Wind Energy Will Cost Households €227 per year

Irish Energy Blog can reveal that by 2020, wind energy will cost each household € 227 per year. This calculation includes grid upgrades, another interconnector, new fast acting back up plant and other system costs required to integrate high penetrations of wind into the system.

The cost for SMEs and large industry is calculated to be higher at around €377 but higher again for large industry users.

Export prices for wind are considered to be zero or as good as zero as in Denmark. There is no impact on wholesale prices because gas generation will still be required and will be the last form of generation taken under the merit order system (therefore setting the price for everyone).

So this charge will be equivalent to another property tax charge for most households. By this stage, the plan is to install smart meters in every house which will further push up the cost of electricity during peak times.

Workings

Wind Subsidy

Electricity Demand by 2020 is estimated to be about 29,000 GW. Wind energy will need to generate 37% of this demand. Assuming it will, (but of course there is no certainty that it will), then wind will be generating 10,730GW by 2020. There is no sign that the price of fossil fuels will recover in the next few years. The low price of gas means that wholesale prices are now about €30-35 / MWh. This means that wind receives a subsidy in the region of € 50 / MWh.

10,730GW x € 50 / MWh = € 536 million. 

This is roughly in line with this blogs previous calculation based on how the PSO Levy is calculated :

PSO Levy could increase by € 550 million by 2020

Grid 25

Grid 25 is a new grid to be built around the country primarily for renewable generation. The cost has changed over the years but 3.5 billion is still a good estimate.

Payable over 20 years - this works out at €175 million per year.

Transmission Lines

New lines required for transporting the energy generated by wind to the grid was recently estimated by the CER to be € 1 billion.

Payable over 20 years - this works out at € 50 million per year.

DS3 Programme

The DS3 Programme is a programme designed to enable power stations run on the grid behind high levels of wind energy. It is estimated to cost € 200 million. I have thrown in an additional €100 million for extra wear and tear to generators as a result of increased cycling and running on low loads. These figures are most likely conservative.

Payable over 5 years - works out at € 60 million per year.

Constraint Costs

I have estimated this to be an additional €100 million per year. These are payments made to generators to come offline to allow wind energy priority access to the grid (or to switch on if there is too little wind). There are also curtailment  payments to wind generators when there is too much wind energy for the grid to handle. The former will increase in the future, the latter is expected to decrease depending on the success (or not) of DS3.


Open Cycle Gas Generators (OCGT)

OCGTs are fast acting plant but less efficient than CCGTs. Eirgrid are planning to connect two of these to the grid to act as back up for wind farms. I have estimated the cost at € 1 billion.

Payable over 20 years - works out at € 50 million per year.

A second interconnector to UK / France - I have put the cost at €600 million. This will be used to export surplus wind energy and import cheaper nuclear electricity.

Payable over 20 years - works out at € 30 million per year.

Total costs are € 1 billion per year.


The CER in their PSO Decision Paper give household energy costs at 37.61% of total bills. So €376 million of this bill will be paid by households and €624 million by SMEs and industry.

With 1.6 million households in the country this works out at € 227 per household per year.

The Myth of Denmark as a self sufficient renewables success

“When you see the wind blowing in your neighbourhood and the turbines moving, you know that you are making money, which is great incentive to support wind power,” Mortensen observes, adding that polls show around 90 per cent of Danes are in favour of increasing wind energy production.

The outcomes to date are impressive. Denmark is now generating close to 40 per cent of its annual electricity needs from wind and on some days production reaches as high as 120 per cent of needs. An efficient market exchange operates with its neighbours in Germany, Norway and Sweden to take advantage of fluctuating supply and demand, as dictated by weather conditions. - Irish Times, October 2015

Much has been made of Denmark in the Irish media of late and indeed by politicians who are holding it up as an example for Ireland to follow in terms of wind energy.

Unfortunately, much spin comes out of Denmark, which coincidentally sells alot of wind turbines.

Danish Wind Subsidy Scheme Vs Irish Wind Subsidy Scheme -

why the Irish wind industry should be careful for what they wish for

The subsidy scheme for wind is slightly different there :

A price supplement is provided of DKK 0.25/kWh for the sum of electricity generation for6,600 full load hours and for electricity generation of 5.6 MWh per m2 rotor area. The pricesupplement is reduced for each DKK 0.01 the market price of electricity exceeds DKK0.33/kWh nominally, and, thus, the supplement altogether lapses, if the electricity pricereaches a cap of DKK 0.58/kWh or more in current prices 

This works out at a subsidy of €30/ Mwh on top of the market price, but once the market price goes above € 40/MWh there is a reduction in subsidy, with no subsidy at all once the market price hits
€ 80/MWh. Aswell, this subsidy only applies to 6,600 hours of operation i.e. 75% of the year. After this, the wind farm receives the prevailing market price in the region like everyone else. As a result, it is not uncommon for wind farms to shut down once the subsidy runs out as they don't receive enough from the market to cover their costs :

 Now owners of wind turbines complain that spot prices do not even cover maintenance cost - PF Bach, Denmark 2015

Somehow I can't see Ireland adopting the Danish subsidy scheme, yet, Ireland is keen to copy everything else from Denmark in terms of wind integration.

