Ireland

Ireland

WindEconomics: Irish consumers pay just €1 a year for wind

The net cost of wind energy in Ireland between 2000 and 2020 amounts to less than €1 per person per year.

Irish consumers are not paying a heifer-ty sum (pic credit: Statkraft)
Irish consumers are not paying a heifer-ty sum (pic credit: Statkraft)

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The analysis by Baringa Partners, commissioned by the Irish Wind Energy Association, examined all the components of the additional costs attributable to wind energy and balanced these against the savings.

In 2018, wind energy contributed 29% of electricity in Ireland, from a capacity of 3,566MW. These figures are expected to rise to 35% of electricity consumption and 4,100MW of installed capacity by 2020.

Savings

The largest single component of the savings, accounting for €2.3 billion, comes from the reduction in wholesale energy costs, since fewer inefficient, high-cost generating plants are required to run.

Wind energy can also reduce the bill for expensive imports at times of high demand – when wholesale electricity prices are also high.

The second biggest component of the savings, at €0.7 billion, comes from the avoided non-compliance costs associated with the European Union’s Renewable Energy Directive.

All EU member states have a target for renewable-energy contributions by 2020 — 16% in the case of Ireland. (The target relates to all energy consumption, not just electricity).

As Ireland is expected to reach only 13% renewable-energy contribution, fines will be levied. Baringa has estimated the extent to which wind energy will contribute to the country avoiding a larger financial penalty.

The third savings component, for €0.2 billion, arises because the presence of wind on the electricity network reduces the capacity payments the system operator needs to make to fossil-fuel generators when they are needed at times of high demand.

Overall, these savings add up to €3.2 billion.

Costs

On the debit side, the largest cost, amounting to €1.9 billion, covers support payments to renewable-energy generators.

There have been two schemes, with premium payments made to electricity generators and recovered through a levy on electricity bills.

Additional network costs accounted for €0.5 billion, to facilitate exports from regions with weak grid connections.

Ancillary service costs amounted for €0.4 billion — these reflect the additional costs of reserves needed to deal with the variability of wind.

Finally, constraint costs clocked up €0.5 billion. These were incurred either when the level of wind generation had to be curtailed to ensure the stability of the system, or when generation had to be constrained to avoid overloading circuits.

The total costs amount to €3.3 billion, while total savings added up to €3.2 billion, making the net cost to consumers over the period 2000 to 2020 €63 million. Baringa equates this to less than €1 per person per year.

As several of these cost and savings components are specific to Ireland, the analysis is not generic, however, a similar picture would probably emerge if these calculations were made in other jurisdictions.

PV costs falling faster than wind in the US

The US Energy Information Administration (EIA) recently published its Annual Energy Outlook for 2019. This looks forward to 2050, with projections for the electricity-generation mix under various scenarios.

Under the most favourable scenario for renewables, wind would account for 128GW by 2050, which is roughly 35% more than the current total.

Solar, on the other hand, would reach just under 500GW. Underpinning these projections is a wealth of data on cost and performance characteristics, and it is instructive to examine how these cost data have varied over the years.

The figures for nuclear, solar, onshore and offshore wind, are shown in the chart (below).

The rising trend for offshore wind reflects the fact that the US came late into that technology. However, a recent analysis by the National Renewable Energy Laboratory of the costs of the 800MW Vineyard Wind project — due to be commissioned from 2022 — used a central estimate of $3,500/kW for the installed cost, well below the figure shown in the graph.

The fall in offshore wind costs will then be just as dramatic as that of PV.

The latter fell from just under $5,000/kW in 2010 to $1,783/kW in 2019. This figure is for fixed-tilt systems.

Onshore wind costs fell steadily until 2016, but have stagnated since that time.

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