SUSTAINABLE ENERGY: A NEW OPPORTUNITY FOR

UNCLAS SECTION 01 OF 03 DUBLIN 000907

SIPDIS

SENSITIVE
SIPDIS

E.O. 12958: N/A
TAGS: ENRG EPET ECON EI
SUBJECT: SUSTAINABLE ENERGY: A NEW OPPORTUNITY FOR
IRELAND'S ECONOMY?



1. (U) Summary: Ireland is moving quickly to increase its
use of renewable energy and position its business sector to
take advantage of the boom in green technology. Rising
dependence on foreign sources of energy, EU environmental
obligations, and growing energy costs that threaten to
diminish Ireland's competitiveness have prompted the
government this year to adopt an aggressive policy requiring
greater use of new energy sources and greater efficiency.
While abundant natural energy resources such as wind and
ocean add to Ireland's advantage, its ability to harness
their potential for commercially available technology remains
its biggest challenge and one that will require even more
government support than is currently available. End summary.


IRELAND'S ENERGY SUPPLY AND CLIMATE CHANGE CHALLENGES: THE
CONSEQUENCES OF ECONOMIC SUCCESS
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2. (U) Ireland's remarkable economic and population growth
over the last decade has resulted in a significant increase
in the Republic's reliance on imported energy and
consequently its vulnerability to energy supply disruptions
and price volatility. While indigenous gas fields supplied
over 80 percent of the Irish market in 1996, today 90 percent
of Ireland's energy comes from imported fossil fuels. Adding
to Irish concerns is the fact that Britain, Ireland's largest
energy supplier, is rapidly increasing its own reliance on
energy imports amid growing domestic demand and declining
North Sea supplies.


3. (U) Strong economic activity has also complicated
Ireland's ability to meet its Kyoto Protocol targets for
greenhouse gas emissions. A European Commission report
released this fall predicts that by 2010 Ireland's emissions
will be 22.6 percent above its 1990 levels -- the benchmark
year for the Protocol -- meaning Ireland will miss its target
by 10 percentage points.


4. (U) According to data from Sustainable Energy Ireland
(SEI),the Republic's electricity currently comes from
natural gas (40 percent),coal (28 percent); oil (15
percent),peat (10 percent),renewables (3.5 percent),and
imported electricity (3.5 percent). With a statutory ban on
nuclear power generation along with commitments to reduce
emissions from "unclean" sources such as coal and peat,
energy economists predict Ireland's dependence on imported
natural gas for electricity could reach 70 percent by 2020 if
no steps are taken.


5. (SBU) Given this import dependence and almost nonexistent
indigenous production, Ireland is beginning to look at the
possibility of liquefied natural gas (LNG) imports as a
solution to its energy security problem. Paddy Power,
Managing Director of Shannon LNG (a subsidiary of Hess
Petroleum),told us that his company is planning to construct
a USD 800 million LNG import terminal on the west coast of
Ireland. He said that the facility will be connected to the
domestic pipeline network and could almost completely fulfill
Ireland's gas import needs. Currently, Ireland imports 85
percent of its natural gas by pipeline from the UK. In light
of this fact, Irish policymakers are concerned that a
disruption somewhere in the European supply chain would mean
the lights going out on the island. (Note: Ireland is at the
far western end of the supply chain. End note.) Power said
that it is for this reason that the government deemed the
Shannon LNG project as of "strategic significance," which
should lead to a faster approval process.

RENEWABLE ENERGY MOVING UP THE POLITICAL AGENDA
-------------- --


6. (U) While traditional fossil fuels will continue to
dominate the energy mix in Ireland, many political observers
have characterized 2007 as a watershed year for Irish energy
policy with the introduction of a unified Republic of
Ireland/Northern Ireland electricity market. Moreover, the
inclusion of the Green Party in Ireland's ruling coalition
that won the national election in May 2007 has pushed energy
and environmental issues even higher on the Republic's
political agenda and facilitated the government's lean toward
increasingly aggressive policies in this area.


7. (U) Even before the ascent of the new coalition
government, however, Dublin had begun moving toward a
sustainable energy agenda in line with the EU's common energy
policy and the need to develop reliable sources for
indigenous energy. The Irish government in March released a
long-term energy plan that commits to boosting the proportion
of energy from renewable sources to 15 percent of electricity

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by 2010, and 33 percent by 2020. This rate of change
translates into a three percent per year decrease in
greenhouse gas emissions. The plan also promised to cut
emissions by requiring all peat electricity stations to be
co-fired with 30 percent renewable material by 2015, and by
requiring all petrol and diesel fuel to have a 5.75 biofuel
mix by 2009.


