1Introduction
1.Developing a coherent, long-term strategy which successfully balances the competing demands for electricity to be secure, affordable and sustainable is one of the most fundamental challenges for any government. The strength of an electricity sector is a key determinant of success in a range of policy areas. Industrial strategy requires an electricity sector which ensures reliable, accessible and competitively-priced energy to attract foreign direct investment and create jobs. Welfare policy requires an electricity sector that can provide secure and affordable energy so people can keep the lights on and power their homes. Environmental strategy requires policies that encourage sustainable, renewable energy and promote technologies which will maximise their utility.
2.Northern Ireland has struggled historically to balance the challenges within this so-called energy ‘trilemma’ of security of supply, affordability and sustainability, and continues to do so. Electricity prices remain uncompetitive for large energy users, with this having been identified as a leading factor in the loss of major employers, such as Michelin in Ballymena, and an inability to attract new foreign direct investment from energy-intensive industries.1 The security of supply situation is such that the system operator, SONI Ltd, fears it may not be able to “keep the lights on” beyond 2021 without new interconnection with the Irish Republic.2 In addition, the NI Executive’s target for 40 per cent of electricity to come from alternative energy sources by 2020 has been put at risk by the early closure of the Northern Ireland Renewables Obligation (NIRO), leaving Northern Ireland as the only part of the UK without a renewables incentivisation scheme.3 The Committee was deeply concerned by these developments and, knowing the relevance of the electricity sector to the wider policy environment, we wanted to investigate further.
3.The electricity sector in Northern Ireland consists of organisations responsible for generation, transmission, distribution, supply and regulation. The primary generators of electricity are AES—owners of the Ballylumford and Kilroot Power Stations—and ESB—owners of the Coolkeeragh Power Station—as well as a growing number of renewables generators. The transmission network is owned by NIE Networks and operated by SONI, while the distribution network is both owned and operated by NIE Networks. There are a number of electricity suppliers in Northern Ireland, the most dominant of which are Power NI and SSE Airtricity. The electricity sector is regulated by the Utility Regulator, an independent non-ministerial government department.
4.Energy policy is devolved to the NI Executive, but energy policy, markets, systems and infrastructure are complex and interconnected, which means that the UK Government continues to play an important role, both directly and indirectly, in shaping the electricity sector in Northern Ireland.4 In addition, following the referendum on 23 June 2016 on the UK’s membership of the European Union, it is clear that Whitehall will play a leading role in determining Northern Ireland’s energy relationship with other Member States, including the Republic of Ireland, during the negotiation process.
5.There are many reasons for the challenges faced by Northern Ireland’s electricity sector, not least its geographic remoteness and the pressures that are inevitable within a small system. However, there is considerable scope for policy interventions which would help to promote a more secure, affordable and sustainable electricity system in the region.
6.With this in mind, we decided to undertake an inquiry in April 2016 into the electricity sector in Northern Ireland. The scope of our inquiry was deliberately broad, reflecting the fact that electricity policy should be considered in a way which reflects its interconnected nature. We sought evidence on the challenges faced by the NI Executive in meeting its target for renewables to contribute 40 per cent of electricity supply by 2020 and asked about the steps required to prevent an anticipated shortfall in generating capacity in the coming years. We were interested in addressing the factors underlying higher electricity prices in Northern Ireland, and how these could be tackled. We also wanted to find out more about the steps required to improve interconnection with the Republic of Ireland and GB markets. In particular, we were keen to find out whether the implementation of UK energy policy had caused difficulties for Northern Ireland in the context of the all-island electricity market, and whether the UK Government was adequately taking into account the aspirations of the sector and the NI Executive when developing energy policy.
7.Over the course of our inquiry we took oral evidence from a wide range of organisations, including Ulster University, the Northern Ireland Renewables Industry Group (NIRIG), RenewableUK, the Consumer Council for Northern Ireland, Power NI, SSE Airtricity, AES UK and Ireland, ESB, the Utility Regulator, SONI Ltd, Mutual Energy, NIE Networks, the Chair of the Energy and Manufacturing Advisory Group (EMAG), Manufacturing NI, Bombardier, and Simon Hamilton MLA, the then Minister for the Economy. In addition, we received written evidence from 30 organisations and individuals, all of which has been published on our website, and held informal meetings with AES UK and Ireland and Gaelectric in October 2016.
8.This Report uses that evidence to highlight some of the key issues affecting the electricity sector in Northern Ireland and makes a number of recommendations to the UK Government, Northern Ireland Executive and industry bodies, urging changes to policies and working practices which we believe would create a more secure, affordable and sustainable electricity system in Northern Ireland.
9.We should note at the outset that the Committee has not taken evidence in relation to the Renewable Heat Incentive (RHI) Scheme, as it is a wholly devolved matter and outside the scope of the inquiry. However, we reserve the right to do so in the future should the NI Executive seek support from the UK Government to cover its liabilities under the Scheme.
10.The Report starts by considering how electricity policy is formulated in Northern Ireland, with a particular focus on how, despite devolution, decisions made at a UK-level continue to have a significant influence in Northern Ireland. The second chapter considers the implications of the UK’s decision to leave the EU on Northern Ireland’s electricity sector, and the policy implications that will need to be addressed by the Government and the NI Executive in the forthcoming negotiations. The final three chapters summarise the key challenges facing the electricity sector, as raised with us by our witnesses. These are structured in terms of the ‘energy trilemma’—security of supply, affordability and sustainability.
11.We are grateful to all those who gave oral evidence and provided informal briefings, to those who submitted written evidence, to the Speaker of the Northern Ireland Assembly, Robin Newton MLA, for allowing us to hold our oral evidence sessions at Parliament Buildings in Stormont, and for the NI Assembly staff who facilitated our meeting there.
3 Q75 (Rachel Anderson, Northern Ireland Renewables Industry Group)
28 April 2017