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The Creation of an All-Island
Energy MarketThe Business Perspective
12th March 2004
Tanya Harrington
IBEC Energy Executive
IBEC-CBI JBI
• IBEC-CBI Joint Business Council is a partnership
of IBEC and CBI (NI)
• The JBC represents the interests of business
throughout the island of Ireland
• Mission:
– ‘to develop and sustain business co-operation within
the island of Ireland and to address issues pertaining to
international competitiveness.’
Outline
•EU Energy Policy
•Energy and Environmental Policy
Context
•Competitiveness
•Environmental Obligations
•Security of Supply/ Fuel Diversity
Priorities
•Market Opening and Design
•Climate Change Measures
•Renewable Energy
•Infrastructure Provision
•Long-Term
•Medium Term
•Short-Term
Issues
Recommendations
New Policy Context
• EU Energy Policy / ESI Trends
Context
• Energy and Environmental Policy
New Policy Context
EU Energy Policy / ESI Trends
New Policy Context
Energy and Environmental Policy
• The issue of climate change overarches energy and
indeed industrial policy formulation and will
ultimately be a driver of fundamental change in the
energy sector in Ireland, on this island and beyond
• For this reason it can no longer be viewed as a
policy that is ‘bolted on’ to the requirements of the
energy sector
Competing Priorities
•Competitiveness
•Security of Supply/ Fuel Diversity
• Environmental Obligations
Priorities
Competing Priorities
Competitiveness
• 2003- 22,706 notified redundancies in the private
sector in the Republic of Ireland. 106 jobs lost for
each working day.
• Competitiveness is not desirable- it is critical.
• Electricity price increases of 28% since 2000 for Irish
business. 3.5 times the rate of inflation, with no sign
of abating!
Competing Priorities
Environmental Obligations
• simultaneous needs of ensuring compliance with
environmental obligations (across two
jurisdictions) and the achievement of security of
energy supplies, with an adequate diversity of
fuels.
• The creation of an all-island energy market
should be encouraged to proceed where it can
demonstrate benefit, while addressing this set of
competing priorities
Key Issues
•Market Opening and Design
•Climate Change Measures
Issues
•Renewable Energy
•Infrastructure Provision
Key Issues
Market Opening and Design
• Directive on the Internal Market in Electricity
and Gas (2003/54/55 EC)- full market
opening by 2007
– Full market opening in RoI market 2005
– Full market opening in NI market 2007
• Regulators in both jurisdictions are adopting
differing approaches to market opening and
wholesale trading arrangements
Key Issues
Climate Change Measures
• Differing Kyoto targets- Different experiences of the
implemented EU-ETS
• No mirroring of arrangements North-South for the
sake of ‘harmonisation’ (UK CCL)
• Rather an integrated suite of measures which achieve
environmental objectives at least economic cost
• Urgent need for NA that are compatible with
implemented EU-ETS
Key Issues
Renewable Energy
•
Major push for enhanced deployment of renewable energy
and a mirroring of support mechanisms North-South
•
Yes where this adds competitive advantage to both
jurisdictions and is technically feasible and affords an
adequate diversity of fuel mix across the generation portfolio
•
No where this adversely affects business competitiveness
(ESB National Grid Report)
•
As with fossil-fuel generation- full external costs must be
internalised into the price
Key Issues
Infrastructure Provision
• Construction of IC2 and Ring Main has driven gas
transmission charges for TPA customers up by 70% in
three years
• Future infrastructure provision (electricity or gas) (E-W
or N-S) should be approved after a cost/ benefit
analysis has been conducted with appropriate
financing arrangements for the provision of
infrastructure supply ahead of demand.
• Due cognisance of the interoperability of gas and
electricity systems
IBEC-CBI JBC Recommendations
•Long-Term
•Medium-Term
•Short-Term
Recommendations
IBEC-CBI JBC Recommendations
Long-Term
• Business across both jurisdictions supports the
overall strategic direction of the creation of an allisland energy market
• Business welcomes the renewed political vigour
and leadership shown by both administrations in
moving this issue forward
• Business welcomes the opportunity to contribute to
on-going work in this area- Report
• Appropriate regulatory and administrative
arrangements will need to be identified in terms of
governance of such a market across both
jurisdictions
IBEC-CBI JBC Recommendations
Medium-Term
• IBEC-CBI Joint Business Council recommends that
a cost/ benefit analysis for a harmonsied all-island
energy market be undertaken, at the earliest
possible stage.
• Thereafter, it will be critical to commence the
process of convergence from a practical
perspective and ensure that all new developments
within either market are convergent and compatible
with achieving an all-island energy market.
IBEC-CBI JBC Recommendations
Short-Term
•
OFREG and CER should work with OFGEM to enable
suppliers from NI and RoI to access entire UK wholesale
market
•
Optimal use of electricity interconnection, accompanied
by development of suitable trading mechanisms
•
Single TSO charged with responsibility for planning and
introducing efficiently utilised interconnection should be
considered
•
In the interim, ESB National Grid and SONI should be
given a specific remit for enhanced co-operation
IBEC-CBI JBC Recommendations
Short-Term
•
Government must work together to harmonise legislation,
regulation, targets and overall policy direction
•
In the area of climate change, Governments should work
to ensure (where possible) that the implementation of
preferred policy measures mitigate the risk of market
distortion on the island.
•
Governments should review the responsibilities and
powers of Regulators in relation to the removal of
barriers to competition and ensuring the appropriate
regulation of market power of incumbents in both
jurisdictions
Conclusions
•
The creation of an all-island energy market and a future ‘regional
market’ represents the correct strategic direction from the business
perspective.
•
This is premised on the view that such a market will deliver enhanced
economies of scale for investment, generation adequacy margin and
network planning, a reduction in regulatory and trading costs and
enhanced competition.
•
The cumulative effect of which should be an improvement in the
competitiveness of business North and South and the attractiveness
of Ireland North and South as a location for inward investment.
•
Business commends today’s initiative by both Governments and looks
forward to working with the Governments of both jurisdictions towards
the achievement of our joint goals.