Energy could be so much cheaper

Gas interconnection

The Celtic Tiger died five years ago. The economic crisis hurts. The end of the pain is not in sight. So you would think that the government would do everything it can to keep prices low. For energy prices, you would be wrong.

Natural gas is an important fuel for heating homes and cooking. It is also used to generate electricity. The gas used in Ireland comes via two pipelines. Bord Gais Eireann (BGE) owns and operates both interconnectors. BGE cannot abuse its market power because the Commission for Energy Regulation (CER) regulates the price. Each year, total costs are divided by the volume of gas transported. BGE is allowed a modest profit.

This simple rule was fine when there was one source of gas only. That will change. Eventually, the gas from Corrib will be brought onshore. There are advanced plans to build an Liquefied Natural Gas (LNG) terminal in Kerry. With LNG, Ireland would no longer depend on the European market, where gas is dear. Gas is cheap in North America because of the abundant shale gas. As gas transport is expensive, it would be cheaper still to exploit the Irish shale reserves.

The costs of interconnection with Great Britain are largely fixed. If another source of gas captures a small part of the market, BGE will spread its costs over a smaller volume. That is, BGE would raise its price. The competition would thus capture a large share of market, and be able to raise its price at the same time. BGE would be forced to raise its price again.

The CER anticipated this and has changed the price regulation. The CER should be praised. It is not often that a government agency locks the door before the horse bolts. However, the new regulations are not good for consumers.

In the future, the right to transport gas over the interconnectors will be auctioned. There is overcapacity now and probably in the future, so the highest bid will not be very high. Therefore, there will be a reserve price. And if BGE still makes a loss, a levy will be imposed on all importers and producers of gas. This levy will be passed on to consumers.

This arrangement guarantees the profits of BGE. It drives up the price of gas and electricity. And because it hurts would-be importers and producers of natural gas, competition is hampered and prices go up again.

Indeed, the Shannon LNG project was stalled earlier this week, primarily because of the new price rules. The CER in effect shielded BGE from competition at the expense of anyone who buys gas or electricity.

BGE is largely state-owned, but a minority share is owned by employees, who will directly benefit from the new CER regulation. The exchequer could benefit too, but state-owned companies in Ireland have a poor track record of paying dividends. Instead, profits are diverted to vanity projects of managers and politicians.

It would therefore be better if BGE gradually writes down the capital invested in the gas interconnectors, and compete in the market on the basis of its variable costs only. Gas and electricity would be cheaper.

The new pricing rules are not yet set in stone. It will be a few years before households will pay more for their gas and electricity. People will complain bitterly to Pat Kenny and #gasprice will trend on Twitter. But then it will be too late to change the rules. The CER should reconsider now.

Atlantic oil

After a long absence, oil exploration companies returned to Irish waters. There is oil in the Atlantic. Now that experience is growing with the ultra-deep oil off Brazil and Angola, there is increasing confidence that the oil in the Irish Atlantic too may be commercially exploited – although the water is colder and choppier.

This is good news. Oil exploitation brings well-paid jobs and welcome royalties. It is early days though.

Some commentators and politicians have jumped to the conclusion that there is an immense richness under the Irish seabed that is being plundered by foreigners, and have called for punitive taxes.

Fact is, a few companies are exploring for oil. They are losing money at the moment, and it will be ten years or more before they would see a return on this investment, if any. There are plenty of other oil provinces that look just as promising as Ireland. Shell’s troubles in Mayo are well known in the international oil industry, and the story of Shannon LNG is making the rounds. Talk of high taxes, even nationalization, may well scare off the next round of would-be investors in Irish oil. The goose will be slaughtered before it has laid its first egg, perhaps golden.

Wind for England

England has a problem. Power plants are aging, and no one is willing to invest in new ones. The European Commission has imposed stringent targets for renewable electricity. The plan is now to build a great many wind turbines in the Irish midlands, and transmit the power to England.

The wind blows harder in Ireland than in England, but this does not justify the extra cost of long distance transmission. Rather, locals effectively use the English planning regulations to block new wind turbines.

Transmission will be over a dedicated grid. EirGrid would not have to invest even more than it already does, and English wind would not be eligible for the generous subsidies on Irish wind.

