Ireland faces significant challenges in decarbonising its economy, especially in the non-ETS sectors; Agriculture, Transport and Heating. EAI is concerned that the scope, intensity and urgency of the measures proposed in these sectors to date will not be sufficient to ensure delivery of Ireland’s 2020 and 2030 commitments and that a lack of progress to date will result in the need to adopt more robust, costly and higher risk measures in the future. Ireland faces the prospect of significant compliance costs for not meeting our 2020 targets and approaches the next decade on the back foot, in terms of meeting the EU’s increasing ambition for carbon reduction.
The scale of Ireland’s decarbonisation challenge is exacerbated by the high levels of economic growth in recent years, which continues to exert upward pressure on emissions, despite some progress in de-coupling over the previous decade. Historically, Ireland did not experience an industrial revolution in the manner that many mainland EU states did and, hence, has experienced a lower level of energy demand from the industrial sector relative to many EU states. More recently however, in the electricity sector, demand from large industry has already begun to account for a larger proportion of Ireland’s total demand, and this trend is set to continue into the next decade. Eirgrid has recently predicted that increased demand from large energy users, predominantly data centres, will contribute to a significant increase in overall electricity demand, in the region of between 20 and 57% in the period to 2027. Whilst this demand is welcomed by the electricity sector, acknowledging that this new energy demand will need to be low-carbon and efficient to the greatest extent possible, the increased demand will put additional pressure on Ireland to meet its EU targets in the period to 2030 and beyond.
At the present moment, the determination of economy-wide objectives for energy and climate policy is no easy task and should be approached with a great degree of caution and consideration. The EU appears minded to increase its current level of ambition, as it is concerned that an 80% reduction on 1990 levels by 2050 will not meet the objectives of the Paris agreement, and the implications of the ongoing BREXIT process for Ireland remain very much up in the air. External developments, regional, wider EU, and international, will have a significant influence on the most cost-effective emission reduction strategy for Ireland.
As a first step in its approach to the development of a National Energy and Climate Plan, the Government must outline a trajectory for cost effective carbon reduction across the economy in order to determine a carbon budget for Ireland and reduction targets for each respective sector of the economy. Detailed modelling should give a more detailed quantitative picture of the economy-wide implications of the current 2050 ambition and inform any submission to the EU in relation to specific time-constrained sectoral targets.
Ireland’s energy and climate objectives must be defined and measured in terms of the level of carbon reduction across the whole economy in order to ensure that synergies are achieved, and conflicts are avoided. Electricity can be used to decarbonise the Irish economy in a cost-effective manner. Increasing the use of electricity to heat our homes and power our cars, will contribute to a reduction in our non-ETS emissions, via the displacement of high carbon fuels in these sectors. The carbon cost of electricity is ‘0’ at point of use, as the cost of carbon emissions from power generation are covered by the EU ETS, which has contributed to the significant reduction in the carbon intensity of power generation to date and will ultimately deliver ‘0’ emission power over the coming decades. As a member of the trade association for the European power sector, Eurelectric, EAI and its members have already committed to the production of carbon neutral electricity by 2045 at the latest.
The Irish Government must ensure that the policy measures adopted to achieve our decarbonisation objectives are complementary and do not conflict. Targets for renewable energy and energy efficiency have an impact on the price of carbon in the economy and must be determined in the context of a cost-effective decarbonisation of the Irish economy. Increased ambition in Renewable Heat and Transport, can contribute both to the achievement of RES targets and carbon reduction in the non-ETS sector. The current approach to energy efficiency is not optimal from a carbon reduction perspective and will need to be reviewed at some point over the next decade. The 2020 targets have proved challenging for Ireland, and the combination of increasing EU ambition, diminishing energy saving opportunities and increasing demand will exert even more pressure on Ireland in this policy area.
Ireland faces a significant challenge to decarbonise and meet increasing demand whilst maintaining its electricity systems to current standards. Given our limited options, and the prohibition on nuclear energy, the higher levels of interconnection and renewable energy will need to be complimented by flexible gas fired generation, supported by a safe and secure regime for Carbon Capture and Storage (CCS) and a supply chain for renewable gas. To ensure that sufficient gas fired generation is operated and new gas fired CCS generation is built, Ireland needs to develop a holistic vision on the future role of fired-generation, that incorporates market, regulatory and policy developments.
To inform a cost-effective and coherent roadmap for Ireland, EAI/PWC has produced its own roadmap for a 90% reduction in the emissions from energy used in electricity production, heat and transport, contributing to a 45% reduction in overall greenhouse gas emissions. At the EU level, a recent McKinsey study for Eurelectric has concluded that a 100% economy-wide decarbonisation is possible by 2050, supported by a carbon-neutral electricity supply and increased electrification of the European economy.
On the supply side, both studies foresee a generation portfolio dominated by renewable energy and interconnection, and a corresponding increased demand for need flexibility and reliability services from traditional and new sources of both supply and demand.