Electricity sector in Northern Ireland Contents

4Security of Supply

86.The rest of our Report considers in more depth the energy ‘trilemma’ in Northern Ireland: security of supply, affordability and sustainability. Of these, the then Minister for the Economy, Simon Hamilton MLA, told us security of supply “is probably the most important issue in terms of the electricity sector in Northern Ireland”.86

87.We start by reflecting on evidence that Northern Ireland is due to enter a supply deficit within the next six years and the consequential importance of constructing a new North–South Interconnector before 2021. We look at the restrictions placed on the Moyle Interconnector in Scotland, as well as the importance of emerging energy storage technologies and their relevance in the context of Northern Ireland’s significant renewables generation capacity. We conclude with consideration of the issues relating to the electricity grid and the difficulties that exist in obtaining connections, especially in the west of the Province.

Supply deficit

88.Northern Ireland is anticipated to fall into a generation supply deficit by 2021.87 SONI’s Generation Capacity Statement, published in February 2016, showed an anticipated deterioration in Northern Ireland’s generating capacity in the coming years.

Figure 1: Adequacy results for the Base Case scenario, shown for Ireland, Northern Ireland and on an all-island basis.

Source: All-Island Generation Capacity Statement 2016–25, Eirgrid and SONI, February 2016

89.A key driver of this is the restriction due to be placed on Kilroot Power Station from June 2020, to ensure that it complies with the emissions levels required within the UK Transitional Plan under the Industrial Emissions Directive. Further reductions in Northern Ireland’s generating capacity are also anticipated, with Ballylumford B due to be taken offline to meet emissions targets within the next five years. It is important to note, however, that on an all-island basis, there would continue to be a generating surplus throughout the reporting period, demonstrating the importance of ensuring adequate interconnection between the two markets; an issue considered in more detail later in this chapter.

90.AES, the operator of Kilroot and Ballylumford Power Stations, told us the assumption made in the Generation Capacity Statement—that Kilroot would operate at a reduced 1,500 hours per year with no further incremental environmental investments—would be commercially unsustainable in practice, and that the deficit of supply could be even greater than forecast if Kilroot was forced to cease operating entirely.88 They told us there were three realistic options for Kilroot.89 The first was that it would cease to operate if the market failed to provide the signals necessary to justify further investment. The second option would be for Kilroot to be upgraded, allowing it to meet emissions regulations, and operate until 2023. The third option would be to redevelop both Kilroot and Ballylumford with new lower carbon technologies, providing a longer-term generation capability. The second and third options would require the market to provide the necessary investment signals and long-term policy clarity from the Executive, which AES felt did not currently exist. We noted earlier in this Report the need for the NI Executive to update its Strategic Energy Framework to provide such clarity.

91.However, the owners of Coolkeeragh Power Station, ESB, told us the predictions of an impending electricity supply deficit were overly pessimistic and that there was a “low probability of there being a shortfall in generation capacity in Northern Ireland in the coming years”.90 Arguing that a new North–South Interconnector would be built “because it has to”, ESB questioned whether estimates of the capacity of existing and future interconnection had been too conservative.91 They also suggested that, despite concerns raised by AES, existing generation would continue to operate through the forecasting period, provided they remained commercially viable. ESB recognised, however, that this would be a challenge for AES and policy makers.

92.Further complicating attempts to limit the supply deficit in Northern Ireland is the fact that the structures for how generators will be compensated through the new Integrated Single Electricity Market have yet to be determined and are not likely to be until 2018. AES stated that this was leading to uncertainty over future income streams and the profitability of existing generation capacity.92 ESB told us they were anticipating lower revenue streams over the coming years, and consequently took a write-down on their Coolkeeragh business in its latest set of accounts.93 These factors inevitably cloud investment signals for market participants at a time when investments need to be made to ensure the construction of additional generation capacity in the period beyond 2025.

93.The CBI said that uncertainty around Northern Ireland’s electricity supply deficit had weakened the Province’s ability to attract foreign direct investment.94 It told us the NI Executive needed to take urgent remedial action to encourage investment in new, flexible sources of electricity generation to demonstrate to businesses that Northern Ireland has a secure and reliable electricity system.

94.It was reassuring, then, to learn about Evermore Energy’s plan to develop a new 400MW gas-fired power station within the Belfast Harbour Estate.95 Subject to planning and financing, the firm’s intention is for the plant to be operational by 2019. The Utility Regulator also explained that a new power plant could make a very valuable contribution to Northern Ireland’s capacity margin, and it was encouraging that Evermore Energy saw the I-SEM as a market in which it could trade.96 SONI also noted that Evermore Energy’s plan would help to alleviate the pressure on capacity, although investment in Northern Ireland’s electricity infrastructure would be needed to ensure it is able to function properly within the market and deliver the best price of electricity to consumers.97

95.Extending the life of existing power stations and providing additional generating capacity will not be the only ways to alleviate security of supply concerns in Northern Ireland. The Institution of Engineering and Technology explained that policymakers may want to encourage further demand-side management in the system, through the use of ‘smart grid’ technologies, greater control of demand peaks through tariff incentives, and encouragement of larger users to generate their own power off-grid at times of high consumption.98