So what does Ireland get out of this? Some construction jobs, fewer maintenance jobs, and more wind turbines to look at. It seems that England struck the better bargain.

Wind power should pay royalties, just like oil and gas pay royalties. England would contribute money to the Irish exchequer if they still want to go ahead.

Royalties would make wind power more expensive in Ireland too, another reason to switch to cheaper gas for power generation.

Paul Hunt had excellent comments on an earlier version.

An edited version (part 2, 3) appeared in the Independent. Without byline online but on paper there is apparently a picture and a wrong email address.

UPDATE: John Mullins, CEO of BGE, disagrees.

42 thoughts on “Energy could be so much cheaper”

  1. I don’t wish to be rude or be accused of playing the man rather than the ball, but that’s not a very well-written article.

  2. Hi Richard,

    Can you provide a source for your comment “Transmission will be over a dedicated grid”. At first glance, this seems pretty unlikely, especially with the East West Interconnector coming on stream in late September, but I’m happy to be corrected.

  3. @Richard, off topic and apologies, but do you know the reason why natural gas provided to homes has been increasing by 20%-plus per annum in Ireland for the past while. This morning’s CSO inflation release shows that it has increased 22.5% in the past year. For something which accounts for 2% of the inflation basket, this is pretty severe.

  4. Its good to have a LNG option.

    But lets not get exited here…… Shale Gas requires high prices to sustain production.
    The bubble is bursting me thinks…..

    During the early years of the 20th century even the oil industry was tending towards overproduction and numerous barons tried to control the entire drill to combustion chain so as to sustain these prices through waste based Industries.
    Think of the Rockefellers

    Also Think of the American car Industry which was the biggest final consumer.

    According to this guy Shale gas is now a commerical failure in the US…. with some Texas fields holding up most of the US shale gas production.

    http://www.youtube.com/watch?v=1386Jt17myY

    The North Sea is declining on a massive scale.
    The UK is sovergin with the Bulk of its LNG coming from Norway & Qatar.
    If the North Sea declines further(it will) it will have first call on any US Atlantic ships if they even make the trip.

    Just saying like……

  5. Hi Richard,

    If BGE were to price at the rate determined by their variable cost, who ends up paying the cost of capital used to install the interconnectors?

    Does this cost, which I imagine will be passed back to the State, just distribute the cost of gas over the whole tax base, so in effect, we all pay for the cost of the gas pipes, despite whether we use gas or not?

  6. The west has no long term energy strategy.(it never did)
    Nobody thinks on 50 to 60 year time lines……

    The Longest term Treasuries go to 30 years.

    Many Nuclear plants will have probally a 60+ year lifetime.
    The Hoover Dam is still operational…….
    Ardnacrusha is still operational…….

    The West is a failure.
    It cannot make long term plans.
    If we get a burst of gas supply , the banks will produce consumer credit and waste it on capital stuff that will probally last perhaps 10 years or so
    Its a pointless process.
    A entropy hole.
    (notice from the video they were hoping for a hot summer to waste the stuff…..which they are now doing on air conditioning – a technology that increased the population and culture of the southern US)
    As in Spain – there is now no siestas unless you are unemployed.

    The waste is Ireland needs to be reduced first.
    The immediate policey should orbit around the dramatic reduction of private car numbers and the elimination of oil central heating from homes.

    I will start taking bets soon whether Ireland will reach its Suez crisis new car reg low withen the next few years not because of policey measures but simple poverty as everything is thrown into extreme waste based consumption otherwise known as policey failure.
    Or success for the few who can make a short term killing.

    Number of new private cars Y1955 : 23,675
    Y1957 : 13,589 (Suez crisis low)
    Y1967 : 40,300
    Y1973 : 74,789 (euro entry and Yom Kippur peak)
    Y1975 : 53,066 (first oil crisis through)
    Y1978 :105,582 (second credit peak)
    Y1984 : 55,893
    Y1987 : 54,341 (EMU through)
    Y1990 :83,420 (pre gulf war peak)
    Y1993 :60,792 (EMU crisis through)
    Y2000 :225,269 (all time high – Y2000 euphoria)
    Y2007 :180,754 (second Euro peak)
    Y2009 : 54,432 (dramatic crash)
    Y2010 : 84,907
    Y2011 : 86,932 (stabilisation at much lower level ?)
    And 2012……
    Decrease of 40.7% in new private cars licensed in June

    There were 5,481 new private cars licensed in June 2012, compared with 9,240 in June 2011, a decrease of 40.7%.
    Jan to June 2011 : 69,254
    Jan to June 2012 : 58,936…… so not stabilization then although the number of car regs is already higher then Y2009

    A bit to go before we reach 13,589 though…….

