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Ireland

Ireland

Policy upheaval puts Ireland in limbo

The huge Irish wind resource and the government's determination to use it makes Ireland a market of great promise. But the best of intentions are no substitute for a well thought-out market framework. Once again the wind

industry is struggling to get out of the starting blocks in the face of another series of policy changes. If the government really wants to capitalise on its most abundant energy asset, it needs to sharpen its focus on the issues

A raft of new policies is emerging from Ireland's energy regulator that will shape the market for electricity, including the market for wind power. Proposals by the Commission for Energy Regulation (CER) for new market arrangements for electricity, a grid code for wind, and a new policy on wind generator connections are all in the final stages of consultation and are expected to take effect within months. But the Irish wind community claims that the CER is ignoring the needs of renewables.

Meantime, the government is consulting on a new policy on renewables to include a support mechanism to replace the outdated Alternative Energy Requirement (AER). Tim Cowhig of the Irish Wind Energy Association (IWEA) is concerned at any attempt to forge policy when the association feels the CER is ignoring the needs of renewables. "It is impossible to agree to the structure of the new market arrangements for electricity until the new support mechanism for wind energy is published by the Department for Communications, Marine and Natural Resources," he says.

Wind is expected to play a major role in helping Ireland meet its renewables and Kyoto Protocol targets, but the installation rate constantly lags behind industry hopes and government expectations. To date, just 240 MW of wind generation has been built, which ranks Ireland 17th in the global national league table for installed capacity and 12th in Europe. Renewables, including large scale hydro, currently account for some 6% of Ireland's electricity, with only 1.25% from wind -- still a long way from the country's EU target of 13.2% of electricity from renewables by 2010.

Ireland looks certain to fail to meet the government's interim goal of 500 MW of new renewables by 2005-with the bulk from wind. The slow rate of renewables deployment so far has been largely blamed on the market framework provided by the AER competitive tendering process, which has signally failed to deliver.

But just when the last AER competition, having undergone a series of tweaks, looked as if it could finally boost wind capacity significantly, transmission system operator ESB National Grid took fright at the prospect of hundreds of megawatts of plant with variable output connecting into its relatively weak network. It called for a halt to offers of grid connection for wind plant until network stability and security issues were resolved. The moratorium on new connections, imposed in December, has made it even more unlikely that the 2005 target will be met.

Complex and premature

In the midst of that confusion, the CER has put forward a series of proposals for new market arrangements for electricity (MAE). Already its plans for the treatment of green energy under the MAE have been slammed by IWEA as over complex, premature and disadvantageous to wind. The CER's draft decision covers combined heat and power, renewables and small scale generation.

It proposes that renewable generators of 5 MW and over be required to register with the system market operator (SMO) to bid offers of generation on a half hourly basis, one hour ahead of trading on the market. Generators will have the option, however, of making "standing offers" at the market floor price which will ensure that the renewables plant are always dispatched first, subject to system constraints. Generating plant of less than 5 MW will self-dispatch, while micro-generators of less than 100 kW will be exempt from the MAE rules altogether.

But it is the commission's plan to apply locational marginal pricing (LMP) to all generators of 5 MW and above that concerns IWEA the most. This means prices paid to generators may be different at each location -- or node -- and will depend on transmission congestion, losses and the prices bid by other generators in the area. In locations where there are constraints on the grid, the price to generators will drop to below the uniform price. These are often the areas where wind farms are located, points out Maureen De Pietro from IWEA. Moreover, on occasion, the LMP could be negative so that wind farms will have to switch off or incur a penalty, she adds.

CER's proposal to introduce LMP is unpopular with generators -- brown as well as green -- claims De Pietro. With many nodes in Ireland, there will be a plethora of different prices for generation. "In a small country like this we do not need a 150 million euro system that is far more complicated than is necessary," she says. "It definitely should not apply to renewables. It is restricting renewables by giving them too many hoops to jump through."

The wind association argues that fixing the market rules for renewables now is premature and should wait until after the government has agreed on its new policy for supporting renewables -- expected to be in August or September this year. This argument would appear to cut no ice with the regulator, who says: "The commission is of the view that if support for renewables or combined heat and power (CHP) is required, it should be addressed outside the market mechanism, such as through a renewable energy or CHP support mechanism."

