Wind farms have been established in Ireland far more slowly than either
the government wished or the resource warranted. The Alternative Energy
Requirement approach has not worked well and is likely to be reformed or
abandoned shortly.
While Ireland and Scotland have the best wind
resources in Europe, Ireland has by far the lowest
prices in the EU for the electricity that wind
can generate. As a result, only 120MW of wind
energy has been installed since Ireland's first
commercial windfarm was built at Bellacorrick
in Co. Mayo in 1992. In 2001 only 7MW was
installed and in 2002 only 14MW. Just one further
one windfarm is under construction.
The Irish wind market has been led by the government's
Alternative Energy Requirements
(AER) programme. AER1, AER3 and AER5
dealt with wind energy.
AER1 offered Power Purchase Agreements
(PPA) from the ESB for a 15 year period.
Contracts for 70MW were offered and 46MW
of capacity was built, a success rate of 66%.
AER3 in 1997 offered contracts for 137MW,
but was a huge failure as only 28% of this
capacity, 38MW, was built.
Under AER5 in 2001, those tendering had to
have full and final planning permission for their
proposed farms for the first time. Contracts
were offered for a massive 355MW of capacity
in late February 2002. By November 2002,
however, none of these projects had been
offered a Power Purchase Agreement as the
industry was still waiting for the energy minister
to sign an order allowing the ESB to buy the
electricity under a Public Service Obligation
(PSO). In other words no project had been able
to draw down project finance from a bank.
AER6 was launched in November 2002 seeking
470MW of renewable electricity from wind,
25MW from biomass and 5MW from hydro.
Bids had to be in by April 2003. Few people
expected that it would be any more successful
than AER5 and the minister even announced
on the day of its launch that his department, the
Department of Communication, Marine and
Natural Resources, would be consulting the
industry and others about how the sector could
reach the EU target of 13.2% of Ireland's electricity
coming from renewable sources by 2010.
This would require approximately 1800MW to
be installed.
The government's 1999 Green Paper on
Sustainable Energy set a target of an additional
500MW installed capacity of renewable energy
by 2005 on top of the 177MW installed or about
to be installed at the time. This additional
500MW is vital for the government's National
Climate Change Strategy.
1. Availability of Power Puchase Agreements
(PPAs): The competitive and restrictive way in
which PPAs are offered under the AER programme
has meant that at least one site has seen
its planning permission expire because construction
couild not go ahead without a PPA.
2. Poor Prices: At roughly 4.8 eurocent per
kWh, the price offered under the AER programme
is by far the cheapest in Europe, and is
lower than the price at 5.2 eurocent per kWh
currently paid to ESB Power Generation for its
electricity from its portfolio of power stations.
This figure excludes the price paid for electricity
generated which is purchased under a separate
Public Service Obligation (PSO).
3. Inadequate Indexation; Although AER1 and
AER3 contracts were subject to full Consumer
Price Indexation (CPI), the AER5 price is subject
to only 25% indexation, a source of discontent
within the IWEA. In contrast ESB Power
Generation not only gets its higher price of 5.2
eurocents but also gets full indexation and is
allowed to pass on any increases in its fuel
costs.
4. Planning Problems. Overall, the IWEA feels
that obtaining planning consents from county
planners is not a major obstacle to the development
of wind energy, even though individual
members of the IWEA contend that certain
local authorities are anti wind. Our major problem
is with An Bord Pleanala, whose decisions
often are seen as a lottery. However, with the
355MW of contracts offered under AER5 it has
by and large overcome the planning issues.
Since the industry started it has 700 MW
inshore wind projects with full planning permission.
5. Grid connections; Connection to the ESB
grid is increasingly becoming a major issue as
wind projects compete for access to the network.
The capability of the Distribution and
Transmission network to connect wind energy
onto the system is limited in most places, particularly
in the more outlying regions of
Ireland, where the wind resource is often the
best.
6. Financial issues: With the prices paid for
wind generated electricity so low, there is
enough cash flow to service the bank loan element
of the typical financial model with 20%
equity and an 80 % bank loan, but no money to
allow for any return on the equity component.