Let's take a look, step by step, at the reality of Denmark's grid operation in 2015:

1. Denmark has 3.5GW of onshore wind, around 1GW more than Ireland. On top of this they have 1.2GW of offshore giving a total of 4.7GW, compared to Ireland's 2.5GW. 
2. Nearly 40% of the electricity mix was from wind in 2014. Strong interconnections was the main factor behind this achievement. However, this figure includes the quite high amounts of wind that is exported so the amount of wind energy actually consumed in Denmark would be less than this figure in reality.
3. Denmark has eight interconnectors compared to Ireland's two.
4. There are many more interconnectors planned in Denmark. It is envisaged that these will make up for the shortfall in dispatchable capacity. Ireland has a surplus of dispatchable capacity. 
5. Denmark is heavily reliant on CHP for dispatchable plant which is declining meaning that Denmark will no longer be self-sufficient in a few years. By 2018, it will be heavily reliant on expensive imports through interconnectors. The reality is that Denmark is far from the "self sufficient renewable success" portrayed by the media here in Ireland. If Denmark had not access to the unique Nordic system, they would have to build more power stations, like the Germans, English and Dutch. 
6. Export to import exchanges can change from 60% export to 75% import in the space of half a day (such as 9th July 2015)
7. It is widely assumed that export prices are practically Zero while import prices are very high. Hence, why exporting wind power does not pay (unless you find a sucker willing to pay the subsidy). 
8. 99% of (their neighbour) Norway's power comes from Hydro. This can be ramped up and down at the touch of a button, without losses in efficiency and therefore is perfect for back up for wind energy. But it is very expensive and as per point 7, the Norwegians regularly fleece the Danes for using it.  Ireland has very little hydro and neither does the UK or France. Gas turbines, by contrast, are not designed to run on low operation levels during high periods of wind, Nuclear plant are designed to run at baseload i.e. constant output. So the Danes are in a unique position viz a viz their wind generation and access to substantial amounts of hydro power. Ireland is not comparable in any way whatsoever.
9. Denmark has the highest electricity prices in the EU. Not surprising, considering the above.

Hydro dam in Norway

Sources : 

PF Bach http://pfbach.dk/firma_pfb/pfb_wind_power_integration_in_denmark_2015.pdf

Danish Dept of Energy: Outline of the Danish support schemes for electricity generation based
on renewables     http://www.ens.dk/sites/ens.dk/files/undergrund-forsyning/el-naturgas-varmeforsyning/el/elproduktion/stoette-vedvarende-energi/outline_of_dk_support_schemes_update_22_04_13_081113.pdf)

Irish Academy of Engineering call for wind farms to pay for associated grid and system costs

IAE - Renewable Electricity Support Scheme Consultation Response

The Academy of Engineering recommends that the new renewable support scheme for wind generation should :

• Reset REFIT reference prices for new developments, undertaken post 2015, to the levels originally set for 2004, to reflect the fall in materials and financing costs 
• Remove CPI indexation from those technologies which are essentially fixed cost, in the case of new developments 
• Remove the Balancing Price paid to suppliers of renewable generation, as there is now no justification for such a payment, particularly following the completion of the EastWest Interconnector 
• Remove access to system marginal prices, when those are higher than REFIT provisions, in the case of both existing and new developments, as payments in this case are both unjustified and are likely to increase significantly, as wind penetration increases. It is inappropriate that wind generators benefit from the system problems caused by increasing wind farm penetration. 
• Require that new renewable electricity developments contribute to the full cost of associated network reinforcements, in proportion to the share of additional capacity required for their development. This will help concentrate development in areas with existing network capacity and thus minimise the requirement for highly controversial new overhead lines. 
• Given that Ireland has substantially more onshore wind generation potential than can ever be exploited there is in Ireland’s case no justification for introducing a separate and higher pricing regime for offshore wind. Thus the Academy supports the present position of not differentiating between onshore and offshore wind.

Ireland's economic recovery - are we not missing something here ?

Recovery is underway in earnest, of that there is no doubt. Many more people are at work than when the crisis was at its worst. But it is as well to recognise that the public finances remain constrained. Huge debts assumed to fund large budget deficits and rescue the banks must be repaid. This is the backdrop against which all fiscal promises must be assessed during the election - Irish Times, 8th October 2015.