96.Northern Ireland is anticipated to fall into a generation supply deficit in 2021. While interconnection with the Republic of Ireland will alleviate short-term concerns, it is clear that Northern Ireland will require new generating capacity to replace what is due to be lost at Kilroot and Ballylumford B. Decisions to invest in extending the life of existing power stations, or to build new low-carbon generating capacity, need to be made soon if Northern Ireland is to avoid a more serious generation supply deficit after 2025. In order to invest, generators require long-term policy clarity from the NI Executive and a clearer idea of how they will be compensated through the new Integrated Single Electricity Market. This reiterates the importance of updating the Strategic Energy Framework.


97.Interconnection between electricity markets as a means of achieving economies of scale can reduce prices for consumers, permit greater market penetration of intermittent, renewable sources of electricity, and increase security of supply, allowing users to flow electricity from low to high priced markets. The following sections consider plans for a new North–South Interconnector, ongoing technical limitations placed on the Moyle Interconnector, and ambitions for future interconnection with Great Britain and continental Europe.

North–South Interconnector

98.At present, three transmission connections join the Northern Ireland and Republic of Ireland grids: the Louth–Tandragee 275 kV double line; the Corraclassy–Enniskillen 110 kV line; and the Letterkenny-Strabane 110 kV line.99 Only the Louth-Tandragee connection has any significant capacity, with the other lines providing limited support to the local network. It is usually restricted to 300 MW of electricity flowing in either direction, to protect the grid in case the point of connection is damaged.100 The limitations of the current infrastructure connecting Northern Ireland and the Republic have created inefficiencies within the Single Electricity Market, affecting security of supply, the connection of new renewables generation, and the cost of electricity for consumers.101

99.A planning application was submitted in 2009 for a new 400 kV North–South interconnector which will run from Monaghan, through Cavan and Meath in the Republic of Ireland, to Armagh and Tyrone in Northern Ireland. It is designed to have a capacity of 1,500 MW and so should allow for the more efficient operation of the Single Electricity Market on the island of Ireland. The project is expected to cost approximately £200 million, of which £90 million would be funded by Northern Ireland consumers through their electricity bills.102 However, the interconnector has yet to be approved, with the planning application currently resting with the Planning Appeals Commission. A public inquiry was held in February 2017, and a decision is due to be made before the end of the year. Planning permission has already been granted for the Republic of Ireland side of the interconnector.

100.Opponents of the interconnector—the most prominent of which are based in Armagh, Bainbridge and Craigavon—are primarily concerned with plans to build the interconnector using 401 overground pylons over a distance of 138km, of which 102 pylons will be located in Northern Ireland over 34km.103 They describe the “potentially devastating impact” for the natural environment and say the interconnector will damage tourism in the affected areas.104

101.SONI told us there would be significant financial and technological concerns in building the interconnector underground, with some independent estimates suggesting it could increase construction costs by 300 per cent.105 Post-construction, operating the interconnector, facilitating connections and identifying faults would be far more efficient were it to be constructed above ground. SONI also highlighted that the interconnector had been designed with smaller pylons to minimise its visual impact.106 The CBI told us the project was so urgent, there was not time to restart the planning process and build the interconnector underground, and the NI Executive should discard this as an option.107

102.Of all the evidence we took during the Committee’s inquiry, one of the most clear and consistent messages we heard was that the new North–South Interconnector was essential for ensuring security of supply in Northern Ireland. The then Minister for the Economy, Simon Hamilton MLA, described it as, “perhaps the key piece of new energy infrastructure in Northern Ireland”.108 SONI’s evidence was particularly striking:

Without the second North–South interconnector, as [the system operator], SONI cannot be confident that we can ‘keep the lights on’ beyond 2021.109

103.With Northern Ireland due to enter a supply deficit in 2021, the new North–South Interconnector will be essential in order to access generation from the Republic of Ireland. The timescale for completion is tight, with planning permission unlikely to be granted until mid- to late-2017, and construction expected to take two years.110 ESB stated that, if the interconnector was not built on time, older generation might need to be brought out of retirement, or new emergency generation constructed at short notice.111 At worst, short-term restrictions on the availability of electricity in Northern Ireland could be necessary, estimated to cost the Northern Ireland economy up to £9 million per hour.112

104.Ultimately, a new interconnector is vital for ensuring the long-term viability of the all-island electricity market. The SEM and its successor, the I-SEM, are designed to operate as a single market across the island of Ireland, but they are not able to do so if there are serious physical constraints within that market. Mutual Energy explained that a single wholesale price for electricity would be unachievable in the long term without improving interconnectivity between the two markets.113