    Still its a possibility.

  7. @Iain
    Indeed.

    The choice is between (1) lower gas prices and lower profits for BGE and (2) higher gas prices and higher profits for BGE.

    BGE is not 100% state owned and its dividends are low relative to its profits, so I think (1) is the better option.

  8. Richard,

    Thank you for your prompt reply.

    My concern with your solution is that the benefits of the effective ‘subsidy’ are absorbed into the markup charged by the end supplier, so the end user ends up supplementing the subsidy somewhat.

    We then end up in the state where gas-per-unit is cheaper then before, but we end up with an offset through indirect taxation that leads to a higher total cost of gas and higher profits for the end suppliers. Can CER regulate out this effect?

  9. Apologies for the prolific use of ‘end’ in the post.
    A thesaurus is required for future posts.

  10. In short – you propose a subsidy, S, for capital costs of BGE. This is paid for by the tax payer.

    This results in cheaper costs of gas as utilities are being charged less per unit of gas which flows through the pipe. Cost for utilities are given by cost of gas, C, plus the cost of transporting the gas, T.

    Pre subsidy, costs (per unit) are C + T
    Post subsidy, costs (per unit) are C + (T – S)

    End user costs, Z, are what is charged by the firm are such that:
    Z = [C + T] + p, where p is mark up

    Post subsidy:
    Z = [C + (T – S)], but since we pay S through tax (U), we get;
    Z + U = [C + (T – S)] + p

    My question is, the firms have the discretion in how much of the subsidy to pass on to the end consumer of the gas. If I were a pricing strategist in a gas co, I’d be passing on \alpha(S), where \alpha < 1 and so the total cost of gas rises. We pay the subsidy, S, through taxes and we don’t get the full benefit of the subsidy in price reductions. Can such an outcome be prevented?

    Or have I just made an idiot of myself on the internet?

  11. @Iain
    Now I get it.

    It is in fact the CER who proposed a subsidy. I am against.

    The question remains, what fraction will be passed on to consumers?

    I think that most would be passed on. Corrib is a high pressure field, so Shell will not manipulate its supply. BGE and Shannon LNG have high fixed cost and identical products, so they’ll go for market share.

  12. This article muddies the waters. The issue is that Shannon LNG’s competitors would be the other UK exporters into Ireland, not Bord Gais. Bord Gais is a price-taker of UK gas. Bord Gais owns the interconnectors and the UK price for gas plus the interconnector cost is the benchmark price for gas in Ireland. Insinuating somehow that with LNG and low US gas prices, Ireland would no longer depend on the European gas market is entirely misleading because Shannon LNG would sell their gas at the highest price the Irish market would bear – which is UK prices plus the interconnector “cost”. Also, note that LNG is already being shipped into the UK and that Ireland and the UK is effectively the one gas market anyway.

    I agree entirely that the CER ruling on the gas interconnector should not be used as a means to increase the profits of Bord Gais but the ruling is only about covering the cost of the interconnector. The overriding ruling of the CER is that competition should not be distorted and this will have to be the basis on which the tariffs are calculated over the next few years. I agree that on this basis Shannon LNG would be successful in preventing any abuse of this tariff-setting process that did not meet with the law or the spirit of the CER decision of June 29th last, but it equally stops Shannon LNG from having an unfair monopoly.

    To somehow link the CER decision with a discussion on what Bord Gais does with its profits is also muddying the waters as that is an entirely separate issue. It is a very valid issue but a separate issue. If you want to discuss the state ownership of Bord Gais then maybe it is worth mentioning as an aside that Shannon LNG is owned by Hess LNG – a company registered in the Cayman Islands tax haven – and that, with, for example, transfer pricing mechanisms, the Irish Exchequer would lose out even more as Shannon LNG reduce their Irish tax exposure. You assert that state-owned companies have a poor track record of paying dividends in Ireland but it should be noted that Bord Gais paid €33million in dividends in 2011 alone and has paid €830million in dividends to the Irish people since 1976. Offshore companies in tax havens do not generally pay dividends to the Irish Exchequer.