But, apart from the obvious large debt, isn't there another more pressing problem facing Ireland in the coming years. Minister for Jobs and Enterprise, Richard Bruton, spelled it out back in February, but nobody in the media seemed to pick up on it :

“Unfortunately, due to a cost base which is significantly out of line with competitor countries, it appears likely that the company will proceed [with re-locating to Poland],” he said in a statement today.

Costs for business are far too high in Ireland, and energy costs are contributing to this. As ESB and economist Colm McCarthy have pointed out, the Irish government are locking the country into high energy costs for decades. We have a situation where the design of the electricity grid has to be completely overhauled to facilitate large amounts of intermittent wind (with the cost picked up by the consumer not the wind industry) and where low gas prices cannot be passed on to the consumer. 

Moreover, the Exchequer is more heavily reliant these days on income tax receipts than previously. This imposes its own limitations, although universal social charge cuts will be centrepiece of the budget next Tuesday and further cuts to come will be signalled. Take note, however, that fiscal projections underpinning the 2016 plan assume another 47,000 jobs will be created on top of some 53,000 new jobs this year.

Low costs for business are essential for job creation and indeed preventing job losses. If the jobs cant be created or even worse, if more industry moves out, then the fiscal projections underpinning economic recovery fall asunder. Income tax receipts fall, welfare costs go up - add in the debt and we will be in dire straits.

Don't be surprised if in the coming months you see shocked politicians expressing their sympathy to those made redundant and shocked media reports examining how and why such a large company could leave Ireland during its "recovery".

Gas Prices Hit Six Year Low but still Electricity Bills rise

The above diagram gives a good indication of where gas prices in the EU are at. It reveals that gas prices have hit a six year low i.e gas prices have not been this low since 2009. Gas power is usually the last generator called on by the National Grid in Ireland so this is the one that sets the wholesale price of electricity for all generators (under the merit order system).

If we look at a recent wholesale price (SMP) profile we can see that it is well below € 50 / MWh, at about € 30 / MWh :

Indeed, we can see that back in February this year it was up around the € 50 / MWh mark :

But still electricity bills are not getting cheaper. This amounts to an abuse of the free market, a market all consumers should be entitled to participate fairly in. The excuse of rising prices for fossil fuels is often used as a justification to hike bills but the opposite doesn't happen here in Ireland, the land where the electricity consumer can be milked till the cows come home.

The guy supposed to be regulating this can be contacted at info@cer.ie

Wind Energy Increases the Price of Electricity - The Proof

Europe Electricity Price Vs Installed Wind / Solar Capacity 

This is probably the most important graph in the current energy debate. I wonder how many of the Irish media will publish it ? Thanks to Euan Mearns.

The Y-axis shows residential electricity prices for the second half of 2014 fromEurostat. The X-axis installed wind + solar capacity for 2014 as reported in the 2015 BP statistical review normalised to W per capita using population data for 2014 as reported by the UN.

Offshore Renewable Energy Strategic Environmental Assessment

In 2010, the Department of Energy and SEAI prepared a Strategic Environmental Assessment (SEA) for their Offshore Renewable Energy Development Plan (OREDP). To comply with the SEA Directive, alternatives to the Plan were considered, including the option not to implement the plan. So were these alternatives assessed correctly ?

It is accepted that there will be environmental impacts :

The SEA has identified that, in some locations, there is potential for the development of offshore wind, wave and tidal energy to have likely significant adverse effects on the environment. This is mainly off the west coast of Ireland which is recognised as being of significant environment and seascape/landscape importance/value. 

So considering that we are looking at significant and irreversible impacts on our coastal and ocean environment (and species), what are the impacts of not implementing the plan ?

Potential effects relating to not combating climate change such of continued effects on temperature, sea levels, precipitation, storminess, sea temperatures and these effects of these on species and habitat distribution and abundance, food chains etc. 

 This is misleading for two reasons. Firstly, whatever Ireland does to combat climate change will be reversed by many multiples by China and India who are building coal plants to meet their world record energy demands. If we even look closer to home, the Netherlands are building three new coal plants with total capacity equal to four Moneypoint coal power stations. Germany are also reliant on new coal power stations :

Water vapour rises from the cooling towers of a brown coal power station in Germany

Ireland does not have a separate climate to Netherlands, Germany or China so if man made climate change will result in an environmental catastrophe here in Ireland, the decisions which can prevent it will need to be taken outside Ireland.

Secondly, the effect of climate change on temperature is still uncertain. The raw records (as opposed to the modified ones) from Valentia Observatory show no remarkable increase in temperature :

http://irishenergyblog.blogspot.ie/2015/03/facts-or-fiction-is-green-movement.html

Indeed, understanding of the climate and the mechanisms that control it is still not properly understood by scientists. It was alleged by James Delingpole that the following extract from the draft IPCC report was altered for the Summary for Policy Makers :

None of the studies cited above has shown clear evidence that we can attribute the observed changes to the specific case of increases in greenhouse gases [sic]. No study to date has positively attributed all or part of the climate change  observed to man made causes. Any claims of positive detection and attribution of significant climate change are likely to remain controversial until uncertainties in the total natural variability of the climate system are reduced. Will an anthropogenic climate [signal] be identified. It is not surprising that the best answer to the question is  “ We don’t know”.

