Eamon Ryan (Dublin South, Green Party)

Ireland currently has 1,459 MW of installed wind capacity which is estimated to rise to 1,703 MW by the end of the year. We are on track to reach our 2010 renewable electricity target. Ireland's target of 40% renewable electricity target by 2020 will be largely met through onshore wind under the Gate 3 process.

There are three offshore wind projects totalling 800 MW of capacity in the Gate 3 connection process. EirGrid's Gate 3 programme shows these three offshore wind projects having firm access to the electricity system on a phased basis in 2013, 2018 and 2020.

The renewable energy feed-in tariff, REFIT, is paid on electricity generated. There are no payments in advance of projects being built and operational. This means that it is likely to be 2020 before there are 800 MW of offshore wind subject to REFIT support. The connection of onshore wind will continue progressively over the next decade with approximately 4,630 MW needed to meet the 40% target by 2020.

REFIT is funded by the public service obligation levy, PSO, which is calculated on an annual basis by the Commission for Energy Regulation, CER, and which is paid for by all electricity consumers.

The 2010-2011 PSO decision was published by CER at the end of August. The total PSO cost calculation comes to €156 million for the next 12 month period. Less than one third of this figure, some €43 million, is in respect of renewable energy support costs, with the balance being mainly peat support prices. Generating plants that are supported by the PSO are typically supported for a 15 year period, so that over time these plants will start to leave the PSO support regime. By 2020 the existing conventional peat and gas plants and most of the alternative energy requirement, AER, renewable energy contracts, which together account for more than €100 million in support in 2010-11 will cease to be supported under the PSO.

REFIT supported renewable generation will come into the PSO calculations progressively over the period to 2020, as renewable capacity is delivered in line with the EU legally binding target for Ireland. The progressive flow of renewable generators coming into the PSO support mechanism will be offset to a degree by the categories of generators exiting the mechanism over the next decade.

The annual cost at current fuel prices of 800 MW of onshore REFIT supported wind generation is approximately €36 million. The offshore REFIT tariff has yet to receive approval from the European Union. It is expected in any case that new offshore wind projects would operate within a more integrated UK and Irish market which would allow for the exporting of such power and would lower the future cost of any such REFIT support measure. Market operators have outlined that the existence of wind generation on our system has had a significant effect in lowering the wholesale cost of electricity as the availability of wind generation has allowed us to scale back the use of more expensive low merit plant. I have asked the Regulator to quantify the estimated savings that have accrued from this effect and will revert to the Deputy in due course.

Costs of wind drop commensurately as and when gas prices rise. For example when fuel prices result in a wholesale market price of €100 million per megawatt hour onshore wind would cost zero. The present level of wind on the system is putting strong downward pressure on wholesale electricity prices in the single electricity market. It is estimated that wholesale prices are already 6%, or €120 million less as a consequence of wind. There are many complex challenges inherent in building an offshore wind sector of scale not least of which are the capital costs of the technology and the need for offshore grids. Getting the project costs down and delivering offshore grids cost effectively is a shared challenge for Ireland and the other countries of the North Sea's offshore initiative. We will continue to work with all stakeholders to meet these challenges.

The Government's twin strategies of integrating renewable energy and increasing energy efficiency are the key to reducing Ireland's dependence on fossil fuels. These strategies make absolute sense from an economic competitiveness and environmental perspective. A high level of wind generation provides a hedge against the inevitability of high gas prices over the coming decade. It is worth emphasising that in 2008 when gas prices were high, wind generators received an adequate return at little cost to the consumer. The REFIT scheme is the best way of ensuring that strategically vital investment in wind generation takes place at minimum cost to consumers.

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