Reindustrialising Ireland and the infrastructure to deliver on that promise
Bord na Móna hosted a round table discussion at the Mountlucas Wind Farm, County Offaly, inviting key stakeholders from the public and private sector representing large energy users and government agencies to explore how Ireland can successfully decarbonise its industrial sector and what energy infrastructure is required to deliver on this vision.
What are the most significant opportunities and pathways for industrial users to achieve net zero systems?
John Reilly
For many industrial and commercial consumers, the simplest pathway to net zero is via electrification and the associated decarbonisation of the power system. Amid a global recognition of this fact, a growing number of organisations are now assessing how electrification can support their decarbonisation ambitions. As wind and solar are the primary technologies driving global decarbonisation, Ireland should be world leading in its ambition for a net zero electrical power system, given the resource we have. If the power system is completely decarbonised, those connected to it receive the benefit. The main barrier to the rapid delivery of a net zero electricity system is the pace at which we deliver critical grid infrastructure to accommodate the necessary expansion of renewable forms of generation.
The other opportunity lies in the replacement of fossil fuels, such as coal and oil, with natural gas in areas like industrial process heating. The focus can then sift to ultimately replacing that gas with a renewable or decarbonised gas, such as green hydrogen. Again, the electric power system can play a role here by enabling opportunities like green hydrogen production, which is a potential substitute for methane in industrial heating processes, for example.
Neil Morris
In 2001, AWS commissioned a study by 451 Research, predicated on the fact that all of the electricity consumed by Amazon’s operations has been matched by 100 per cent renewable energy for a number of years. The study determined that businesses in Europe can reduce energy use by nearly 80 per cent when they run their applications on the AWS Cloud instead of operating their own data centres. It also found that businesses could potentially reduce carbon emissions of an average workload by up to 96 per cent by making the switch. In Ireland, we have signed corporate power purchase agreements for 326MW of renewable energy from wind farms, with more in progress, and two years ago we decarbonised our back-up generation. The biggest opportunity to decarbonise systems, at least on the compute side, is by migrating to the cloud.
Matt Kennedy
The opportunities have never been greater because the technical solutions have never been as abundant, mature, and technically relevant than today. Underpinning this is enabling policy, a society that is fully engaged and supportive of a green growth economy, and an industry desire to be more productive and competitive.
We have embraced the opportunity electrification offers across power, heat, and transport with the deployment of onshore wind, and the pivot towards offshore wind. Outside of electricity, the development and scaling of renewable gases becomes really important to challenge of decarbonising industrial heat. Recognising that there is not one single decarbonisation pathway is important to meet the diversity of needs and maturity that exists across industry.
Michael McCarthy
The single greatest opportunity lies in the ambition of each organisation’s sustainability strategy. Cloud Infrastructure Ireland’s membership has committed to 1.2GW of renewable energy on the system; a significant signal of the sustainability and decarbonisation ethos that exists among cloud providers. Migration to the cloud, moving away from on-premises infrastructure, and entering a cloud system operated by companies who have invested significant finance and effort into their decarbonisation strategies, therefore, is an enabler of those many connected strategies.
The Tallaght District Heating Scheme, the collaboration between Codema, South Dublin County Council, and AWS is a great example of how cohesive ambition can contribute to the State’s overarching decarbonisation ambition. However, there are challenges to that pathway. A commitment to private wires policy was included in the 2020 Programme for Government but has now breached the election cycle. The new administration must remove the obstacles that can inhibit wider ambitions to decarbonise the system.
How can Ireland balance sustainable industrial demand growth with national energy security?
Michael McCarthy
There must be an alignment between enterprise and energy policy, and the Government Statement on the Role of Data Centres in Ireland’s Enterprise Strategy acknowledges this synergy. From an Ibec perspective, 1.2GW of renewable energy on the system delivered by private industry is quite significant in terms of enabling the decarbonisation of the grid. However, we must ensure that the other components of the system are moving in tandem with that effort. If we engage in a circular debate about not having enough supply, then we cannot focus on ensuring adequate generation.
In recent years, the capacity auctions have proven to be unfit for purpose. Therefore, if we continue designing a system which is doomed to failure, it is inevitable that a system alert will be issued. In turn, that brings us back down a rabbit hole of debating how each stakeholder can reduce energy usage. Align this with the Government’s policy on decarbonisation of heat and transport, which means more electric vehicles and more heat pumps. Allied to this, there are other factors informing the increased consumption of electricity; we have a growing population, we have full employment, and there is an increasing focus on digitalisation.
When looking holistically at this reality, the obvious conclusion is that the relevant organs of the State must pay attention to the challenge of generation. If there are clear barriers, they must be removed, and we must shift the focus away from reducing usage and towards generation.
Matt Kennedy
Traditionally, we have operated in a Venn diagram encompassing the pillars of competitiveness, environmental protection, and security of supply, but industrial policy now also plays a significant role. How do we balance the industrial demand with security of supply? You can do it in several ways, but having an integrated approach to spatial planning is one, and that involves a cohesive approach. EirGrid has modelled its future energy scenarios, but I would also like to see large energy users working together to inform those scenarios from an industry perspective. This would add collateral value to the decision-making process which can address energy security and energy demand in tandem.
