Department for Communications, Energy and Climate Action

SSE response to

Public Consultation on draft National Energy and Climate Plan for Ireland

February 2019

1. Executive Summary

The challenges facing Ireland in relation to climate change are well documented. The figures in Ireland’s draft National Energy and Climate Plan provide further confirmation that Ireland is not on track to meet its decarbonisation and renewable energy targets for 2020. This intensifies the challenge facing Ireland as it seeks to contribute to higher 2030 EU targets.

In the scenarios put forward in the draft NECP for 2030, Ireland falls short of its emissions targets. Our view is that the potential for renewable electricity to drive decarbonisation has been underestimated in the models provided. A renewable electricity target of at least 70% should be the goal. This will be needed to drive the decarbonisation of Ireland’s economy and society. Renewable electricity, particularly onshore wind over the past decade, has been a success story to date but we need to build on this by setting an ambitious target for 2030. The draft NECP says that the Renewable Electricity Support Scheme (RESS) will provide for “a renewable electricity ambition of up to a maximum of 55% by 2030”. SSE would urge the government to not place a limit such as this on Ireland’s ambitions.

We also believe that the scenarios put forward underestimate the potential of offshore wind. Large scale offshore wind developments are the key to achieving Ireland’s transition to a low carbon economy. Offshore wind has a pivotal role to play in helping Ireland to meet its 2030 energy targets and is the technology best-placed to deliver the large-scale renewable generation Ireland rapidly needs. Offshore wind can be delivered at greater scale and with higher capacity factors that onshore renewables and has benefited from falling costs.

To date, policy, regulatory and grid structures have focussed on the successful delivery of onshore wind, however, onshore renewables are experiencing growing social acceptance challenges, planning constraints and a reduction in suitable sites. This is making onshore energy development more challenging and costly. Offshore renewables offer the solution. A recent report from KPMG highlights that with the right policy environment, 4GW of offshore wind could be delivered by 20301. The development of key enabling policies such as the Renewable Electricity Support Scheme (RESS), grid connection policy and permitting can enable the delivery of such a target. Taking these important steps will provide certainty for citizens, policy-makers and investors out to 2030 and enable them to make meaningful contributions to Ireland’s energy targets in the short to medium term.

1 KPMG report: ‘Offshore Wind: Ireland’s social and economic opportunity’: https://assets.kpmg/content/dam/kpmg/ie/pdf/2018/11/ie-offshore-wind-nov-2018.pdf

If we fail to meet our targets, Ireland will be exposed to significant annual compliance costs and fines. It is anticipated that we will fail to meet our 2020 mandatory renewable energy target of 16% by approximately 3%. Our performance in energy efficiency and emission reductions has also been poor, and as a result we are anticipated to miss our energy efficiency goal of 20% by 4% while non-ETS emissions are anticipated to be between 0% and 1% below 2005 levels by 2020, compared to the targeted 20% below. This leaves Ireland at significant risk of fines of approximately half a billion euro annually. From 2020 onwards, the cost of not meeting our climate commitments will grow significantly as acknowledged by Minister Bruton recently2. We can avoid these compliance costs and put Ireland on course to a low carbon future by 2050 with concerted action now.

The energy efficiency targets included in the draft NECP will require an intensification of activities. The government needs to ensure that measures to improve energy efficiency are sufficient, funding from central government is comprehensive and demand for energy efficiency improvements rises. The energy efficiency ambition envisaged in the NECP will require deeper, more expensive measures in the next decade. The Energy Efficiency Obligation Scheme (EEOS) needs to evolve in recognition of this. A corresponding increase in support funding will also be needed to boost demand and reduce financial barriers. While the EEOS has been successful to date, ongoing efforts to achieve energy efficiency upgrades must not fall disproportionately on energy suppliers. Alternative measures must also drive activity across the sector.

The key points of our response are: • Government should adopt a target of 70% for renewable electricity to support economy wide decarbonisation and diversify our energy mix; • A national target of 4GW offshore wind by 2030 should be included in the NECP. It is the only technology capable of delivering a step change in our renewable deployment rate; • Carbon pricing must be strong enough to incentivise change, a trajectory to 2030 is needed. Consideration should be given to a carbon price floor in the ETS sector; • Meeting an energy efficiency of c 24% will require a significant increase in government funding, as acknowledged in the draft NECP. Any changes to the Energy Efficiency Obligation Scheme (EEOS) need to be fair and achievable. Policy costs associated with increased

2 https://www.irishtimes.com/news/environment/carbon-emissions-reductions-could-be-95-per-cent-off-target-says- minister-1.3706152

measures to achieve the depth of improvements required should be funded through the Exchequer. • The electrification of heat and transport sectors is the most effective way to decarbonise, policy and measures to enable this need to be delivered; • Delivery of the North-South Interconnector should be an immediate priority for Government to deliver benefits to customers; • Maintaining the single electricity market on the island of Ireland and enhancing its integration with other European markets is imperative to ensuring the most efficient electricity prices for customers.

These points are discussed in further detail in our response. The following sections outline our views in relation to the projections, policies and measures outlined in the document covering the five dimensions of the energy union: decarbonisation, energy efficiency, energy security, internal energy market and research and innovation.

2. Introduction

SSE wishes to make the enclosed submission for consideration as part of the Department of Communications, Climate Action and Environment (DCCAE) consultation on Ireland’s draft National Energy and Climate Plan (NECP) 2021 – 2030. We responded to DCCAE’s initial consultation on a NECP for Ireland in November 2018. In our submission, we called on the government to adopt ambitious climate and energy targets to set the path for our transition to a decarbonised economy.

We welcome the commitment made by Minister for Communications, Climate Action and Environment, Richard Bruton, to make Ireland ‘a leader in responding to climate change, not a follower’ and his commitment to create a ‘whole of government plan to tackle climate change’3. We look forward to seeing the detail of this in due course. New and expanded policies are needed to put Ireland on the path to a low carbon future. We would encourage the Minister to include these measures in Ireland’s NECP. We need to galvanise society behind a singular plan. Multiple plans risk creating uncertainty and reducing accountability.

