Colm McCarthy: Case for wind must be proven on costs
If the policy makes no economic sense, the objectors' arguments should win the day, writes Colm McCarthy
When a necessary and desirable economic development project comes along, there will often be objectors and the immediate instinct is to dismiss them as nimby and selfish. If the economic benefits stack up, sometimes the environmental costs will have to be endured and the trade-offs faced squarely.
But if the economic benefits are illusory, the objectors should win the day. Protests against transmission pylons and wind turbines have become a major focus of political agitation around the country, especially in the midlands. The issues are related, since the need for some of the new transmission pylons derives from the Government's ambitious targets for wind-generated electricity.
The Government intends that no less than 40 per cent of Ireland's electricity needs must ultimately be supplied by renewables, almost all wind. In addition, there are plans to build wind farms in Ireland beyond these ambitious targets for domestic market share, with a view to exporting wind-generated electricity to the United Kingdom. It is not at all clear that this policy makes economic sense.
The extensive plans for wind energy include a scheme from the State-owned Bord na Mona to construct 1,000 megawatts of capacity on exhausted peat-lands in east Offaly and west Kildare. At the typical cost of €1.5m per megawatt, this scheme would cost €1.5bn. The ambition of this scheme is apparent if one considers that the fixed assets of Bord na Mona are currently valued at just €270m. The company sees the 1,000 megawatts as a first phase, possibly to be doubled in due course.
Other State bodies, including Coillte, the forestry company, are also planning wind investments. Both the ESB and the State gas company, BGE, already own wind farms, so the Irish Government owns four State companies involved in wind-powered generation. BGE has been trying to off-load its wind farm business, acquired in 2009 at a cost of €500m, thus far without success. The State is simultaneously selling wind farms and acquiring new ones. The Government has allowed itself to become, in effect, a market-maker in wind farms.
There is opposition from residents' and community groups, particularly in the midlands, to these wind farm proposals. Modern wind turbines are visually intrusive – they are the height of the spire in Dublin's O'Connell Street, and some even higher. In addition to visual intrusion, there are concerns about noise emissions and possible health effects.
Partly in response to the wind farm plans, EirGrid, the State-owned operator of the electricity grid, is planning major new power lines around the country and there is opposition also to the construction of the pylons which carry high-voltage lines. Not all of EirGrid's intended investment, contained in its Grid 25 network enhancement plan, arises from the wind-farm investments: EirGrid believes that certain grid improvements are necessary anyway. But it is clear from the Grid 25 documentation that a substantial portion of the cost of around €4bn arises because of the continuing proliferation of wind farms.
Under current Irish arrangements, wind producers do not pay the full costs they impose on the transmission network; they pay only the immediate connection cost. The so-called 'deep connection' costs are imposed on consumers at large. There are other subsidies to wind generators, including a guaranteed minimum price, also imposed on consumers.
Irish consumers of electricity pay high prices by European standards. Figures from the EU's statistical service, Eurostat, show the following pattern for the first half of 2013 (see table, above): Industrial consumers in Ireland pay 41 per cent above the EU average while households do a little worse, with a penalty of 42 per cent. There are many reasons for the higher costs in Ireland but the headlong rush into expensive wind energy is one of them. The UK's prices are also above those in competitor countries. It is rather striking that excessive energy costs are the biggest single topic of current political controversy in the UK, but barely register in Ireland, where excess costs are even higher.
The wind industry lobby has managed to persuade Irish politicians that wind energy is not merely low on carbon emissions, which is true, but also cheap, which is not true at all. Wind energy companies enjoy a price guarantee, whose cost falls on consumers. This is a subsidy, plain and simple. But there are additional subsidies that are hidden. Extra transmission costs not borne by the wind companies are an additional burden.
Unlike conventional power stations, of which just 20 or 30 would comfortably serve the entire Irish market, wind produces electricity over large geographic areas, often remote from the centres of demand, requiring extensions to the national grid. Ireland
now has adequate power generation capacity nationally, due to sluggish demand since the bubble burst. There would be limited need for grid investments were it not for the expanding wind industry, which does not pick up the tab for extra transmission.
There are other hidden costs. When the wind blows, conventional units (gas, turf, oil or coal) must be switched off, to be ramped up again, sometimes at short notice, when the wind dies down. This results in additional carbon emissions as well as additional cost, since the units lose efficiency. The continual 'cycling' of units designed for continuous operation is likely to shorten their operational lives, according to engineers, a further source of hidden additional cost.
Wind power is unreliable. The turbines need wind above a minimum speed and produce power unpredictably. At best, a wind farm will produce power for about one hour in three, and those hours are impossible to predict more than a day or two in advance. For every unit of wind capacity, a standby unit must be kept available and this is costly.
The maximum demand on the Irish electricity system, recorded in 2010, was just over 5,040 megawatts. Demand has fallen since, and peak demand this year has been about 4,500 megawatts. Low demand (say at 6am on a fine summer's Sunday) can be as low as 2,000 megawatts. Installed wind capacity is already approaching 1,800 megawatts, high relative to peak demand and too much to be used safely when demand is at the low end of the range.
An electricity system is potentially unstable if excessively reliant on unpredictable wind turbines, creating unacceptable risks of blackouts and damage to equipment. It is debatable whether Ireland needs any more wind turbines, additional to those already built and under construction. If the Government persists in its expansion plans, Ireland will have one of the highest ratios of wind to total capacity in the world, with electricity prices to match.
Recognising the weak case for further wind capacity, the wind lobby has been seeking government backing for plans to export wind-generated power to the United Kingdom. The Irish Academy of Engineering produced a detailed report on this issue in June 2012. It concluded that the Government should do nothing in support of wind farms for export that would increase costs for Irish taxpayers or for Irish consumers. The Academy noted that: "At a time when capital for investment in Ireland is so scarce, it is critically important to minimise investment in public infrastructure such as transmission. Given that the Irish Government implicitly stands behind such investment by State-owned companies such as ESB and EirGrid, it must be realised that such investment competes directly with government investments in, for example, Irish health and education."
The Academy also noted that Scotland has substantial wind resources and the costs of transmission to England should be markedly lower than the costs of serving this market from the Irish midlands. If, as the Academy recommends, the would-be exporters have to meet these costs, their projects may not be bankable. They are spending large amounts of money in the midlands in the expectation, it would appear, that Irish consumers will bear these costs.
If more investment in wind farms makes economic sense, helping to contain carbon emissions in a cost-effective manner, local objectors should be dismissed in the broader national interest. But if the policy makes no economic sense, the objectors have an unarguable case.
The Government commissioned a report on these issues last year, but it has not yet been published. There should be no further government support for wind generation until a full technical and economic analysis of costs and subsidies is available.