Electricity Association of Ireland

Topic:

The Energy Transition

Submission:

For over 100 years the electricity system presented a profoundly stable business model in the broadest sense with modest incremental developments in generation and networks technologies. Then the world of electricity changed, slowly initially but with the rate of change now accelerating to wholesale revolution. A number of clear drivers are causing this change:

•  A revised political philosophy that sought to drive efficiency, innovation and cost reduction through deregulation and privatisation
•  Technology developments in generation and the pace of these developments, particularly renewables
•  The application of communications technology and with it the creation of “Big (enormous) Data”.

However, from an industry perspective, overarching all of these developments and providing added impetus to each has been the growing body of scientific evidence confirming human induced climate change is a real and increasingly urgent threat to global economic wellbeing and the wellbeing of the planet in general. In response, the industry expects that electricity generation must come with zero emissions at the latest by 2050.

Why the focus on electricity? It is because, critically, electricity has the ability to contribute significantly to the decarbonisation of the overall energy system and deliver the required national, European and global “energy transition”. The above drivers dictate that the future electricity/energy system will be:

•  Decarbonised,
•  Decentralised,
•  Digitised and, with the potential application of block chain technology,
•  Democratised

Decarbonised electricity 

As of now, decarbonisation can only be delivered in Ireland exclusively through the adoption of renewable energies given the legal prohibitions on nuclear and carbon dioxide storage. Biomass, biofuels and biogas will have roles to play in meeting energy demand however, on a purely cost basis, it remains likely the most significant contribution will continue to be delivered by wind generation. Solar photovoltaics (PV) will play an increasing role as this technology continues to develop and reduce dramatically in cost. Elsewhere in Europe nuclear will also continue to play a role.

Ongoing innovation in demand management and energy storage technologies will progressively improve the ability to manage very high levels of penetration of variable generation. However, until the reliability (and cost) of such systems approximates to current levels of expectation for the continuity of supply, then some form of flexible, firm back-up generation is required. Most probably such back-up will comprise gas turbines that emit CO2. Consequently, as a policy need, Government should revisit its approach to the transposition of the EU’s Carbon Capture and Storage Directive.

Decarbonised energy 

Electricity generation is responsible for a declining contribution (less than 30%) of annual CO2 emissions from total energy use. The significant majority of emissions arise mainly from the provision of heating and transportation services. As noted, a number of options arise that can facilitate decarbonisation of these sectors including biomass, biofuels, biogas and structural changes through improved building standards and public transportation services. However, land availability for food production coupled with environmental and sustainability considerations will limit the scope for renewable fuels for both heating and transport. However, electricity is also in a strong position to meet the this challenge and in the process also improve energy efficiency and increase the share of renewable energies in these services. As is happening elsewhere, Government should initiate policy measures to support the electrification in heating and transport. A first step would be to reconsider the metric used to measure energy efficiency, which today in a carbon constrained world equates 1 kWh of energy from coal to 1 kWh of energy from wind. 

A further benefit for Government arises as a result of the manner in which CO2 emissions are regulated with an emission trading system (ETS) sector for generation and large industry and a non-ETS sector comprising all other emissions. Consequently, replacing fossil fuel use by electricity in heating and transport results in the full reduction in emissions to the atmosphere from the fuels substituted. The role of electricity as a least cost means to reduce emissions from heating and transport should be actively supported. 

Decarbonised economy 

Ireland has a unique greenhouse gas emissions profile as a result of the continuing large contribution from agriculture. Consequently, Ireland faces a major challenge in meeting its EU emissions obligations. This puts Ireland in a position where it must be first mover in Europe on a range of policy issues, including those highlighted above. The recent climate and energy White Paper provides a useful starting point and the measures it identifies should be evaluated in detail and progressed with urgency.

Decentralised 

Falling renewable technologies prices coupled with legislative requirements on zero emission buildings will ensure the localised development of on-site electricity generation. This brings positive benefits but also some important challenges, in particular the need to maintain investment in critical back-up generation and networks infrastructure and to ensure social equity. Wide scale distributed generation with almost zero short run marginal cost is fundamentally altering the cost structure of the industry towards fixed costs. However, the pricing regime continues to be based on variable consumption. As battery storage costs also fall, more homes and buildings will move towards an almost “off-grid” environment. As a result cost recovery for all fixed investments falls on a declining number of generally lower income households. Attention needs to be given by Government and regulators to the cost and price issue now to ensure investment and maintain social equity. 

Digitalisation and Democratisation 

In the not too distant future we will see tens of thousands of localised generation and energy storage units, hundreds of thousands of smart meters and millions of enabled household devices. Communication technology will connect all these elements moving the industry into the realm of “Big (Mega) Data”. These changes and will further revolutionise the industry and the relationships between those who produce, consume and store electricity – which in many cases will be the same entity. How, when and at what overall cost it happens depends on the flexibility and supportiveness of the policy and regulatory frameworks. How it is paid for will be an equally important challenge and one critical to ensuring the economic and social wellbeing of society.

About Owen Wilson:

Owen Wilson is Chief Executive of the Electricity Association of Ireland, the representative body for the industry on the island, having previously over 32 years industry experience working with ESB in a number of management roles. Dr. Wilson was also chair (2008-14) of the Environment and Sustainable Development Policy Committee of Eurelectric, the European electricity industry association, and a member of its executive e committee.  He has worked closely with a range of stakeholders on key national and EU energy, climate and environmental policy issues.