    On Sunday, Shannon LNG announced in the ‘Sunday Business Post’ the postponement of the Shannon LNG project for a couple of years (the first step towards abandoning the project altogether). To make that announcement so soon after the Energy Regulator outlawed a monopoly price-fixing loophole in the Irish gas market, proved that the Shannon LNG project was only ever an anti-competitive predatorial attempt to gain an unfair dominant market position which would have effectively forced Irish consumers to subsidise the Shannon LNG project by up to €50 million per year

  13. I will repeat these UK first quarter figures toll because I think they are so important for us as they indicate a structual shift in UK energy use.

    Higher coal use / lower Gas use as the price is now so high.

    Quarterly energy statistics: Energy trends and quarterly energy prices
    28 June 2012
    The main points for the first quarter of 2012 are:

    Indigenous production of fuels in the UK fell by 11.6 per cent in the first quarter of 2012
    compared with a year earlier. Production of oil fell by 13.0 per cent whilst gas fell by 14.1 per cent as a result of maintenance work and slowdowns on a number of fields.
    Total primary energy consumption for energy uses fell by 2.3 per cent. However, when adjusted to take account of weather differences between 2011 and 2012, primary energy consumption fell by 1.1 per cent.
    Of electricity generated in the first quarter of 2012, gas accounted for 27 per cent (its lowest share in the last fourteen years) due to high gas prices, whilst coal accounted for 42 per cent. Nuclear generation accounted for 17 per cent of total electricity generated in the first quarter of 2012, a decrease from the 19 per cent share in the first quarter of 2011.
    Onshore wind showed the highest absolute increase in generation in the first quarter of 2012, increasing by 51 per cent, from 2.4 TWh in the first quarter of 2011 to 3.6 TWh, as a result of much increased capacity. Large increases in generation were also seen in hydro (up 43 per cent – due to high winter rainfall), offshore wind (up 50 per cent) and bioenergy (up 21 per cent due in part to the conversion of Tilbury B to dedicated biomass).
    In addition, an article on renewables in 2011 (page 49 of Energy Trends) shows that renewable energy accounted for 3.8 per cent of energy consumption compared to 3.2 per cent in 2010, as measured against the 2009 EU Renewable Energy Directive.

    Dork – it must be said this increase in renewables is only acheived after massive in my view malinvestment in wind especially offshore stuff which has a very poor input output return if any.
    The British Nuclear Industry has been starved of funds since the 80s with the one and only PWR going on line in the mid 1990s so therefore most of the research & manufacturing costs was wasted.

    percentage change of a year earlier (2012 Q1)
    Coal production : -12.3 %
    Coal imports :+20.8%
    Coal demand :+15.8%
    (Of which power stations:+19%)

    oil production : -13%
    net imports :+35.3%
    Primary demand :-1.3%

    Gas production : -14.1%
    Gas demand :-11%
    of which electricity :-29.9% (56.8Twh)
    domestic :-1.8% (128.1Twh)
    Imports of gas decreased 6.3%
    LNG accounted for 23.2% of imports.
    Of which Qatar 23%
    Norway 60% (is not Norways fields declining also ?)

    WHERE IS THE GAS BABY ?

    The Brits are chancing their arm with this Irish Wind stuff me thinks.
    The bulk of their electricity imports come from Nuclear base load surplus France and will come from there for a long long time me thinks.

    Ditto for the new interconnectors between Norway and Denmark.
    Its Hydro surplus Norway which produces the power , not Denmark and German wind stuff.
    http://www.eib.org/projects/loans/2011/20110128.htm

    Ditto for French surplus electricity export to Spain
    http://www.eib.org/projects/loans/2010/20100263.htm

  14. @Johnney
    You make some great points
    Part of the reason why western European energy demand is declining is because they don’t have the money to buy the stuff.

    The money goes offshore…………..

    Its a very sick world out there.

    Its kind of ironic that these companies are failing because there is no demand in these now non nation state economies – its quite funny really.

