IRELAND GRAPPLING WITH CLIMATE CHANGE AND ENERGY

C O N F I D E N T I A L SECTION 01 OF 03 DUBLIN 000228

SIPDIS

SIPDIS

E.O. 12958: DECL: 04/02/2018
TAGS: ENRG EPET ECON PREL PGOV KGHG SENV EI
SUBJECT: IRELAND GRAPPLING WITH CLIMATE CHANGE AND ENERGY
ISSUES

REF: 07 DUBLIN 907

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Classified By: DCM Robert J. Faucher. Reasons 1.4 (b/d).


1. (C) Summary: The Irish government is developing policy
measures to deal with environment/energy concerns, including
climate change, energy security, and power generation and
distribution. A lack of indigenous energy resources has
focused the government on a mix of energy efficiency and
renewable power sources. The Irish government has not
written off traditional fossil fuels, having "fast-tracked"
the approval process for an LNG regasification terminal. It
remains hopeful that significant gas fields will be uncovered
in the North Atlantic. While planned additional electricity
generating capacity looks sufficient to meet rising demand,
the government will need to significantly upgrade the
transmission system. A strong sense of urgency to tackle
these issues, however, is lacking. End Summary


2. (U) This cable is based on information gathered in
conversations with key energy and environment contacts in
Ireland, including:

-- Sara White, Deputy Secretary General, Department of
Communications, Energy, and Natural Resources.

-- Padraig McManus, CEO of Electricity Supply Board (ESB).

-- David Taylor, CEO of Sustainable Energy Ireland.

-- Tom O'Mahoney, Assistant Secretary, Department of the
Environment and Local Government.

-- Morgan Bazilian (AmCit),Special Advisor to the Minister
on Energy and Climate Change, Department of Communications,
Energy, and Natural Resources.

Climate Change and Irish Energy Policy
--------------


3. (C) While not as vocal as other Europeans, the Irish view
U.S. climate change policy warily. Initially skeptical about
the motivation behind the U.S.'s Major Economies Meeting
(MEM) process, there is now a greater level of comfort that
the U.S. does not intend this as a replacement to the Bali
process but rather as a feed-in to the process, according to
O'Mahony.


4. (C) Ireland's national climate change goals are ambitious.
White said that Irish Prime Minister Bertie Ahern "fully
endorses" the conclusions reached at the 2008 Spring European
Council and that he is committed to reducing emissions by 30
percent in line with the recommendations laid out in the
government's 2007 Energy White Paper. She admitted that the
government is aiming high with its emission reduction and
renewable penetration targets. However, she added, with the
wind energy sources that are in the pipeline, Ireland could
meet both goals.


5. (U) The White Paper sets out goals relating to energy
efficiency, use of renewables in the fuel mix, and emission
reductions, among other things. The government is putting in
place policies so that, by 2020: Ireland will have reduced
energy use by 20% in the industrial sector and by 33% in the
public sector; 33% of its electrical generation will come
from renewable fuel sources (primarily wind); and, carbon
emissions will be 20% below 1990 levels. Currently, Ireland
is about 25% above its 1990 levels -- far over Ireland's even
less-ambitious Kyoto goal of 13% above 1990 emissions.

Wind and Ocean Energy -- Resources a'Plenty
--------------


6. (C) Ireland is blessed with some of the best wind and
ocean energy resources in the world, and the government is
beginning to focus efforts on promoting these sources of
energy. The wind sector makes up the majority of the 7500 MW
of renewable generation in the approval pipeline. The main
issue is connecting this capacity to the electrical grid.


7. (U) Ocean energy technology is less advanced than wind.
The Irish government has put in place a package of incentives
to jump-start the sector. In January 2008, Energy Minister
Ryan announced a three year, Euro 26 million (USD 41 million)
package that, among other things, introduces a guaranteed,
subsidized tariff to make ocean energy price competitive. In
addition, the Embassy is working with the Irish government to
set up a workshop on July 17 and 18 in Galway to highlight
Ireland's ocean energy potential.


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8. (C) White believes that technological developments will
drive solutions to global warming and thought that Ireland
really needs to focus on a very small set of initiatives in
which it can play a significant role. She saw no value in
"stretching ourselves too thin" and said that the government
"is taking a bit of a punt on ocean energy development."
McManus agreed and said that Irish business will end up just
"buying the best technology" in areas like clean coal and
carbon sequestration.

Chasing Energy Security
--------------


9. (C) Ireland is heavily dependent on imports to meet its
energy needs. Currently 90% of Ireland's energy comes from
imported fossil fuels (60% oil and 30% natural gas). The EU
average is 65%. Most of the gas comes from the North Sea
fields and is imported through the UK, but these fields will
soon be in decline. As this happens, Europe will rely more
heavily on Russian gas. By promoting renewable sources of
fuel, Ireland hopes to alleviate some of this import
reliance, but oil and gas will still make up the bulk of the
energy mix. Regarding gas supplies from Russia, White -- who
is Ireland's representative on the International Energy
Agency's Governing Board -- said that her personal view is
that Gazprom "will act like a regular company that is
interested in selling its gas" and, therefore, she doesn't
worry about Russia, though she knows others do.


