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Ireland

Ireland

Wind economics set to beat gas in Ireland

Switching from gas powered generation to wind power for future supplies will typically save consumers in the Republic of Ireland EUR 10 a year on a typical household electricity bill in the long term, while the extra cost in the first five years amounts to no more than a fraction of a euro cent per kilowatt hour. So concludes a far-reaching study commissioned by the Irish Wind Energy Association based on "realistic" movements in gas and wind prices over the next 15 years. The study looks at the technical and economic potential for wind to meet 23% of Ireland's electricity demand by 2010 and 41% by 2020.

With rising gas prices and falling wind power costs, Irish consumers can make savings on electricity bills

if the government focuses its energy policy on creating

a market for

power from the wind rather than from fossil fuels

Switching from gas powered generation to wind power for future supplies will typically save consumers in the Republic of Ireland EUR 10 a year on a typical household electricity bill in the long term, while the extra cost in the first five years amounts to no more than a fraction of a euro cent per kilowatt hour. So concludes a far-reaching study commissioned by the Irish Wind Energy Association (IWEA) based on "realistic" movements in gas and wind prices over the next 15 years. The study looks at the technical and economic potential for wind to meet 23% of Ireland's electricity demand by 2010 and 41% by 2020.

"Ireland has the potential to generate the cheapest wind power in the whole of Europe. It has the best wind resource as it is the first land mass for several thousand miles to intercept the prevailing westerly winds," states the study. "There are no insuperable technical issues to constrain wind development," even on Ireland's relatively isolated grid. Rising gas prices and falling wind prices mean that Irish consumers have the opportunity to be among the first in the world to cut both their greenhouse gas emissions and electricity prices through the widespread use of wind power.

In a "realistic" scenario for wind power in Ireland, which assumes that gas prices will rise at no more than 2% a year, installation of 2500 MW by 2010 will result in an initial extra cost that peaks at a minimal EUR 0.00088/kWh. After 2010, the extra cost disappears and by 2020, with 5500 MW of operating wind plant, the consumer is saving EUR 3 for each megawatt hour of electricity consumed, or EUR 0.003/kWh.

In an alternative "improved" scenario for wind, which sees gas prices rising at 3.5% a year and takes into account the cost of fuel price risks, the extra cost to the consumer peaks at EUR 0.00044/kWh already by 2008 -- half the cost in the "realistic" scenario -- and then steadily disappears. By 2020, the switch from gas to wind results in a drop in the price of electricity of EUR 0.0077 a kilowatt hour. Even in an unlikely "worst case" scenario for wind, with gas prices not going up for 15 years, the cost to the electricity consumer of increasing wind's share of supply to 41% between 2005 and 2020 adds just EUR 2/MWh, or EUR 0.002/kWh.

Kind to gas

In calculating future generation costs, the IWEA report takes into account a wide range of parameters for both technologies, though stresses that the instability of gas prices -- which in just the past year have risen 30-40% -- makes comparison difficult. Taken as given is a "conservative" continued fall in the cost of wind. It is also presumed that improvements in gas-fired technology may help compensate for its rising fuel price.

For wind, the study includes its generation costs, plus the costs associated with the variability of wind, such as increases in reserve and balancing power. Costs are balanced against "value." Wind has a "fuel saving value" and a "capacity saving value," which is the volume of generation that does not have to be built thanks to the new wind plant. "Fuel saving value" includes the cost of meeting caps on carbon emissions under the EU's Emissions Trading Scheme, due to start on January 1.

The study does not include the "external" cost of gas generation -- the cost to society of its pollution -- although repeats several times that if these costs were included, wind is clearly by far the cheapest option. Neither is wind credited with its "embedded generation" advantages -- the economic benefits to the grid of generating electricity close to where it is consumed -- since these are site specific and thus not always present.

Wind Energy: The Way Forward for Ireland, was produced for IWEA by energy consultant David Milborrow, Windpower Monthly's contributing technical consultant. The calculated cost of switching from gas to wind in Ireland includes dealing with technical issues specific to wind, such as the extra flexibility required to balance not only the ebbs and flows of demand, but also those of supply. Until wind provides 20% of supply, balancing costs are negligible to Ireland's power system operator. In the longer term, with a greater wind penetration, the construction of a planned interconnector to Wales will "ease the assimilation of increasing amounts of wind energy."

The study stresses that the proposed build-up of wind is not instant. It takes place over a time period long enough for the refinement of technical solutions to reserve power and balancing issues. Better load management and advances in the ability of gas-plant technology to "follow load" will bring relatively greater benefits to wind by reducing the economic penalties associated with variable supply. Improvements in forecasting output from wind plant are also on the horizon and will knock further fractions of a cent off the already small additional costs of scheduling an energy source that cannot be turned up or down at will.

The existing high voltage transmission system in Ireland is extensive. The study points out that unlike in Scotland, where areas with "very good wind regimes" have no access to the high voltage transmission system, "in Ireland there are many areas with good wind regimes close to the existing transmission system." Even when transmission constraints are taken into account, "with proper site selection, up to 3000 MW of wind power generation could be connected to the existing or planned transmission system" in Ireland. Furthermore, if the Wales interconnector goes ahead -- and consideration is given to wind power development needs in planning the new transmission corridors and network connection points associated with the link to Wales -- "significant additional wind power capacity could be undertaken without further significant transmission reinforcement."

Heavy reliance on gas is a particular Achilles' Heel for security of supply in Ireland. It is "the EU country with lowest ratio of natural gas storage capacity to average daily natural gas imports." As a result, natural gas supplies in Ireland are among the least secure in the EU, states the report. "Crucially, all natural gas imports to the island of Ireland could, in the opinion of insurance risk assessors, be totally lost for a period of up to ten days, due to a single incident."

In contrast, the Irish winds are an inherently secure source of renewable energy. Pricing this advantage has not been attempted in the IWEA report, but it points out that "value of lost load" is a fairly standard concept in electricity studies. If this value were included, the economic benefit of switching from gas to wind in Ireland would increase, potentially by around EUR 7.6/MWh.

The study's assumptions of future generation needs are based on those provided by the Irish transmission system operator. Irish demand will grow at 3.8% a year to 2010 and by 2.3% a year to 2020. At those rates, generation will rise from 28 TWh in 2005 to 41 TWh in 2020. The assumption that new wind power plant will displace or defer the construction of gas fired plant is based on the fact that gas has been the predominant source of new generation ever since 1990. If wind also displaces peat and coal-fired generation, the savings to the Irish consumer -- particularly savings in peat subsidies -- will be greater than if just gas is displaced.

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