    It follows my Ryanair train of thought.
    Ryanair appears to be a success by cutting prices via labour arbitrage as long as the passengers don’t all work for similar companies.
    When they do – demand collapses as they now neither have the money nor time to travel.
    Ditto for tax arbitrage

    Neo liberals such as Toll can’t seem to make the connection.

    So ESB workers get paid higher wages…… As long as they don’t fly to the Cayman island too often much of their money stays withen national bounderies although withen the Euro this will still involve massive imports of goods & services.
    However some of the money they get will eventually flow into a Irish shopkeeper pockets….

    What we are witnessing is a massive deglobalisation event which the CBs are fighting to keep together at all costs it seems.
    The externalties of this level of globalisation seems to be higher then the benefits.
    But it we must travel down this river to prove something or other.

  15. Why not build an gas/oil fired power station/s next the landfall then export the power in the form of electricity via a undersea cable to France/UK.

  16. @Richard
    In telecoms regulation, which is largely overseen by EU diktats, use of dominant operators facilities is very tightly regulated in terms of prices that are fixed for long periods of time independent of market fluctuations. In fact, if there is too much capacity on a network costing models are used to adjust for this percieved ‘inefficiency’ not withstanding the investment is already sunk. As such operators are only allowed to recover what a supposedly ‘hypotehtical efficient’ provider could recover.

    What is the reason for an apparently much laxer approach to facility regulation in gas/electricity in Ireland/Europe? Is inefficient investment in facilities still allowed to recover costs including a return on inefficient investment?

  17. @Richard Tol:

    A good article which I mainly agree with but a couple of quibbles:

    1. The IC transmssion tariff for 2012 was €0.297/MWh or about 1.5% of the €20/MWh NBP gas price, 0.6% of the €50/MWh avg. SMP and 0.15% of the €200/MWh retail electricity cost. So it depends on how we define much in “much cheaper”.

    2. “Gas is cheap in North America because of the abundant shale gas. As gas transport is expensive, it would be cheaper still to exploit the Irish shale reserves.”

    #REF? Have you come across any figure from Tamboran on their $/MMBtu breakeven from their Leitrim shale? The idea that American drillers could just quickly start fracking outside the US has met some geological resistance in e.g. Poland and China:

    “June 17 – Exxon Mobil Corp (XOM.N) has decided not to go ahead with its shale gas exploration projects in Poland because its test wells failed to produce commercial quantities of gas, daily Gazeta Wyborcza reported in its weekend edition.”

    http://uk.reuters.com/article/2012/06/17/uk-exxon-poland-idUKBRE85G0JF20120617

  18. @Inscruable
    What I have read suggests Poland and the Paris basin (not going to happen) have the best shale deposits in Europe.

    In other words the best of a bad lot when compared to Texas.
    So why Ireland ?

    Far more energy can be saved via relatively easy policey options.

    The problem with this is that our monetary system cannot express these savings as success as it is a waste (debt) based system.

    We get a sort of dead air withen the monetary construct – this can be seen quite clearly in the car /oil tax returns.
    If countries could just produce greenbacks we would not need to tear the gaff apart.

  19. “Energy could be so much cheaper”

    1. I think it’s fair to ask, “How much cheaper?”. Let’s take the IC cost as 50m/yr and use the annual trade stats from the CSO to measure the value of gas imports and domestic production at about €1.5bn/year. That tells us that recouping the IC cost adds 3% to wholesale prices.

    2. Let’s assume that the CER directs BGE, a 97% state owned body, to assume 50m/yr losses for its IC investment. The state is now worse off and must recoup its loss from the taxpayers. But that’s OK because gas is now “so much cheaper”.

    3. Gas interconnection to Ireland is vital public infrastructure which protects the public from losses of up to 1bn a day as estimated by the authors of this paper. Energy security is a public good.

    4. The idea of privately owned grid and interconnect for wind power seems unsupported by current legislation. The UK will have difficulty meeting its binding renewables targets and may be willing to pay a premium for Irish wind electricity.

    5. Royalties for wind make less sense than taxes on fossil fuels. After all wind does not run out. In practice, profitable companies with immovable heavy capital investment may be taxed at will in future by host governments.