There must also be enhanced balancing to ensure that generation meets demand at the right times and, therefore, incentivisation of energy storage plays a major role.
“‘Ireland Inc’ stands on the brink of a massive industrial policy opportunity.” John Reilly
John Reilly
We often hear that Ireland has some of the highest electricity prices in Europe. There is a very simple reason for that. In the single hour that we are sitting here today, Ireland’s economy and its citizens will spend €1 million importing fossil fuels to meet our energy demand. So we need to rapidly take fossil fuels out of our energy mix both for competitiveness and security reasons.
Demand growth can align with energy security. Ireland’s energy policy is based almost entirely on expanding renewable energy generation – targeting over 20GW from intermittent renewables by 2030. Tapping into our indigenous resources, given the natural resources we have, is the best way to manage both our energy security and climate challenges. In wind in particular, we have a natural resource that is the envy of many economies, we simply need to capture and use it.
Trying to manage a small, electrically isolated power system like Ireland’s, with intermittent and non-synchronous forms of generation, is a challenge, but not an insurmountable one. Given the nature of this generation and our emissions reduction targets, it will be necessary to over-install renewable capacity. That means that at times, one of the biggest challenges will be overproduction of energy. So Ireland does not have an energy problem per se, but rather an infrastructure problem, which means we cannot always efficiently capture and utilise this clean green energy for the benefit of the economy to the extent that we would like.
In the past it was assumed that the answer to the overproduction problem was to export the excess energy. However, from an industrial policy perspective, we must now focus on capturing and utilising this green energy domestically to power our industrial sector. Rather than exporting green energy we should focus on facilitating the export of green data, green agrifood, and green pharmaceuticals. In this concept, ‘Ireland Inc’ stands on the brink of a massive industrial policy opportunity.
Neil Morris
To date, October 2024 recorded the third highest volume of wind energy generation in Ireland. However, 21 per cent of the energy that we generated was not utilised. We must be clever about expanding our infrastructure and storage capacity. We have the technology now. Rather than dispatching down and disconnecting the windfarms from the grid, we must bring the energy directly to stakeholders. Currently, we are utilising overcapacity to provide free hot water to people who are in energy poverty, but this moves the peak.
Anything we can do to flatten the peak of demand enables us to utilise more of the green energy that we have. Finding ways to utilise our overcapacity is important from a capital investment perspective; it is a real challenge for any project investor to invest in a scenario where, in a good month, 20 per cent of output does not have a route to market.
Interconnection is a major asset, but if we are to realise the full economic benefit of our abundant renewable energy resource, we must add value, whether through green data, green molecules, or green food.
“If we are to realise the full economic benefit of our abundant renewable energy resource, we must add value…”
Neil Morris
How can collaboration between demand customers and generation accelerate large scale grid investments?
John Reilly
If you draw a line from Derry to Cork, most of the renewable energy generation we are developing sits west of that line. At the same time, most of the demand is not just east of that line but is centred on the east coast from Dundalk down to Arklow. The Dublin region is in a very challenged position right now, in terms of being able to connect and accommodate large energy users. It is effectively electrically constrained and is at full capacity.
One of our major challenges is delivering the power lines necessary to move power across the country from where it is generated to the major demand centres on the eastern seaboard. Therefore, we must utilise the capacity currently available on grid infrastructure we have developed in the regions and bring the demand closer to the supply. Acknowledging this opportunity to co-locate assets on a single site is something which will unlock major benefits for the wider energy system and consumers.
Bord na Móna’s Eco Energy Park concept is based on co-locating green generation with demand around a single substation or hub. In doing so it is possible to begin facilitating an ecosystem of likeminded industrial customers. The synergies which can be established, for example, with the development of district heating around data centres in an urban area, can be replicated in an industrial context too. Our ability to synergise and co-locate renewable energy with storage technologies with dispatchable decarbonised gas fired generation can create a situation where the Eco Energy Park’s clients can be guaranteed clean green energy on a 24/7 basis.
Matt Kennedy
Green energy parks are a great case study of migrating demand closer to the regions. Industry and large energy users are everywhere, but innovative thought is required in terms of how to best utilise our renewable generation opportunities, while also embracing the digital age and ensure that these things can flourish at a regional level. Innovation and best aligning supply with demand is about figuring out the best way to co-locate the two.
Neil Morris
Rather than developing the grid infrastructure, with all of the challenges that that brings, in order to move the energy to where the user is located, it is much more efficient and less time-consuming to move the consumer closer to where the energy is generated. We need to maximise the benefit of every joule of energy that we generate.
“The single most important policy is the one that the CRU is tasked with communicating to us in Q1 2025 in relation to large energy users.”
Michael McCarthy
Michael McCarthy
EirGrid and SONI have produced Shaping Our Electricity Future and set out a pathway in terms of what must be done to transition the grid to the point where we achieve 80 per cent of renewable energy on the system. There are a lot of strategies, but we need to push the vehicles of policy a bit more urgently. This is going to require leadership at local and national level. We cannot afford to have progress derailed by regionalised groups.
