Pat Rabbitte (Dublin South West, Labour)

I apologise for being late.

Deputy Mulherin has given a lucid explanation of the problems that may arise from an unexpected decision of the Single Electricity Market Committee, SEM Committee. The Government places considerable emphasis in the importance of wind energy as a contributor to both energy security and environmental sustainability. We have international obligations because, under the renewable energy directive, Ireland has a legally binding renewable energy target of 16% by 2020. The latest estimates from the SEAI show that approximately 4,000 MW of renewable generation capacity will be required provided we meet our energy efficiency targets, and more if we do not.

At present, there is approximately 1,900 MW of renewable generation. This means that, within nine years, we will need to more than double the amount of renewable generation to meet our target. The directive provides that where we do not reach our renewable target domestically, we will have to purchase renewable credits at a yet unknown price from other member states to make up any shortfall. This would impose unacceptable costs on taxpayers. Given the scale of the necessary build-out required, any issue that could compromise the scale or pace of development necessary is a matter of serious concern.

At present, renewables projects receive payments from the wholesale market in respect of both "constraints" and "curtailments". Constraints arise where a transmission or distribution line is down for maintenance or due to some fault. Generation that uses the line must be "constrained" until such time as the line is in use again. Curtailment arises where there is high wind at times of low demand, and wind projects have to be curtailed because the system cannot handle the amount of generation. Until the committee's decision was taken, wind generators were paid the relevant wholesale price for the time they were offline. The all-island SEM Committee, representing energy regulators North and South, has responsibility for this matter independent of the Government.

The SEM decision to grandfather curtailment levels applied to wind farms took the Department and most industry stakeholders by surprise, as it reversed what was indicated in the SEM Committee's consultation paper of August 2011. The decision, as it stands, would favour existing generation units deemed to have what is termed "firm connection" status while placing the entire burden of curtailed output on new generation plants that would typically be built in advance of having the firm connection status. Typically most wind farms would connect years in advance of a firm date. The decision could also be very serious in terms of developers that were planning to connect on a non-firm basis in the coming years.

Modelling done by industry indicates that non-firm wind farms could be affected by being turned down to a significant degree, such that the financial viability of the projects would be threatened as they would not be paid when turned down. What I have heard from industry stakeholders is that the decision would slow down new projects by years and potentially mean that projects would be built too late for our 2020 targets. I have asked for a formal analysis of the impact of this decision from the Commission for Energy Regulation and also separately from EirGrid. I am also requesting the Sustainable Energy Authority of Ireland for an assessment of this decision.

I welcome the fact that the SEM Committee has invited industry representative associations to its next scheduled meeting at the end of this month. It may be that during the consultation process the industry did not adequately communicate the adverse implications of the option eventually chosen by the SEM Committee. The industry will now have the opportunity to bring fresh information to the SEM Committee and l am sure the committee will weigh the evidence carefully in light of any new information.

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