Ireland's energy trilemmas
Frontispiece: Ireland, as part of the European Union, is working hard to reduce GHG gas emissions which mostly come from energy usage. Strengthening public opinion on climate change risk is for the most part influencing policy towards the environmental impact part of the Energy Trilemma. In this paper, I return to the subject of the energy transition in Ireland, and present some viewpoints about the counterpoints of energy security (or reliability) and affordability.
Both states on the island of Ireland, Northern Ireland (NI) and the Republic of Ireland (ROI), have ambitious targets to reduce GHG emissions for the UK and the EU, respectively. But Ireland also has more than one competing issue that at times can be counter to the reduction of emissions from energy (which is about 80% of total emissions). Paramount amongst these issues are two factors that reflect energy’s role as the lifeblood of the Irish economy and society. Firstly, energy must continue to be affordable, and if anything needs to become cheaper with time to allow the economy to flourish and grow. Indeed a healthy economy makes for resilience for society in the face of climate change and other risks like global pandemics. Secondly, energy must be secure or reliable, free from risks such as obstruction, price gouging by monopolies, or intermittency of supply. Businesses, communities, and public infrastructure can’t afford the lights to go out all of a sudden. These two factors, together with the environmental impact, form a trilemma for policymakers, consumers, and businesses to manage. Unfortunately, it’s all too easy to polarize debate and action onto one of these factors, for example, be slavishly focused on emissions reduction, and be forgetful of the other significant factors that need to be part of the solution space.
In this blog I will examine three examples of this trilemma, using data from the ROI only, although I strongly believe the scenarios are similarly manifested in NI, and of course elsewhere in the world.
Figure 1: Emissions history and targets/projections across sectors other than agriculture, waste disposal and land use. (Source EPA)
GHG emissions targets
Figure 2: GDP, Energy Consumption and Emissions per capital. (Source data from IEA, IMF and BP Energy Statistical Review, graphic, Capriole Energy)
Ireland, along with Denmark and Luxembourg, has the most challenging target for greenhouse gas (GHG) emissions reductions in the EU; a 20% reduction on 2005 emissions levels by 2020 (Figure 1). Activity contributing to the achievement of these energy targets will help to meet the binding EU greenhouse gas emissions targets but does not guarantee them, because Ireland’s contribution of total EU-27 emissions is only 1.7%. That’s why in my prior article about the energy transition in Ireland I opined that it was really a leadership opportunity for Ireland, rather than a fundamental part of reducing global emissions and mitigating the risks associated with global heating. For me, it follows that Irish policymakers must, therefore, be additionally cautious in Ireland to ensure that meeting tough emissions targets for the benefit of the EU does not come at the expense of rising energy costs or reliability/security risks because those issues can cause ruin on their own.
This pattern is somewhat mimicked on the global stage where Ireland contributes 0.17% of the world’s emissions. In per capita terms, Ireland has middling emissions but has a low energy use per capita, particularly when compared to GDP per capita, Ireland is the fourth highest in the world on that measure (Figure 2). The challenge of reducing the carbon footprint of the country must be met in a measured way, while continuing to provide affordable and reliable energy to end-users, both commercial and residential.
I will now examine the trilemma for each of the three main energy modes in Ireland: electricity, heat, and transport.
Figure 3: GHG emissions from primary energy uses in Ireland. (Source: SEAI).
Electricity
Electricity accounts for 27% of energy-related emissions in Ireland, but only provides 19% of final energy. This reflects the generation of electricity in thermal natural gas and particularly coal power plants which is inefficient and produces high GHG emissions. The amount of GHG associated with electricity generation is coming down (Figure 3), as renewables, particularly wind, further penetrate the grid, with a goal of 70% renewable energy in the grid by 2030.
There are two challenges that need to be met in electricity for Ireland. The first is that the demand forecasts, at least before Covid-19, were for electricity demand to grow by roughly a third by 2030, from 2019. This growth is largely driven by the development of multiple energy-thirsty data centers in Ireland. Thus even with an increase to 70% share by renewables, Ireland would still need more than 70 billion cubic feet (bcf) of natural gas for power generation in 2030 (Figure 4). As discussed further below there may be ways to reduce grid demand through efficiency and substitution, but the point remains that in all reality Ireland will still be generating large amounts of electricity from natural gas in the next decade (Figure 4).
