The future of electricity

Document 3 Key stakeholders come together to discuss the main challenges facing Northern Ireland’s electricity sector, how to speed up infrastructure investment and the state of the all-island market.

What do you see as the key challenges for the sector?

Tom Gillen

The immediate challenge is cost with customers focusing on price. There’s a strong desire for a more carbon-efficient energy supply. Security of supply is always a potential issue but there’s enough generation at the moment for demand. The large amount of renewables coming on line is also a key challenge.

Gary O’Callaghan

All of our customers are telling us that cost is the key issue. Security of supply doesn’t necessarily pose a problem today but we’ve seen incidences in the past where we’ve questioned the security of supply.

The CO2 agenda is obviously on everybody’s lips. For me it’s trying to match the cost issue with the speed issue. I think we do things far too slowly.

Tanya Wishart

Costs to customers, security of supply and sustainability. There are the issues around the integration of the wholesale energy markets, going forward with the European agenda, and also the impact of the additional intermittent-type renewables and the future grid development.

Michael Harper

We need a longer term perspective as energy projects take many years to come on stream. In this context, security of supply for us is the main issue and this is about what’s going to secure competitiveness in the very long term. This will mean transitioning to a low or a no carbon economy. If you try to preserve the status quo, you ultimately end up with a less competitive, less secure energy system.

Robin McCormick

There are a lot of decisions that need to be made. There is a 40 per cent renewables target in the South. There will be a 40 per cent renewables target in the North. But what are the next decisions? That will determine the rate of delivery. We’ve a very slow delivery of infrastructure at the moment and this is a key enable of renewables.

What are the barriers to delivery? Is the energy infrastructure inevitable?

Robin McCormick

There’s an obvious need for transmission infrastructure. Having achieved the

40 per cent, the next issue is whether there is a bigger picture we should be looking at and how quickly we should be looking at it e.g. offshore networks developing into a super-grid or how markets integrate to deliver maximum flexibility.

Gary O’Callaghan

If there was no objection to people paying more for their electricity, there would be a less complex process to develop our grids. Similarly, longer term investments such as ocean energy would be able to attract government supports facilitating a better ‘concept-to-value chain’.

At present there is a strong will in government to make these investments, but they simply do not have the money. In some cases, particularly in marine or ocean energy, the investment that’s required there is significant but the potential that’s there is enormous.

When it comes to government investment and the potential risks and returns, I don’t think people are being presented with the full argument. What are oil and gas going to cost in six years’ time? What happens if there are interruptions in supply? What’s the impact of that on industry or the economy, health or welfare?

We need to look forward 10 or 15 years into the future and decide how we want the energy sector to develop, and set this as our vision for the future. We need to examine all the risks and benefits and formulate a plan on how to get there. With this comprehensive vision of the future, we will be able to educate people and bring them along as they will see the bigger picture benefits in the long term.

Tanya Wishart

The Executive and other stakeholders need to take a long-term view about the investment required to meet the CO2 targets. There aren’t any easy solutions to meeting these targets and the issues go beyond the cost of the network development.

Michael Harper

Running up to 2008 with the increasing oil prices, everyone here will know the pressure that was being put on the economy, and on the politicians to do something about it. If that’s repeated with a bigger impact, more than $150 per barrel, there will be a significant headache for the economy. I don’t think “Let some other part of the UK make the changes, we’ll carry on as we are” is a sustainable approach.

Tanya Wishart

The push to increase wind on the island of Ireland and the targets for 2020 could actually lead to increases in CO2 emissions above the level that would be achieved at a slightly lower percentage of wind because of the impact on existing power stations and cycling (that is the carbon emissions that result during the start up and shut down of conventional generation).

I think in Northern Ireland what you see more and more are people actually opposing developments that they see directly impacting the quality of their life. In other locations, where there’s government sign-on, there’s more of a willingness at a high level of government to push these things forward.

Robin McCormick

If DETI has set out its stall on a 40 per cent target then government has got to bind itself around that. There is an increasing need for buy-in for delivery.

There’s a broad consensus that we need to move in this direction. And that means that we need infrastructure and we need to invest. It’s not a colossal amount of money if it is achieved by overhead lines. It could be much more significant if it was underground.

There’s a certain amount of infrastructure development that needs to be done, no matter what scenario you pick. Government needs to make up its mind about what it wants and everybody else needs to say that’s what they want as well.

Tanya Wishart

The target is for a percentage of renewables. The impact on carbon is something different. We will do everything we can to facilitate the network required to meet those targets. We don’t want to be giving someone an open chequebook, however, by going forward without a firm plan and cost/benefit analysis.

How’s the market operating?