105.The Utility Regulator stated that improving interconnection would allow greater wind capacity and other renewable sources of electricity onto the system, and reduce high generating constraint costs, which are paid to compensate generators who are constrained from supplying electricity into the grid when there is excess generation on the system. They are estimated to total £10 million a year in Northern Ireland.114 SONI pointed to evidence that consumers were currently paying an additional £40 million a year due to the absence of the new North–South Interconnector in various additional charges, such as the £8 million in capacity payments made to the Ballylumford power station. The interconnector’s continued absence was likely to see capacity costs increase further amidst a wider generation supply deficit after 2021.115

106.A new interconnector would, moreover, give confidence to potential investors in Northern Ireland’s electricity sector. SONI told us it would show that the all-island market was robust and unconstrained, and that investors could be confident that the electricity they generate would have full access to the SEM and I-SEM.116

107.The proposed North–South Interconnector has near unanimous support from across the electricity sector in Northern Ireland. Its benefits are clear: security of supply amidst an anticipated supply deficit after 2021, greater capacity for renewable energy, and substantially lower costs for consumers. We recognise that there are objections to the new interconnector regarding its likely impact on the landscape. However, the evidence we have received strongly suggests building the interconnector underground would be financially and technologically impracticable.

108.We urge the Planning and Appeals Commission to make its final decision on the interconnector as soon as possible so, if approved, construction can be completed well in advance of the anticipated generation supply deficit in Northern Ireland in 2021.

Moyle Interconnector

109.The Moyle Interconnector connects the electricity grids in Northern Ireland and Scotland through submarine cables running between converter stations in County Antrim and Ayrshire. Owned by Mutual Energy, the high voltage direct current link has a capacity of 500 MW. The Moyle Interconnector has suffered from technical faults in recent years. It had been fully repaired and running at full capacity, but has recently developed another fault, which has for the time-being halved its capacity.117

110.In addition, as noted briefly in Chapter One, technical restrictions have been placed on the Moyle Interconnector in Scotland. Mutual Energy explained that they hold a long-term Transmission Entry Capacity for flows of electricity into Scotland of 80 MW, which was agreed when the Moyle Interconnector was built on the assumption of a low demand for electricity exports from Northern Ireland into Scotland.118 However, following the implementation of the Carbon Price Floor in Great Britain and an increase in costs in that jurisdiction, demand profiles have changed and forecasts indicate that exports to Great Britain are likely to exceed imports into Northern Ireland for the foreseeable future. While the Transmission Entry Capacity in Scotland was temporarily increased in 2016 to 287 MW in the summer months and 295 MW in the winter, a long-term increase has not been granted by National Grid in Scotland. The company has argued that the grid network has become too congested in south-west Scotland, with a significant recent increase in the number of wind farms in that region. Consequently, the Moyle Interconnector’s Transmission Entry Capacity is due to revert to 80 MW in November 2017.119 Imports to Northern Ireland have also been constrained to 450 MW.120

111.The Utility Regulator stated that restrictions on the Moyle Interconnector were a key concern, and that significant investment was required by National Grid in south-west Scotland, so that both regions could benefit from the ability to import and export electricity through the interconnector.121

112.However, Mutual Energy gave evidence that National Grid currently has no plans to upgrade the grid in Scotland, as there was no incentive for them to make the necessary investments.122 We were told that the Utility Regulator, SONI, Mutual Energy and the Northern Ireland Executive had been liaising with their counterparts in Great Britain (including Ofgem, National Grid, Scottish Power and the then Department of Energy and Climate Change), but no progress had yet been made. Mutual Energy stated that, ultimately, a decision would need to be taken by the UK Government to direct Ofgem and National Grid if the restriction was to be cleared.123

113.Overall, restrictions on the Moyle Interconnector have added to security of supply concerns in Northern Ireland and increased electricity costs for consumers.124 Limitations on Northern Ireland’s ability to export electricity at times of high wind generation has forced the system operator to require renewables generators to curtail their supply to maintain the stability of the network.125 This has increased costs for consumers in the Single Electricity Market, with substantial constraint payments being made to affected generators, and reduced incentives to invest in renewables generation in Northern Ireland.

114.The Moyle Interconnector is further restricted by frequent outages, enforced by National Grid in order to facilitate the connection of additional wind farms on the network in Scotland. This included a three-month outage in the summer of 2016.126 As with the Transmission Technical Capacity restriction, outages on the interconnector have led to increased costs for consumers and diminished security of supply in Northern Ireland. Despite the clear impact on Northern Ireland, Mutual Energy stated that National Grid did not consult with their counterparts in the Province when determining when to implement network outages, and no formal mechanism existed to take account of the effect on consumers in Northern Ireland.127

115.Of particular concern to Mutual Energy was an apparent lack of joined-up thinking in the UK Government with regard to interconnector policy. During the 2016 Budget statement, the then Chancellor, George Osborne MP, announced that the Government had accepted the National Infrastructure Commission’s recommendation for “an increased level of ambition on interconnection”, and support for “the market delivery of at least 9 GW of additional interconnector capacity”.128 Mutual Energy expressed disbelief that the UK Government could announce an ambition for greater interconnection, while ignoring restrictions currently in place on the Moyle Interconnector. They stated:

In that context it is remarkable that an existing interconnector, by which consumers in Great Britain might have access to low carbon wind energy from Northern Ireland, is constrained by the grid in Scotland129

116.Mutual Energy explained that removing the constraint on the Moyle Interconnector and making the necessary investments in the Scottish grid would be more cost-efficient than building new interconnectors to other external markets, and bring substantial benefits to both the Northern Ireland and Great Britain markets.