Figure 4: Historical electricity generation by fuel type and projection until 2030. (Source: Data: SEAI, EIRGRID; Graphic: Capriole Energy)
The second challenge is that Ireland like many parts of the world has no clean baseload alternatives to thermal power plants and therefore no inexpensive and reliable backup to periods when the wind doesn’t blow, or the sun doesn’t shine. There is good deal of expectation that battery storage can meet the challenge of filling in for variable renewables. Ireland’s second larger-scale battery project was recently sanctioned, with Inogy to install a 60 MW lithium-ion plant near Lisdrumdoagh in County Monaghan. There is a pipeline of such projects amounting to 2.5 gigaWatts (gW) capacity being approved and progressed in Ireland. However, considering that the country uses on average roughly 3.4 gigaWatthours (gWh) per hour, all that battery storage will only have the ability to cover about an hour of dead calm and stationary wind turbines over the country. Potential solutions for this include interconnectors with (technically) more reliable electricity from the UK and Europe, but there are political risks with that supply that need to be considered.
Figure 5: Energy prices in Ireland for domestic and commercial customers (Source SEAI).
The ability of the current grid capacity to supply consumers has come into sharp focus with the news that an increasing number of the data centers, both active and slated for development, are having to install gas-fired generation adjacent to the facility because the grid, particularly in the Dublin area where many data centers are located, is unable to cope. Many of the data centers are owned by the tech giants Microsoft, Amazon and Facebook, companies that face their own challenges to become net-zero on emissions. In a poster child illustration of the trilemma, for both the companies and the government, the data centers are having to generate more emissions than preferred for energy, in order to secure affordable and reliable electricity to drive and cool the systems. This of course poses a particularly interesting challenge to the Irish government, having to balance between the financial and employment benefits that these companies provide Ireland, versus the impact on GHG emissions. Moreover, as the Irish Times points out, it will make it more difficult for the government to convince farmers and other emissions-intense sectors to reduce their emissions. Some tech companies such as Facebook are using corporate power purchase agreements with renewable electricity providers to alleviate this problem, but while it ought to be the goal of investment decisions, a unique net-zero solution for all three corners of the trilemma may not yet be possible and judgment will be required.
One final point on electricity for now. Both for domestic and commercial needs, electricity at supply costs is two to three times more expensive than other energy types (Figure 5). For a forward decarbonization strategy of electrifying (most) everything to work most effectively, the cost of electricity will need to be kept from increasing while the grid is decarbonized and reliable capacity increased. This demand increase can be at least in part offset by radical efficiency improvements in smart and efficient energy buildings that capture part of their energy quotient from the immediately adjacent environment. I will come back to these opportunities in the next trilemma about heat.
Heat
Figure 6: Heat as a final energy (in mWh) in Ireland. (Source: Data: SEAI; Graphic: Capriole Energy)
Heat as a mode comprises 38% of the final energy used in Ireland and nearly half that is used warming spaces and water in Irish homes (Figure 6). Residential heating is both a big draw on energy, particularly fossil fuels, and hence a substantial portion of the country’s GHG emissions. With around 400,000 homes in Ireland classified as energy-poor, residential heating is a great example of an energy trilemma. How do we both reduce emissions and eliminate energy poverty in a lasting manner?
Figure 7: Final energy demand in Irish dwellings. Note that the total residential energy by year includes electricity to lights and aplliances, unlike Figure 6. (Source: Data: SEAI; Graphic: Capriole Energy).
There is a wide range of grants backed up by consumer information provided by the Sustainable Energy Authority of Ireland (SEAI). Grants are available to owners of existing homes to encourage retrofitting of insulation and renewable energy devices. Building regulations have recently been updated to improve energy efficiency over the previous ratings by a further 30%. There is a number of energy solutions that are both cleaner than coal, oil and natural gas, and can be run for similar or less cost (Figures 7, 8). Yet in the last five or years or so little progress has been made in the average energy demand of dwellings in Ireland and the proportion of renewable heat supplied to homes is tiny (Figure 7). Why is this so?
