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Guernsey Electricity - Off-Island Electricity Cable Connectivity - Statement by the Minister of Treasury and Resources

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Wednesday 29 May 2013

This is the statement made by the Minister of Treasury and Resources, Deputy Gavin St Pier, to the States of Deliberation regarding Off-Island Electricity Cable Connectivity

[CHECK AGAINST DELIVERY]

Mr Bailiff, Members of the States,

Since the failures of the cable links between the Channel Islands and France last year, Guernsey Electricity has been working with Jersey Electricity to develop a strategy for future electricity cable connectivity to the islands.

Sir, with the support of the Commerce and Employment Department and the Energy Policy Group, I am pleased to be able to report to Members this morning that Guernsey Electricity has entered into an important agreement with Jersey Electricity to further develop cable connectivity between the Islands and France that will deliver significant benefits for Guernsey in terms of the security and affordability of electricity supplies within a relatively short time frame. These will be delivered under the umbrella of the Channel Islands Electricity Grid.

Members will be aware that, since the cable failures last summer between Guernsey and Jersey and between Jersey and France, the proportion of the Island's electricity requirements that Guernsey Electricity has been able to import has fallen from around 80% to just over 30%, resulting in the need to generate significantly more on-island. In spite of the complete repair of the Guernsey to Jersey cable, the permanent failure of the oldest Jersey to France cable means that there remain limits on what can be imported to Guernsey and risks do remain to the security of these remaining limited supplies. Furthermore, the costs of generating electricity on-island are significantly higher than importing it and this was reflected in a 9% increase in tariffs that was required in October last year. On-island generation also brings with it a number of environmental issues, notably the higher emissions associated with running our diesel generators.

Against this background, Guernsey Electricity has within the last week signed an agreement with Jersey Electricity to participate in the delivery and evaluation of a number of major new cable initiatives. These are as follows:

We should be very clear that these projects will deliver a number of significant strategic benefits to Guernsey that are consistent with the Island's Energy Policy in the short and medium term. They will help deliver affordable and secure energy supplies, as well as support the drive towards decarbonisation.

Firstly, the delivery of the Normandie 1 and 3 cables will significantly improve Guernsey's importation capacity through Jersey from its present low level of 16MW to a much improved level of 60MW. This new level of import will allow almost 90% of the islands current electricity demand to be sourced via the existing Jersey-Guernsey import cable. Guernsey Electricity has confirmed that this will reduce its production costs by reducing its reliance on higher cost electricity generated on-island. Once these cables are in place, this will provide an opportunity to make reductions in electricity tariffs.

Secondly, the reduction in on-island generation that Normandie 1 and Normandie 3 will allow is entirely consistent with the objective of the Island's Energy Policy to decarbonise our energy supplies through the importation of electricity from renewable and sustainable sources. Currently 30% of the electricity imported through the cable comes from hydro-electric power stations. It will also significantly reduce the environmental problems (such as noise, vibration and emissions) associated with on-island generation.

Thirdly, the active progression of plans for a second cable between Guernsey and Jersey will further improve the Island's security of supply position by removing the cable network's single point of failure between Guernsey and Jersey. The intention is that this project will be fully evaluated such that a decision can be made on whether or not to commit to this project during the course of this year. If such a decision is made, then it is anticipated this cable could also be installed by the end of 2016.

I should say that Guernsey Electricity is also continuing to evaluate the possibility of a direct cable from Guernsey to France. However, current estimates put the timescale for delivering this at between 6 and 10 years. It is more likely that the possibility of such a direct link will be considered in conjunction with the replacement of the existing cable between Guernsey and Jersey, which will be reaching the end of its economic life in the next 10 years or so.

It is anticipated that Guernsey Electricity will be contributing just under £30 million towards the capital cost of the Normandie 3 and Normandie 1 cables. This contribution is based on the proportion of the importation capacity to which the Company is contractually entitled under the agreement. The intention is that this commitment will be financed on a debt basis following the States resolution during the 2013 Budget debate in December that enables the company to borrow to finance its capital expenditure. Given the significant strategic benefits that these proposals can offer for the Island, my Board feels it would be appropriate to facilitate this through the authorisation of the necessary borrowing.

Members of the States, I am particularly pleased that these initiatives are to be progressed under the umbrella of the Channel Island Electricity Grid. It is my firm belief that the Islands are at their strongest in dealing with the challenges that face them when they work together. The CIEG is a good example of this philosophy working in practice. Indeed progress in these commercial arrangements is a positive - and the perhaps the most tangible - result of the regular and direct dialogue between the two Treasury & Resource Departments in which I and my opposite number in Jersey, Senator Ozouf, have been engaged in the last 12 months.

Finally, Sir, it is true to say that the failure of the cables between the Islands and France during the course of the last year has presented some major technical challenges for Guernsey Electricity, both in terms of maintaining supplies and in undertaking repairs to the cable between Guernsey and Jersey within a remarkably short time frame. The company has addressed these challenges with great determination and has worked most diligently with its colleagues in Jersey to revise and develop their strategy for the future. I should like to place on record my appreciation for the tenacity and hard work that the directors, management and staff throughout the company have demonstrated over this time.

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