This extract now seems to be deleted from the IPCC website since 2011 :

http://www.ipcc.ch/climate-changes-1995/ipcc-2nd-assessment/2nd-assessment-en.pdf.


So there is absolutely no certainty that the negative impacts on the environment in the "Not Implementing the Offshore Renewable Plan" will actually occur or indeed that Ireland can do anything to prevent it anyhow.

But it is a certain certainty that there will be significant impacts on the ocean and its habitats by installing renewable energy and offshore grid infrastructure in implementing this plan.

So the impact on the Irish environment from climate change is both uncertain and out of our hands in any case and should not be included in this assessment. But the environmental impact of going ahead with this plan is both certain and as a direct result of actions the Irish government take. Therefore, the latter needs to be given full consideration in the assessment.

Other impacts include volatility of prices of electricity from fossil fuels and the implications of these on business/enterprise in Ireland as well as the effects on domestic customers in terms of fuel poverty etc. 

This should not be an issue as the reverse is actually true. Offshore energy will require a higher subsidy than onshore energy due to its higher capital costs. As onshore renewable energy is already higher than fossil fuel generated energy, offshore will then be even higher. There are also extra costs from further increasing the surplus of generation capacity and installing a new grid. So electricity bills will increase from implementing the plan, not from not implementing it.

Limitations relating to intermittency of supply from onshore wind. In comparison tidal energy is much more predictable and constant and offshore wind is generally less intermittent. 

Once again, there is no actual evidence to back this up.  The following graph comes from a presentation by Mark O'Malley of UCD Engineering Department :

 We can see that there is a high correlation of wind and wave energy. In otherwords, when the wind is blowing, so too are the waves rolling. And vice versa.  Offshore wind does tend to have higher capacity factors (i.e. output) but would still be classified as non dispatchable i.e. it can't be switched on at will unlike a conventional plant.

So the benefits of this enormous plan are still not clear to the ordinary citizen. The benefits to the country from not implementing it are also not made clear - maintenance of our pristine ocean environment and habitat, lower energy costs and therefore more jobs, less surplus capacity, more reliable electricity and improved tourism image (which also results in more jobs).

The SEA Directive states :

Member States shall ensure that environmental reports are of a sufficient quality to meet the requirements of this Directive

What do you think - is this assessment of "sufficient quality"  and an examination of all alternatives when all options are open or is it just rubber-stamping of a decision already made ?

Who was right - IWEA or IAE ?

THE Irish Wind Energy Association (IWEA) has described as “bizarre” a report from a leading group of engineers which called for Irish wind energy investment to be halted so Ireland could ensure its international competitiveness - Irish Examiner, March 4th, 2011.

So four years on, who won the argument - the Irish Wind Energy Association or the Irish Academy of Engineering ?

We were told that :

IWEA chairman Michael Walsh yesterday warned that there is no “solid reason why the high gas and electricity prices of 2008 will not return”.

We know now that in fact the price of gas has dropped significantly (about 40% from last year). Mr Walsh lost the bet. But he was right about the high electricity prices but not for the reasons he thought. We now have higher electricity prices than in 2008 but this is due to hikes in levies and network costs. If electricity prices were more reflective of fossil fuel prices, they would have gone down, not up.

“It also does not reflect the relationship between wholesale prices and wind generation. The study by Redpoint released this week demonstrates that this effect reduces the price of electricity by €256m per year by 2020 against a public service obligation cost of €52 million,” - Michael Walsh, IWEA, 2011.

There is no evidence that wind reduces wholesale prices or if there is, I have yet to see it.  Indeed, if the IWEA statement above was correct, then that would mean, given lower gas prices and lower wholesale prices, our electricity bills should have come down significantly. But instead they have risen and Ireland now has the third highest electricity prices in the EU :

http://ec.europa.eu/eurostat/documents/2995521/6849826/8-27052015-AP-EN.pdf/4f9f295f-bb31-4962-a7a9-b6c4365a5deb

Eurostat shows the Energy and Supply component of electricity bills for households which would include the wholesale price. As you can see, this component has risen 20% since 2011, at the time the Irish Examiner article was published :

This tends to indicate that the wholesale price has only gone in one direction - and its not down. Remember, the above data does not include subsidies for wind farms or subsidies of any kind. So before you even add on the subsidy, the price of electricity has gone up, not down, which it should have done according to IWEA. Wrong once again. The report prepared by Redpoint should be consigned to the same bin that ESRI's "soft landing" report was eventually thrown in.

The addition of €30/Mwhr to the costs of wind generation is not supported by any quantitive evidence or indication how the estimate was reached,” - IWEA, 2011.

