SSE will have to see which way the wind is blowing before entering domestic market here
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ANYONE looking for an immediate reduction in the size of their electricity bills because of the takeover of Airtricity by Scottish energy giant, SSE, should not hold their breath.
While it may seem unlikely that Scottish and Southern Energy (SSE) is forking out €1.455m for Airtricity so it can enter the Irish electricity market, the economics of the single market mean it is now a far more attractive play than previously.
As well as that, the acquisition, which also includes a €746.5m payment in respect of the net proceeds received by Airtricity for the disposal of its North American business, is actually valued at €1.826bn, and to justify that figure SSE will have to start securing immediate value from the business.
Under that scenario, it is likely to reverse the decision by Airtricity a few years ago to exit the domestic electricity market here, a move which should ensure additional cash flow from a business it is well placed to run.
SSE is the largest producer of renewable power in Britain. It has extensive hydro-electricity interests and is perfectly placed to offer irish consumers this 'green' power source.
Perfectly placed because its Scottish base allows it to sell electricity directly into the Northern Ireland market. And from there, it can easily, and more or less immediately, access the market south of the border.
The acquisition will mean by 2013, SSE will have over 3,500MW of operating renewable energy capacity.
SSE said the deal would more than double its operating wind energy capacity from 170MW to 480MW, making it the largest wind farm operator in the UK and Ireland.
On top of this, Airtricity has a further 940MW of wind farms under developments -- that means either planning consent has been received or the farm is already under construction.
Recent policy changes have put in place ambitious targets for the reduction of greenhouse gas emissions.
In Ireland, the Government wants a third of our electricity to come from renewable sources by 2020, while in SSE's own backyard the Scottish target is to have half of its power coming from renewable sources by the same date.
Power
As things stand, SSE could potentially service about 80pc of the total electricity demand in Ireland from its renewable output -- the one stumbling block is the absence of an interconnector large enough to import this amount of power.
But changes are happening on the interconnector front as well. Two rival consortiums are well advanced with plans to build new interconnectors across the Irish Sea.
Assuming these projects proceed to plan, then there will be capacity in place to import about 2,000MW of power into the southern Irish market by 2012, a figure which is equivalent to about 40pc of our daily electricity demand.
So with these links in place, it is likely that SSE will become a serious player in the Irish electricity market and play an important role in helping meet the renewable power generation targets.
- Pat Boyle
