Tuesday, 14 February 2012
Topical Issue Debate
Alternative Energy Projects
Just before Christmas, the Single Electricity Market Committee, SEM Committee, made a whammy of a decision that has left those trying to develop our wind industry reeling and that will affect adversely the achievement of the Government's 2020 renewables targets for wind energy. The committee decided to grandfather curtailment levels when there is too much electricity being produced for the grid from wind energy rather than to curtail the output of every wind farm proportionately. Grandfathering is the allocation of curtailment based on new wind farms, with non-firm access being curtailed first. This means that instead of every wind farm being curtailed or asked to reduce its output, because there is too much energy entering the grid, some will bear all the burden and some will bear none at all. This decision will have a devastating effect on the development of new wind farms and the achievement by the Government of our 2020 renewables target of having wind capacity of 4,000 MW. Some 1,500 MW are currently installed.
If we look to those parts of the country with the best wind resource in Europe, such as the west, and decide to build the wind farms there, we will realise there is no grid or superhighway to take the energy therefrom. It is like seeing no roads in vast sectors on a road map. We have a massive deficit in our grid infrastructure. Under the new decision, the areas in question will carry the burden of curtailment. The wind farms in these areas would be asked to cut back their electricity output at their own expense whereas those in areas where there is firm access to proper grid infrastructure could operate at a capacity of 100% and be guaranteed payment for their energy. I have already been contacted by wind farm developers in Mayo who have planning permission and grid offers but who will get no finance from a bank or investor on account of the grandfathering of curtailment.
In effect, people are being punished because they are trying to develop in areas in which the last Government and EirGrid failed to develop infrastructure. In my county there is a community wind farm project, rather than one associated with big industry, yet the developers are being told they will not receive finance. We need to remember that if we are to develop our wind energy potential, we will require significant interest and investment from the private sector. They have a real appetite to develop wind farms. Therefore, we should not support the decision of the SEM Committee, which would choke the financial viability of new wind farm projects.
There over 500 MW of investor-ready wind farm projects in counties Mayo, Galway, Leitrim, Donegal, Clare, Kerry, Cork, Waterford, Tipperary and Cavan that will be affected negatively by the decision. In my county alone, developing the 600 MW offered through Gate 3 would see an investment of €250 million. Analysis has shown there is not enough firm access for the capacity of wind generation required to meet the 2020 targets. On this basis the committee's decision will stop the wind industry building sufficient capacity to meet our targets.
The SEM Committee is not a body with a mandate from the people to make Government policy on renewables, to amend such policy or interfere therewith. The decision was sprung on the industry without consultation. The committee previously indicated curtailment would be applied proportionately and shared equally by every wind farm in the country. There was no consultation or regulatory impact assessment taking cognisance of our targets. Therefore, it is imperative that the Minister impart Government policy in the strongest terms to the SEM Committee and leave it in no doubt that its action is contrary to Government policy, and that he requires the SEM Committee to engage in a proper consultative process so the grandfathering decision will be knocked on its head.
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.