For some consumers, particularly those without the capital means and/or ability to afford their current fuel bills, the grants are likely insufficient stimulus. For example, the grant for solar thermal is €1,200, but a system costs €6,000 to €13,000 to install. Consumers may understand that the installation cost of the solar thermal system amortized over 20 years may present lower annual fuel bills than their old oil boiler (Figure 8), but the upfront capital costs are a challenge. It also appears that many consumers have misconceptions about cleaner technologies such as heat pumps and further the reputation of these energy sources may be tarnished by poor design and installation by “cowboy contractors” in the past. According to Simon Whelan, an energy consultant with the Wicklow energy solutions company Glenergy, the main problem is the leakiness of Irish homes. Simon tells me: “the existing housing stock in Ireland is mostly poorly insulated and requires high temperature and high capacity heat sources (gas/oil boilers) to heat them sufficiently. Insulation levels need to be improved first before heat pumps can operate economically. It’s currently a €30,000 to €40,000 investment to get an oldish house totally upgraded. Weigh this up against a €1000 fill of oil a year that many live on.” In addition to heat pumps, other cleaner or clean technologies like solar thermal and geothermal can also be much more effective. Simon concludes that the grants available are woefully light compared to the capital challenge, and believes low-cost financing is required to accelerate progress.
Simon Whelan’s comments stimulate a thought experiment to consider the potential scale of energy savings if Irish homes received the kind of investment Simon considers necessary. Let’s (conservatively) assume there is a stock of 800,000 homes that could deliver a 25% reduction in energy usage if the €30,000 upgrade was applied to each and every home. The 2018 average energy usage per dwelling was around 18,000 kWh (Figure 7). That adds up to an energy-saving over 20 years of 40 tWh at a total price tag of €24 billion, or €0.60 per kWh. Compare that to offshore wind, on which the Irish government is to focus in the next decade: the cost of supply of offshore wind is expected to be around the same price per kWh by 2025. Said another way, fixing these homes, properly, would remove the need for 0.5 gW of offshore wind capacity. Is there a way to transform the way we think about energy in our homes and other buildings based on this insight?
Figure 8: Fuel costs for heating Irish homes. The data is from SEAI except for solar thermal which is calculated by amortizing a €10,000 installation over 20 years.
There further appears to be some myopia amongst the big energy providers with respect to the selection of technologies. It’s no surprise that natural gas infrastructure will want to concentrate on ways to decarbonize the gas in the grid, rather than seek alternatives. For example, Gas Networks Ireland seeks a goal of 20% biogas replacing fossil natural gas by 2030. Unfortunately, the cost of upgraded biogas (CO2 from anaerobic digestion of agricultural and other waste removed) looks to be 2 to 4 times forecast natural gas prices. With the Corrib gas field expected to be depleted by 2030 and assuming no further offshore gas development (Figure 9), the generation of biomethane will at least offset some of the foreign fossil gas improving the security aspect of this energy source. This remaining security issue could be further eased by enabling (rather than banning) offshore gas exploration to fast-track one or two more Corrib-like developments during the next 10 years, as well as adding several hundred valuable jobs and more than €2 billion tax revenue.
Figure 8: Natural gas consumption history and generation (data from IEA) and projections (from Gas Networks Ireland, IOOA and Capriole Energy).
ESB, the national electricity provider, has presented some good reports on the energy transition and has naturally focused on electrification as the primary lever. To their credit, ESB has launched some endeavor into carbon capture and sequestration (with Equinor), which makes sense if the pragmatic view is that Ireland will continue to burn fossil gas in 2030 at levels of at least 60% of today’s consumption (Figure 9). However, their reports on paths to the decarbonization of residential energy are a little quieter on technologies like solar thermal which can take care of 60 to 70% of a home’s heating needs without grid electricity. I think the huge challenge for ESB and the electricity providers is to track a course for cheaper, cleaner, reliable and 30% more elecricity by 2030.
Figure 9: Irish Transport in 2018. (Source: CSO)
Transport
Transport accounts for the largest proportion of GHG emissions in Ireland’s profile (Figures 1 and 3) and its component parts are nicely illustrated in the infographic from the Central Statistics Office (CSO) in Figure 9. Irish vehicles put an astonishing 47 billion km on the odometer in 2018 and 76% of that distance was in private cars. In 2018 Ireland consumed as primary energy 52.7 million barrels of oil (as refined products) and 68% of that fueled transport. There is no indigenous crude oil production in Ireland, so the country is 100% dependent on imports of foreign oil and oil products. Hence anything that can be done to reduce oil consumption will not only reduce emissions but improves energy security. So optimization of this trilemma depends on available clean technology at affordable cost of replacement of the old fossil fuel technology.
