Thursday 28 February 2013

Address to the Irish Bioenergy Association

I had the pleasure to deliver my last address as President to the members and guests of the Irish Bioenergy Association annual conference in Kilkenny on 21st February.

Fergus O’Dowd TD, Des O’Toole & Bill Stanley (Coillte), Tom Bruton (IRBEA President)

I was asked to speak about the state of the bioenergy industry in Ireland. It would be all too easy to adopt a pessimistic outlook and list the myriad of challenges faced by the sector. There’s no disputing those challenges and the difficult economic backdrop we face in Ireland. Indeed there have been some prominent business closures during the last year. Nevertheless there are many opportunities and several reasons to be positive for the future of the industry.


Our chronic energy security situation has not gone away

Despite some oil and gas finds, we continue to import 89% of our energy. A Eurostat survey released last week put us behind 23 other EU countries, with only Malta, Cyprus and Luxembourg importing more energy than Ireland.
The effects of climate change continue to manifest themselves. There has been a marked increase in extreme weather events over the last few years. There is a growing body of evidence and consensus that these are linked to climate change.
Bioenergy has a key role to play in halting and reversing the negative effects of climate change. Our national and European renewable energy targets remain in place and are based on substantial growth in bioenergy by 2020.
We continue to strive for a level playing field with fossil fuels. I’m convinced the best way to promote renewable energy is through recognition of the cost to our society of carbon emissions. To give credit, Ireland is one of only four countries in the EU to introduce a carbon tax so far, and there is no doubting the political challenges of introducing a carbon tax. Nevertheless I contend that we need to move from €20/t C towards €100/t to make bioenergy competitive and have a material impact on consumer behaviour.


The importance of biomass in renewable heating cannot be overstated

We will require hard work, a coherent industry, political commitment and enlightened policy to reach our renewable heat targets. We have to go from 5% to 12% fossil fuel displacement in a few short years.  We can perhaps learn from the success of the Renewable Heat Incentive scheme in the UK where 171MW of boilers were installed during the first year of the schemes operation. This scheme is also now operational in Northern Ireland.
IrBEA continues to develop and promote the Wood Fuel Quality Assurance scheme. This is an important tool for consumer confidence in wood fuel products.
Through a European project IrBEA will send a delegation to Austria next month to visit a number of biomass heating projects. This will be an opportunity to learn from others but also a great opportunity for our members to work more closely together to grow the biomass heating market here at home.
The Wood energy group of IrBEA has been working hard to promote public procurement of renewable heat from biomass.
The late Shane McEntee had really taken this mission on board and worked with our committee on biomass heating in public buildings. We will miss him as a lateral thinker and a champion of bioenergy.


The issue of land use - The long running food vs fuel debate continues

It is my belief that this issue keeps coming up due to the disconnect between consumers and farming. People forget how critical energy is to all aspects of our daily lives, including food production.
It requires 35 litres of oil to till an acre of wheat… or 60 litres of oil to produce 1,000 l of milk. These are farm gate figures and exclude processing, distribution and marketing. We should also keep in mind that half of our food is wasted after it leaves the farm.
At a policy level, the ambition of FH2020 is praiseworthy, but it is impossible to deliver without a sustainable and secure energy supply. We need to work closely with our colleagues in agriculture to cultivate the link between food AND fuel.


We do need to acknowledge that land and indeed water are finite resources

We need to commercialise technologies that deliver new feedstocks to the biomass and energy mix. We also need to continuously optimise the use of biomass already to hand. We should get behind our researchers, innovators and creative thinkers in pursuing this goal. I’m not just talking about the traditional state funded research, but I’m also talking about our businesses and entrepreneurs rowing in behind the effort.
I’m just back from 2 weeks in Iowa, USA where I was hugely impressed by the co-ordinated industry and academic push to commercialise biofuels from crop residues such as straw and other organic waste
Anaerobic digestion (AD) plants can also help us meet our renewable energy targets while also delivering many environmental benefits. The IrBEA AD group has developed a digestate standard. The group will also be doing more work to facilitate the certification of AD plants by the energy regulator. We need to get to a point where more biogas projects are obtaining project finance.


Significant employment and economic development potential

This time last year we launched an economic study that identified significant employment and economic development potential.
Our credible independent estimates highlighted the need for €1.5billion investment and highlighted the 3,000 jobs that can be created through meeting our 2020 targets.

Friday 8 February 2013

Energy Economics and Politics with Professor Henry Lee

We had the pleasure today of a meeting with Professor Henry Lee from the Belfer Center for Science and International Affairs at Harvard. I was part of an exchange group at Boston College Irish Institute.

Professor Henry Lee at Hovey House, Boston College

Professor Lee is an expert on global energy and the geopolitics  and economics of energy.
The more interesting points I took away here (apologies in advance for any misquotes).

On Oil Prices:
  • Large oil discoveries have been found and from 2015 there could be a sustained period of lower oil prices, say something in the $60/bbl range.
  • Prices will continue to fluctuate dramatically from something like $45/bbl to $250/bbl over the next decades
  • Despite the twin influences of weak economic growth in developed economies and over-capacity in world oil supply, prices have maintained a high level at present. The main reason for this is geopolitics, in particular the Iran oil embargo.
On Climate Change:
  • Developed economies around the world have stuck their heads in the sand for the last 25 years and largely continue to do so. However pressure to act is increasing. Politicians get caught in current issues and don't have a long term horizon to arrest the effects of climate change.
  • The social and climate costs of energy are clearly not factored in. Suggests $125/t carbon equivalent would need to be added to fossil energy cost.
  • In the US there is very strong resistance to energy taxation. Tax on petrol has stayed static at $0.42/gal since 1992.
On Energy Policy Generally:
  •  Subsidising energy technologies (for example feed in tariffs for renewables) is twice as expensive as carbon taxation methods to provide market signals.
  • Best policy (according to Prof Lee) is to put a price on carbon and ratchet it up over time.
  • A sustained technical innovation effort in energy is required. Research teams need the ability to take on high-risk projects with game changing potential. Technologies can take 20 years to commercialise and a long-term view is required from funders, particularly government.
  • Energy efficiency is clearly a potential easy win on climate change, but we should not underestimate consumer reluctance to adopt energy efficiency technology. Consumers generally discount purchases at 30%. An example would be a consumer purchasing a new fridge - he/she only has a 2-3 year payback horizon on any operating costs savings from getting the most efficient fridge.
On China:
  • Chinese economic growth will slow to around 5% and drop occasionally to 1% over the coming decades. About 1/3rd of current Chinese growth of 9% is sustained by building projects.
  • China will have to invest massively in air and water quality. Already in 2013 Beijing has had air pollution above 700ppm on 8 occasions. In plain English this means you can only see a few feet around you.
  •  By 2020 we could see 80% of middle-east oil going to Asia. This will transform the politics of energy. Could we see a situation where China wishes to intervene in middle-east countries in the event of civil unrest? Literally will China send in troops?
  •  China has already become an importer of coal. Many smaller Chinese coal mines were pretty unsafe places to work and have been shut down. 

On Russia:
  • Russia generates 35% of national budget from oil. National finances are extremely exposed to a drop in oil prices. Around $100/bbl is needed to sustain this contribution to the state coffers.
On Japan:
  • Registered minus 3% economic growth in last quarter. Some of this contraction is attributable to Fukushima. Older power plants have had to be taken out of hibernation and put back in service.
  • There are few obvious solutions for Japan which has no offshore shelf to speak of, limited land and a massive population.
  •  There is some prospect of import of LNG and in more bluesky thinking, interconnection to neighbouring regions with land resource.