Beyond the policy debates and formal reports, more and more people are seeing the impact of climate change on their lives. From the flooding caused by Storm Eleanor at the start of the year to the impact

3 Reported in Irish Times, 7 November 2018: https://www.irishtimes.com/news/environment/threat-of-climate- change- requires-revolution-in-how-we-live-says-bruton-1.3689512

on farming of drought-like conditions over the summer, the threats associated with climate change are here and will only grow more severe. Ireland has a responsibility to act. Failure to prioritise implementation of the appropriate short and medium-term policy options will increase the costs of measures in future and exacerbate the impacts of climate change for Irish citizens. We need to take action now. If we are to be a leader in responding to climate change, the scale of the challenge means we must unite behind a plan to put Ireland’s economy on a different path and transform society.

We welcome the publication of proposed legislation in the event of a no-deal Brexit and the commitment to ensure the continuation of the single electricity market and other essential services. We recognise the challenges that a no-deal outcome would present Ireland but would encourage the Minister to ensure that climate change mitigation remains a priority.

3. Dimension: Decarbonisation

3.1 Green House Gas Emissions

Ireland’s draft NECP reiterates what we already know – Ireland is not on course to decarbonise, will miss its 2020 targets and is on a pathway to miss its 2030 targets. Ireland’s National Policy Position necessitates an 80% reduction in emissions from electricity generation, transport and the built environment by 2050. Ireland’s draft NECP casts further doubt over whether these can be met as can be seen in Figure 1, as outlined in the NECP. New initiatives are required if Ireland is to meet its objectives on climate change and avoid the associated cost of non-compliance.

Figure 1: All greenhouse gas emissions under scenarios in NECP vs National Policy Position

According to the latest data from the Environmental Protection Agency, total emissions for Ireland are estimated to increase by 2% by 2020 and decrease by 1% by 2030. The draft NECP states that the incorporation of measures under Ireland’s 2018 National Development Plan (NDP), new initiatives identified by Teagasc, and a change in reporting methodology will make a significant improvement to Ireland’s emissions projections to 2030. These measures would need to be very substantial to reverse the current trend. Information on these measures should be included in the modelling provided in the final NECP to provide a clear trajectory. The decarbonisation challenge facing Ireland means that ‘business as usual’ or the expansion of current measures will not be enough. Ireland needs bolder measures to tackle ETS and non-ETS emissions. Measures to reduce overall emissions need to include boosting renewable energy production, diversifying the renewable energy mix, intensifying the electrification of heat and transport and; improving energy efficiency as outlined later in this document. To strengthen signals and drive behaviour change, strong carbon pricing in needed.

The NECP outlined various scenarios for carbon pricing, Figure 1 shows that greater emissions are anticipated in the low oil price scenario relative to the high oil price scenario. This is because a low oil price environment is projected to lead to greater energy demand, creating a more challenging environment in which to increase energy efficiency and renewable energy penetration, as the monetary incentive to diversify away from fossil fuels will be weaker. Stronger carbon pricing (in both ETS and non-ETS sectors) will therefore be required to provide a more stable, cost effective and technology neutral incentive to choose lower carbon solutions.

• Non-ETS - We believe there is strong merit in strengthening the carbon tax. In strengthening the carbon tax, the government should provide an indication of long-term trajectory to provide clarity for investors. We welcome commitments made by the new Minister for Climate Action in this regard. The government should also evaluate the merits of extending the carbon tax to cover sectors beyond transport and heat.

• ETS – The government should also consider introducing a carbon price floor to strengthen the current ETS model. We welcome the commitment made by Minister Bruton to work with the UK, France, Netherlands, Finland, Italy, Portugal and Sweden to strengthen and extend carbon pricing and improve the overall ambition, coverage and predictability. The government should also evaluate the merits of being one of the first movers in this area. In assessing the best approach for Ireland, the Government should look to countries where such mechanisms have

been effective, for example Great Britain. SSE believes that a long-term trajectory is crucial in order to provide certainty to investors.

• Cross-party support is crucial to enable these policies to proceed on a stable trajectory. Ensuring that such policies are accepted by the public is also of vital importance. The ringfencing of funds raised should therefore be considered. Suggestions from the government so far include that households be given a “carbon cheque” to compensate for an increase in carbon tax or that funds raised be given back through the social welfare system. Another option is that funds raised could be allocated to climate mitigation and adaption measures. Allocating these funds to energy efficiency and microgeneration would enable customers to make the investments needed to reduce their consumption and the cost of energy. Careful modelling and analysis needs to be undertaken alongside a full consultation to ensure the path taken will drive the preferred behaviour and the policy is sustainable over the long term.

3.2 Renewable energy

An overall renewable energy target of 27.7% (NECP2 – high oil price) / 24.8% (NECP4 – low oil price) has been included in the draft. The draft also includes targets for renewable electricity, heat and transport. We believe that the draft NECP has underestimated the capability of renewable electricity. While Ireland has struggled with emissions reductions and the decarbonisation of the heat and transport sectors, the decarbonisation of electricity has been a success story to date. Ireland needs to continue to build on this success. The share of electricity from renewable energy has increased fourfold from 2005 – 2017 - from 7.2% to 30.1%. The majority of this has been from wind energy4. The SEAI Energy in Ireland 2018 report found that renewable electricity – chiefly wind – reduced CO2 emissions by 2.7 million tonnes in 20175.

The draft NECP states that the Renewable Electricity Support Scheme (RESS) will provide for “a renewable electricity ambition of up to a maximum of 55% by 2030”. We caution against putting a limit on the quantum of renewable electricity. A report produced by Baringa, commissioned by the Irish Wind Energy Association, shows how Ireland can supply 70% of our electricity from renewables by 2030 on a cost neutral basis for

4 https://www.epa.ie/newsandevents/news/name,65204,en.html 5 SEAI Energy in Ireland report: https://www.seai.ie/resources/publications/Energy-in-Ireland-2018.pdf

consumers. Achieving this will require a variety of renewable electricity sources including onshore wind, offshore wind and solar alongside enabling technologies like batteries, DS3 investment and interconnection6. The electricity sector in Ireland has proven its ability to deliver renewable capacity, an ambition of 70% will act as a catalyst to continue investment in renewables and ensure we are on course to deliver for 2030.

