Leo Varadkar (Dublin West, Fine Gael)
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Question 806: To ask the Minister for Communications, Energy and Natural Resources the rule or requirement, if any, of the single energy market which requires a wind generator to have a purchasing power agreement with a supplier; and if he will make a statement on the matter. [48318/10]

Leo Varadkar (Dublin West, Fine Gael)
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Question 807: To ask the Minister for Communications, Energy and Natural Resources the services the suppliers provide to merit the reward of a 15% REFIT balancing payment for contracting REFIT supported windfarms; and if he will make a statement on the matter. [48319/10]

Eamon Ryan (Dublin South, Green Party)
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I propose to take Questions Nos. 806 and 807 together.

The Single Electricity Market does not impose a requirement on wind generators to have power purchase agreements with suppliers. A majority of wind generators would however have entered power purchase agreements because they have voluntarily chosen to participate in the AER or REFIT schemes. Having a power purchase agreement with a supplier is a condition of those schemes.

A small number of wind generators would not be participating in these schemes either because they have chosen not to do so, or have already availed of the schemes for the duration of their contracts which have now ended. Some wind generators have chosen of their own volition to leave the schemes and participate directly in the Single Electricity Market.

The AER scheme is no longer open for new applications. The REFIT scheme, which guarantees a minimum price for certain classes of renewable electricity generation, is designed to underpin the business case for investors in the renewable generation sector.

A key component of the scheme is the requirement for Power Purchase Agreements (PPAs) between renewable energy generators and suppliers. The PPAs create certainty for generators and incentivise suppliers to purchase renewable electricity.

Payments, including the 15% balancing payment, are made to the suppliers who enter commercially negotiated Power Purchase Agreements with generators of renewable electricity. Under a PPA, the supplier undertakes to purchase all the output from a renewable energy generator at contract prices which are fixed between the generator and the supplier at the commencement of each individual contract for 15 years, irrespective of the open market pool price.

The supplier also assumes the market interaction role between the individual generator and the pool market and incurs additional costs in respect of this which are also reflected in the balancing payment.

In designing the REFIT scheme, my Department concluded that in order to ensure suppliers' critical participation in developing renewable generation capacity in the liberalised electricity market, a proportionate balancing payment mechanism was necessary. There has been a steady increase in total capacity of renewable projects on the system since the introduction of the REFIT scheme.