The result is that the wind industry is forced to
avail of whatever tax incentives are available
and what clever tax experts can engineer.
Although the Programme for Government stated
that tax incentives would be made available
to the renewable energy industry; this may not
happen in the present financial climate and the
whole industry could grind to a halt unless
either full indexation is restored to the AER5
and AER6 prices or these are improved marginally.
The de-regulated market will continue to grow
and companies selling green electricity may
offer Power Purchase Agreements to independent
developers. If new players enter the market
and existing players grow bigger, these private
PPAs may become attractive enough to compete
with the government-supported ones.
The government committed itself to the development
of offshore wind in the Programme for
Government and contracts for 50MW were
reserved for this sector in AER6 offering considerably
higher prices - 8.4 eurocents or possibly
more than for onshore wind developments.
A lot of activity has and is taking place
offshore but the implementation of many of the
projects will depend on the construction of a
interconnector to Great Britain.
Green Credits/ Green Certificates/ Emission
Trading are in their infancy throughout Europe
and some trial trading is already taking place.
However, they are not yet a bankable commodity
against which we can borrow to finance our
farms.
As will be seen from the above, government
support is really in the form of longterm contracts
and the security that banks and investors
like. Wind energy has a very high upfront cost
of approximately 1 - 1.1 million euros per
installed MW. Once built, the fuel cost is nil
and the turbines will continue producing emission-
free electricity for at least 20 years. It
should be noted that wind energy is not alone in
requiring secure off-take contracts; The
Commission for Energy Regulation (CER) has
recently published a consultation paper which
may very well result in the ESB PES (Public
Electricity Supply) being asked to offer guaranteed
off-take contracts to new gas-fired power
stations.
Finally, it is about time the "official" government
bodies recognised the potential and the
opportunities that the wind industry offers in
terms of rural development, income generation
and employment generation. It creates consultancy
jobs, construction jobs, and manufacturing
jobs as well as extra income for the legal
and financial sectors. At present there is full
planning permission for in excess of 1,000 MW
of wind power, representing an investment of in
excess of 1.1 billion euros, most of it from
indigenous Irish companies. The potential of
the sector is huge.
The IWEA was established as an association
in 1993. It now has two arms. One is a company
with charitable status whose objects are to
promote wind energy and to undertake
research. The other is a limited company to
deal with the IWEA's commercial aspects and
revenue-generating activities.
The IWEA offers different types of membership
running from Ordinary to Associate and
Corporate. It has an elected Council, which
elects a chairman. Under the Council there are
a number of committees, which each has a
chairman, who must be a member of the
Council. The current committees are:
Administration, Planning, Grid, Market
Regulation and Policy, Public Relations, Off-
Shore and Finance.
The IWEA has a fulltime staffed office in
Arigna, Co. Leitrim, serving 200 ordinary
members, 11 corporate ones, 20 associates, 5
directors and 22 Council members. Key activities
include organising two annual conferences,
issuing newsletters, maintaining a website,
preparing consultation papers and submissions
and involvement in external groups.
These include close contact with government
departments, the Commission for Energy
Regulation, international and EU links. The
IWEA has two representatives on the Council
of the EWEA (European Wind Energy
Association). It is represented on the IBEC
Energy Policy Committee and was part of the
government's Strategy Group for Wind Energy
and the Grid Investment Group. The IWEA
has close links to the Renewable Energy
Information Office and the local energy agencies.
IWEA, Arigna, Carrick-on-Shannon,
Co. Roscommon, Ireland This is one of almost 50
chapters and articles in the 336-page large format book, Before the Wells
Run Dry. Copies of the book are available for £9.95 from Green Books. Continue to Panel: Companies' wind power investment plans dashed
CONSTRAINTS ON THE DEVELOPMENT
OF WIND ENERGY:
WHAT HAPPENS NEXT?
WHY DOES WIND ENERGY NEED GOVERNMENT
SUPPORT?
THE IWEA ITSELF
Tel: +353-(0)71 9646072,Mbr>
Fax: +353 (0)71 9646080,
email: office@iwea.com