    6. LNG supply would help energy security but the net benefit needs to be balanced against the costs.

  20. Why Dork , when you’re right on the spot. I’m dutch. We don’t have a long term policy on sustainablity ergo a struggling economy. The germans are investing in sustainability and have flourishing economy. If anything the Irish should take this crisis as an opportunity to leave gas and oil for what they are, think long term and create a clean and sustainable economy and the ability to feed half of europe in a safe way. Next to being a great place to live and work in other sectors. Coming from a very polluted country, I’d say there is no other way.

  21. @Arjen
    Thanks Arjen
    Came across a excellent video of what I think is Europort Rotterdam.
    http://www.youtube.com/watch?v=vD05HCJsci0

    It plays like a Maritime Blade Runner.
    We are dealing with such immense energy densities now – especially withen China and its enormous coal consumption.
    They are building these ports to channel and contain this new energy flow.

    But if something goes wrong at these leverage ratios………
    I think the global supply chains are just too long with no internal redundancy built withen local systems.
    This reduction in redundencey appears to increase profitability via what they call efficiency but the systems are so fragile because of these manic efforts.
    Somethings got to give.

  22. @ R. Tol,

    Indeed I would agree with your comment about royalties on electricity from wind generation.

    If this is not to be the case, then once again the Irish will have been betrayed.

  23. From the 1959 discovery of a large Dutch gas field near Groningen to Dutch disease* and in recent times a gas glut:

    http://www.dbresearch.com/PROD/DBR_INTERNET_EN-PROD/PROD0000000000259898.pdf

    *Just for PC folk you could mistakenly brand me a racits, “Dutch disease”, is a term coined by the Economist in 1977 to describe the impact of a North Sea gas bonanza on the economy of the Netherlands. This malady involves commodity exports driving up the value of the currency, making other parts of the economy less competitive, leading to a current-account deficit and even greater dependence on commodities. This matters all the more because mining and hydrocarbons are capital-intensive businesses, generating relatively few jobs.

  24. Osborne seems to have got the memo with 500 million for the electricification of the Midland main line.

    Osborne backs £10bn rail plan

    Financial Times‎ – 17 hours ago
    George Osborne will seek to reinvigorate the government’s growth agenda next week, before MPs depart for … Osborne backs £10bn rail plan …

    Dork – This investment could also be tied into increasing St Pancreas international operations as that is the terminus for this line with many substancial towns & stations on this route.
    This is a typical Midland mainline station serving a 20,000~ size town.
    en.wikipedia.org/wiki/Market_Harborough_railway_station

    Indeed Eurostar is reporting signs of weakness as the Hinterlands of London & Paris become all extracted out.
    http://www.rail.co/2012/07/12/eurostar-sees-fall-in-business-passengers/

    British investment in rail is not of a French scale but something seems to be happening (they will get more bangs for their Buck from the above operations rather then the construction of new high speed lines)……………………..
    Also from http://www.rail.co/
    “The Government has backed an investment of up to £500 million to build a new rail link between Heathrow and the South West.

    The link is expected to take more than one million cars off the roads around Heathrow and create the airport’s first rail link outside London.”

    Meanwhile the closing down of the Derry Rail line for 9 months~ will have effects on transport stats up North I guess.
    (The historic rise of rail passenger numbers up there will be halted)

  25. Another Richard Tol article, throwing everything but the kitchen sink in in order to give the Greens and reds another kick in the nuts.

    Must be a day of the week ending with “-day”.

  26. No evidence whatsoever to back up R. Tol claim about fracking shale here (with attendant risks to aquifers/green image of country / tourism industry / farming) being cheaper than sourcing gas on international market offered. FAIL.

  27. I made this post about the wind energy project in a thread that died a few weeks back. Sorry to just paste it here again but I’m rather ignorant of the whole thing and looking for someone in the know to comment.

    comment:
    “Sorry to drag up old news but since this is plastered all over the media again today I read up a bit on their website. It seems A dedicated grid/transmission system is the plan after all.

    http://www.mainstreamrp.com/energy-bridge/

    “The Energy Bridge project will capture wind power generated onshore and offshore in Ireland, transport it under the Irish Sea and connect it to the UK via a grid connection that Mainstream has already secured. The cable for transporting the energy from the wind farms is entirely independent of Ireland’s existing electricity system.

