the method, there is opposition to it from Green, Alliance, Sinn Féin and SDLP MLAs. The UUP wants to see a detailed environmental impact assessment before any fracking happens. The TUV says they tend to be against it but would like to see more investigation of the practice.

Fracking for gas occurs by cracking open the rock formation and channelling the gas into an onshore well. It is said to be necessary to let the fossil fuel flow from the rock into the wellbore at an economic rate. The fluid injected into the rock usually consists of water, sand (to hold fractures open after treatment) and chemical additives. Gels, foams and compressed gases can also be injected.

It is supported because of its ability to reduce market costs and its contribution to a worldwide flow of gas, particularly in the US domestic market where gas market prices have almost halved in two years. The US and Canada are estimated to now have gas security for approximately 100 years.

Fracking has been the subject of increasing scrutiny and environmental debate. Frack fluid is claimed by some to contaminate groundwater (for example in Wyoming in 2006 where shallow groundwater was found to be contaminated) and the gases and chemicals are said to have the potential to migrate to the surface. There are also worries from residents about the potential mishandling of waste.

The practice has been banned in France and suspended in New South Wales in Australia, and New York and New Jersey. In 2004 a study by the US Environmental Protection Agency found that injection of fracking fluids into coal bed methane wells posed minimal threats to underground drinking water. The study, however, did not focus on other aspects such as disposal of fluids and other environmental concerns. It also occurred before the number of contamination claims started to grow.

A 2011 study by Duke University, North Carolina, found that groundwater tended to contain much higher concentrations of methane near fracking wells, with a potential explosion hazard. It found that the methane’s isotopic signatures and other geothermal indicators were consistent with it originating in the fracked deep shale formations rather than any other source.

Fracking in Lancashire was suspended after two small earthquakes in April and May this year, which occurred after drilling operations. An independent study directed by Dr Hans de Pater (Delft University of Technology, Netherlands), concluded that it was ‘highly probable’ that the quakes were triggered by the fracking.