Energy

Energy policy makes progress

David-Sterling-new Speaking at the Northern Ireland Renewable Energy Seminar, DETI Permanent Secretary David Sterling explained the context and opportunities for energy policy in the region and the progress made since 2010.

Northern Ireland has made laudable progress in energy policy, DETI Permanent Secretary David Sterling said as he outlined progress on the Strategic Energy Framework to agendaNi’s Renewable Energy Seminar.

Among a number of matters relating to energy in general and renewables in particular, the department is planning to publish an Offshore Renewable Energy Bill, which would establish a decommissioning regime for the offshore renewable sector as well as putting in place legislation to address safety and navigational issues. A consultation on this concluded on 15 April. It is intended that the Bill will be introduced to the Assembly in spring 2014 with an enactment date of March 2015.

Comparisons are often made between Scotland and Northern Ireland. Sterling, though, pointed out that Northern Ireland’s context is entirely different. We are a much smaller geographical area and population, political structures are different in that we have a five-party coalition (as opposed to the single-party Scottish Government) and Scotland has a much longer experience of renewable energy (dating back to large scale hydro-electricity projects).

The idea that the Executive was not working closely together on a range of “bread and butter issues” was a misconception. Sterling remarked: “We do work well across the Executive, sometimes a lot better than people imagine but our challenge in DETI is quite considerable.”

Renewable energy is only one of a number of significant responsibilities within the department’s energy remit. The Energy Division in DETI has less than 30 staff compared to over 800 in the UK Department of Energy and Climate Change (DECC) but he believed that they “punched well above their weight.”

Policy was being developed in the context of four trends:

• increasing demands from the European Commission for environmental protection, which regularly resulted in new directives on carbon and renewables;

• the increasing cost of fuel and capital (despite short-term decreases);

• security of supply issues, related to heavy dependence on gas and imported fuel oil for home heating; and

• increasing regulation flowing from Europe.

Northern Ireland also had the highest level of fuel poverty in the UK. Politically, the sustained economic downturn means that “there is perhaps a greater concentration on the here and now than there might have been several years ago.” This meant a focus on ameliorating the immediate problems of unemployment and fuel poverty.

Nuclear energy was uneconomical in Northern Ireland and there was no political consensus in favour of this on the island of Ireland. The province was obliged to meet the EU’s 20:20:20 targets on energy efficiency, renewable energy and greenhouse gas reductions by 2020.

Opportunities

Despite a difficult context, the Executive sees opportunities for renewable energy, both onshore and offshore, and in the marine, bio-energy and renewable heat sectors. However, constraints existed around grid development and environmental issues. The 2010 Strategic Energy Framework was agreed between all parties in the Executive and sets out goals in four key areas:

• building competitive energy markets;

• security of supply;

• developing infrastructure; and

• enhancing sustainability;

In terms of competitive markets, the Single Electricity Market (SEM) was established in 2007. Northern Ireland expects to meets its current obligations on the further integration of electricity and gas markets by 2016. There is now greater competition in the retail electricity sector, and retail gas supply in Greater Belfast, and the first stage of market opening in the ‘10 towns’ gas licensed area occurred in October 2012.

DETI was pleased that the gas storage facility in East Antrim had received planning permission as, should this project be successfully implemented, it would help with security of supply. Northern Ireland needed more transfer capacity in interconnection, and the delay in obtaining planning permission for the second North/South interconnector was an issue, particularly as this was costing consumers across the island at least £25 million per year.

Meeting renewable electricity targets was also reducing the province’s dependence on imported fossil fuels.

The Executive has allocated £32.5 million to support the extension of the natural gas network into the west of the province. The current interest in underground gas storage and compressed air energy storage in East Antrim was another sign of progress in infrastructure.

DETI is keen that NIE and the Utility Regulator reach agreement on the required investment for grid development, and that the right balance is struck between the needs of consumers today and those in future.

On sustainability, renewable electricity is on track to meet the 2015 target (20 per cent) but the 2020 target would be more challenging and is dependent on grid investment. The onshore renewables sector is market-led and DETI’s approach is technology-neutral.

Marine development

Offshore renewables are of increasing importance and the Executive has published an offshore renewable energy strategic action plan (March 2012) and regional locational guidance (July 2012) to support the sector. The Crown Estate has granted initial development rights for 600MW off the South Down coast and two 100MW tidal projects at Torr Head and Fair Head on the North Coast.

Northern Ireland could also capture “significant” benefits from the renewable energy supply chain. Invest NI has a database of 400 companies which were interested in working in the sector. The global offshore sector has been valued at $100 billion and DETI welcomed the development of Dong’s £50 million project base in the Belfast Harbour Estate.

“This is an area again where ministers see renewables as an area which isn’t just good inherently but also provides considerable commercial opportunities for our local businesses,” he stated.

The Northern Ireland Renewables Obligation (NIRO) has been incentivising renewable electricity generation since 2005 and UK-wide electricity market reforms will result in the replacement of the NIRO by feed-in tariffs with contracts for difference from 2017.

DETI believes that the EMR proposals will meet Northern Ireland’s needs and provide a more stable investment environment over the longer term. Northern Ireland will retain the flexibility to set its own strike price for large scale feed-in tariffs with contracts for difference and also plans to introduce a separate feed-in tariff for small scale generation i.e. below 5MW.

Electricity market reform is not a fait accompli. The Executive has, perhaps, been less publically vocal than the Scottish Government but importantly has been very successful in its negotiations with DECC, to the benefit of Northern Ireland.

The delivery plan for electricity market reform will be published in July and will include an indicative strike price for Northern Ireland. The Executive has retained the power to approve a socialised different strike price for Northern Ireland as well as a right to set a further different strike price, the differential cost of which would have to be met by local consumers.

The renewable heat target was challenging due to the low baseline. The renewable heat incentive was introduced for non-domestic customers in November 2012 while the scheme for domestics (the renewable heat premium payments) has attracted approximately 700 applications since its introduction in May 2012. Phase 2 of the scheme, extending the RHI to the domestic sector and new technologies, is now under development.

Going forward, the greater penetration of natural gas is a priority for the Executive. “Sometimes it’s forgotten just how significant this can be for households in Northern Ireland who have been reliant on heating oil,” he explained. This will reduce emissions, as gas has a smaller carbon footprint than oil, and make a “significant dent” in fuel poverty.

In conclusion, Sterling commented: “I think the benefits of renewables are obvious in reducing carbon, providing opportunities for commercial exploitation, improving our sustainability and our security. I do think that we have much to be proud of here.”

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