One can see from the diagrams here, that the wholesale price is normally around the € 50 MWh mark, outside peak times. Under REFIT, wind gets € 70 per MWh, plus another circa €9.95 MWh balancing payment.  So the additional € 30 MWh calculated by IAE back in 2011 was spot on and still applies in 2015. Wrong again, IWEA.

So why is our energy policy still been led by those who have been proven wrong ?

The economics of electricity generation

The general definition of economic sustainability is the ability of an economy to support a defined level of economic production indefinitely - Thwink.org 

Able to be maintained at a certain rate or level  e.g. "sustainable economic growth" - Definition of Sustainability, Oxford English Dictionary

Traditionally, when you wanted to build a new gas plant, you obtained a bank loan on the basis that the output and hence income of the plant could be determined in advance and was at a price linked to the wholesale cost of gas. There would be a certain amount of downtime for maintenance but your plant would be running for most of the year. This meant that the bank was satisfied that you could meet your repayments.

Total generation capacity in the country was linked to demand for electricity in the economy with some spare capacity for reserve. This meant that the cost of your electricity bill was pretty much directly linked to the amount of electricity you consumed with a few added extras to keep the system running and of course, profitable.

During the last decade, with the advent of intermittent renewables, most notably wind generation, both of the above sound economic principles began to be unwound.

Wind generation requires a subsidy because the output of wind is uncertain and therefore banks would be wary of funding such intermittent generation. The wind might blow, then again it might not. If your 20MW wind farm is only generating at half output i.e. 10MW, the subsidy you receive in effect brings your output up to 16MW (10MW multiplied by € 80 / €50 ). In otherwards you would only have received 10MW * €50 = € 500 MWh but instead you will receive 10MW * 80 =
€ 800MWh. Now the bank will be much happier.

If we now go back to our gas plant that has received bank funding, its output is starting to become more uncertain as intermittent wind is pushed onto the grid. Therefore, its income which was once fairly regular becomes staggered and less certain. Now, the banks will become worried, how certain are the loan repayments ?

So once we introduce alot of intermittent generation such as wind and solar into the system, all forms of generation, which were once dispatchable and reliable, become intermittent. This means that some form of subsidy needs to be introduced for the gas plant either in the form of a REFIT style subsidy on the market price or a capacity payment to ensure the plant remains financially viable throughout periods of high wind and solar penetration. So now, we enter into a new era of electricity generation economics where subsidies are required to maintain all generators, not just the renewables. We reach a stage where the gap between supply and demand is so large that there is simply not enough peanuts to go around for everybody and so subsidies are required for all. This differs from the heavily subsidized farming industry because demand for farming products is always equal to or above supply.

This situation that we then have is the exact opposite of the free competitive electricity market we were promised by the Fianna Fail government, when in 2006 they broke up ESB's monopoly on the market and set up Eirgrid to run the national grid. The fact is that when ESB controlled the electricity market, electricity was much cheaper (and no, I don't work for them).

The housing bubble evolved in exactly the same manner - there was a huge over-supply of houses, developers required subsidies in the form of tax reliefs and cheap credit (we now know that all that cheap credit was in effect a taxpayer funded government subsidy) and there simply was not and never could have been enough demand to maintain that level of supply indefinitely.

So the question is how long will it take for the levels of over investment in the electricity market to begin to become unsustainable and the bubble bursts ? It will most likely happen when the level of electricity bills becomes so high that more and more consumers fail to pay the bills on time or at all. Disconnections will rise. Quite a large proportion of the hikes in energy bills are loaded on industry. When most of them decide to jump ship to more competitive countries, as in the case of Cadburys, we are deep trouble, not just because of the resultant job losses, but because there will be a significant hole in the funding of the electricity bubble. When holes begin to develop at the bottom of a pyramid, the whole pyramid eventually collapses.

When this happens, subsidies to generators will be slashed, loan repayments will no longer be met, and the banks will be facing another hole in their balance sheets. In effect, this means that today, the electricity generation assets on the balance sheets of banks are significantly overvalued. Their current valuation is only as good as the ability of the electricity consumer to continue funding indefinitely the ever wider gap between electricity supply and demand (and the supporting grid infrastructure required to support it).

It may turn out that because electricity is a necessity good, the bubble will continue for longer than the housing bubble. This then means that people will have less discretionary spending in direct proportion to the increasingly higher electricity bills. So there will be a period where the electricity bubble will impact other sectors in the economy, themselves already impacted by the higher bills (e.g. a designer clothes shop will be impacted twofold with less customers and higher bills).

There are alot of industries dependent on discretionary spending in Ireland and along with the water charges (water is another necessity good), the hikes in energy bills will put a squeeze on them. Cold weather will also increase the demand for coal and oil - necessity goods which are now heavily taxed. With government policy, and the majority of investment, focused almost solely on electricity generation and windmills, people have little choice when it comes to heating their homes e.g. the investments into retrofitting and energy efficiency are tiny compared to wind energy.

