Friday 2 December 2016

There are no cheap solutions to meeting Ireland's renewable electricity targets

Published 23/06/2016 | 02:30

‘Some counties are quite saturated with turbines, while others barely have any’
‘Some counties are quite saturated with turbines, while others barely have any’

This week Roscommon independent TD Michael Fitzmaurice called on Coillte to suspend construction on a large windfarm in the county. Locals are concerned about increased flooding. Earlier this month ESB and Bord Na Móna got planning permission to proceed with a 61-turbine windfarm at Bellacorick in Co Mayo, but only after the project had been scaled back from its original plan to have 112 wind turbines.

  • Go To

Onshore windfarms are facing greater difficulties as residents become more vocal about the longer term implications of having them.

The reaction is understandable given that some counties are quite saturated with turbines, while others barely have any.

These issues create unique challenges for the minister in charge of natural resources, Denis Naughten. A Roscommon man, who is also responsible for delivering on Ireland's renewable energy targets, the question of windfarms is tricky.

Mr Naughten has made several comments in recent weeks about the need to look at other renewable energy options and not just onshore windfarms. And he is right. The government of the day decided several years ago to put most of its renewable eggs in the windfarm basket.

We don't have a tariff subsidy for offshore windfarms or for solar power. Onshore windfarms have got us so far, but Ireland is on target to miss its binding EU renewable energy targets.

Last year just over 20pc of our electricity was generated through wind energy. However, our 2020 target is 40pc for electricity and an overall renewable energy target (which includes heat, transport and electricity) of 16pc of our needs coming from renewable sources.

Missing the 2020 target means Ireland will be taken to court by the European Commission and fined. The costs are estimated by the Department to be between €100m and €150m per percentage point we are short.

Based on last year's performance the bill caused by the shortfall could be as high as €600m.

We have some options. We could opt for an "Eirexit" from the EU but that isn't likely to happen now is it? We could go hell for leather into further onshore wind which will antagonise large swathes of the electorate, particularly in rural areas where some people are sick of these things.

If anything, central government has already bullied some counties into windfarms by preventing county councils from developing their own planning rules restricting windfarm development.

However, the low-hanging fruit in onshore wind has been picked. Getting to the next phase could be politically very costly. The other alternative is to secure agreement to delay paying the fines on the basis that Ireland promises to meet its 2030 targets. This seems quite likely and consistent with our traditional approach to deal-making in Brussels.

But even with that, the Government would have to show how it was going to make the 2030 targets. It might have to make a belated commitment to support offshore, solar and other renewable options. We have just one offshore windfarm operating in Ireland which generates around 25MW of power.

There are several other offshore farms planned and at various stages of development but they need a ministerial order to grant the lease of the seabed.

They also need a tariff regime or commitment from the state on what guaranteed price they will get for their electricity.

These things won't get built without state subvention. Industry players argue that such a subvention is necessary for a time, that this is essentially a strategic government initiative and we cannot meet the binding targets without it. If Denis Naughten wants to broaden the renewable electricity base, and I think he should, how much money will he have to find from the State coffers right away?

On Day One, he won't have to find any. He would have to agree a future tariff regime with producers of other renewables and they could then finance their investments, build the infrastructure and avail of a subvention from about 2020 onwards, when they are built.

The UK has gone down this road and become a major producer of offshore and onshore wind energy. But it isn't cheap. The British state has put in about stg£10bn in subsidies in the last five years.

Last year 25pc of Britain's electricity was generated from renewables (a combination of windfarms, solar panels and other sources), up from 9pc in 2011. However, despite being a world leader in wind power, it is actually behind Ireland in meeting its overall energy targets, reflecting how badly it has done on other aspects of renewable energy efficiency.

As the price of oil has fallen, it has also become a lot stricter on the state subventions it provides. At times Tory government policy has been to row back on wind energy subsidies while still providing a relatively high level of support.

Earlier this year the British government said that offshore windfarms built in the mid-2020s would receive a guaranteed price for their electricity of up to £85 per megawatt hour. This is about 8.5p per kilowatt hour.

For example, the support announced for the new Hinkley Point nuclear power station in England, due to start generating in 2025, is £92.50 or 9.25p per kilowatt hour.

Offshore windfarms are a lot more expensive that onshore turbines to put up. It is heavy in capital investment and there can be further complications with the public consultation process.

The costs are coming down as the efficiency increases. European turbine manufacturers are committed to bringing down the costs. It currently costs around 12c per kilowatt hour to produce and they see that coming down to 8c by 2025.

Since the Irish Government decided to abandon subvention for offshore wind and focus heavily on onshore, several prospective projects have been just about ticking over.

They include the Dublin Array project being developed on the Kish and Bray Banks in the Irish Sea, 10 km off the coast of Dublin and Wicklow. It is being backed by Saorgus Energy, an established Kerry wind energy company. It has already gone through a public consultation process and needs the minister to grant the lease and a tariff agreement for the offshore sector.

The Dublin Array project has the potential installed capacity of at least 520 MW, capable of meeting the green electricity demands of over half a million homes.

The Oriel Windfarm is an €80m project backed by Gaelectric and Dundalk businessman Brian Britton. Other investors include Glen Dimplex founder Martin Naughton.

It plans to have 55 turbines, delivering a total of 330 MW of renewable energy, 22km off the coast of Dundalk.

Others include the Codling Bank project in the Irish Sea a stalled project which was backed by the family of property developer Johnny Ronan and Norwegian billionaire Fred Olsen.

Eddie O'Connor's Mainstream Energy is a significant offshore wind power developer but not in Ireland. Its €2bn Neart Na Gaoithe project off the Scottish east coast had a recent setback.

Tariff agreements from the British entity in London that negotiates them, lapsed. This was because the planning process for the project got bogged down in court delays in Scotland around the possible damage the windfarm might do to sea birds.

Mainstream will hope to re-negotiate the agreements again to ensure the project goes ahead.

Offshore wind is an expensive big ticket item for its investors and the governments that provide the subsidies that make it happen. Denis Naughten has plenty to ponder on how Ireland can meet its energy targets while reigning in excessive numbers of onshore windfarms.

He could commit to a long term, but potentially expensive subsidy regime for other renewables. More renewables may mean explaining higher levies on householders bills, especially if they are going to a handful of investors.

Or he could do nothing, let the targets slide and leave it for another minister in 2020 to pick up the pieces with the EU. Who knows, maybe half the countries will have left the EU by then anyway.

It's over to you minister.

Indo Business

Read More

Promoted articles

Editors Choice

Also in Business