Collaboration between regulators

117.Emerging from this is a wider point about the effectiveness of the existing collaborative mechanisms between policymakers, system operators and regulators in Northern Ireland and Great Britain. Reflecting on their experience with the Moyle Interconnector, Paddy Larkin, Chief Executive of Mutual Energy, noted that there was no legal requirement for the regulator in Great Britain to coordinate or collaborate with the regulator in Northern Ireland, or operate with regard to the interests of the other jurisdiction.130 This contrasted with the legislative requirement for the regulators of Northern Ireland and the Republic of Ireland to work together within the SEM Committee. Jenny Pyper, Chief Executive of the Utility Regulator, gave evidence that:

[ … ] there are healthy tensions when it comes to the interests of consumers in Northern Ireland and the interests of consumers in the Republic of Ireland, but the legislation that was put in place charges the SEM Committee with considering the interests of all the consumers on the island of Ireland.131

118.This clearly makes sense in the context of operating a single electricity market on the island of Ireland. But it is also a model of collaboration that could have relevance within the context of operating the UK’s electricity system. Mutual Energy recommended that legislation be introduced to require UK regulators to work together, in much the same way as the regulators are required to within the SEM Committee.132 They also told us there was a need for one body to have overall responsibility for crossborder coordination, which was able to ensure that regulators and other bodies in each jurisdiction worked together to ensure issues of mutual interest were resolved as quickly and efficiently as possible.

119.The Utility Regulator stated that it already had close linkages with Ofgem.133 However, Mutual Energy was of the view that, although UK regulators made some effort to work together informally, cross-border considerations appeared to be of a much lower priority than issues affecting a single jurisdiction, and there was no obligation to consider the interests of the whole of the UK in decision-making. This had contributed to a lack of urgency over resolving issues such as the restrictions placed on the Moyle Interconnector.134

120.The Moyle Interconnector has been placed under a substantial technical restriction by National Grid, leaving the only interconnector between Great Britain and Northern Ireland considerably underutilised. The restriction is indicative of the lack of joined-up thinking on electricity policy. Restrictions have been imposed by National Grid without meaningful consultation or with regard to the effect on the electricity sector in Northern Ireland.

121.We believe that, as it is the UK Government’s intention to deliver 9 GW of additional interconnector capacity to the UK, it should first ensure the full utilisation of existing interconnection infrastructure within the whole of the United Kingdom. With this in mind, the UK Government should direct National Grid, Scottish Power and Ofgem to make the necessary investments in the Scottish grid to ensure the Moyle Interconnector is able to import and export electricity at its full capacity as soon as practicable.

122.We recommend the UK Government consults with the regulators in Northern Ireland and Great Britain to determine whether a more formal mechanism should be introduced to improve collaborative working practices and to better facilitate the consideration of UK-wide interests in the operation of electricity markets. The Department for Business, Energy and Industrial Strategy should also take greater responsibility for ensuring that cross-border issues are resolved to the satisfaction of stakeholders in both the GB and NI jurisdictions in a timely manner.

Further Interconnection

123.The Northern Ireland Executive has ambitions for additional interconnection between Great Britain and Europe. The then Minister for the Economy, Simon Hamilton MLA, told us, “we should not think just about the North–South interconnector, we should think more about East and West, but we should be looking at more opportunities”.135 One opportunity the Minister noted would be for Northern Ireland to serve as the landing point for a potential new 750-mile interconnector with Iceland. Such a decision would need to be made by the UK Government, but Mr Hamilton highlighted the potential benefits to Northern Ireland, were the Province to be included in these plans.

124.Noting the Executive’s enthusiasm for inclusion in UK-wide plans for future interconnection with Europe, we urge the UK Government to give full consideration to Northern Ireland when determining landing points for potential future interconnectors with countries such as Iceland.

Electricity Storage

125.Emerging electricity storage technologies have the potential to revolutionise the operation of electricity systems, significantly increasing efficiency and enhancing security of supply without the need for extensive investment in additional generation and reinforcement of electricity grids. Electricity storage encompasses a range of technologies, from small-scale demand-side systems designed for individual consumers to manage their electricity usage, to large-scale grid-level technologies, intended for the management of electricity supply and demand at the national level.

