Wind industry pleads for grid certainty

IRELAND: Ireland's wind industry has urged the broad coalition government to end the uncertainty surrounding grid connections and incentive schemes if the country is to generate 40% of electricity from renewables by 2020.

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At its annual conference in March, the sector urged the country's leaders to push through legislation for a new incentive regime as soon as possible and speed up the permit process for new grid connections.

Topping the list of concerns is the government's proposal to review the country's incentive regime, the Renewable Energy Feed-In Tariff (Refit). The government says support should go only to the most cost-effective renewable-energy projects. It also proposes that customers should benefit from a "claw-back" mechanism when market prices exceed the Refit tariff.

Trying to plan for long-term investments while policymakers change the rules is like "wading through treacle", Aidan Forde, director of developer Saorgus Energy, said at the Irish Wind Energy Association (IWEA) annual conference in Dublin. When promises of a Refit for offshore wind were made three years ago, some offshore developers began preparatory investments, he said. But nothing has happened since, with the government failing to apply to the EU for state-aid clearance of such support.

"That is the sort of treacle I'm talking about. If the state says it's going to do something it has to do it, otherwise it's a negative investment signal." Forde added that it would only get more difficult to develop wind farm sites. "The low-hanging fruit has been plucked," he said.

The new Refit 2 regime will make it much more difficult for developers to arrange project finance, according to Peter Baillie, managing director of developer Energia. He believes that the claw-back clause and a partial removal of indexation will mean that Refit prices cannot keep pace with Ireland's consumer price index.

"These measures will lead to reduced prices for generators," he says. Baillie warns that only one fifth of the projects currently being offered grid-connection agreements under the Gate 3 round of applications are likely to be economically viable, according to a recent industry review. In Northern Ireland, where generators receive support under the UK's Renewables Obligation system, support value is nearly double that in the Irish Republic, Baillie adds.

There is uncertainty about when Refit 2 is to be delivered, too. John Brereton, general manager of developer and consultant Wind Prospect Ireland, explains that it could take at least two years to secure EU state-aid approval and for the Dail, the Irish parliament, to amend the public service obligation (PSO) - the levy that passes costs of energy support on to consumers.

A review of Refit 2 could add a further year's delay for state-aid clearance and another year for PSO approval, Brereton fears. A hiatus of this scale risks Ireland losing its skilled wind workforce to foreign economies that are powering ahead with wind deployment, he warns.

Stumbling blocks

The grid network is a potential obstacle for the 6GW of renewables to be built throughout the island of Ireland to meet both jurisdictions' 40% targets. As more projects connect to the Irish system, a growing issue for generators is the curtailment that occurs when wind farms are required to reduce their generating output due to insufficient grid capacity. Unlike some countries, generators in Ireland are not compensated for curtailments.

"When you are working out your returns for a project you need to know with certainty what you will be allowed to produce," says Brereton. This may not be a big problem if the curtailments last just for a few years until grid reinforcements are built. "But for Gate 3, the constraints or curtailments are for the whole duration of the project," he adds.

Eirgrid chief executive Dermot Byrne told the IWEA conference that in a small island market like Ireland, with a potential 48TWh of annual wind generation, curtailment was inevitable to ensure a secure system. But an upgraded transmission system would be able to cope with 75% of wind generation at any one time - making curtailments relatively rare.

Under its Grid 25 programme, which looks out to a 2025 horizon, Eirgrid plans to double the size of the existing transmission network with more than 3,400 kilometres of new lines and upgrades. There are concerns, however, that the network will not be built in time unless Eirgrid and distribution network operator ESB speed up the approval process for new lines.

The regulatory uncertainty has been blamed for poor investor confidence, leading to a mere 150MW of new wind being built last year - the lowest amount since 2007. To reach its 2020 goal, Ireland will have to install more than 400MW of wind every year.

IWEA chairman Stephen Wheeler summed up the problems: "While the policy framework and targets are set, the underlying enablers - planning, grid and market arrangements - are not."

Ireland's energy minister, Pat Rabitte, has acknowledged the industry's concerns. He told the IWEA conference that his government was aware of the need to implement the strategies developed and to speed up grid upgrade. He also said his department would work with the environment ministry to finalise the process for granting consents to offshore wind and marine renewables, and prioritise securing EU state-aid clearance for Refit 2.

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