Tom Gillen

On a day-to-day basis, it’s working very well. In terms of investment, renewable generation is being constructed on the back of government support. It is difficult to see any thermal plant being built as the market price does not support it. Given the focus on cost, the regulators are unlikely incentivise thermal plant construction.

Tanya Wishart

One of the areas for development of the market is the medium-term review where we’re looking at the capacity payment mechanism and trying to facilitate what we believe is necessary to incentivise the optimum mix of generation. The other area is market integration because there’s no point in us going along a path to make changes, and to then have to make additional changes to facilitate market integration with other markets in Europe.

Michael Harper

The main logjam is the grid. There is a need to build the infrastructure to accommodate the new capacity, and also for accommodating large amounts of marine renewables off the east coast. The Executive’s target of 40 per cent and the separate marine renewables target are exactly right for 2020 but you also need to think where to go beyond that.

Robin McCormick

The electricity market was designed in the context of the issues that people had with the previous arrangements, both North and South. SEM has probably ticked all the boxes. It works very well for an island system because you know what you’re dealing with a day ahead.

There’s a big need to start thinking about what we’re going to be like post-2012 with the interconnector with Wales. We’re a small electricity market – like Greater Manchester in the context of GB – and we’re going to have more and more renewables and intermittent generation.

How are we going to manage the flows that will result from that? Whether we get into a regional market that serves everybody or tinker with the one that we have, we need to recognise that the market needs to develop.

Tom Gillen

Well, the push in Europe is to combine markets and regionalise them and there are groups of TSOs getting together to better manage the flows across the systems. That just means if there is extra wind power here that can be exported, you need to be able to export it into Great Britain and onwards. It’s all about maximising utilisation. It seems not a great idea to bundle up a lot of wind onto a small system and then have to turn it off.

What are your views on smart grids and the future of electricity networks?

Gary O’Callaghan

I would like to put smart grid in the context of my 10-year vision for the future. I think smart grid has a very significant role to play. I was one of the lucky ones to be involved in the ICT industry back in the 80s when it revolutionized. The industry moved from the concept of a simple rotary dial telephone in the 1980s to today where we have global IP-based internet audio-visual communications. I think the energy world will go through the same transition over the next 10 years.

Tanya Wishart

Customers don’t want data, they want solutions and they want products to be sold to them and suppliers to create a final package. I would say the best place for all of that is in a commercial-type environment rather than a regulatory-type environment. I see, as a regulator, our concern is to ensure that the information within the regulated companies is made available to allow commercial development of a lot of these different proposals that you suggest might happen.

I agree with you a lot could be of benefit and could happen and definitely the ability is there to make it happen. On the other side of the coin the concern is this idea of ‘big brother is watching you’ and the amount of access that people then are giving to their daily lives and their daily routines. Therefore there has to be a certain element of choice that people will want because of the benefit that comes to them rather than them say they were pushed in a certain direction through a regulated environment.

Robin McCormick

Smart meters, smart phones, smart networks, smart grids, all sounds almost too good to be true and I think quite possibly it is. Take a smart meter at the very lowest level and that tells somebody how much the electricity that they are using costs. You are giving them the opportunity to change their behaviour.

That’s one area we haven’t actually proven particularly well. There’s some evidence that some people change, maybe the gadget geeks in society see there’s an opportunity at home where somebody says: “Listen, I can save you x per cent if you allow me to control your fridge, your water heating and your electric blanket.” Then it is down to how it is optimised. It becomes increasingly more complex and the need for a standard communication protocol and standard equipment is the only way that it can generate the scale that is necessary for it to work efficiently.

If the wind is blowing, you don’t actually want people to turn off their water heating at 5 o’clock at night.

Gary O’Callaghan

There are many concepts being discussed today. Some will come to pass, but many will never happen. I don’t know, for example, if I believe that distributed generation will get a lot of traction in this country. Some people will say smart grid will be one of these concepts which will never get off the ground but again, it is worthwhile looking at trends from the 1980s.

Mobile phone companies were forecasting mobile phone penetration rates of between 40 and 45 per cent on the island of Ireland. The penetration eventually went up to 105 percent penetration. They just completely under-estimated how quickly it would catch on and how much people would use them. If smart grid applications remain complex, then the concept of only being used by ‘geeks’ will no doubt apply. The smart in smart grid, smart phone and smart meter is about ‘de-geeking’ them and making them more user-friendly and accessible by the man or woman on the street.

It isn’t just data. It is common user interfaces whether it is at home, in the car or on the mobile device, which are easy to use so that literally your phone gives you a choice: Do you want to switch on your heating, switch off your fridge, charge your car, sell your car battery energy etc? There is potential for a huge number of user-friendly applications to be developed to make all of this work seamlessly.