126.Electricity storage presents a particular opportunity for Northern Ireland, where these technologies could allow the market to take full advantage of the significant investment that has been made in renewable generation in recent years. The ability to store renewable energy—capturing excess electricity at times of high generation so that it can be used when the wind does not blow—has the potential to dramatically increase the contribution of renewables on the system, reduce costs for consumers through lower wholesale prices and constraint payments, and allow for the more efficient management of the electricity grid through better control of supply and demand and reduced congestion on the network. RES explained that large-scale, subsidy-free electricity storage has the potential to save UK consumers £10 billion a year by 2050.136

127.Grid-scale electricity storage technologies are already commercially and technically viable.137 During the Committee’s visit to Kilroot Power Station, AES showed us its Advancion Energy Storage Array, which is the largest battery energy storage array in the UK and Ireland, with a capacity of 10 MW, and the only system at transmission scale. This was a fully commercial, subsidy-free project, and was the first stage of a planned 100 MW lithium-ion battery array at Kilroot, which would reduce system costs in Northern Ireland by £8.5 million per year. 138

128.Gaelectric told the Committee of its plans for a Compressed Air Energy Storage (CAES) facility in Larne, which will have a generation capacity of 330 MW once it becomes operational in 2018.139 CAES Larne was designated a Project of Common Interest by the European Commission, allowing access to EU funding and logistical support. We learned that the CAES project could present an opportunity for Northern Ireland to be a world leader in this area of energy storage technology.

129.These existing projects demonstrate that grid-scale energy storage technologies should not be dismissed as opportunities for the distant future, but are instead systems that can be utilised today. However, we were given evidence that the UK Government, Northern Ireland Executive and Utility Regulator could do more to support investors in storage technologies, and that the current regulatory framework for energy storage was outdated and represented a significant barrier to market entry.140

130.For example, one of the key concerns for energy storage technologies such as CAES Larne—although less so for in-house technologies, such as at Kilroot—relates to the double-charging of policy costs on electricity. Storage facilities are charged for consuming the electricity they store, while the end-user of the electricity is then also charged for consuming it. It has been recommended that the regulatory framework be updated so that policy costs only apply to the end user, not the electricity storage provider.

131.More broadly, Gaelectric highlighted the Energy and Climate Change Committee’s recent Report into ‘the energy revolution and future challenges for UK energy and climate change policy’, and agreed with its analysis of the main issues faced by potential investors in energy storage. In its Report, the Committee made the following recommendations:

We reiterate our previous call on Government to move quickly on addressing regulatory barriers faced by storage: there must be a clear definition for storage, double-charging must come to an end, and a separate asset class for grid-level electricity storage should be established as a matter of urgency. The Government must also review the outdated Capacity Market rules and regulations in relation to storage, including considering increasing the contract length and addressing restrictions around the stacking of revenues for storage projects. We further recommend that Government sets out a high-level public commitment to making the UK a world leader in storage and sets a storage procurement target for 2020. The Government should also consider a possible subsidy framework for energy storage to accelerate deployment given the importance of storage to unlocking the full potential of renewable energy141

132.Technically and commercially viable energy storage technologies are already available. They present an opportunity to revolutionise Northern Ireland’s electricity system, increasing efficiency and enhancing security of supply, reducing the need for substantial investment in additional generation and extensive reinforcement of the electricity grid. The AES Advancion Energy Storage Array at Kilroot Power Station and Gaelectric’s plan for a Compressed Air Energy Storage (CAES) facility in Larne are two prominent examples of the potential that already exists for energy storage in Northern Ireland. However, the current regulatory framework is outdated and represents a considerable barrier to market entry for potential investors.

133.We join the former Energy and Climate Change Committee in calling on the UK Government and Northern Ireland Executive to address the regulatory barriers faced by investors in energy storage technologies. In particular, double-charging must come to an end and the Utility Regulator should ensure that the new Integrated Single Electricity Market (I-SEM) is designed with regard to the future role of storage technologies within the system.

Electricity Network

134.The Northern Ireland Executive has put considerable effort into achieving its vision of making Northern Ireland a more attractive place to do business, rebalancing the economy away from the public sector, and attracting foreign direct investment to create private sector employment. Part of this approach should see Corporation Tax cut to 12.5 per cent from April 2018; a policy which this Committee has already examined in detail.142 To take full advantage of the growing interest in Northern Ireland as a place to invest, the Province also needs a modern electricity network; one that is reliable, efficient and able to support businesses as they look to invest, expand and create jobs. In addition, generators—in particular in the renewables industry—need to be able to secure connections to Northern Ireland’s electricity grid without incurring significant costs or extensive delays.

135.During our inquiry the Committee was keen to explore whether Northern Ireland’s electricity network was effective at supporting the Northern Ireland Executive’s ambitions for the economy in the Province. We considered the extent to which the grid was an enabler or an inhibitor of economic growth, as well as the promotion of sustainable energy and security of supply.