In this scenario, different sectors in the economy will start to feel the squeeze and we will see another recession. This will be the beginning of the bottom sections of the pyramid collapsing. On top of this will be the disappearance of large industry - another section at the bottom of the pyramid gone. The electricity bubble will have collapsed but, like the housing bubble, will have brought down alot of other industries with it.

But whatever the sequence of events - one thing economists know for certain is that an economic bubble will eventually collapse.

One of Europe's leading renewable energy experts on the alternative to wind energy for Ireland

So if we have reached saturation point with wind energy as the evidence clearly shows, then what are Ireland's options for the future ?


Malcolm Brown, a director of BW Energy, has almost three decades experience in the international energy sector and low carbon economy. He therefore is a voice that carries a lot of weight in any debate on energy policy. He has now brought his expertise to bear on the current debate in Ireland.

New technologies will make cheaper green power and also protect the country's tourism

by Malcolm Brown, director BW Energy

THE Government is planning to erect hundreds of gigantic pylons as tall as Liberty Hall across Ireland as part of a € 3 billion network upgrade.

Up to 2,000 new wind turbines will be built through the country's beauty spots - and next to our world-famous racing stables.

Last week Eirgrid said it could consider technology that would mean no new pylons - but only in the South-East.

Ireland has an "all-wind strategy" to meet EU 2020 renewable "green power" targets. But these plans are now outdated and unnecessarily expensive. By the end of 2014, Ireland had installed more than 2,000 wind turbines in rural heartlands and was just halfway to its target of 40% of renewable electricity by 2020.

Meeting the target requires a doubling of onshore wind power. So, another 200 new wind farms involving 2,000 new turbines - to be subsidised by the ordinary bill payer.

And to carry all this extra power, high-voltage lines will be strung over 700km of countryside - on huge pylons up to 60m in height. More wind power requires more pylons because it is produced in remote places which are actually the heartlands of the vital horse and tourism industries.

The construction and operation of these turbines and pylons threatens the tranquillity essential for the equine and tourism industries.

Tourism is worth €3.4 billion to the economy and horse racing is worth another € 1 billion. Why threaten such vital industries, especially when there is no need to do so? And who will pay for all these new turbines scattered across a very beautiful countryside? It will be you, the ordinary electricity consumer through subsidies added to your bill.

In 2015, Irish electricity prices are amongst the highest in Europe. Irish householders pay 42% more for their power.

Fortunately, there are better, cheaper ways to meet EU "green power" demands. Technology today offers better solutions in transmitting and producing "green power".

Last week, EirGrid, which is responsible for Irish electricity transmission plans, announced that "developments in technology now allow us to achieve improved performance from existing transmission infrastructure". Modern technology called "series compensation" can put more power onto the system without the need for new infrastructure and there is also scope for more undergrounding of high-voltage cables. That means better value for electricity bill payers. The higher tech option at Grid Link - from Kildare to Wexford and onto Cork - would save € 300million compared to the original plan.

Improved technology has found a cheaper, better way of transmitting electricity. But hard-pressed Irish electricity bill payers should also be asking the question, "Can new technologies also help to actually produce subsidised 'green power' more cheaply?" The answer is a resounding "Yes".

Existing dirty coal-fired power stations can now be re-engineered to produce clean "green power" from sustainable biomass, or burning wood pellets. Ireland can meet her 2020 EU "green power" target in one fell swoop by converting the Moneypoint coal-fired power station in Co Clare to burn sustainable biomass.

With Moneypoint supplying up to 25% of Irish electricity demand from a single power station and being the country's largest single emitter of greenhouse gases, it has a key role to play in fighting climate change. It is economic common sense to re-engineer an existing power station to produce "green power".

Then use the same transmission system to deliver this power rather than spending billions of euros on doubling wind power and associated transmission investments.

And that way you also protect Ireland's stunning countryside, and its racing and tourism industries.

Republished from The Irish Mirror with kind permission from Malcolm Brown. 

Five Reasons why we have reached saturation point with wind energy

To any impartial analyst, Ireland has reached saturation point with wind energy and it should now be time to put a pause on new wind development and consider our options. No damage was ever done down through history by pausing before deciding what to do next. Think of how many billions of euros we could have saved if this was done in 2006.

