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Synergy on 2020 targets unlikely to be the norm

Agreements between the UK's transmission system operator and the developers of clusters of wind farms across the Irish Sea in Ireland have been described by their promoters as a once-in-a-lifetime opportunity. Mainstream Renewable Power's Energy Bridge and Element Power's Greenwire project plans are bold; between them, they represent up to 8GW of wind energy to be generated in Ireland and sold into the UK electricity market across dedicated HVDC interconnectors.

The island of Ireland and the UK mainland already enjoy some grid interconnection. The Moyle interconnector between Scotland and Northern Ireland has 80MW capacity into Scotland and 450MW into Northern Ireland, and the recently completed East-West interconnector links North Wales and the Republic of Ireland with 500MW of capacity in each direction.

Interest in installing new cables under the Irish Sea has been heightened by the requirement for EU member states to meet renewable energy targets by 2020. Written into 2009's Renewable Energy Directive are provisions for countries that expect to fall short of their target to trade with nations lucky enough to have a surfeit of cheap renewables. In other words, the directive encourages renewable-energy deployment where it costs the least. In theory, the potential annual saving across Europe could be EUR10 billion.

Ireland and the UK seem ideal partners for this kind of co-operation. With its enviable wind resource, Ireland is well positioned to export relatively low-cost wind power. At a time when Ireland's own electricity demand is muted by recession and wind-farm development constrained by grid capacity, a new export market could enable gigawatts of greenfield development, generating economic activity and employment.

The UK has a lot to gain from co-operation, too. Irish onshore wind could provide a cheaper - and quicker - alternative to UK offshore wind. As well as reducing the cost of complying with the target, importing renewable power effectively exports the headache of public resistance to onshore projects. New infrastructure connecting north and south-west Wales (via Ireland) may also reduce the UK's need for expensive grid upgrades.

Ireland and the UK also have close political and cultural ties and a history of energy co-operation in their favour. Despite the daunting technical challenges and huge investment needed, co-operation is being taken seriously by policymakers. The Energy Bill currently progressing through the UK parliament acknowledges that projects outside the UK may access future support mechanisms, and a memorandum of understanding between the Irish and UK energy ministries is expected to outline the terms on which these joint projects interact with the UK's electricity market.

Benefits abroad

But this is not the whole story, and more than just electricity would pass between the UK and Ireland. Co-operation under the Renewable Energy Directive will mean that assets built on Irish soil receive UK financial support. Also, buying renewable power from overseas removes an important pillar of renewable energy policy for the UK - the development of industries that can drive economic growth and create jobs. UK bill payers could be seen to subsidise Irish jobs. In Ireland, the isolation of the wind farms from the domestic grid could undermine the energy security benefits that are typically associated with interconnection projects.

Fundamentally, it is this broader set of costs and benefits associated with renewables that will determine whether the UK-Ireland joint projects receive the necessary financial and political backing, and also whether co-operation is likely to happen between other EU member states. The redistribution of industrial and other benefits when trading renewable energy may preclude significant use of co-operation mechanisms.

Other than the balancing of unexpected overand under-performance against targets in the short-term, it seems likely that co-operation will be confined to cases with significant, long-term "spin-off" benefits. It is surely telling that a leading example of co-operation is the joint green certificate scheme between Sweden and Norway - which already have harmonised electricity markets and so more to gain than most from co-operation. More generally, improving interconnection to enhance system security tends to be a key benefit. Joint projects between maritime neighbours such as the UK and Ireland or the Baltic nations fit the bill nicely.

As member states strive to benefit from domestic renewables deployment, co-operation under the directive before 2020 is likely to fall short of realising the full potential efficiency savings. The number of factors that need to align for co-operation mean it might happen more often than once-in-a-lifetime - but not much more.

Oscar Fitch-Roy is a senior policy consultant at renewables consultancy GL Garrad Hassan's strategy and policy unit.

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