Written Evidence submitted by Prospect (EEE0004)
1. Prospect represents 141,000 engineers, scientists, technical specialists and managers across the public and private sectors, and is the union of choice in the UK for managerial and professional employees. We represent managers and engineers in the electricity supply industry throughout the UK, including hundreds in Northern Ireland’s power sector including at NIE Networks and AES, as well as at SONI.
2. Recent redundancy announcements at these companies are of great concern to our members, heightening fears that a potentially reckless focus on cost control is risking the future security and stability of our electricity supplies, whilst also stripping away a vital layer of skilled workers at a time when Northern Ireland’s economy can ill afford to lose them. It is clear that the closure of AES Ballylumford and Kilroot power station would have widespread impact on the local community. The knock-on effect among the many suppliers and subcontractors to AES would also be huge, and there are wider ramifications for the region. As the largest rate payer in Mid & East Antrim, communities will be made poorer by the closure of generation units in Islandmagee and Carrickfergus.
3. In summary, we believe that:
• The system operator and the utility regulator must guarantee security of electricity supply for Northern Ireland.
• This requires long-term management of network assets in conjunction with the skilled workforce necessary to deliver a sustainable, safe and secure energy future.
• The regulator UREGNI needs to reconsider the damaging focus on short-term cost reduction that has led directly to the current crisis and instead take a more holistic approach to Northern Ireland’s future energy needs.
• All these measure are necessary in order to ensure attractiveness to high value manufacturing and engineering investment and thereby help to secure future prosperity.
4. Our responses to specific questions posed by the Committee are set out below.
What are the positive and negative effects of the Integrated Single Energy Market (I-SEM)?
5. The announcement by AES follows a failure to secure contracts in the Single Electricity Market capacity auction. This means that Northern Ireland faces the possibility of losing 36% of its dispatchable generating capacity by the end of the year, with no clear alternatives in place to ensure continued security of supply.
6. The I-SEM relies on the north-south interconnector to increase supply for Northern Ireland from generators in the Republic of Ireland. However this has only just received planning permission and will not be complete until 2021 at the very earliest. It is unclear how the I-SEM could function without this interconnector if Kilroot and Ballylumford generating units are closed down. Data provided by SONI regularly shows that coal, provided by Kilroot, provides around one quarter of Northern Ireland’s electricity requirements, and more on days when there is no wind.
7. The Moyle Interconnector, between Northern Ireland and Scotland, is currently running at full capacity but has only been able to do so since September last year following a prolonged reduction in capacity of 50% due to several faults. It is unclear how reliable this will be going forward, but in any event there is no spare capacity in the interconnector to take further power from Scotland.
8. No evidence has been provided by SONI or UREGNI to support their claim that the 567MW capacity lost by the closure of Kilroot and Ballylumford generating units will be covered by alternative means until the north-south interconnector comes online and beyond that. This is clearly an untenable position, which leaves Northern Ireland facing the possibility of major power cuts.
What are the broader implications of the Kilroot and Ballylumford power station closings?
9. The double hit of a hard border and too little capacity in Northern Ireland would be a disastrous outcome for residents and businesses. Future prosperity is dependent on reliable sources of power. In this regard the ability of the large number of smaller “demand side units” and other generating sources that were successful in the T-1 capacity auction to come online when required by the System Operator is untested, as is their ability to provide that supply for a sustainable period, for example depending on their fuel reserves.
10. There are also concerns that the cost of electricity to the consumer may increase. Although much has been made of around £50m savings in capacity payments, this may actually be overshadowed by increases in generation payments. The majority of the island’s wind generating capacity did not bid into the T-1 auction. Those generators will not therefore receive a capacity contract to cover their fixed costs but they will receive an enhanced (DS3) payment when called upon to generate electricity. Prospect has seen no evidence that implications for overall consumer costs following the closure of Kilroot and Ballylumford units have been properly examined.
11. It is a similar drive to reduce costs, apparently without a corresponding concern for the security and sustainability of Northern Ireland’s transmission and distribution networks, that has led UREGNI to slash revenues for NIE Networks by almost 9% in the new RP6 price control. This has been done despite concerns raised by informed commentators that network spending in key areas was already too low. With the growth of renewables, the development of new interconnectors, and moves towards ‘smart grids’, the complexity of running electricity networks is set to increase exponentially. Sustained investment and an adequate skilled workforce to manage it safely and reliably are essential. However forcing NIE Networks to cut costs is producing the opposite outcome, as the recent announcement of significant job losses indicates.
12. Loss of key skills in the Northern Ireland energy sector alongside mounting job losses in manufacturing will undermine the ability of local policy-makers to make a convincing case to relocate to Northern Ireland if energy security cannot be guaranteed.
13. The requirement for generators to bid into continued 12-month capacity auctions beyond 2019 could lead to other casualties. The main cause of Kilroot’s “expensive” bid into the T-1 capacity auction was due to it having two large maintenance overhauls scheduled during the T-1 period (to September 2019). Costs of previous maintenance cycles could be spread across multi-year capacity contracts, reducing the overall fixed costs over time. It should be noted that one of the Huntstown power stations in the Republic of Ireland was not granted a capacity contract in the auction for the very same reason – and that station is one of the newest and most efficient power stations on the island. This has led to deep concerns that other power stations, such as the remaining Ballylumford units and Coolkeeragh power station, will fall foul of the same issue as their maintenance cycles come around. The logical consequence is that over time all large-scale power generation capacity in Northern Ireland will be similarly affected.
What bureaucratic, legal, or infrastructure obstacles remain for the construction of the North-South Interconnector?
14. The north-south interconnector has only just been granted planning permission. Any call for a judicial review or similar by concerned stakeholders will delay the construction of the interconnector, currently expected to complete in 2021 at the very earliest. This can only increase the risk that Northern Ireland’s power demand cannot be met with available generating capacity should Kilroot and Ballylumford units close.
How will the Republic of Ireland's proposed energy integration with the EU, through a Celtic Interconnector or other means, affect its energy integration with Northern Ireland?
15. It is worth noting that continuing Brexit uncertainty threatens to undermine the operation of I-SEM and that UREGNI has admitted that ‘If there is no access to the EU Internal Energy Market then it is possible that the [I-SEM] will not function’.
What are the implications of the prolonged state of the collapsed Executive and NI's pressing energy needs?
16. Lack of an Energy Minister has led to concerns about who is regulating the regulator. It also leaves many important questions unanswered including who has ownership of a Northern Ireland energy strategy and where is the oversight of the potential impacts of SONI and the regulator’s decisions on security of supply for businesses and the population of Northern Ireland.
17. There is an urgent need to inject some common sense into energy policy in Northern Ireland, and consistent political leadership and oversight is critical in this regard. For Northern Ireland to develop and maintain a secure, reliable and sustainable energy system fit for the future, it is essential that policy is not driven solely by a desire to cut costs in the short-term without due regard for the consequences. Northern Ireland urgently needs more investment in dependable generation assets, in network management and reinforcement, and in its skilled workforce.