Fixed prices not high enough -- Irish standard offer contract

The price that wind and other renewables can expect under Ireland's new fixed price support mechanism is not enough to create a viable market, says the Irish Wind Energy Association (IWEA). The government has set a standard price of EUR 0.057/kWh for large wind projects over 5 MW and EUR 0.059/kWh for small wind. Landfill gas is to receive EUR 0.07/kWh and hydro and biomass EUR 0.072/kWh.

The prices, however, are only partially linked to the consumer price index. "Our view is that it will not be enough unless they increase the amount of indexation," says IWEA president Paddy Peahon. Ireland's natural resources department has ruled that renewables prices will only be linked to 25% of the annual index increase. "We have made a case to the department that you really need 100% for these things to work financially," says Peahon.

The total cost of the standard offer program is capped at EUR 119 million over 15 years. The fixed price contracts replace a system of competitive tendering under an Alternative Energy Requirement, which the government concedes has failed to deliver enough renewables capacity. Ireland has a target of 13.2% of electricity from renewable energy by 2010, which requires a total 1450 MW of installed capacity. The country currently has 675 MW of renewables operational, 175 MW under construction and further development is expected from the latest AER competitions.

400 MW more

The government says it will need at least a further 400 MW -- mostly wind -- to meet its target. Earlier this year natural resources minister Noel Dempsey announced his intention to move to a system of standard offer contracts. But he could not resist adding a measure of competition to the process: renewable developers will have to compete for the capacity, which will be allocated on a first come, first served basis. Only projects with full planning consent and a grid connection offer can apply.

Successful applicants will be able to contract with any licensed electricity retailer for a 15 year power purchase agreement. Retailers will be compensated for the extra costs of the standard offer contracts. The government claims the program will add EUR 3.40, plus sales tax to annual domestic bills.