Garrett Blaney, Member at the Commission for Regulation of Utilities, has a broad European perspective, as well as deep knowledge of the Irish market. Garrett discusses the need for collaboration and consumer centric approaches to regulation across Europe to address the complexities and complications arising from Brexit, both at home and abroad.
You took on your role as Chair of the Board of Regulators for the Agency for the Co-operation of European Energy Regulators (ACER) in November 2017. What has ACER been able to achieve so far over that time?
The key area of focus for ACER in the past nine to twelve months has been the finalising of a set of network codes which will align the generation, transmission and consumption of energy across the energy markets in Europe. This is finally coming to fruition and will create a much more unified European approach.
In parallel to that we have started thinking about areas that were not addressed specifically in these codes. For example, the facilitation of a large volume of renewables which have entered the system across Europe. We have also been looking very closely at the whole digital agenda and how that might impact the energy sector. These are both areas in which we have collectively started to put high level strategies together. This is evolving into our 3D approach – decarbonisation at least cost; digitalisation with the consumer in mind; and finally, but very importantly, dynamic regulation.
Within ACER we are trying to seek a European consensus to address problems, rather than a fragmented approach where every country operates separately. We believe that this will help us move forward together. This is fundamental for regulators as we are always thinking about the challenges that are coming up in the future rather than focusing on the challenges that have already passed.
“We are trying to seek a European consensus to address problems, rather than a fragmented approach.”
What are your key priorities as Chair over the next two years?
To move these strategies forward we are committed to proactive engagement with policy makers and parliamentarians. One key area where we are being very proactive is the Clean Energy Package. This is about to enter the Trilogue process where the European Parliament, European Commission and Council agree a new suite of legislation that will set the approach going forward.
This has been set up very much with the consumer interest at heart and deals with areas like distribution, setting out a framework for changes happening currently in the market. We have been very active in its development, but the challenge then comes in the implementation of the legislation when it is finalised. We expect it to be completed by the end of this year, and then there is a big piece of work for regulators across Europe. Something that has been fundamental throughout is that we share best practice and common knowledge and in some legislative pieces, such as this, we are mandated to take a common approach.
As we look to the future and path towards Brexit, what impact do you believe this will have on the utilities sector in Europe in general, and for Ireland and the UK in particular?
I have quite a European sense of Brexit, as you might expect. When I talk to fellow European regulators it is not something that has been particularly welcomed or seen necessarily as a positive development. We have had a close working relationship with the fellow UK regulators, and they are highly regarded. There is a real sense of loss that they will no longer be with us to the same extent.
One of the challenges that we all face is a better understanding of what it will mean in the short to medium term. I don’t think that is unique to the energy sector, but the question of how Brexit will play out and what it will mean is still to be seen.
We have set up networks to help each other as European energy regulators so we can derive a common approach around Brexit, but we are still not clear what the implications are as yet. The Brexit white paper (July 2018) still leaves questions for the energy sector, even at this stage, of what exactly the UK’s position will be in the internal European energy market.
As regulators we are used to dealing with change, but we also exist to encourage certainty. Regulatory certainty flows into investor certainty and we always need to keep that in mind. Brexit isn’t enabling or engendering the sort of certainty and stability that is preferable in this environment. We have to work with the complications and we will try our best to deliver whatever the ramifications are for Brexit.
Looking more closely at Ireland, the complications are much more significant. We have one single electricity market across the island, between Northern Ireland and Ireland. That was very much bedded into European approach. What happens to that market in the medium to long term is still very much an open question. It has brought significant benefits to consumers and industry across the countries, as well as significant renewables investment. It does pose concerns, but we just aren’t fully clear on how it will work out. There is certainly political will between the UK, Ireland and the European Commission who have all recognised the benefits of an all-island approach to the electricity market. We are very keen to see that continue.
However, that is a political aspiration and the challenge for us as regulators is to see what that would mean in practical implementation. For regulators, the legislative framework is fundamental to what we are delivering and how we operate within that construct. Legislative uncertainty is not helpful for regulation, but there needs to be greater clarity at a policy level initially.
From an international perspective, does Brexit present any new opportunities across the utilities markets?
I would love to offer a bright and optimistic response, but I am not sure that the opportunities are clear. As regulators we need to be honest and realistic and from our perspective, at a European level, the downside to Brexit is much, much bigger. I am not sure we can see many upsides. I may well be wrong, but at the moment our focus is on risk mitigation and creating a good forum of co-operation for post Brexit.
Do you anticipate that Dublin, and Ireland more broadly, will be a more or a less attractive place for people to live and work post-Brexit?
I moved back to Dublin from the UK in 1992. There has been a lot of positive change in that time and it has become a very attractive place to live. The quality of life in Dublin, and in Ireland more generally, is very good. Ireland is the destination of choice for many multi-nationals, but particularly US technology firms, to locate their European headquarters. For example Apple, Google, Facebook, Microsoft and Intel all have European HQs here. We enjoy a very multi-cultural society today. The large influx of new talent and capability has created a very vibrant place to live and work. However, this does present some challenges. There are pressures on rents and housing which is indicator of this growth and we need to do better on that.