3.2.1 Offshore wind

SSE believes that the draft NECP shows a lack of ambition in relation to the potential of offshore wind. Offshore wind has a pivotal role to play in enabling Ireland to meet its 2030 energy targets and is the technology best-placed to deliver the large-scale renewable generation Ireland rapidly needs. The cost of offshore wind is on a downward trajectory with significant reductions in technology prices and improved technical performance. This means offshore wind is now a proven option, with a trajectory to hit price parity with established technologies in the medium term.

There are several proposed offshore wind projects in Irish waters, at different stages of development, which can deliver up to 4GW of renewable energy in the coming years. These new projects can deliver the significant volume of clean energy needed to decarbonise our economy, and bring our island nation benefits including coastal regeneration, indigenous jobs, and supply chain development.

Offshore wind development will not only help Ireland reach its climate targets, reduce reliance on fossil fuels, and improve air quality, it will also bring significant socio-economic benefits. We have seen a number of FDI companies, particularly data centres seek out locations with green energy. In order to continue to attract this type of investment, Ireland will need to increase the share of renewables on the system.

The development of offshore windfarms will also create jobs and derive economic benefits as evidenced in the UK. A UK study estimates that the Gross Value Added (GVA) to the UK per GW installed in 2017 was £1.8bn7. In addition, the UK has seen significant investment in supply chains over the past decade with companies like Siemens Gamesa investing over £300m in an offshore wind

6 Baringa, A 70% Renewable Electricity Vision for Ireland in 2030: https://www.iwea.com/images/Article_files/Final_Baringa_70by30_Report_web.pdf 7 ORE Catapult: The Economic Benefits of Offshore Wind: https://ore.catapult.org.uk/app/uploads/2017/12/SP-0012-The- Economic-Value-of-Offshore-Wind-1.pdf

manufacturing facility in Hull in recent years8. While Ireland is a smaller and less mature market, we believe the potential benefits for Ireland’s economic development are significant. According to the SEAI’s Wind Energy Roadmap, onshore and offshore wind could create 20,000 direct installation and Operation and Maintenance jobs by 2040. In addition, SEAI has stated that offshore wind represents a significantly greater employment opportunity than onshore wind post-20259

3.2.2 An ambitious target for offshore wind

Ireland’s draft NECP has a stated ambition of 1.8GW of offshore wind installed by 2030. This is significantly lower than our nearest neighbours’ ambition to install up to 2GW of offshore wind every year in the 2020s, as stated in their draft NECP10. Britain already has 7GW of operational offshore wind energy, the majority of which has been delivered in the last decade11. Clear policy commitment and ambitious targets have stimulated investment and driven economic value. New policy agreements in the UK between industry and government mean that our nearest neighbour is likely to deliver at least a third of the UK’s electricity from offshore wind by 2030.

In contrast, Ireland’s offshore wind energy industry has stalled since the first phase of the Arklow Bank Wind Park was co-developed by GE and Airtricity in 2003. With a seabed territory almost ten times the size of its landmass, the opportunity for Ireland is enviable. The Sustainable Energy Authority of Ireland (SEAI) has stated that Ireland has the potential for 30GW of offshore wind by 205012.

Ireland’s draft NECP projects that offshore wind will increase by approximately 200MW annually from 2023. While we understand this trajectory is indicative, we have concerns that this phasing does not give certainty to developers who are progressing offshore wind projects with MW potential in excess of these volumes, in line with global trends. SSE’s Arklow Bank Wind Park has a consented capacity of a minimum of 520MW, for example. Offshore turbine technology has advanced since the 25 MW Arklow demonstrator project was commissioned in 2003. High volume projects are now the norm as greater energy can be harnessed from a single turbine. Renewable Electricity Support Scheme (RESS) auction volumes need to recognise this reality and be large enough to support the most economic

8 SSE, Beatrice Offshore Wind Farm Project, Socio-economic impact report: http://sse.com/media/475202/Beatrice-Socio- economic-impact-report-v2_BMF_FINAL_200717.pdf 9 SEAI Wind Energy Roadmap to 2050: https://www.seai.ie/resources/publications/Wind_Energy_Roadmap_2011- 2050.pdf 10 The UK draft National Energy and Climate Plan: https://www.gov.uk/government/publications/uk-national-energy-and- climate-plan-necp 11 SEAI Wind Energy Roadmap to 2050: https://www.seai.ie/resources/publications/Wind_Energy_Roadmap_2011- 2050.pdf 12 Ibid

delivery programme. Ireland’s NECP needs to provide a signal to developers, investors and supply chains that projects such as this will be accommodated and factored into grid connection policy.

As stated above, the models provided show Ireland plans to build on average 500 MW of renewable capacity per annum from 2018 to 2030. The analysis in the document states this may be sufficient in the high oil price scenario but that low oil prices will require greater renewable energy deployment. Higher volumes of onshore wind and biomass co-firing have been included in the high oil price scenario to take account of this. Given the real potential of offshore wind, higher volumes of offshore wind should also be included in the NECP. Allowing for the greater deployment of large-scale offshore wind would put Ireland on a sure path to decarbonisation.

3.3.3 Enabling offshore renewable energy development

Ireland’s NECP should include commitments and timelines to address the barriers to offshore wind in Ireland in order to stimulate investment and development. While we understand that the NECP is a high-level document, clear signalling from the government that these issues are going to be dealt is needed. Separate reports recently published by KPMG13 and Cornwall Insights14 have set out how Ireland can exploit the enormous potential of its offshore wind resources and the key enabling policies needed. SSE believes the following needs to be progressed:

• Develop a targeted policy to develop offshore wind, supported by an Offshore Wind Energy Development Committee on the IFSC model which brings together Government departments, State agencies and industry.

