Pat Rabbitte (Dublin South West, Labour) | Oireachtas source

A joint modelling study entitled, Impact of Wind Generation on Wholesale Electricity Costs in 2011, was undertaken by the Sustainable Energy Authority of Ireland and EirGrid. The study looked at the impact of wind on the electricity market, including the impact on the operational requirements of the thermal generation. It shows that wind did not add any additional cost to the price of electricity. While constraint costs increased slightly in the scenario with more wind power, this was more than offset by the reduction in overall production costs. Constraints were estimated to add about 1% to total costs in the wind scenario but the fossil fuel offset by wind generation reduced total costs by around 12% in the same scenario.

When the cost of the public service obligation supports for wind energy is accounted for, there was no material cost difference between the scenarios with and without wind. The analysis showed that wind generation lowers wholesale prices by €74 million which almost exactly offsets the costs of the PSO levy and other costs associated with the generation of wind energy. The study clearly demonstrates that wind energy did not contribute to higher wholesale electricity prices on the Irish electricity system in 2011.

In any given year, the relative effect of renewable electricity on final prices depends to a considerable degree on the cost of alternatives. This is particularly the case with gas prices because gas is the single biggest fuel used for electricity generation in Ireland. Wind power shows the greatest relative economic advantage when gas prices are high. When gas prices are in the medium to high range, wind power tends to lower electricity prices. Thus, wind can be seen as a hedge against high gas prices. Natural gas prices in Ireland have increased by over 60% since 2009. Projections for future gas prices by the International Energy Agency and the EU Commission show that further growth in gas prices of up to 30% is likely in the next decade.

Additional information not given on the floor of the House.

Wind energy lowers wholesale electricity prices because of its near zero short-term running costs, displacing the most expensive form of generation that would otherwise be used in the wholesale market. It adds to retail prices through market payments associated with wind power, principally the PSO levy that funds the REFIT, renewable energy feed in tariff, payments. The balance of these two determines the final impact of electricity prices.

The independent electricity transmission system operators, TSOs, in Ireland and Northern Ireland, EirGrid and SONI, have carried out technical studies and analysis of the all-island system over the past number of years. The results of these studies can be found in the reports entitled respectively, Facilitation of Renewables and Ensuring a Secure, Reliable and Efficient Power System in a Changing Environment. These reports are published on the EirGrid website. However, the key messages from these studies are that the 40% 2020 renewable targets set by Governments in Ireland and Northern Ireland are achievable, notwithstanding that significant challenges to the operation of the system will have to be overcome.

To manage the achievement of these targets over the coming years, EirGrid and SONI have established a programme of work entitled Delivering a Secure Sustainable Electricity System, DS3. This work programme includes enhancing generation portfolio performance, developing new operational policies and system tools to use the generation portfolio efficiently to the best of its capabilities, and regularly reviewing the needs of the system as the portfolio capability evolves.

See this speech in context