Figure 10: Circa 2011 road map for EVs on Irish roads. Note that the total passenger car stock is missing two zeros, top value should be 3,500,000 not 35,000 (Source: SEAI).
Figure 11: Private cars in Ireland by fuel type and the reality of EV growth. (Source: Historical data: CSO; Graphic and projections: Capriole Energy).
There is an interesting and well illustrated “road map” for the inculcation of battery electric vehicles and plug-in hybrid electric vehicles (BEVs and PHEVs) published by SEAI apparently back in 2011 (Figure 10). I like the shape of the projections with more fuel-efficient Internal Combustion Engine (ICE) vehicles replacing old ICE models, and proportionately greater proportions of EVs, both PHEVs, and pure BEVs, making up a greater share with time. I like the H2 fuel cell vehicles coming in too as a minority share because I have concluded from my research that H2, similar to its place in heating, will only play a niche role in transport - heavier vehicles like lorries (trucks) and buses.
The major problem now with the old SEAI projection is that it has already been proven over-optimistic with regard to actual EVs on Irish Roads, for example in 2019 it was about 0.4% of the passenger car fleet. Despite that flaw, in 2019 the Irish government, as part of the Climate Action Plan, upped the ante on these projections by declaring a ban on petrol and diesel vehicles from 2030 onwards, with the hope of encouraging the ownership of nearly 1 million electric vehicles on Irish roads by 2030. The first point to note about this projection is that it is not likely to happen. Taking private cars alone, which comprise very nearly three-quarters of the total current vehicle fleet of 2.7 million, there isn’t enough annual turnover to realistically achieve this target. Roughly 100,000 cars are retired each year. To put 800,000 EVs on the road instead, newly purchased replacement cars would need to be 100% EV by 2023, which is a 17 fold increase in sales over 4 years from last year. That doesn’t seem likely. Even to reach 100% EV new cars by 2030 requires an exponential growth of about 30% more of the market share in the prior year (Figure 11).
Figure 12: Cost of ownership calculations for two fancy cars available in Ireland, one ICE and one BEV.
Leaving this magical thinking of a goal that is highly unlikely if not impossible, there are substantial changes to the EV market that still need to happen to start to optimize the trilemma associated with transport. Firstly, while there is a better range of PHEV models on the market now, we are nowhere near the range of BEV models at price points similar to ICE cars can afford to purchase. The existing BEVs are in a price range of higher-end saloons and SUVs. For example, the Tesla Model 3, the “less expensive” offer from the world’s leading EV manufacturer, has a price tag of €48,900 for rear-wheel drive and starting from €60,700 for its all-wheel-drive version. I have run my own calculations comparing a Tesla Model 3 (Performance model) with an equivalent performance BMW 3 series and illustrate the assumptions and outcomes in Figure 12. I have assumed close to parity on purchase cost because of SEAI grants and reliefs on Vehicle Registration Tax (VRT). The other assumptions come from a variety of sources including my own data from owning a Tesla Model 3. My calculations suggest it’s a close run thing on ownership costs now in 2020 between the two vehicles in the same class of body type and performance, with the Tesla about 5% cheaper. (That’s not the case in the USA, where I reside most of the time, because electricity is far cheaper). Of course, in terms of ownership emissions, the Tesla wins hands down (less than 50% of the BMW) and I haven’t allowed for an improvement in Irish electricity GHG emissions intensity from the 2018 average I used as an assumption. Consumers need a range of BEV models with a starting price tag starting at €30,000 (assuming full grant and VRT relief takes it down to an affordable €20,000) so that the “kitchen table” economics of car ownership work at all levels of disposable income. While traditional car manufacturers are finally waking to the Tesla disruption, it will still take a number of years to catch up.
Aside from choice and supply of models, another reason consumers are not yet buying EVs in the required numbers is the perceived “range anxiety” even for a geographically small country like Ireland which I know from experience from driving in the USA is largely unfounded and will become less of an issue as charging station networks are extended. Nevertheless, charging is an issue now, and will continue to be so, particularly for people with on-street parking, and it’s not clear that the traditional petrol station model will work.
