Page 8 - European Energy Innovation - autumn 2017 publication
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8 Autumn 2017 European Energy Innovation

Brexit and Ireland's energy supply:
time to look seriously to LNG?

By Seán Kelly MEP (pictured)              Irish power mix is significant. On top       A diversification of Ireland's supply
                                          of this, as part of the Clean Energy         would therefore seem to be very much
The United Kingdom's                      Package, the Commission proposes to          in the interests of the EU-27.
            decision to leave the EU has  put an emission performance limit on
            brought with it significant   electricity capacity payments, which         The IEA's recent report "Gas 2017"
            uncertainty that has been     would effectively rule coal out of such      offers some very interesting insights
well documented at this point. There      subsidies. It is clear, therefore, that for  into global gas markets and their
is no EU Member State that stands to      Ireland, as an island country, gas will      rapid development. Gas demand is
be more affected by Brexit, and the       continue to have a crucial role in the       expected to grow by 1.6% year-on-
ongoing negotiations, than Ireland.       medium term at least. Maintaining a          year to 2022, with the growth in LNG
With the Irish and UK economies still     secure and competitive supply will be        supply capacity predicted to grow at
closely linked, particularly in terms of  vital for Ireland’s economic prosperity      a faster rate than global demand. The
trade, for Ireland there is no upside to  post-Brexit.                                 most interesting parts of this report
Brexit - the question is, how bad will                                                 relate to the development of US LNG
it be? One area that has been given       A key point here is that we are not          exports. US production is expected
less media attention thus far, yet is     fully clear exactly what impact Brexit       to increase at an annual rate of 2.9%,
probably one of the key issues in the     will have on the Irish energy system.        and this is bringing changes to the
Brexit talks is energy, and particularly  While we do not necessarily have an          international gas market. LNG is
how Ireland will be impacted.             impending security of supply crisis,         creating competition with pipeline gas,
                                          some interesting points made by              and price and contractual rigidities are
Ireland currently has two main            commentators recently raise some             softening.
sources of gas supply - the Moffatt       important concerns. Firstly, the UK
Interconnector from Scotland, and         will no longer be under the same             While piped gas will continue to
the Corrib gas field off our west         regulatory regime as the EU, nor under       dominate the European market, LNG
coast. Up to recently, Ireland was        the jurisdiction of the European Court       now offers significant market benefits,
around 95% dependent on the               of Justice.                                  as well as an option to diversify supply
Moffatt Interconnector for our gas                                                     and to mitigate the risk of shortages.
supply. While Corrib gives us some        Regulatory divergences down the line         Improving the EU’s capacity to buy
temporary relief from this almost total   could put additional costs onto the          LNG on the global market - which
dependence, we will likely be back        gas that Ireland imports. Additionally,      includes the better utilisation of
to that situation again sometime in       as pointed out recently by Dr Thierry        existing regasification capacity - will
the mid-2020s as the Corrib resource      Bros of the Oxford Institute for             increase flexibility and exert downward
depletes. During this time, according     Energy Studies, imposing regulations         pressure on the European gas spot
to Gas Networks Ireland, our gas          on EU-UK pipelines to push up UK             prices, to the benefit of EU consumers
demand is set to increase – likely by     energy prices could be tempting for          and industry.
around 30% by 2025. This increase         some EU Member States seeking to
will be mainly due to a move away         increase their competitiveness against       With Brexit, Ireland's case is slightly
from coal and peat, and indeed            the UK, something that would not             different and arguably more pressing
the completion of the North South         be in the interests of the Irish energy      given our reliance on a country
Interconnector between Ireland and        consumer. Similarly, Ireland's security      currently preparing to leave the EU.
Northern Ireland, creating additional     of supply is something that the UK           An LNG terminal in Ireland would
gas demand in the power sector.           could potentially use as a bargaining        reduce our exposure to any potential
                                          chip in Brexit negotiations; the UK is       supply shocks; lest we forget, Ireland's
This projection also accounts for the     well aware that EU negotiators cannot        storage capacity is limited, and post-
expected drop in residential demand       put at risk the energy security of           Brexit, the UK will not be subject to
due to increased energy efficiency,       one of their most pro-EU members.            EU solidarity rules on security of gas
demonstrating that the expected
additional contribution of gas to the

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