Competitive Irish system after all

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Ireland's new market framework for development of renewable energy -- proposed as a support system based on fixed power purchase prices -- is apparently to have a competitive element to it. The new system will bear many similarities with the previous market set-up. It will be known as the seventh Alternative Energy Requirement (AER VII), and conditions for applying for support will be the same as for AER VI, except developers will need a valid grid connection offer and will be able to obtain a power purchase agreement with any licensed electricity retailer, not just the incumbent Electricity Supply Board.

As in previous AERs, developers will have to compete for support. Although a fixed price system, AER VII will be subject to "quantitative limits," says Eugene Dillon from the Department of Communications, Marine and Natural Resources (DCMNR) in a note to industry players. "In this context, where developers and suppliers will be competing for a limited quantity of support, the process will continue to be referred to as a competitive process," he writes.

But the capacity available under AER VII cannot be specified until AERs V and VI are closed, says the DCMNR note. Although it does not discuss what prices might be expected from AER VII contracts, the note says they will reflect the operating costs of an efficient operator in each technology. "In the case of wind, for example, the fixed price will reflect the cost base of the sector but will not track movements in oil prices." Once the competition opens, support will be allocated on a first come, first served basis.

Minister for Communications, Marine and Natural Resources Noel Dempsey announced in April that a German style "feed-in" tariff would replace Ireland's system of bidding for contracts under successive AER competitions.

The aim of the new fixed price system is to allow Ireland to meet its renewables target. The six competitive tenders in the AER program have so far failed to deliver enough capacity. The goal of 13.2% of electricity from renewables by 2010 demands a total of 1400 MW of capacity. Around 624 MW of renewable plant is already operational, of which 362 MW is from wind. More capacity is due online under the two most recent AER competitions but this will not be enough to bridge the gap.

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