• Ensure the design of the new Renewable Electricity Support Scheme (RESS) facilitates the development of offshore wind projects. The High-Level Design of the new RESS is welcome but does not provide certainty for investment in offshore wind energy. The optimum RESS design should reflect the following: o Auction volumes must be sufficient to encourage large offshore wind projects to participate, as economies of scale will only be realised if support volumes are large enough to support the most economic delivery programme. Delivering offshore wind

13 KPMG, Offshore Wind: Ireland’s Economic and Social Opportunity: https://assets.kpmg/content/dam/kpmg/ie/pdf/2018/11/ie-offshore-wind-nov-2018.pdf 14 Cornwall Insights, A Great Leap Forward? Offshore Wind in Ireland: http://ireland.sse.com/media/539571/Cornwall- Insights-Report.pdf

projects in small phases will increase costs and result in inefficient use of connection infrastructure. o Support diversification – the RESS provides for use of ‘technology caps’ to drive diversification in the auction. This mechanism should be implemented in the early auctions to encourage offshore wind participation; o Appropriate delivery timeframes – offshore wind projects need longer to construct given the environmental conditions offshore, supply chain maturity in Ireland and scale of the project programme;

• Ensure Grid Connections Policy enables offshore wind energy to connect as quickly as possible. A Grid Connections Policy for offshore wind energy needs to be established as quickly as possible in order to enable offshore wind to connect. o A facilitative grid connection policy should allow the participation of all technology types including offshore wind be that through a ring-fenced allocation round or as part of ECP 2. o The path for offshore projects to access grid must align with the announcement of RESS auctions and allow sufficient time for projects to satisfy application criteria. The associated transmission reinforcements for connection of offshore wind must be completed pre-energisation to maximise the value to the Irish customer and manage the project risk. o Offshore wind developers should be supported in engaging early with EirGrid (perhaps via the Advance Works Package (AWP) process) to determine viable grid connection methods pre-auctions.

• Complete foreshore leasing reform and the Marine Spatial Plan to enable future offshore renewable projects to be developed.

o There are a number of existing projects along the East Coast, such as Arklow Bank Wind Park, which already have consent and can be delivered early in the next decade. For future offshore projects currently in earlier-stages, a consenting regime must be defined to provide a clear route from initial application for planning / lease all the way to market. MAFA legislation needs to be concluded and Ireland’s Marine Spatial Plan (MSP) completed at the earliest opportunity to provide clarity to developers. o Ireland’s MSP should include a presumption in favour of offshore renewables and take a principles-based approach to allocating sites for development. This will afford

Ireland the flexibility to benefit from the best offshore wind sites, whilst ensuring acceptable co-existence with other maritime uses. o SSE would caution against an overly-specific zoning approach within the MSP which would require the government to carry out extensive and expensive surveying, and risks being overly rigid, thereby excluding attractive and affordable sites in a sector where technology is evolving at pace.

If enacted, these proposals can stimulate the strong pipeline of offshore wind projects already in the Irish Sea and could deliver around 1000MW of capacity in the immediate future, and an additional 3000MW by 2030.

3.4 Onshore Wind

Onshore wind will continue to play an important role in Ireland’s energy system and has delivered well for Ireland to date. In 2002, Ireland had just 146 MW of onshore wind. New wind farms commissioned in Ireland in 2017 brought the total wind capacity to over 3300 MW15. SSE is Ireland’s largest provider of wind power with almost 740MW in our onshore portfolio. Onshore wind will need to continue to play a key role in Ireland’s renewable energy mix. With the resolution of a number of issues, Ireland can ensure the timely and predictable delivery of onshore wind projects.

Wind Energy Guidelines: Critical to the continued development of onshore wind is the revised Wind Energy Guidelines (WEGs), which are due to be published for consultation in early 2019. With the development of the industry it is sensible that the 2006 guidelines be revised and updated. We look forward to participating in the coming consultation on the WEGs. It will be important to ensure that in seeking to address issues raised by local communities, the development of renewable energy is not prevented as this will inhibit our ability to decarbonise and meet our renewable energy targets.

Local authority planning: In recent years there has been an issue with various local authorities not adhering to the Wind Energy Guidelines when making decisions in relation to wind energy development. Divergent approaches at local authority level continue to be a concern for developers with some local authorities choosing to arbitrarily put large tracts of land out of scope of development in their development plans, by applying criteria that are not included in the Wind Energy Guidelines. In recent years’ county development plans have varied despite the Minister with responsibility for

15 Eirgrid, ‘All-Island Generation Capacity Statement 2018-2027: http://ireland.sse.com/media/539571/Cornwall-Insights- Report.pdf

Energy calling for a uniform approach across local authorities. This creates uncertainty for developers and makes the proposition of seeking permission for new wind farms a challenging prospective. We would encourage the consistent application of the Wind Energy Guidelines from a national, regional and local perspective to support the development of renewable capacity to deliver Ireland’s energy and climate targets. We hope that the new approach planning outlined in the National Development Plan will improve this. As a responsible developer, SSE is committed to best practice in developing our projects, clear standards assist us in doing so and in progressing projects with confidence; unclear standards discourage investment.

Renewable Electricity Support Scheme: The previous REFIT scheme has proven successful and effective in delivering renewable generation. It is essential that the new/proposed Renewable Electricity Support Scheme (RESS) which we welcome, effectively incentivises the development of renewable electricity generation to ensure Ireland meets its 2020 and 2030 targets. The government and relevant bodies need to work in collaboration with industry stakeholders to support projects in effectively competing in auctions and provide the best value for consumers. Like offshore wind, projects need sufficient notice prior to auction, realistic delivery timeframes and appropriately set bid bonds and eligibility criteria to ensure delivery. We support efforts to further develop community benefit and community ownership in Ireland. It is essential that the community element of the RESS is flexible enough to encourage investment and protects and supports local communities.

Repowering and co-location: In order to meet our 2030 targets, existing windfarms will need to be repowered. Repowering is the process of replacing old turbines with newer, more efficient ones. If repowering is not possible, a portion of our hard-won progress will be lost between now and 2030. In addition, there may also be opportunities to utilise other forms of generation at the same site, maximising the value of existing assets built for the wind farm. If repowering and co-location are to be effective, there will be a need for a streamlined planning process for existing sites and the ability to amend connection capacity to facilitate the re-development. Mechanisms to support repowering and co-location should be included in the NECP.