Tom Gillen

The problem is that for the customer, it is price-driven. We have developed a number of sophisticated products that help customers manage usage and reduce costs. These services do not, however, attract a premium. Indeed many customers take them as a given from their supplier. This should be an important learning point for those designing smart grids. Customers will want these improvements without increasing their costs.

Michael Harper

When we are at the penetration levels of wind energy and other intermittent sources of energy that can be brought on, the challenge will not be daily imbalances. It’s going to be the seasonal imbalances. Smart metering and smart grids will not help that.

Robin McCormick

It is unlikely that people will change their behaviours unless there is a significant increase in prices – but we need to have invested in the systems in advance.

Tanya Wishart

I would point out that fuel poverty levels currently estimate that 40-50 per cent of households are in fuel poverty. I would suggest that people in that position are already feeling that pain and if they felt they had options available to them or information to help them make informed choices, they would make those sorts of decisions.

What is the one big issue government or the industry needs to look at?

Robin McCormick

I suppose, from a system operator’s perspective, obviously the delivery of great infrastructure is the issue for us because it’s really what is required to enable a lot of these other initiatives we’re talking about. It is required if we are going to reduce our emissions and if we are going to have the levels of renewable integration that we’re targeting.

Tom Gillen

Long-term, we need infrastructure that meets the carbon reduction targets set by government.

Gary O’Callaghan

The biggest issue for me is the lack of long-term vision. It may only be 10 years down the road but we need to decide what we’re going to look like and then try to sell that story to the man on the street. There are significant benefits for everybody, maybe short-term pain but in the medium and long term there could be benefits and I think that if the vision is set out and it becomes common knowledge and common language and a common currency, then I think people will buy it.

Tanya Wishart

Education, people understanding and realising decisions and the overall impact, rather than looking at the small impact on making one decision with which they are not comfortable.

Michael Harper

I think part of the debate is about recognising that Northern Ireland is only a small player in a global market for energy. There is a very rapidly increasing demand in Asia for energy, there are major global constraints emerging in terms of easily accessible oil and gas resources and there are increasing constraints from the need to reduce carbon dioxide emissions.

It therefore seems to me that we have to be more honest about the extent to which, in Northern Ireland, we can actually maintain the accepted levels of electricity services at prices that we currently consider affordable. That has to be a healthy debate, however unpalatable it may be for politicians, because the sooner we recognise that we cannot continue with ’business as ususal’ expectations at the same price, the sooner we are able to start thinking about what we need to do.

Are there any benefits of using electric vehicles?

Gary O’Callaghan

There is evidence of concrete demonstrations of eV projects both north and south. However, at present, the only progress is the appearance of charging posts at strategically selected locations. In terms of concrete demonstration projects, these are still at an early stage of development but the potential is enormous.

eV can really drive our renewable energy sector. If we have got a capacity on the island for 7,000 megawatts of onshore wind and another 3,000 megawatts of offshore plus up to 500 megawatts in the ocean – only the tip of the iceberg, there are potentially enormous amounts more.

By changing all of the vehicles including public transport to electric over a period of time, you’re going to need all of those renewable megawatts but you’re also going to need smart systems to manage transmission, distribution and demand.

The Participants

Gary O’Callaghan

Gary O’Callaghan is Head of Energy Sector with Siemens in Ireland. He has operational responsibility for renewable and fossil power generation, energy services, power transmission and power distribution. He joined the company in 1992. He transferred to power transmission and distribution in 2004 and subsequently took over responsibility for the full energy portfolio at Siemens Ltd.

Tom Gillen

Tom Gillen was appointed during 2009 as Chief Operating Officer for Viridian Power and Energy, the Viridian Group’s integrated generation and supply business which includes Huntstown and Eco Wind Power and energia. He joined Viridian in 2000 and became Managing Director of energia in June 2008.

Michael Harper

Michael Harper has worked in renewable energy policy, advocacy and project implementation covering different technologies and disciplines in both the private and charity sectors. He is Managing Director of B9 Energy Offshore Developments Ltd and is the project leader for THETIS Energy Ltd, which is aiming to develop a 100-200MW marine tidal project off the north-east coast of Northern Ireland.

Robin McCormick

Robin McCormick is the General Manager and a Director of SONI Ltd. SONI has a licence to operate the Northern Ireland transmission system and is also licensed as market operator. Both of these roles now require close co-operation with EirGrid. In March 2009, SONI Ltd became part of the EirGrid Group. Robin has also held a number of senior positions in NIE including Transmission Planning Manager and Regional Customer Services Manager.

Tanya Wishart

Tanya Wishart is a utility regulator in Northern Ireland and is responsible for the regulation of the electricity networks and supply businesses in the province. The generation wholesale market operates on an all-island basis and there is a Single Electricity Market Committee to regulate this market. As a member of the Oversights Committee, Tanya takes responsibility for the operational aspects of the market.

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