Whether it will be more attractive post-Brexit is very difficult to know. There have been studies done that show that in a hard Brexit context, Ireland could be badly affected with a real impact on our economy, particularly with all the trade between our two countries. There are so many imponderables about Brexit, it is really very difficult to know exactly how this will play out. As regulators we are also very nervous about forecasting the future. Quite often that goes wrong and we like to see ourselves as people with our feet on the ground. I don’t know how the future lies, but all we can do is try and plan for a range of outcomes and aim to ensure that these are the best for the consumers as part of that process.
“There are so many imponderables about Brexit, it is really very difficult to know exactly how this will play out.”
Technological innovations continue to impact and disrupt the utilities market. Whilst this does bring challenges, do you consider there to be opportunities also for European regulators?
The digitalisation agenda is a key area that we are spending a lot of time thinking about now. Until this point the European Commission’s Digital Single Market strategy hasn’t been very influential in the energy market in the way it was in telecoms and other sectors. We are starting to think about the challenges including cyber security and consumer protection more generally but also the technological opportunities that could arise. This is particularly apparent in a decarbonisation context.
We have large volumes of renewables at a local level, for example people being able to produce as well as consume energy. We are also looking at seismic shifts in the transport sector with developments like electric vehicles. As the take up of electric vehicles increases, we need to be thinking about this far more, as there is the potential for challenges on network demand. If it happens at peaks that will cause real problems. However, we are looking at how digitalisation can help us solve some of those problems and introduce more competition and more opportunity for consumers to participate in the wholesale market.
We see opportunities but we need to tread carefully and be aware of the potential disruption. If the disruption is a consumer favourable then it is welcomed, but where it adds complexity for consumers that is a challenge. We need to think about all of our customers, not just the tech savvy ones, and make sure that the role of regulators is to ensure that the consumer stays at the heart of energy’s interests.
As part of this, there is more emphasis on our staff increasing their own levels of technology knowledge, but also cross-sectoral knowledge is becoming more important. We have started to engage at a European level with fellow telecoms regulators, data commissioners, consumer organisations and ombudsmen. We have started an initiative where we talk together, look at bundled products and identify where there is an overlap between sectors. In order to regulate well, we will need to be absolutely more collaborative in the approach we take.
You are also Commissioner at the Commission for Regulation of Utilities (CRU) in Ireland. In 2017 the organisation changed its name to reflect the integration of water regulation responsibilities. What would you describe as the success and challenges that have resulted from an integrated regulatory model?
We are very busy as an organisation and the name change, and the inclusion of water within our regulatory remit has just magnified that. Water has been a challenge in Ireland. There has been a lack of legacy investment in the water infrastructure and the processes around its maintenance and distribution. Moving forward we have two key objectives – one to ensure we get efficient investment, and the other is to ensure that we drive operational efficiencies.
We are, however, at an interesting point in Ireland as we have recorded the driest period since 1976. It is also the same year we had very high snowfalls in March. This has brought significant challenges and highlighted the necessity for proper investment in the water infrastructure and the need to drive efficiencies. This may be a one-off event or something more serious in terms of climate change, but it does show that we need to improve resilience in the system. Energy and water are fundamental services and we need to have them for society. Resilience is something we put a premium on and something we have to maintain in the system.
There is still a large piece of work that needs to be done in the water context, so we need to be careful talking about success when so much challenge is ahead of us. There are synergies between network regulation in water and gas and we have been able to use those well internally in terms of sharing staff knowledge and people can really see value there. We have made some progress but there is a lot more that needs to be done.
“Resilience is something we put a premium on and something we have to maintain in the system.”
When presented with the challenge of introducing new regulatory systems, such as the water billing structure in Ireland, what would you highlight as the key elements required to aid successful delivery?
We don’t have water billing for domestic use in Ireland and this has been a significant political issue for a while. It also presented a real challenge for the regulator, and we had to work together with government to support and help our respective roles, ensuring independence but also ensuring alignment where possible.
It is not the job of a regulator to frustrate government policy and it is also very important that the considerable technical know-how that sits within regulatory bodies can input to policy development through strong and open communication. This was reaffirmed as we went through a difficult time with water. It was vital that we ensured that the regulatory model came out intact with its independence clearly shown.
To ensure this we commissioned an independent review by the Organisation for Economic Co-operation and Development (OECD ). The report highlighted that the OECD was very favourably disposed to how we’re organised and how we managed the various tasks we were set. It also encouraged us to increase the levels of engagement with parliamentarians and policy makers as we move forward. I think having that external validation and putting the model under external scrutiny is a good thing, as it means we avoid any self-congratulatory analysis or require government analysis. We found it a very helpful process and consider that this helps to keep our regulatory system healthy.
Garrett Blaney – Biography
Garrett Blaney has been a member of the Commission at the Commission for Regulation of Utilities since February 2010, and Chairperson from February 2014 to February 2017. Garrett’s lead responsibilities relate to electricity networks (interconnection, wind connections), wholesale (SEM/I-SEM), generation (conventional, renewable, licensing), security of supply and internal operations. He also leads international relations. In 2017, Garrett was elected the Chair of the ACER Board of Regulators and also the President of CEER. Prior to this Garrett had over 20 years of experience working in the energy industry. He was previously Strategic Development Director for Viridian Power and Energy and Commercial Director for Huntstown Power, Ireland’s first independent power producer.