Cliff Taylor: Energy security now central to economic planning

There has been a lot of talk over the last few years about what Ireland’s economic model should be as our ability to offer foreign companies a lower tax rate becomes more and more constrained by international rules.

Some of this has been overdone – Ireland’s attraction has always been based on a more complex web of factors, including access to the European Union market, a young, skilled population and so on. Yet it is still reasonable to ask what our next moves should be.

The war in Ukraine has raised a lot of questions about the shape of world politics – and economics – in the years to come. But one thing is crystal clear. Energy security will be a linchpin of economic competitiveness in the years ahead, as well as being an essential wider imperative for governments.

When you add to this the need to phase out fossil fuels, a central point of any successful future economic model is clear – it will be a secure supply of green energy. It will be the first box to be ticked for any investor – the essential condition of an economic strategy. Add in developing the supply of skilled labour and the research and knowledge infrastructure and you have a credible basis for a plan.

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If Ireland does not develop the necessary renewable fuels, then we will not have clean electricity, which is the bedrock of the transition in the longer term

Ireland has limited direct exposure to Russian energy. But in a world where everyone will be scrambling for supply this does not really matter. Energy supply is tight and demand is set to grow further. And while Ireland has national oil reserves, we have no gas storage facilities.

A long-promised Government review paper on energy security must be urgently published, along with a strategic plan. Telling people that “it will be all right on the night” is not going to cut it.

Ireland has had a somewhat lackadaisical approach to energy security over the years. Once the Kinsale field closed the associated underwater gas storage facility did too. With new oil and gas exploration closed off, this leaves Ireland’s gas supply reliant on the Corrib field – which is slowly running down and supplies about 30 per cent of gas – and pipelines connections to the UK.

We are relying on Brexit Britain for our gas storage. With the EU planning to sharply reduce reliance on Russian gas this year, Ireland needs to develop a plan for next winter. Ibec, the business group, has called for urgent moves to develop gas storage plans, to provide some leeway. Dáil deputies would be better discussing this than throwing around soundbites about profiteering petrol companies.

Supply protocols

In the event of a shortfall, under EU protocols some of the gas coming to Ireland from Norway via the UK could be redirected to make sure all countries have enough to meet essential needs. With the UK no longer in the EU, how exactly this would all work is not clear.

Ireland also has protocols with the UK on what happens if supplies run short. But the key point is that even though we don’t directly use Russian gas, we are still exposed.

As well as the short-term issues here, there are also vital longer-term considerations. What is a credible strategy for Ireland’s fuel mix as we transition to greener energy in the years ahead? There may be some scrambling to do in the next year or two – for example, Ireland has had to prolong the life of the coal-burning power station at Moneypoint on the Shannon estuary.

But the road ahead has to be to green energy. And while Minister for Environment, Climate, Communications and Transport Eamon Ryan got some flak for telling people to drive more slowly, demand measures including reducing transport emissions – as well as dealing with power-guzzling data centres – will be part of this.

As well as Ireland playing its part in combatting the existential threat of climate change (which, of course, should be more than enough reason) there is the other clear imperative. Without consistent moves towards a supply of clean energy, investment here will taper off. Some businesses may get away with “greenwashing” – pretending to do the right thing – for a while yet.

But not for much longer. The focus now from investors on ethical and green issues is growing by the day, as is the demand from employees to work for companies – and live in countries – responding to this agenda.

This offers Ireland an enormous long-term opportunity. Wind energy, particularly off the west coast, has enormous potential not only to supply Ireland, but also to export energy. Already there is very significant investment interest from countries such as Germany. Ireland should be able to develop this resource on a basis which is favourable to the State. If we can get this right.

Trade-offs

And getting it right requires doing something which the Irish State has often been spectacularly bad at – facing up to trade-offs in planning and delivering long-term projects.

This requires action on the planning system – the energy sector has pointed to the very lengthy processes it currently faces to develop wind power and Ibec has called for wind energy projects and network improvements to get special public-interest status in the planing system. Significant extra resources may also be needed in our planning system and in areas of the public service to deliver this.

If Ireland does not develop the necessary renewable fuels, then we will not have clean electricity, which is the bedrock of the transition in the longer term. But if Ireland gets this right, then the opportunities have to be very significant.

Economist Mariana Mazzucato of the University of London, an influential voice in how to develop the role of the State in the economy, has spoken of the need for countries to develop national "missions" – projects led by the State in co-operation with business to deliver on key goals. If there is one area where this approach is required in Ireland it is renewable energy.