1. Dumping of wind power and the 50% limit on wind - recent evidence shows that during periods of high winds we have to dump more and more of available wind energy to maintain a safe secure supply of electricity.  On the 30th March, at least 26% of available wind energy was dumped. 
2. Over capacity - We now have generation capacity equivalent to double our peak demand and three times that of our average electricity demand needs. Let's use up this excess capacity before we start building any more. No new generating units (including wind) need to be built unless they are replacing retired units.
3. Baseload plant minimum load requirements - there is a requirement for 5 large generating units to be running at all times for "dynamic stability". These comprise combined cycle gas turbine plants and Moneypoint coal plant. This means they can never be completely switched off. Increasing wind penetration further will exacerbate the inefficiencies inherent in running these plant on low loads, thereby negating any additional savings due to adding more wind.
4. Electricity bills are one of the highest in Europe - government policy has locked society into high electricity prices with the preference towards subsidized forms of generation meaning savings from falls in wholesale prices can never filter down to consumer's bills. Another factor is that an over supply of generation capacity results in units requiring subsidies and capacity payments to recover their high fixed costs as payments for energy generation become insufficient and staggered due to low demand and more intermittent wind on the system. There are also extra costs due to new infrastructure required to carry the wind power.
5. Impacts on other sectors - The tourism and equine industries are two of the largest industries in Ireland supporting many direct and indirect jobs. Chances are if you live outside any of the main cities, your job is dependent in someway on either of these industries.  Planting wind farms and associated pylons near scenic and horse breeding locations will have a negative impact on these important industries.  The Irish Hotels Federation recently warned that the location of energy infrastructure should not diminish the natural beauty of the landscape because this is an important element of the Irish tourism product. Already, this impact is being felt with one castle owner recently saying "The tourists can't believe it. They said we're mad. They said we're ruining our heritage. They say it's disgusting to go around Ireland now"

What's In Your Electricity Bill: Part 5 - The PSO Levy

PSO Levy could increase by € 550 million by 2020

The PSO Levy is possibly one of the craziest schemes ever introduced by an Irish Government (along with electronic voting machines, bank guarantee etc). While the idea is to promote fuel from indigenous sources, the result is bad for competition and bad for the consumer. The levy reimburses generating companies when the wholesale prices are low. It props up peat and wind plants aswell as some idle gas plants. You could be fooled for thinking that the substantial capacity payments already been paid to these plant was for this very purpose, but nothing about the electricity market in Ireland is straightforward.

Imagine if the price of bread was suddenly cut in half but the government slapped a levy on the bread to bring the price back up to normal levels. But instead of the levy going to the government, as happens with petrol, it goes back to the bakery. This would result in a win-win situation for the baking companies and a lose-lose situation for consumers. In effect, it acts as a buffer against market forces. Yet we were told by Minister Dempsey in 2007 that "we are introducing structural changes in the electricity sector that will create a more attractive investment climate for existing and new players, deliver increased competition, reduce the cost of electricity and offer greater choice for consumers”. But in 2010, instead of enjoying the fruits of a competitive electricity market, consumers began paying the PSO Levy which ensured energy companies made profits on certain generators regardless of what happened to prices in the market (Note 1).

It's true that only a portion of the levy goes to wind generation. But a closer look is required to see what is going on.

This chart shows where the PSO Levy goes :

Gas generation

The single biggest beneficiary of the PSO Levy is Tynagh gas plant whose profits soared to €40 million in 2013 :

http://www.irishtimes.com/business/energy-and-resources/tynagh-energy-profit-soars-60-to-40m-after-shutdown-1.2037578

Tynagh is not run very often but cannot be allowed to close down as this could affect "security of supply" - in otherwords, when the weather does not deliver in terms of wind energy, the good old reliable fossil fuel plant will step in. Lower demand is also a factor because this means the plant receives less income from the market. Tynagh will receive €69 million from the PSO this year - about 21% of the total levy. The Energy Regulator explains :

 This is because most of Tynagh’s allowed PSO costs are fixed rather than related to its output, so the less the plant runs and receives correspondingly lower SEM revenue, the higher the PSO subsidy needed to cover its allowed fixed costs.

But as we can see above, Tynagh does not just recover its fixed costs, it makes substantial profits from the PSO.

Aughinish and Tynagh entered a contract for differences (CfD) agreement with Electric Ireland, whereby EIectric Ireland recovers or returns additional monies paid under the agreement from/to the PSO levy. These arrangements were put in place for a 10 year period, and are accordingly expected to end in 2016, at which
point they will no longer receive ex-ante PSO payments.

It will be interesting to see if the PSO Levy will be extended next year for Tynagh but for the purposes of this blog I will assume that it will extended. Indeed, in Eirgrids recent capacity statement, on page 51, you can see that the plant is expected to remain open up to (at least) 2024.

Peat generation

Peat receives the largest proportion of the levy at 35% but there are no new peat plants in planning. So we can assume that this charge will remain roughly static in the coming years. There will come a time when these peat plants will have to be closed down and replaced as the fuel runs out. Bord Na Mona, the semi state company that runs these plants have now diversified into wind energy. But as wind energy (non dispatch) is incapable of replacing dispatchable peat generation, there will still be a gap in the power generation supply market of about 340MW when the peat plants close down that will have to be met by something else e.g. biomass or gas.