Grid investment: Increasing the volume of renewables on the system requires both expansion and upgrading of the grid. SSE welcomes the intention to “reinforce the transmission network to facilitate the planned growth and the transfer of renewable energy generated to the major demand centres”, as outlined in the National Development Plan. Ireland is now considered a world leader in grid policy

with the successful DS3 programme. Continued investment in, and upgrading of our grid system is needed as we outline in Section 5.

Commercial rates: Windfarms have experienced significant increases in their commercial rates liability with these sometimes doubling or tripling since the valuations office commenced a countrywide revaluation scheme in 2015. The quantum of the increase is not predictable or equal across different counties and is causing uncertainty for developers. This impacts the attractiveness of investment in wind as expected returns over a project lifetime are uncertain. The limited ability of wind farm operators to react to the commercial environment in the same way as other businesses should be recognised and addressed by the Valuations Office to ensure consistency and continued investment in the sector.

3.5 Microgeneration

We support the vision put forward in Ireland’s energy white paper of empowered energy citizens. SSE believes that customers should be informed, engaged and empowered at all levels of energy policy and put at the centre of the energy transition. Proposals to promote community ownership of energy, enhanced community benefit payments and tools such as smart meters will hopefully assist in engaging energy citizens.

Enabling and facilitating microgeneration is an important part of ensuring citizens are able to actively participate in Ireland’s transition to a low carbon economy. SSE welcomes the launch of the grant- aided pilot microgeneration scheme, targeting solar PV installation and domestic customers for self- generation. Data gathered during the pilot scheme will go towards informing potential future phases of support for microgeneration. It is important that we understand the barriers to self-generation and how best to address these.

Ireland will be required to take action in this area to ensure alignment with the recast Renewable Energy Directive which recognises the rights, entitlements and obligations of renewable self- consumers to generate, store and sell renewable electricity. Facilitating this will require that a number of structural, technical and financial barriers be addressed before the introduction of a tariff or other financial support for exported electricity. The EU Directive also necessitates that a legal framework under which microgenerators can sell back to the grid is established. As an energy supplier with experience in the GB market, where microgeneration is more advanced, we look forward to feeding into the government’s proposed plans in this area. Issues which will need to be examined include a reform of network charges, an assessment of the impact on the PSO, and the development of a fair

tariff for exported electricity taking the benefits of self-consumption into account. The models employed in different markets should also be evaluated to establish whether they are implementable in the Irish market.

Measures are needed to support microgeneration for the citizen and community, while also ensuring that those who cannot afford to invest in self-generating technologies are not disadvantaged. Any proposals which would lead to a mandated requirement on energy suppliers may impose policy costs on consumers. There is a risk that, if not done correctly, providing incentives to those investing in microgeneration will lead to increased costs for households who are not in the position to invest in technology for their homes. In any case, such proposals would require a detailed financial and regulatory impact assessment. We look forward to working with the government and opposition parties on this issue to ensure the proposals brought forward are workable and do not lead to unintended consequences.

3.6 Renewable transport

The draft NECP foresees an exponential increase in electric vehicles. The draft anticipates an additional 500,000 EVs on the road by 2030 and that all new cars sold in Ireland will be zero carbon emission or zero emission-capable by 2030. This ambition is very welcome. Transport sector energy use is currently almost exclusively (98%) oil-based. Latest estimates suggest there will be approximately 8,000 EVs currently on the road in Ireland by 202016. Reaching the target of 500,000 will require switching on a significant scale.

The main barriers to the uptake of electric vehicles are the capital cost, range of vehicles and charging infrastructure. The supports and incentives designed to stimulate demand for electric vehicles in Ireland are welcome. These include a purchase grant for EVs, VRT relief, relief from Benefit-in-Kind taxation and a discount on road tolls. These supports have helped ensure that EV users benefit from lower running costs than fossil fuel vehicles. The high up-front cost for EVs remains a significant barrier, however. Ireland’s best-selling electric vehicle costs over €30,000. The government’s grant covers a maximum of €5,000 of the cost. While this is welcome, the government should consider increasing the grant amount and making grants available for second hand cars. Until the up-front costs have come down, EVs will remain the reserve of those on high incomes.

16 https://www.irishexaminer.com/ireland/only-8000-electric-cars-to-be-on-our-roads-by-2020-471479.html

Further investment is needed in Ireland’s EV charging facilities to ensure these vehicles are a viable option for people. While the range of these vehicles is continuously improving, the lack of widespread, reliable charging infrastructure is a valid concern for those thinking of switching as it impacts the ability of drivers to make long journeys with ease. Ireland’s charging infrastructure needs to be integrated into local and regional spatial planning, dwelling and non-dwelling building regulations, and planning of the electricity transmission and distribution network.

3.7 Renewable heat

Energy efficiency upgrades are central to the transition to a low carbon economy. This is just the first step, however. To fully decarbonise the built environment, the switch from using fossil fuel as the source for the energy used in buildings to alternative energy sources is vital. Barriers to decarbonising heating include a low oil or gas price, the higher upfront capital cost of heat pumps and a lack of customer familiarity. Measures to stimulate demand, educate consumers and reduce barriers are therefore needed.

SSE believes that the electrification of heat is the most effective way of driving decarbonisation in this sector. Electrification can provide a drop-in solution with limited disruption to the consumer. The benefits of this were demonstrated with the EU funded Real Value project which SSE delivered in partnership with academic institutions and electricity network operators. Real Value installed Smart Electric Thermal Systems in homes, commercial premises and public buildings in three countries – Ireland (550) Germany (150) and Latvia (50) and showed that smart electric thermal storage technology has the potential to transform how consumers use and store energy, in the form of heat, in homes and buildings.