8. (SBU) To achieve these targets, Ireland's National
Development Plan for 2007-2017 set aside new funding,
including 276 million euros in the sustainable energy sector,
to support renewable energy, energy efficiency, and
innovation. The plan designated 150 million euros
specifically for research into ocean and tidal energy. Morgan
Bazilian, Special Advisor to the Minister of Energy, told us
that he hopes to get additional funding in this area of
energy development.

ECONOMIC BENEFITS OF CLEAN ENERGY TECHNOLOGY
--------------


9. (U) Ireland's move to greater renewable energy use is as
much an economic decision as political. Irish businessmen
and government officials estimate that if the right policies
and incentives are adopted now, clean energy technology could
trigger Ireland's next investment boom and reinvigorate the
now slowing Celtic Tiger economy. Recent UN data show that
$85 billion was invested worldwide in developing green
technology in 2007 alone -- funding that Ireland would like
to tap.


10. (U) The Republic's western seaboard has one of the best
wind resources in the world and the introduction of an
all-island electricity market and prospect of a UK-Ireland
electricity connector by 2012 could enable Ireland to export
"green" electricity into mainland Europe. Wind is expected
to provide the bulk of Ireland's renewable energy over the
next decade; however, energy experts counsel that improved
grid connections and efficient electricity storage facilities
are urgently needed to maximize its potential.


11. (U) Ireland's energy sector current employs 12,000
workers, according to Irish government data, and Minister for
Energy Eamon Ryan has told the Irish press that this figure
has the potential to increase four-fold. Already,
enterprising Irish companies such as Airtricity and OpenHydro
have entered the green energy market with success.
Airtricity has developed into a 1.3 billion euro firm in less
than ten years and OpenHydro was selected as the first
renewable energy company to install a tidal turbine at the
European Marine Energy Center off the Scottish coast.


12. (U) In addition to revenue generation, Irish economists
predict the move to renewable energy will create long-term
benefits for Ireland. Rising energy costs have placed Ireland
in the top three most expensive European countries for
industrial consumers of electricity, hurting the Republic's
business competitiveness. Moreover, Ireland already has had
to set aside millions of euros to purchase carbon credits for
its excessive emissions.

LOOKING TO DEVELOP A NICHE IN OCEAN ENERGY
--------------


13. (U) Irish officials expect that ocean energy may be
deployed in small-scale demonstrations by 2010, but do not
expect it will contribute significantly to Ireland's
electricity supply before 2020. The prospect of ocean
energy, however, has keenly interested Irish business as it
represents an untapped commercial market and Ireland's
offshore coastline is ideally suited to large-scale wave and
tidal generation.


14. (U) Using the offshore wind market as a reference, Irish
economists project the value of the domestic market for ocean
energy could be 180 million euros in 2020, rising to 780
million euros by 2025. They estimate by securing 20 percent
of the European export market, Irish developers could bring
1.6 billion euros to the Irish economy by 2025 and create
1,300 new jobs. SEI projects even greater gains, estimating
the market for ocean energy may be worth 2 billion euros for
Ireland by 2025.


15. (U) Business officials assess the biggest challenge for
Ireland will be making the ocean technology commercially
viable. While wave energy is close to being able to provide
commercially available electricity -- a wave energy prototype
has begun generating electricity during trials in Galway --
tidal technology is still prohibitively expensive compared to
wind turbines and carries with it potential environmental

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problems such as negative effects on ecosystems. Ireland,
too, is likely to face stiff international competition, with
experimental ocean energy projects currently being tested
throughout the world including in other European nations such
as Denmark, Greece, Sweden, Norway, and the UK.

SEEKING U.S. EXPERTISE
--------------


16. (SBU) Bazilian told us that the Irish government could
use U.S. collaboration in a number of key areas, including
making ocean energy commercially viable, the technology to
promote energy efficiency, and experience in revenue
decoupling. (Note: Revenue decoupling is a ratemaking
mechanism designed to eliminate the dependence of a utility's
revenues on sales, thereby allowing the utility to actively
promote energy efficiency without having to sacrifice
financial stability.)

COMMENT
--------------


17. (SBU) On energy and environment issues, the Irish
government is looking for ways to ensure security of supply
and fulfill its Kyoto commitments. On the latter, Ireland is
on the hook to reduce its emissions to 13 percent above 1990
levels by 2012. However, Ireland will only be able to reach
this goal through the purchase of emission credits because
the government has yet to implement policies that will allow
it to reach its targets for electricity from renewable
sources. Alluding to Irish history, one climate change
economist we spoke to joked that the only way the government
can reach these targets is to cut the population in half by
promoting outward migration. Inevitably, the right policy
will likely be a mix of initiatives, including building an
LNG regasification terminal, boosting the ocean and wind
energy sectors, and improving energy efficiency.
FOLEY