10. (C) Most of Ireland's indigenous gas production comes
from the Kinsale field, but that, too, is reaching the end of
its life. The Corrib gas field, operated by Shell, holds
enough gas to supply about 60 percent of Irish gas needs.
However, Shell faces local opposition to the construction of
a nine kilometer stretch of pipeline that would connect the
field to the national gas grid. If the pipeline is approved,
the first gas is expected by the end of 2009. Julian Cetti,
Shell Ireland's Head of Commercial and Business Strategy,
hinted that Shell did not have a "Plan B" if they didn't get
approval. He added that Corrib and the planned Shannon LNG
regas plant (owned by U.S. oil firm Hess) together would be
sufficient to meet Ireland's domestic gas demand for many
years.


11. (C) Ireland's real hope, however, is to find more gas in
the Porcupine Basin in the North Atlantic. Shell reps and
Bazilian told the Embassy that 2008 could be a big year for
gas exploration in Ireland. Shell's Cetti said there "could
be 20 or more Corribs out there -- or very little --
depending on how the exploratory drilling progresses this
year." The Irish government just announced the results of
the latest round of license tendering for fields in the North
Atlantic. ExxonMobil (and partners) won two of the four
licenses up for grabs.

Power Generation and Distribution
--------------


12. (U) The big news on this front is ESB's (the former
monopoly electricity producer and transmitter) recent
announcement of a Euro 22 billion (USD 35 billion) investment
program to 2020. The investment will assist ESB in cutting
in half its emissions in that time period and moving to zero
net emissions by 2035. One-half of the funds will go towards
investments in renewable energy and the other half is geared
to improving its networks and facilitating the connection of
wind generation.


13. (C) Bazilian told the Embassy that getting this package
put together took some effort, largely because the ESB union
"took some convincing." The powerful union has long
complained about the planned un-bundling of the transmission
network, and raised this issue during these talks. Mary
Twomey, Senior Policy Analyst, Competitiveness Division at
Forfas, said that, in its 2007 Energy White Paper, the
government called for full ownership unbundling by the end of

2008. She worries that the recent decision by Energy
Minister Ryan (Green Party) to appoint an independent
commission to study the issue of unbundling is a step
backward.


14. (C) Over the last several years the government has
encouraged greater competition in generation and has mandated
that ESB reduce its market share to no more than 40% in order
to provide room for competitors. As a result, ESB plans to
close three aging plants that generate about 20% of Ireland's
electricity. White pointed out that current generating
capacity "is not sufficient for our medium-term needs."
However, new entrants into the market have not materialized
as rapidly as the government had hoped, though she now sees

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more interest from outside players.


15. (U) Eirgrid is the transmission system operator (but ESB
still owns the grid) and, with its Northern Ireland
counterpart, runs the All-Island Electricity Market. This
market went on-line November 1, 2007 and all reports indicate
that it is functioning well. At a recent conference, Dermot
Byrne, CEO of Eirgrid, said that he expects downward pressure
on prices as new generation comes on-line and the All-Island
market matures. He expects demand for electricity to grow
about three percent per year (current peak demand is 5000MW),
requiring 400 to 600 MW of new generation capacity by 2011.
In the medium-term, he said that there is approximately 885
MW of conventional plant and about 7500 MW of renewable
generation in the queue -- enough to meet the increased
demand.


16. (C) Ireland's bottleneck is not necessarily generation
capacity but rather the transmission system. Over the past
two decades, Ireland has invested very little in
transmission. Now, in order to support the All-Island
market, Eirgrid will build a 350MW interconnector to Northern
Ireland and begin work on an interconnector to Wales. Twomey
agreed that the transmission grid needs expansion and, for
that reason, worries that the Northern Ireland project may be
"at risk or, at least, significantly delayed" by on-going
protests against the construction of high voltage lines.
(Note: The protestors want the cables buried underground. End
note).

Comment
--------------


17. (C) With the inclusion of the Green Party in government,
environmental and energy issues have become an area of
ferment within the Irish policymaking community. The
enthusiastic engagement by Minister Ryan has produced some
notable results -- the ocean energy incentives and the ESB
investment program, in particular. However, other observers
here echo Jim Barry's (CEO of Irish firm NTR) comment that,
"the government does not have an energy/climate change
policy," and that it is making decisions on an ad hoc basis
rather than engaging in any strategic thinking. Part of the
problem is that, as Tom O'Mahony said, the Irish populace has
not, "internalized the costs of global warming," so there is
no sense of urgency to move on the issue. Without public
pressure to do something, there is a risk that the government
will lose enthusiasm for the project and "kick the can down
the road" to a future government.
FAUCHER