Concerns for renewables generators

136.The Northern Ireland Executive’s ambitious target for renewables to contribute 40 per cent of electricity supply by 2020, alongside the introduction of the Northern Ireland Renewables Obligation (NIRO) in 2005, led to a rapid increase in the number of renewables generators of all scales requiring connections onto Northern Ireland’s electricity network. Nicholas Tarrant, Managing Director of NIE Networks, stated that 926 MW of renewable generation was currently connected to the grid, with another 703 MW of projects contracted for connection.143

137.However, NIE Networks has struggled to cope with the rapid increase in demand for connections. The Northern Ireland Renewables Industry Group (NIRIG) told us the Northern Ireland electricity network was ageing and was never designed to facilitate connections remote from bulk supply points or demand sources, which is where the majority of wind connections are requested.144

138.Connection problems were further exacerbated in August 2015, when NIE Networks and SONI announced a ‘connections moratorium’. Following a decision by the Utility Regulator to relax the rules relating to the requirement to achieve planning permission before a connection offer could be requested—leading to a “deluge of new applications” beyond the 1,600 already in the pipeline—NIE Networks and SONI announced they were unable to fulfil outstanding connection requests or make new connection offers for the foreseeable future.145

139.We received evidence from renewables industry representatives that the moratorium, combined with the early closure of the NIRO in June 2016, represented a serious threat to the Northern Ireland Executive’s 40 per cent target for renewable electricity, and the attractiveness of the Province’s electricity sector for investment.146 NIRIG stated that the moratorium had put at risk £900 million of investment in onshore wind farms.147 Lightsource Renewable Energy Holdings Ltd informed us that 13 of their renewables projects, representing a total value of £140 million, were subject to the connections moratorium, of which six had been granted full planning permission.148 They explained that its investment decisions would need to be reconsidered if there continued to be uncertainty.

140.Later in 2016, NIE Networks told us they had consulted with the renewables industry and agreed planning permission should be re-established as a criteria for obtaining a grid connection offer.149 The company further decided to issue 200 MW of new connection offers to renewables generators, but also rejected 1,600 MW of applications. Some applications were rejected due to limitations in transmission capacity in the electricity network, while others were rejected due to constraints, and the need for further investment, in the distribution network.150

141.Deficiencies in Northern Ireland’s ageing electricity network and the recent ‘connections moratorium’ imposed by NIE Networks and SONI caused considerable uncertainty for the renewables industry, threatening investment in the sector, undermining security of supply, and putting at risk the Northern Ireland Executive’s ambitious target for renewables to contribute 40 per cent of electricity supply by 2020.

Concerns for businesses

142.Manufacturers also reported that Northern Ireland’s ageing electricity network was damaging investment and growth. The then Minister for the Economy, Simon Hamilton MLA, reflected this in his evidence to the Committee, telling us he had spoken to a number of businesses who had concerns about their ability to connect to the grid and expand their businesses. Mr Hamilton stated he did not want private sector growth to be inhibited in any way by restrictions in the electricity network.151

143.We heard other evidence reflecting these concerns. Dr Patrick Keatley, Research Fellow at Ulster University, said it was “difficult, expensive and slow to get connections” to the network.152 Large businesses, heavily reliant on an efficient electricity network, frequently encountered high costs and delays when seeking connections to the grid, limiting their ability to expand, create jobs and bring much needed economic growth to Northern Ireland.153 Stephen Kelly, Chief Executive of Manufacturing NI, reported concerns from his members regarding the lack of availability of power on the grid and difficulties in getting necessary connections due to congestion in the electricity network.154 Worryingly, Dr David Dobbin, the Chair of the Energy and Manufacturing Advisory Group (EMAG) said that inadequacies in the electricity network had created an environment in which, “Northern Ireland is not currently in a position to compete for investment where there are high energy requirements”.155

144.Dr Dobbin also told us there was a “postcode lottery” in Northern Ireland, where it was easier to obtain grid connections and develop economically if the business was in the east of the Province than if it was based in the west.156 While Larne, Ballymena and Belfast tended to benefit from a relatively strong grid, there were considerable weaknesses in Cookstown, Tyrone and Fermanagh where the electricity network was “not fit for purpose”.157 This was a concern echoed by the CBI, who told the Committee grid connection problems were hampering efforts to rebalance economic development in the west.158

145.Dr Dobbin also told us that Dale Farm had direct experience of these difficulties. Dale Farm had intended to make a £30 million investment in a new plant in Cookstown, but was informed by NIE Networks that there was insufficient capacity in the local area and so was asked to pay for its own 27-mile line from Magherafelt, at a cost of £7 million, and wait two years for the connection to be completed.159 The substantial additional cost and delay made the investment by Dale Farm in Cookstown—which would have created 100 additional jobs in the area—commercially unviable.

146.We also heard concerns about the reliability of the existing grid. Dr Dobbin told us one of Dale Farm’s plants had experienced 15 brownouts—intentional or unintentional reductions or restrictions in the availability of electricity—in one year as a result of failures in the electricity network.160 The power failures had led to substantial additional costs for the agri-foods business, with each incident estimated to have cost the firm between £40,000 and £50,000. It was noted that reliability was one of the main factors, alongside high energy costs, why many large industrial users were choosing to generate their own electricity off-grid.