Eirgrid expect the 3 peat plants to still be in operation up to 2024 at least.

Wind generation

Wind energy is given a fixed price plus 15% for electricity generated called REFIT (Renewable Energy Feed In Tariff, it works out at around €80 MWh compared to €43 MWh for gas). The PSO levy finances REFIT by making up the shortfall wind receives from the market.

Wind makes up 27% of the levy but this is one to watch as 1,000's of new MWs are planned. I have seen various reports of the amount of planned wind farms ranging from 4,000MW to 6,000MW and even more than that. But Eirgrid seem to think around 4,000MW is required to meet the targets. So that means that about 2,000MW more is due to be built by 2020. So how much will this cost the consumer in terms of PSO Levy ?

Let's look at this step by step :

1. The allowance for REFIT increased from € 51.07 million to € 90.5 million this year. This is a hike of € 39.43 million.
2. We are told that "Overall the amount of renewable generation, mostly wind, estimated to receive the PSO levy next year is 138 MW more than the current year (due to REFIT 2 primarily), hence increasing the levy". So we will be building approx 14 times more than this amount by 2020 (138 x 14 = 1,932MW).
3. So 138MW of new wind generation requires € 39.43 million from PSO. We are building 14 times this capacity between now and 2020. Multiplying 14 by € 39.43 million gives us € 552 million additional PSO required for wind (39.43m x 14 = 552m).

So we will have to increase the PSO Levy by € 552 million to pay for all this additional wind. So who will pay for this ? Well page 32 of the PSO Levy Decision Paper shows how much extra each consumer type pays for the current PSO increase.  So we can deduce from that how much the € 552 million will cost for each consumer type (Note 2) : 

+ 2,000MW wind = + € 552 million PSO by 2020 paid for by :

Domestic customers  = + € 300 per customer per year

Small commercial customers = + € 1,285 per customer per year

Medium/large customers = + € 220 per kVA

As you can see a €300 increase will drive many families into fuel poverty. As for SME's, a near 

€ 1,300 hike in their bills will put a lot of them out of business. Large industry will simply look elsewhere to locate their plant - Poland, USA, India or perhaps China. 

It will be argued that this increase will be offset by savings due to more wind generation. But there are more system costs due to more wind apart from the PSO Levy as the Energy Regulator recently pointed out  :

• Constraint costs for conventional power plant - plant must be compensated for running differently to their schedule which will become more frequent with more intermittent wind - http://irishenergyblog.blogspot.com/2014/12/whats-in-electricity-bill-part-2.html
• Curtailment costs of additional wind - as more wind gets added, more wind farms will have to be shutdown at high winds due to the restriction on exporting electricity to the UK (more on this in a future blog). Wind farms get paid to shutdown or curtail their generation. 
• Increased maintenance of conventional plant - http://irishenergyblog.blogspot.com/2014/10/news-from-germany-and-uk.html
• The cost of upgrading the grid infrastructure to facilitate more wind generation - estimated at between € 3.5 and 4 billion.
• Costs associated with running plant inefficiently - the increasing fuel costs of running conventional plant on low loads to accommodate high wind penetrations.
• The increased costs with maintaining more reserves at high wind penetrations         - http://irishenergyblog.blogspot.ie/2014/12/seais-quantifying-savings-from.html

So it's hard to see much savings, if any, from adding more wind at this stage. 

Our government has locked society into high electricity bills for many many years to come. The combined social impact of this along with the other charges recently introduced for water etc and carbon taxes will change the lives of many Irish families whose lives revolve around access to relatively affordable electricity. 

Disconnections will bring home to many people the true nature of the energy policy devised by the previous government.  But by then, like the banking collapse of 2008, it will be too late. 

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Note 1

Noel Dempsey (Fianna Fail) was Minister for Energy from September 2004 till June 2007. He was succeeded by current Green Party leader Eamon Ryan who held the position until January 2011. So the question as to what happened between the time Noel Dempsey brought in the "structural changes" and Eamon Ryan's tenure ended could be the topic of another article or indeed a book to do it full justice.

Note 2

Workings based on information provided in CER PSO Levy Decision Paper 2014/15 - page 32. 

https://www.cer.ie/docs/000967/CER14361%20PSO%20Levy%20Decision%20Paper%20%202014-15%20%28New%29.pdf

14 is the multiple of wind generation required to get to 4,000MW as per Step 2 above.

Domestic : €42.87  - €64.37 = €21.50 increase this year. 

€21.50 * 14 = € 301 per customer per year

Small commercial customers : €129.83 - €221.66 = €91.83 increase this year. 

€91.83 * 14 = € 1,285 per customer per year

Medium and large customers : €18.47 - €34.20 = €15.73 increase this year. 

€15.73 * 14 = € 220.22 per kVA