The scenarios put forward in the NECP also foresee an increase in biomass in residential heat. The NECP template asks for views on specific measures to promote the use of energy from biomass taking account of biomass availability yet the draft doesn’t include this information. We would encourage the government to include this detail in the next iteration. Ireland will likely need to import much of this biomass. An analysis of fuel stock availability and import prices is therefore needed to ensure this change will be both carbon and cost efficient. The draft NECP also states that increased co-firing of biomass in Ireland’s three operational peat stations will affect the availability of biomass resource for heating, pushing up the price and curtailing the take up. This needs to be factored into Ireland’s plans.

4. Dimension: Energy efficiency

Energy efficiency not only helps Ireland achieve its climate change objectives, but also reduces energy bills and improves health and social inclusion. We support the government in its prioritisation of energy efficiency in Ireland’s National Energy and Climate Plan.

The biggest challenge with energy user engagement is lack of understanding and knowledge of citizens and businesses concerning the production and consumption of energy. We are playing our part to raise awareness and engage citizens in the energy and climate debate. Our new ‘Generation Green’ campaign which includes ads on national television and across social media aims to highlight how small changes taken at an individual level can make a difference. A similar government education campaign is needed to ensure our citizens are aware of the impact behavioural changes can have, drawing on the findings from the SEAI’s newly established behavioural economics unit.

The revised Energy Efficiency Directive has set an EU wide energy efficiency target of 32.5% to which Member States must contribute. The Irish government has indicated its intention to achieve an energy efficiency improvement of c. 24% by 2030 as part of this. We welcome the acknowledgement in the draft NECP that achieving this ‘will require a very significant scaling up of effort, capacity, investment and engagement’. As identified in the draft NECP, ‘the making available of substantially more grant funding’ is of critical importance as is the need ‘to galvanise more commercial and domestic decision- makers to act on improving energy efficiency’.

The burden of meeting higher targets must not fall disproportionately on energy suppliers who already have significant obligations in relation to energy efficiency. Ireland’s approach needs to include an expansion of other alternative measures and grant funding alongside reform of the supplier obligation. An over-reliance on any one measure will put Ireland’s ability to meet its energy efficiency targets at risk.

4.1 Energy Efficiency Directive – Article 7

Ireland currently meets its obligations under Article 7 of the Energy Efficiency Directive (EED) through alternative measures. These alternative measures include an obligation scheme for energy suppliers. Consultation is currently underway on the transposition of the revised Article 7 of the EED which SSE is contributing to. The transposition process will involve two public consultations and will take at least twelve months. We outline our high-level views on the transposition below.

We need to learn from the experience of trying to meet 2020 EU energy efficiency targets. Delays in the roll out of the national smart metering programme and a short fall in the energy efficiency savings achieved in new builds, led the government to increase Energy Efficiency Obligation Scheme (EEOS) targets to make up the short fall. Ireland’s energy efficiency target needs to be based on what can be achieved by multiple policy measures rather than an over-reliance on one policy. Above all, energy suppliers need stability and certainty so that they can plan effectively. While the Energy Efficiency Obligation Scheme (EEOS) has proven very effective – much of the low hanging fruit and cost-effective savings have already been achieved. Over the next decade, it will become progressively harder and more expensive to achieve further energy savings through the EEOS - thus making Ireland’s task harder. Recent changes to the Primary Energy Factor at an EU level may also impact on supplier’s ability to achieve energy savings. The cumulative impact of these changes needs to be recognised and mitigated. The scheme must be reformed to reflect these challenges and be supported by better funded state programmes and alternative measures.

SSE welcomes the acknowledgement in the NECP that substantially more grant funding and additional measures will be needed to boost demand among domestic and commercial decision-makers. The continuation and expansion of schemes like Better Energy Homes will be crucial to achieving domestic energy efficiency objectives. On the commercial side, grants and incentives to boost demand among large energy users are needed as substantial savings are possible in this sector. EirGrid assumes that due to the expected growth in demand from large energy users, the electricity demand in Ireland could grow by up to 57% in the next 10 years17. Grant programmes and incentives should therefore be targeted at this group to unlock these potential savings. The short timelines in which works need to be delivered under current SEAI grant models is a barrier which needs to be addressed.

SSE also believes that policies like the EEOS can be funded in different ways and placing the cost of such policies on electricity bills is a regressive way to impose policy charges. Paying for such policies through bills has no regard to a customer’s ability to pay – creating the most difficulties for those in fuel poverty and has the ability to undermine the broader social, health and wellbeing benefits that the activity brings. In SSE’s view, policy costs are more progressively and appropriately recovered through the Exchequer (which takes account of ability to pay) rather than through energy bills. There may be merit in considering the use of revenue from carbon tax receipts to support energy efficiency measures.

17 Eirgrid, ‘All-Island Generation Capacity Statement 2018-2027: http://ireland.sse.com/media/539571/Cornwall-Insights- Report.pdf

4.2 Alternative measures

As acknowledged in the draft NECP, meeting the proposed energy efficiency target will require a significant increase in government funding and investment alongside increased demand among commercial and domestic consumers to undertake such improvements.

Smart metering –The smart metering programme needs to proceed on schedule. Previous delays have impacted on Ireland’s ability to meet 2020 energy efficiency targets. In order to be most effective, smart meters should provide real time access for householders and businesses to information on their energy consumption. The availability of increased data via Smart Metering and the subsequent development of consumer incentives such as Time of Use tariffs have the potential to enable demand side activation and improve energy efficiency. It needs to be recognised however that changes to data protection legislation may have an impact on the anticipated benefits of smart metering. This needs to be factored into government plans at an early stage rather than other measures having to make up any shortfall as happened previously.

Expansion of grant programmes and supports – Ireland has made real progress in improving the energy efficiency of buildings in recent years as a result of programmes including SEAI Better Energy Homes which SSE is proud to deliver in partnership with local authorities and other suppliers. Greater government investment is needed in grant funded programmes such as this. This needs to include effective grants and supports to unlock the energy savings potential among large energy users. Details of spending plans should be published this year to stimulate activity.

Low cost finance options – The government should also explore low cost finance options for domestic home owners and SMEs. This could include greater adoption of the initiatives developed by the European Investment Bank, encouraging banks to broaden their suite of ‘green lending’ products, low cost home improvement loans and tax incentives to support energy efficiency improvements.