    Using underground cables we will connect a number of turbines to create a single wind farm. We then connect several wind farms to a regional collector node, forming a wind park. Our underground cable then carries the electricity to the east coast”

    @Antoin & Richard, you mention no one in their right mind would build a private grid. So what’s the deal with this then? I still see this as similar to the export of non renewable resources. AFAIK leases on turbine sites are in the region of 100 years, so direct acccess to the resource is basically lost to us. The only difference we won’t run out of wind so the tax stream (such as it will be) should remain for as long as energy is exported.”

  28. @ I generally Disagree,

    The purpose of the underground cable is that it will be HVDC.

    That’s High Voltage Direct Current.

    It is the only way to transport very high powers over long distances efficiently i.e. 1 GW or more, perhaps even 5GW.

    The grid in Ireland is just too small to manage such powers, hence they are building their own independent electricity cable which will connect into the UK grid.

    Basically Richard Tol is right.

    Ireland gets lots of wind farms, light flicker from the blades, swishing sound from the blades, some jobs maintaining the machines, and… and ..

    Well that’s it really.

    There is lots of talk about jobs, but none of the components will be made in Ireland, i.e. transformers, XLPE cables, generators, silicon rectifers, not even the gearboxes etc.

    All this equipment will be assembled like a giant lego set on site. Once the system is commissioned the workers can go back on the dole.

  29. @IGenerallyDisagree – it will never go ahead.

    Think of the trouble with building transmission lines near populated areas (or indeed anywhere in Ireland), which are part of the Irish network, i.e. providing electricity to Irish people. Do you think lines built through similar areas (even underground HVDC), which are solely for the purpose of supplying energy to our British neighbours, will get planning permission/community buy-in?

  30. Sorry again, I was away for a bit and forgot to check back in. I read elsewhere that the cables will/would run along side the roads at ground level but not underground. That makes more sense to me since I would have thought underground cables would be prohibitively expensive. I’m still left feeling that if this goes ahead in 30 years we’ll end up getting a pittance in tax from these while paying ever more to import energy from elsewhere in Europe.

  31. Richard Tol went on to local Radio Kerry yesterday to criticise “crazy” objectors (as he called them) who were causing delays to projects and thereby giving Ireland a “bad reputation” internationally. It is utterly laughable that an academic should on the one hand, such as in the case of Hess LNG / Shannon LNG, be explaining that the reason for the interconnector tariff is to reduce costs being passed on to the consumer and then on the other hand be saying that the projects should not be delayed and allowed to cut corners to go ahead anyway. Why bother having a development consent or licensing process if that’s the case? Are we supposed to put the interest of international companies before the national interest and give them what they want at any cost just because they are able to spend huge sums of money on marketing of spin and lies? His objectivity is seriously compromised by these sort of sound bites which smack more of personal attention seeking than the sound logic he is equally capable of on a good day. There would not have been any delays if proper procedures had been followed in the first place by the companies involved.

    From Radio Kerry (www.radiokerry.ie) the following was reported:
    “25 Jul 2012
    Shannon LNG, Corrib, and Poolbeg give Ireland bad reputation on energy projects

    Shannon LNG, Corrib and Poolbeg have given Ireland a bad reputation on energy projects, according to a lecturer who specialises in energy economics.

    Richard Tol is a professor of economics at the University of Sussex, and is also a professor of the economics of climate change at the Vjije Universiteit in Amsterdam. The 600 million euro liquefied natural gas terminal proposed for the Tarbert Ballylongford landbank has been beset with delays.

    The project’s backers, Shannon LNG, are now considering high court action against the Energy Regulator, in a row over proposed charges for gas interconnectors it says it won’t use. Richard Tol says, along with the Shannon LNG plant, the Shell Corrib gas project in Mayo, and the Poolbeg incinerator in Dublin have given Ireland a bad reputation for energy projects.”

  32. @Johnny
    Accurate reporting.

    I think there is a distinction between legitimate concerns and appropriate use of the planning procedures on the one hand and irrational fears and procedural abuse on the other hand.

    Shell/Corrib and Covanta/PoolBeg are well-known internationally, and Irish planning is seen as capricious.

    Ireland could do with inward investment, and may thus be concerned about its reputation.

    Management practices at semi-states are also no secret, and these companies will be sold at a discount as a result.

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