Energy Costs to Business. Scope for Addressing Ireland s Energy Costs

Transcription

1 Energy Costs to Business Scope for Addressing Ireland s Energy Costs 21 st January 2015

2 AGENDA Background issues: Factors influencing costs Policy measures Regulatory options Business actions

3 Context Competition: EU and Domestic A political and utility concern Island economy Geography and scale issues Climate emissions profile Agriculture emissions (and consequences) a unique concern Energy sources: Public acceptability Renewables (wind, other RES) Unconventional and conventional gas Infrastructure

4 Price variance from Eurozone average Industrial Electricity Prices vs. Eurozone average (Semester 1, 2014) Consumption by Band (%) IA = 12% IB = 32% IC = 17% ID = 25% IE = 7% IF = 6%

5 Price variance from Eurozone average Domestic Electricity Prices vs. Eurozone average (Semester 1, 2014)

6 Factors influencing costs EU energy and climate policy and relevant framework Energy (electricity) regulation and markets Point on the investment cycle And catch-up from previous (networks) under-investment

7 EU Policy Costs Direct cost of policy target AND Differential cost of target form AND Differential cost of operational constraints POLICY INSTRUMENT OBLIGATION LEVEL EU COST EQUALISATION DEPENDENCY Climate (CO2) 2020 ETS Binding EU Yes (EUA price) - Climate (GHG) 2020 Effort Sharing Binding National No Offsets Decision RES 2020 Target Binding National No Interconnection Energy Efficiency Target Indicative EU / National No - Internal Market Network Codes Binding EU Yes (Euphemia) Interconnection Climate (CO2) 2030 ETS Binding EU Yes Climate (GHG) To be agreed Binding National No Offsets RES 2030 Target Binding EU Yes Interconnection Energy Efficiency 2030 Target Indicative EU / National No PLUS Domestic policy costs (e.g. addressing fuel poverty) ***

8 Electricity regulation and markets Current SEM: Approx. 90% of cost is regulated BCOP, Network Price Reviews, Policy costs/taxes Supply costs (approx. 10%) Strong competition for business customers Future I-SEM Mandated requirement to implement EU design Increased risk for generators and suppliers in theory offset by benefits of additional competition and efficient I/C trading EU energy only market model under pressure Zero marginal cost RES; Variable generation Failure to value capacity/flexibility proving costly to resolve

9 Investment cycle Major refurbishment and expansion over past 10 years Cost inevitably reflected in Network price Network cost contribution to industrial prices (2012)

10 Policy measures Scale of challenge requires continued investment Minimise policy implementation costs Robust CBA requirement for all prospective EU/national policy measures Coherent energy and climate policy instruments Optimum (market derived) post 2020 RES contribution EU policy framework supportive of trading Interconnection (including France) Regulatory certainty supported via appeals mechanism Support new energy technologies via industrial policy

11 Regulatory options Wholesale Generation Ensure I-SEM and DS3 success (minimise risk) Deliver optimum I/C level Networks How to/who to pay for (regulated) infrastructure? Retail Electricity (and gas) networks + smart meters Facilitate risk management, new offerings

12 Business actions Tariff options available (including Pool pass-through) if willing to take fuel price risk Focus of EU policy on reduced demand (and decarbonised electricity) Address energy efficiency New market must incorporate high RES penetration Requires additional (remunerated) system services (not all generator only delivered) I-SEM and DS3 are important!

13 Conclusion Promote EU policy flexibility to reflect variety of national circumstances Utilise flexibility to ensure domestic instruments (and their overlap) deliver least cost Communicate choices and decisions to all parties Energy transformation requires investment: Regulation should ensure Acceptable risk profile for participants Effective competition Market requires customer engagement Identify potential benefits (e.g. energy efficiency, DSM) Doing nothing is not an option