From a Cloud Infrastructure Ireland perspective, we are building relationships across government departments and state agencies, and we are working in tandem with them. We are now at the stage in public policy where industry has stepped up to the mark with solutions, strategies, and the ambition that will decarbonise the grid. Now the wheels under the policy vehicle must be oiled and gain momentum to drive forward a cohesive agenda which incorporates the twin transitions of digitalisation and decarbonisation.
How can Ireland best prepare itself for major capital investments in, and the acceleration of, AI demand?
“We need our future energy system to be a strong pillar of support for FDI…” Matt Kennedy
Neil Morris
It goes without saying that AI is going to grow over the coming years. From an AWS perspective, that will require greater access to more renewable energy. From an Irish perspective, that means developing the ability to have a pathway to future growth. There are opportunities to connect some large energy users to the grid now, and there are some pathways to demonstrate that there is a future for the availability of renewable energy in Ireland. If that requires co-location, we are committed to doing it.
John Reilly
To reiterate, we do not have an energy problem in Ireland; we have an energy infrastructure problem. The energy transition, globally, is going to cost trillions of dollars. In Ireland, it is going to cost billions of euros, but it is a transition, which, if done properly, can bring enormous benefits to the economy.
The entire cost of the upgrading of our infrastructure should not fall on the rate-paying base of electricity consumers. The current mechanisms used today to pay for our energy infrastructure must be examined. It was an interesting and positive development that the previous Government utilised a portion of the Apple tax revenue and put it on the table on behalf of the State to develop our grid infrastructure. We must look at innovative ways in which the delivery of grid infrastructure – both transmission and distribution – can be accelerated, and a key part of that is deciding how it is paid for and by whom. It may seem counter intuitive but if we significantly increase demand for green electricity as a core element of this energy transition, we will significantly reduce the unit cost of electricity for all consumers, in spite of the significant investment in infrastructure that is required.
Matt Kennedy
An understanding of the infrastructure is critical. We need much more collaboration among decision-makers to bring certainty to the policy implementation, and this applies to network distributors, operators, regulators, and government. This would give us a joined-up framework to determine who will pay for the future grid. Ultimately, we are embracing the digitalisation agenda. It is very hard to decouple decarbonisation from digitalisation, and this is how we will prepare our economy for the future.
Michael McCarthy
Digital services in Ireland are an exemplar to the rest of the European Union and beyond, and we must ensure that we preserve and protect that level of investment. Overall, a full examination of policy will be required to ensure that we have an environment which is best conducive to the rollout of AI, while ensuring there is sufficient renewable energy on the system.
We must ensure that the vision and strategy are there on the part of industry. In terms of the infrastructure challenge, the capital is available, and the ambition is outlined, but the policy aspect requires more development.
What policy decisions must Ireland make to sustain FDI and ICT investment on a scale equivalent to the past decade?
Michael McCarthy
Ultimately, I think the single most important policy is the one that the CRU is tasked with communicating to us in Q1 2025 relating to large energy users. We have an all-of-government statement about the role of data centres in Ireland’s enterprise economy which talks about the additionality of renewables, co-location, grid capacity, and the economy, but what we do not have is a workable regulatory policy to operationalise and successfully implement that government statement. Nationally, we must get that regulatory policy right if we are to give the new government a mandate for the role of data centres.
Neil Morris
In Ireland today, there are in the region of 300,000 people directly employed as a result of FDI and hundreds of thousands who have indirectly had had very successful careers on the back of FDI. I think we owe it to the coming generation not to remove that opportunity from them. In 2024, AWS has announced just north of €30 billion of European investments, none of which is yet earmarked for Ireland because we are still awaiting a large energy users connection policy from the CRU.
That investment will not wait for Ireland because demand exists elsewhere. In this State, AWS employs 4,500 people and roughly the same again in data centre expertise among indigenous companies. That is expertise that has developed organically over the past two decades. As such, it is important to note that it is not just AWS employment that may not have the same opportunity for growth in the future unless we get the right policy in place.
Matt Kennedy
Ireland is now a very attractive place to do business with many competitive attributes ranging from a strong talent and education base to connectivity with the US and Europe, and also an existing FDI base that has enabled our indigenous SMEs to flourish, grow, and export. We need our future energy system to be a strong pillar of support for FDI, not a hinderance, and it is important that policy has multi-stakeholder buy-in and provides a clear pathway to maximising those assets.
John Reilly
There is a clear rationale for maintaining and not eroding Ireland’s tax base because it is that tax base that drives social cohesion in the form of our education, health, and social welfare systems. FDI underpins that tax base. Over the past decade, climate and energy policy have been intertwined and what I would like to see now is a similar approach to the integration of energy and industrial policy. The challenge for the next Government is determining how we harness our abundant natural resources to meet the increasing demand for green energy, while sustaining existing, and attracting new, FDI to this country. It is only a subtle policy shift, but I think if the ambition is established quickly to achieve a net zero power system, it would drive one of the biggest economic booms this country has ever seen.