Skills investment – In order to meet the ambitious upgrade programme outlined above, greater investment in and development of the trade skills pipeline is needed. At present, SSE are experiencing a significant skills shortage as the new build and retrofit market ramps up. If not addressed, this has the potential to be a major barrier to delivering on the ambitions of the National Development Plan.

Building regulations - The building regulations have been supportive of the transition at a domestic level in terms of directly requiring greater levels of energy efficiency and indirectly the installation of

heat pumps in new residential dwellings, however more needs to be done. We welcome the NZEB building standards and would recommend the acceleration of this standard in the retrofit market, including the extending of the Deep Retrofit Programme beyond just a pilot scheme

Energy poverty – Delivering affordable energy to customers is a key focus for SSE. Energy poverty is a function of three factors: a person’s income, the cost of energy and the energy efficiency of their home. Research by the Economic and Social Research Institute (ESRI) has found that energy poverty in Ireland is strongly correlated with basic deprivation, suggesting that energy poverty is primarily a function of inadequate resources to cover living costs rather than simply an energy issue18. This demonstrates the need for a response which spans economic and social policy.

SSE endeavours to support customers experiencing fuel poverty and has led the way with a number of initiatives in recent years including pre-pay meters, and reduced tariffs for in-debt customers. SSE believes that measures beyond this should be funded through the exchequer. SSE wholly supports the continuation of the SEAI’s “Better Energy Community” scheme and “Warmer Home Scheme”. SSE has experienced first-hand from joint projects undertaken with the SEAI and relevant county councils how effective they have been in tackling fuel poverty.

5. Dimension: Security, Solidarity and Trust

Secure supplies of energy are essential for all economic activity, for the effective delivery of public services, and for maintaining safe and comfortable living conditions. While Ireland’s electricity generation capacity is considered sufficient to ensure security of supply standards are met at present, a number of factors mean that energy security will need to be a crucial consideration in Ireland’s NECP.

Despite progress in the generation of indigenous energy sources in recent years, Ireland still imports a significant amount of energy – 60% of gas, 100% of oil and is reliant on gas to generate approximately 46% of electricity as outlined in the draft NECP. Ireland’s Corrib gas field will deplete over the coming 10 to 15 years, potentially increasing demand for imported gas. Ireland is also especially reliant on the UK for energy imports which is an issue for consideration in the context of Brexit. We welcome commitments made by the UK and Irish government in relation to the continuation of the integrated

18 ESRI report: Is fuel poverty in Ireland a type of deprivation? https://www.esri.ie/pubs/JACB201504.pdf

Single Electricity Market and the continuing functioning of the gas market which is of vital concern to the supply security of both Ireland and Northern Ireland.

Overall demand for energy is also projected to increase, according to EirGrid’s most recent generation capacity statement. While there is sufficient plant currently, adequacy is expected to be eroded by the growth in demand and some notified plant closures. By 2024, in the absence of the second North South Interconnector, this would result in the need for additional capacity19. We welcome the continued commitment by the government to proceed with the North-South Interconnector as stated in the draft NECP.

SSE considers that the following steps are necessary: • Continued efforts to diversify the energy mix - Diversifying the fuel mix enhances energy security, particularly where there is an over-reliance on a single fuel source. New wind farms commissioned in Ireland in 2017 brought the total wind capacity to over 3300 MW, contributing to the increase in overall RES percentage to 30%. SSE considers that offshore wind should also be developed to bolster supply security as we outline in section 3.

• Maintain market structures - Government and relevant agencies should ensure that the SEM market, capacity and ancillary service revenues are sufficient to deliver the generation capacity required. SSE are satisfied that the ISEM design gives Ireland the ability to participate in a more integrated EU wide market. The DS3 programme will be increasingly important in supporting a higher proportion of renewables on the system. To maximise the efficiency of our grid system the continued review and evolution of the DS3 programme will be needed and should be supported.

• Delivery of critical infrastructure – While interconnection should not be viewed as a substitute to development and diversification of our generation mix, there is a need to prioritise the delivery and efficient use of critical grid infrastructure to improve security of supply and deliver additional annual savings for consumers. The North-South interconnector in particular urgently needs to be progressed. Please see the next section for further detail.

19 Eirgrid, ‘All-Island Generation Capacity Statement 2018-2027: http://ireland.sse.com/media/539571/Cornwall-Insights- Report.pdf

• DS3 - The DS3 programme will be increasingly important in supporting a higher proportion of renewables on the system. To maximise the efficiency of our grid system the continued review and evolution of the DS3 programme will be needed and should be supported. DS3 has made Ireland a world-leader at integrating variable renewable electricity onto the grid, it is crucial that EirGrid is supported to continue advancing the programme, increasing the SNSP to ensure Ireland can use more variable renewable electricity in future.

6. Dimension: A fully integrated internal energy market

Brexit and the potential risks associated with a no deal scenario have created uncertainty and have raised new questions about Ireland’s level of electricity interconnectivity; however, EirGrid’s grid analysis shows that security of supply is not an issue at present. The commitments made by the Irish and UK governments to maintain the existing close relationship in relation to energy are welcome. Any future interconnection proposals should be evaluated through a robust CBA process; it is also worth noting that greater energy security is delivered through increased indigenous generation capacity in comparison to interconnection.

The draft NECP outlines the government’s plans in relation to interconnection. SSE considers the progression of the North-South interconnector to be of vital importance. The North-South interconnector is projected to bring savings of upwards of €30 billion for consumers and will enable the new integrated Single Electricity Market to function as intended20. This should be a priority.

Additional interconnectors have been proposed including the Greenlink interconnector between Great Britain and Ireland and the Celtic interconnector between Ireland and France. SSE recognises the concerns about security of supply in light of Brexit but would caution that any interconnection project must be subject to rigorous and comprehensive Cost Benefit Analysis and should only proceed where a net positive for customers, bearing in mind the relative responsibilities to pay for the infrastructure by all beneficiaries, and potential financial assistance from the EU.

