IEA marks progress on Irish reforms and industry's Y2K preparations

The International Energy Agency, Paris, published a report commending the Irish government's progress on energy reforms, but questioned the role of Dublin's Electricity Supply Board.

Meanwhile the agency reported that the energy industry is making good progress to prepare its computer-based systems to handle the millennium date change problem, but warms that there is no room for complacency.

IEA Executive Director Robert Priddle said: "A strong growth in the Irish economy poses considerable challenges for Ireland's energy policy, but growth also provides the resources for the government to address energy policy issues in a manner consistent with economic and social objectives. Competition and energy efficiency go hand-in-hand with lower energy costs and improved environmental performance."

The IEA report reviews all aspects of Irish energy policy and commends progress being made to reform the energy sector. The sector is at present dominated by four state-owned bodies with considerable influence in the market. In the electricity industry, IEA is concerned that the Electricity Supply Board may continue to dominate the market and impede the development of competition. In the gas industry, there is a need to develop new sources of supply to match growth in demand.

The report draws attention to the need to develop a comprehensive database on greenhouse gas emissions to enable the preparation of response measures based on quantified information. A new program of energy efficiency measures is needed urgently to replace the present program of the Irish Energy Centre, which concludes this year, said the agency.

Ireland is committed to limiting growth in greenhouse gas emissions to 13% above their 1990 level by the period 2008-2012. Without measures to contain them, Ireland's emissions could grow by about 26%, or twice the rate of growth of the Kyoto commitment.

In 1998, the Irish government published a commissioned study of greenhouse response options. No decisions by the government have been announced to date. A deficiency noted by the IEA was the limited information on greenhouse gas emissions in Ireland.

The IEA concluded that on the supply side, phasing out peat production would make economic and environmental sense, notwithstanding that imported gas would then become more important. On the other hand, further one-off changes on the supply side, such as closing Ireland's only coal-fired power plant, should not form the basis of policy.

On the demand side, implementation of efficiency programs is presently the responsibility of the IEC. More ambitious energy efficiency policies appear to be necessary. The agency said new measures should go beyond current programs and include the cost of environmental damage, mandatory efficiency regulations and emissions trading in energy prices.

The IEA concludes that any policies on the demand side should be designed to be ongoing, and should be integrated with economic policy to bring about permanent changes in the use of energy in all sectors. In all cases, cost-effectiveness should be the criterion for selecting measures, with particular attention given to the impact of greenhouse gas reduction on reform in the gas and electricity sectors.

The Irish energy sector is dominated by four state-owned bodies: the ESB, Bord Gais Eireann (gas), Bord na Mona (peat), and the Irish National Petroleum Corporation (which owns and operates the country's single oil refinery).

These organizations were said to be undergoing change, with good prospects for the creation of a competitive energy sector. The IEA report concludes that the principal issue for electricity is the likely continuing market dominance of the ESB.

The principal issue for gas is future source of supply - a second gas Interconnector pipeline and/or the development of domestic finds. The report comments that a very positive signal to the market would be for the first power station to be built under the government's new arrangements to be owned and operated by a company other than the ESB.

Peat will become the only domestic energy resource in a matter of years, unless new gas development occurs to replace declining production from the Ballycotton and Kinsale gas fields, the agency warns. There is no electricity interconnector other than to Northern Ireland, and the single gas interconnector to the UK is close to full capacity. The recent Corrib gas discovery off the west coast is important in this context, although its location is at some distance from the existing network.

Policies on peat have been aimed partly at achieving social objectives, especially maintaining employment. These objectives may not be compatible with economic efficiency and environmental objectives and could have implications for the future of the energy sector if, for example, peat harvesting and combustion continue to be used as means of redistributing income and generating employment.

"Whether as a result of competition in the electricity market, or as a means of achieving its Kyoto target, Ireland is likely to see a continuing growth in demand for gas," said the IEA.

"This prospect has given rise to concerns about the diversity of the fuel supply and the security of supply. The IEA report considers that part of the answer may lie in renewables. The report concludes that there is a need to develop an integrated policy approach to renewables, which would take into consideration not only the direct costs of renewable energy, but also the landscape value of proposed sites and the grid costs."

Regarding industry's Y2K preparations, the IEA carried out a simulation exercise of possible Y2K disruptions in the energy sector, which involved the 24 member countries of the IEA, plus the Czech Republic and Poland, along with participants from the companies of the agency's Oil Industry Advisory Board and sector experts from finance, electricity, shipping and other markets.

"The object," said the IEA, "was to challenge energy supply experts with a hypothetical scenario of events, which could plausibly occur in the context of the date rollover to 2000, or at the leap year. The scenario was designed to test how the energy community would respond to potential problems, not to predict what those problems might be. There was no implication that extensive disruption is probable."

Discussions focused on the implications of potential Y2K events not only in oil production, refining and delivery, but also in grid supplies of electric power and natural gas. One object of the exercise was to highlight the broad range of interdependencies, which exists between the energy sector and other industrial sectors.

"Companies and governments are engaged in widespread efforts to assure a smooth transition," said the IEA, "and participants expressed general satisfaction with progress to date. A sustained effort to the end of the year will be necessary in order to prepare for the risk and effects of possible incidents."

As part of its Y2K preparations, the IEA has been putting emphasis on "awareness raising" in the oil and related sectors. Regional seminars have been organized in Caracas, Singapore, Abu Dhabi and Moscow with participants ranging from government policy makers to executives representing international and national oil companies, other energy companies, including utilities and infrastructure providers. A fifth seminar will be held in Prague in mid-October.

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