147.The costs quoted by NIE Networks for connections onto the network were of particular concern to several witnesses. Manufacturing NI reported that one of its members had been required to pay £2 million to obtain a connection to expand their business.161 The Ulster Farmers’ Union said they were aware of quotes of £600,000 to connect a 250 kW wind turbine to the electricity network.162 Action Renewables explained that grid connection charges were often over 50 per cent of capital costs in the small-scale generation sector.163

148.Of particular concern was the way in which connection offers were prioritised by NIE Networks and SONI. During its inquiry, EMAG was told offers were made on a strict first-come-first-served basis, and no consideration was given to the relative economic benefit of each investment in determining when connections would be made.164 This had created a situation in which applications from businesses seeking to make high-value investments were often left waiting behind smaller, less strategically important connections. Dr Dobbin suggested that a new, independent body be established to adjudicate as to the relative economic importance of each grid connection, to guide NIE Networks on what priority to give each application. He believed NIE Networks would support such a plan.165 The CBI recommended the Northern Ireland Executive bring forward legislation to ensure priority was given to connections which offered the greatest economic return and aligned best with its economic strategies.166

149.We share concerns expressed to us that capacity on the electricity network has become an inhibitor of economic growth in Northern Ireland, especially in the west of the Province. Industry groups reported that the costs and delays associated with connecting to the grid had limited their ability to invest, expand and create jobs.

150.The Northern Ireland Executive should consider establishing an independent advisory body to identify connection applications with high strategic importance, and ensure these are given appropriate priority by NIE Networks when connection offers are sought.

Additional investment in the Network

151.NIE Networks is regulated by the Utility Regulator and is subject to periodic reviews in respect of the prices it is able to charge for the use of the transmission and distribution networks in Northern Ireland. NIE Networks recently submitted its business plan for the period October 2017 to March 2024 for the 6th regulatory price control period since Northern Ireland Electricity was privatised in 1993. This price control period will be known as RP6. The business plan proposed capital expenditure of £508 million on Northern Ireland’s electricity network between 2017 and 2024, of which 55 per cent would be spent on asset replacement.167

152.Manufacturing NI stated that consumer research had demonstrated that business customers were unwilling to pay more for network investments than they had done during the RP5 price control period, and that the costs proposed by NIE Networks for RP6 should be carefully scrutinised.168

153.Other witnesses told us significant investment was required in the grid, over and above what had been proposed by NIE Networks for RP6. Renewables industry groups, including ABO Wind, called for “significant investment in the NI grid network [ … ] to ensure that renewables generation can connect to the grid”.169 Dr Patrick Keatley of Ulster University told us “the network—the grid—needs an overhaul”, while the CBI highlighted that the grid requires additional investment to facilitate the connection of renewables, improve system security and permit further economic development.170

154.In its report, EMAG recommended that the Northern Ireland Executive make strategic investments in the electricity network, following a similar model to that used when public funding was provided to the public sector to facilitate the roll-out of the broadband network into rural areas in Northern Ireland.171 It called on the Northern Ireland Executive to carry out:

[…] a review of whether strategic grid investment by the Executive is needed, beyond what would normally be approved by the Regulator, particularly in the west of Northern Ireland to support regional economic development and facilitate the deployment of renewable energy.172

155.We join EMAG in calling on the incoming Northern Ireland Executive to undertake a review into whether additional investment in Northern Ireland’s electricity network, beyond what has been proposed by NIE Networks for the RP6 price control period, could have substantial benefits for economic development, security of supply and the deployment of sustainable sources of electricity.

Security of Supply overview

156.The then Minister for the Economy, Simon Hamilton MLA, said he had no concerns about security of supply up until 2020.173 He also told us it was not necessary to be “alarmist” regarding security of supply concerns beyond then, but that he was mindful of the importance of the issue.174 However, he said Northern Ireland could be in a far worse position, and there were a number of reasons to be optimistic with regard to security of supply after 2020. He noted that the North–South Interconnector, the proposed new power station in Belfast Harbour, the battery storage facility at AES Kilroot, and the Gaelectric proposal for a Compressed Air Energy Storage (CAES) facility in Larne, would—if developed as planned—mean “we will look back and say we were worrying about nothing” in the years to come.175

157.The then Minister for the Economy had an optimistic outlook for the security of supply situation in Northern Ireland. We nevertheless urge the next Northern Ireland Executive to focus on the challenges that exist within Northern Ireland’s electricity sector, and make the necessary policy and legislative changes to alleviate these significant security of supply concerns before they become crises.