It is clear based on statements made by the EU Commission and Irish and UK Governments that maintenance of status quo is preferable. Further, there are existing bilateral arrangements in place between gas TSOs which we can fall back on if EU solidarity rules are displaced in Brexit. In addition,

20 Grant Thornton, Strengthening the all island electricity network by 2020: http://www.eirgridgroup.com/site- files/library/EirGrid/Grant-Thornton_FINAL-Report_North-South-Interconnector-02.21.2017.pdf

at present there is existing capacity in the gas interconnectors. We consider that it would be preferable if infrastructure be constructed in response to commercial market signals. Congestion rents are one measure of the value of interconnectors, but these tend to decline with additional interconnection.

SSE welcomed the launch of the new market in October 2018 and the potential benefits it will bring to consumers on the island through lower energy prices. The new market aligns the all island market to the European Internal Energy Market (IEM). This means Ireland is now able to trade electricity across European markets to deliver the most efficient prices to customers. SSE would call on Government to further support this integration by ensuring the Regulator (CRU) and Market Operator (SEMO) ensure operational issues are addressed including the ability to trade on the intraday markets.

We believe an all island market delivers the most efficient outcomes for customers and its maintenance should be a key priority post-Brexit. Similarly, if the UK is to leave the IEM we must ensure that efficient interconnector trading between the two markets can continue.

7. Dimension: Research and innovation

Ireland’s needs to continue to develop its research environment to ensure we have the tools required for the transition to a sustainable, low carbon environment. SSE welcomes the intention to significantly increase investment levels in technology research to enable Ireland’s low carbon transition and to ensure we are well positioned to take advantage of investment and job opportunities. Collaboration between industry and academia to advance this aim will continue to be of critical importance.

Research into developmental technologies which are at a progressed state of readiness and which are more likely to ultimately contribute to Ireland’s targets in the medium term would be an efficient use of Exchequer resources. Research should also focus on how it can enable existing and established technologies to progress in Ireland. With offshore wind set to become part of Ireland’s energy mix, targeted research to progress this goal is of crucial importance. SSE is involved in the Eirwind project which is working to provide data and information to facilitate identification of potential areas for offshore wind farms and enable decision-making by the industry. The project, which is led by the MaREI centre includes Government stakeholders such as the Department of Housing, Planning, Community and Local Government, SEAI and the Marine Institute. Research projects such as this

provide real, tangible outputs to support the energy sector. We would encourage Government to continue to support this type of work which will ultimately drive the development of the sector.

SSE also believes that research and development should focus on tackling challenges currently facing the energy system. The launch of i-SEM in October and the changes that ensued have increased the need for more advanced wind forecasting technologies to help mitigate volatility in the Balancing Market which poses significant risks to wind energy developers. Achieving EirGrid’s ambition of 75% SNSP will only heighten the need for more advanced forecasting technology to ensure stability. For this reason, SSE is working to break new ground in the field of wind forecasting. In late 2018, in collaboration with UCD’s Centre for Applied Data Analytics (CeADAR), we were successful in obtaining funding from the Sustainable Energy Authority of Ireland (SEAI) to support a project focused on significantly improving the accuracy of wind generation forecasts. This project, named FREMI (Forecasting Renewable Energy with Machine Intelligence) will bring together SSE’s vast knowledge and data, built up from developing and managing the largest wind portfolio in the market, with CeADAR’s skills as a renowned centre for excellence in advanced data analytics. We hope that projects such as this will continue to receive funding.

The continued focus on developing new technologies to enable the integration of indigenous renewable resources is particularly welcome given the high penetration of renewables on Ireland’s system and our ambition to achieve 75% SNSP in the future. Research to advance battery technology would also be beneficial in this context.

8. Conclusion

The NECP is an opportunity for Ireland to set out its energy ambition to 2030 in a clear, structured and cohesive manner. Climate change is a real and present issue for our society, the effects of which are becoming more obvious with more frequent extreme weather events. Ireland is an island nation with an enviable wind resource, located at the edge of Europe, relying on energy imports. We need to re- evaluate our energy situation and make firm commitments to transition to energy independence through a diversified energy mix powering electrified heat and transport sectors – this should go some way to address our enduring emissions challenge from agriculture.

The Government has been clear in its intention that leveraging private investment is imperative to deliver the measures set out in the Ireland 2040 vision. To do this the market needs certainty and early signals. At the time when our current renewable energy target of 40% the industry had confidence

and certainty. At that time there was a facilitative connection policy and defined support scheme which have underpinned progress to date. We need to replicate this now to ensure we can deliver for 2030 and beyond.

9. About SSE

At SSE we’re proud to make a difference. From small beginnings we’ve grown to become Ireland’s second largest energy provider, supplying green electricity and natural gas to over 800,000 homes and businesses on the island.

Since 2008, SSE has invested over €2.5 billion, in growing our energy business here – creating jobs in Ireland, sustaining employment, driving competition and greening our economy. Our 29 onshore wind farms have a combined generation capacity of 740MW, making us the largest generator and provider of renewable energy in the integrated all-island Single Electricity Market. Our portfolio includes Ireland's largest onshore wind farm, the 169MW Galway Wind Park, which we jointly developed with Coillte. We forecast that Galway Wind Park will produce over 600GWh of green energy each year – enough renewable energy to power over 140,000 Irish homes, the equivalent of every home in Galway city and county, offsetting over 220,000 tonnes of harmful CO2 emissions.

We also developed Ireland’s only offshore wind farm at Arklow Bank in Co. Wicklow. Since the development of Arklow in 2004, SSE has become a leading developer of offshore wind in Great Britain with 319 MW of operational capacity and a further 4GW in development stage. We are currently developing the 588MW Beatrice wind farm in Scotland which is expected to power approximately 450,000 homes.

SSE is Ireland’s largest single contributor of funding to rural communities from wind energy. Since 2008, SSE’s Community Funds have provided voluntary funding totalling over €6.5million to over 2,100 groups near SSE wind farms in rural Ireland supporting community-led energy efficiency and sustainability projects.