Despite these problems, I find the EV proposition very attractive, with clear potential for the electric vehicles to grow to be cheaper as well as cleaner than their fossil fuel counterparts. I argue with those that will listen that the Tesla is really tech, providing a far superior and distinctive experience for the consumer. Think iPhone versus the flip phone. I believe that EVs could still exceed 20% of the road stock by 2030, although there will need to be progress on the issues outlined above if the BEVs are to take up a greater share (Figure 11). But as with the other trilemmas, EVs are not a silver bullet, the transition is going to take decades, and Ireland will remain for some time on the hook of oil dependence. To illustrate this further let’s conduct a final thought experiment on this topic.
Let’s assume that about 20% of driven kilometers by private cars are electric by 2030. I am speculating here that most commute miles driven by PHEVs are covered by the battery. Taking my projection of 400,000 EVs on the road in 2030, each driving an average of 17,000 km per vehicle and a 6 km per kWh economy then I estimate 6.8 billion km would be electrified with an additional 1.1 terraWatthours (tWh) of annual electricity required. This is very modest compared to other sources of power demand growth like the data centers and confirms a key conclusion of SEAI’s 2011 report. Let’s further assume that 2030 ICE-vehicle miles are 20% more fuel-efficient than 2018 in addition to oil consumption reductions achieved by electrification. Together that causes a reduction of 30% reduction in consumption of oil by cars compared to 2018 levels, despite the slight growth in the private car stock (Figure 11). Finally let’s consider that this 30% reduction is accomplished across all transport sectors and over other oil-consuming sectors, such heating considered above. Ireland’s oil consumption would be at 36 million barrels per year going into the next decade. This underscores the point that even with acceleration of electrification of cars, the challenges associated with more difficult to carbonize transport sectors such as aviation, points to a reality that progress is likely to be measured in decades and some of Ireland’s dependency on oil may well continue beyond 2050. The only alternative to this is the acceptance of a transformation in lifestyle and societal norms associated with vastly reduced personal mobility and a hugely diminished desire for goods transported from afar. Even with the lessons of covid-19 in mind, such a transformation seems unlikely, unless there was an economic catastrophy leading to a much-different world.
The last point on this topic concerns the Ballyroe oil field, 50 km south of Cork, discovered in 1973 and still not in development. It looks as if it has between a confident 100 million barrels of reserves with an upside of more than 600. The current operator, Providence resources, is confident that the project can be delivered economically, even at current low prices. With a peak production of 30,000 barrels per day and field life of 25 years, Ballyroe has the potential to meet about one-third of Ireland’s annual oil demand from 2030 or earlier, together with billions in state revenue and several hundred jobs. It seems to me that to block that opportunity to instead rely on foreign oil, is an action in the category of “cutting off your nose to spite your face”. Instead, I suggest the Irish government should be working with Providence to fast-track the development, taking the opportunity to reduce the emissions (Scope 1, 2) intensity of the development by considering concepts such as integrated offshore wind and interconnected offshore power.
Conclusion: managing the trilemmas
It’s clear that even only mildly polarized, politics and idealism can nevertheless get in the way of a balanced perspective and mindful action. The reader should not misinterpret my motives, despite a 25-year-career with bp, I am firmly fixed on supporting the energy transition, for a number of reasons. Facing up to a reality of complex trade-offs, a balance of old and new technologies, compromises on previous societal norms, is certainly much harder than standing on one side of the debate and shouting. I suggest Ireland needs to do the hard work, for the future good of the country. Its ambition to be a climate leader is laudable especially given Ireland’s contribution to the problem is tiny. However, to be a meaningful and sustainable part of the solution, adaptive leadership is needed to plot a course through the energy trilemmas. A singular focus on one corner of a trilemma is foolhardy. For example, technology, cost, and security demand a future for natural gas in electricity generation for several more decades and relying on foreign gas while there may indigenous resources to develop seems ill-advised. There appears to be huge opportunity to focus on efficiency to do more with less energy in heating, instead of building more primary energy capacity. Transforming mobility and transport certainly is possible but needs a pragmatic approach to the costs involved and the availability of the necessary technology.
I remain optimistic that these trilemmas can be optimized in a way that is good for the current world and better for future generations. But we must face these challenges head on, be explicit about the trade-offs, and accept there are some current societal norms and habits will need to change.