86 Q616 (Simon Hamilton MLA, Minister for the Economy)

87 Eirgrid and SONI, ‘All-Island Generation Capacity Statement 2016–25’, February 2016

88 Q245 (Carla Tully, AES UK and Ireland)

89 Q249 (Carla Tully, AES UK and Ireland)

90 ESB (ENI0017) para 3.8

91 Q245 (Paddy Hayes, ESB)

92 Q248 (Carla Tully, AES UK and Ireland)

93 Q247 (Paddy Hayes, ESB)

94 CBI Northern Ireland (ENI0023) para 10

95 Evermore Energy (ENI0027) para 1

96 Q314 (Jenny Pyper, Utility Regulator)

97 Q334 (Robin McCormick, SONI Ltd)

98 Institution of Engineering and Technology (ENI0022) para 2.2

99 Eirgrid, ‘North–South Interconnector: Answering your Questions’, page 5

100 Ibid, page 6

101 SONI Ltd (ENI0024) para 1.2

102 Q357 (Robin McCormick, SONI Ltd)

103 Q343 (Robin McCormick, SONI Ltd)

104 Robert Graham (ENI0002) para 11

105 Q364 (Robin McCormick, SONI Ltd)

106 Q363 (Robin McCormick, SONI Ltd)

107 CBI Northern Ireland (ENI0023) para 18

108 Q617 (Simon Hamilton MLA, Minister for the Economy)

109 SONI Ltd (ENI0024) para 2.11

110 Q356 (Robin McCormick, SONI Ltd)

111 Q250 (Paddy Hayes, ESB)

112 As reported in CBI Northern Ireland (ENI0023) para 18

113 Q429 (Paddy Larkin, Mutual Energy)

114 Q314 (Jenny Pyper, Utility Regulator)

115 Qq332–3 (Robin McCormick, SONI Ltd)

116 Q332 (Robin McCormick, SONI)

117 Q385 (Paddy Larkin, Mutual Energy)

118 Mutual Energy (ENI0014) para 4.1

119 Mutual Energy (ENI0014) para 4.3; and Q395 (Paddy Larkin, Mutual Energy)

120 Mutual Energy (ENI0014) para 4.14

121 Q317 (Jenny Pyper, Utility Regulator)

122 Mutual Energy (ENI0014) para 4.4

123 Q426 (Paddy Larkin, Mutual Energy)

124 Mutual Energy (ENI0014) para 4.5

125 Q389 (Paddy Larkin, Mutual Energy)

126 Mutual Energy (ENI0014) para 4.5

127 Ibid

128 HM Treasury, Budget 2016, 16 March 2016, sections 5.3 and 5.8

129 Mutual Energy (ENI0014) para 4.11–4.13

130 Q395 (Paddy Larkin, Mutual Energy)

131 Q285 (Jenny Pyper, Utility Regulator)

132 Q411 (Paddy Larkin, Mutual Energy)

133 Q284 (Jenny Pyper, Utility Regulator)

134 Q410 (Paddy Larkin, Mutual Energy)

135 Q640 (Simon Hamilton MLA, Minister for the Economy)

136 RES (ENI0018) para 2.5

137 AES UK and Ireland (ENI0013) para 10

138 Ibid.

139 Gaelectric Holdings (ENI0011) para 1.5

140 Gaelectric Holdings (ENI0011) Executive Summary

142 Corporation Tax in Northern Ireland, 2010–12, Northern Ireland Affairs Committee

143 Q484 (Nicholas Tarrant, NIE Networks)

144 Northern Ireland Renewables Industry Group (ENI0021) para 21

145 Q485 (Nicholas Tarrant, NIE Networks)

146 Lightsource Renewable Energy Holdings Ltd (ENI0009) para 1.4

147 Northern Ireland Renewables Industry Group (ENI0021) para 22

148 Lightsource Renewable Energy Holdings Ltd (ENI0009) para 3.1.4

149 Q485 (Nicholas Tarrant, NIE Networks)

150 Q485 (Nicholas Tarrant, NIE Networks

151 Q646 (Simon Hamilton MLA, Minister for the Economy)

152 Q23 (Dr Keatley, University of Ulster)

153 Qq574–575 (Stephen Kelly, Manufacturing NI)

154 Ibid.

155 Q537 (Dr David Dobbin, Energy and Manufacturing Advisory Group)

156 Ibid.

157 Q523 (Dr David Dobbin, Energy and Manufacturing Advisory Group)

158 CBI Northern Ireland (ENI0023) para 24

159 Qq523–536 (Dr David Dobbin, Energy and Manufacturing Advisory Group)

160 Q528 (Dr David Dobbin, Energy and Manufacturing Advisory Group)

161 Q574 (Stephen Kelly, Manufacturing NI)

162 Ulster Farmers’ Union (ENI0031) Section 4

163 Action Renewables (ENI00026) para 3.2

164 Q534 (Andrew Webb, Energy and Manufacturing Advisory Group)

165 Q534 (Dr David Dobbin, Energy and Manufacturing Advisory Group)

166 CBI Northern Ireland (ENI0023) para 25

167 Q467 (Nicholas Tarrant, NIE Networks)

168 Manufacturing NI (ENI0006) para 54

169 ABO Wind (ENI0015) para 11

170 Q23 (Dr Keatley, University of Ulster), and CBI Northern Ireland (ENI0023) para 12

171 Q545 (Dr David Dobbin, Energy and Manufacturing Advisory Group)

173 Q616 (Simon Hamilton MLA, Minister for the Economy)

174 Q642 (Simon Hamilton MLA, Minister for the Economy)

175 Ibid.

28 April 2017