Moratorium

The hoped-for lifting of Ireland's five month moratorium on new wind connections could have been expected to hold some comfort for the country's wind energy developers. But it was not to be: new requirements on wind turbines to comply with Ireland's grid code could mean that Irish developers will see no new connection offers for wind projects for at least 12 months, fears IWEA.

While energy regulator Tom Reeves rejected ESB National Grid's request to extend the moratorium for a further six months until it completes studies on the impacts of turbines on the network, based on modelling to be supplied by turbine manufacturers, he has agreed to another request. In a draft policy on wind generator connections, he is proposing to allow the grid operator to "constrain" wind power stations off the network on occasion to maintain system security as more wind is connected to the grid.

Ireland has a relatively small and isolated power system. A limited amount of interconnection with the UK currently exists via a link from Northern Ireland to Scotland. From 2006, the government hopes work could begin on a 1000 MW Ireland-UK interconnector. Yet by then, some 660 MW of new wind is expected, according to a survey of connection offers commissioned by the energy regulator. This would mean wind accounting for around 14% of the country's total installed capacity.

Reeves decision to allow the grid operator to curtail output as necessary affects not only all future wind plant, but also all projects in construction that have not yet been commissioned. He is more vague over wind stations currently operating, saying they "may be required to comply with the requirement to provide the technical facility to constrain the wind turbines." That will depend on rules governing constraining wind turbines to be developed by ESB National Grid. These were due out for consultation by the CER by the end of May.

IWEA's De Pietro questions the legality of Reeve's suggestion that existing wind farms -- and projects that have already been offered connections to the grid -- be required to curtail their production. "He is saying that all connection offers will be in effect non-firm. It will be extremely difficult to get finance for projects under these conditions," she says.

Reeves accepts that the prospect of production curtailments will make investments in wind appear more risky, but believes the policy will send locational signals for siting wind farms so that developers avoid areas where the grid is weakest or where there is too much intermittent plant. "It's important to remember that there are 800 MW of connection offers already signed up that are likely to be coming on to the system over the next few years," says Clíona McNally from CER.

closer to danish levels

The Irish grid is small and poorly interconnected, she says. "We are moving forward on plans to build an east-west interconnector [with the UK], but meanwhile we are getting close to penetration levels of wind plant similar to Denmark." She adds, however, that the Danish system is connected to the Swedish and German grids and is part of the European grid network. "Ireland has a very good wind regime and it is in customers' interests to see wind that is safe and secure on the system," she says. "We want to face and address the issue as soon as possible so the wind industry can move forward with certainty."

The regulator expects that constraining wind plant will be infrequent. For the first few years it will happen only on rare occasions, if at all, McNally says. But she points out that developers will have a clearer idea of how often they will be likely to be constrained when ESB National Grid completes its modelling of the impact of turbines on the system. The grid operator expects this process to take a further six months after it has received software models from turbine manufacturers.

IWEA accepts the inevitability of constraining production as more wind plant come online, but criticises the timing of the measure and would prefer to see it introduced in phases. The industry complains that both the regulator and ESB National Grid have for years been aware of the scale of wind penetration needed to achieve targets and should have acted in good time to resolve the issues.

Although inadequacies in the grid should be dealt with, states De Pietro -- with at least some of the several billion euros for grid reinforcement directed to areas of potential wind development -- introducing the new policy on wind connections represents a further year of limbo for wind developers on top of the five month halt to many projects caused by the moratorium. Development has been effectively killed until the modelling is completed, adds IWEA's Cowhig. "It will be 12 months before they start making offers for wind connections."

The CER claims to have seen no evidence that the moratorium on wind connection offers has jeopardised Ireland achieving its target of 13.2% of electricity from renewables by 2010. Neither is its new policy on wind connections likely to do so, it says. IWEA points out, however, that as a result of the moratorium, the government's target of 620 MW from renewables by December 2004 will definitely not be met.

De Pietro explains that the government's vehicle for achieving its target is its sixth Alternative Energy Requirement (AER 6), which guarantees 15 year power purchase contracts to some 365 MW of renewables projects -- provided they are up and running by end 2004. "A lot of people with AER 6 contracts were affected by the moratorium," says De Pietro. "They have lost six months so far out of a very limited development and construction window for the project. We have asked the government to extend the deadline."

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