Struggling with policy and emissions

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Ireland's failure to seriously harness its wind resource could become a costly error for the next generation as the country starts counting the likely cost of penalties for failing to meet its Kyoto commitment on control of carbon dioxide emissions

As Ireland faces up to the prospect of stiff penalties for falling short of its Kyoto commitments to limit greenhouse gases, a healthy market for wind energy -- an essential part of the solution -- continues to elude the country. This was a key issue debated at this year's premier annual conference of the Irish Wind Energy Association (IWEA).

The two day conference, held in Cork April 10-11, celebrated the ten year anniversary of both IWEA and Ireland's first wind farm, at Bellacorick in Mayo. Yet with only 145 MW of installed wind capacity, despite an abundant wind resource which is the envy of most European countries, delegates at the conference found little cause for celebration. The industry now awaits the last competition for contracts under Ireland's Alternative Energy Requirement (AER) legislation and a consultation on a new support mechanism to replace it.

Setting the scene, economist Peter Bacon reflected that when Ireland's Kyoto commitment was set, its target of a rise in greenhouse gases to 13% above 1990 levels in the period 2008-12 looked lenient at the time. Explosive economic growth, however, has led to the country exceeding this target by 10% in 2000. It now looks as though by 2010 emissions will be 25-30% higher than in 1990.

From the government's environment department, Patrick O'Sullivan added that Ireland is the highest per capita emitter of greenhouse gases among EU countries and the fourth highest in the world. "Our per capita emissions are completely out of control. There are under five years to go before we will be in the start of the commitment period," he said. To reach its emissions targets, Ireland will have to reduce its projected emissions by 15 million tonnes of carbon dioxide, said O'Sullivan. Under the National Climate Change Strategy (NCCS), renewable energy sources would account for a reduction of one million tonnes of CO2.

facing big penalties

Bacon pointed out that, according to some projections, penalties for exceeding emissions targets could cost the country EUR 1.45 billion in 2008 at the start of the compliance period, and up to EUR 4.3 billion by 2012. This would amount to 1.1% and 2.8%, respectively, of projected GDP. Even if measures are introduced to limit emissions as assumed in the national climate strategy, the country would still incur fines of EUR 650 million in 2008 and EUR 1.3 billion in 2012, he said. "You are talking about big numbers."

Government policy statements have consistently identified the role wind energy has in curbing greenhouse gases, but all initiatives to date have failed to exploit it fully, said Bacon. Moreover, they have failed also to recognise the sector's potential to export green energy to Europe, he added. "If the sector is going to grow, the economy needs adequate interconnector capacity with Europe," he said. This would assist market liberalisation, allow Ireland access to internationally competitive power prices and reduce the need for spinning reserve to back up wind generated electricity.

Minister for Communications, Marine and Natural Resources Dermot Ahern told delegates he was determined that government targets for renewables would be achieved. The government's aim is for an additional 500 MW of renewable energy by 2005, and Ireland's EU target is for 13.2% of electricity from renewables by 2010. To meet the targets huge private sector investment will be needed, said Ahern. "And if investment conditions are not right then we will not have projects built."

Open and transparent

Ahern defended the government's closure of a tax loophole and its ending of other fiscal measures that the wind sector had used in the past to raise equity for wind projects, and he warned that no other tax incentives are to be made available. "The slowing down of the economy has placed pressure on public finances and the reality is that measures that contract the tax base are extremely difficult to obtain, regardless of the merit of your case." Instead, he said, he had addressed those setbacks in the terms of AER VI, and "put in place an open and transparent mechanism that would be attractive to investors."

The minister assured the conference that he would offer contracts "as soon as practicable" after the end of April closing date. But he warned that under European state aids rules, support in the competition would be limited to 500 MW for onshore wind. "I predict in AER VI the reserve list option will be activated," he said.

Turning to offshore wind, Ahern said he had thought long and hard about including it in AER VI. "The key issue is whether additional costs can be justified." He said he would have liked to go further than the two 25 MW projects included in the competition, but was advised that support for one or more small demonstration projects could reduce offshore costs of subsequent projects.

IWEA chair Tim Cowhig reported that wind now accounts for 145 MW of capacity -- 1.5% of the Ireland's electricity needs. But only 21% of large-scale projects have been built under AER III, and scarcely any projects under AER V.

To date, pricing structures have not allowed most projects to achieve a commercial return, he explained. And given a typical set of project financing conditions, only sites with wind speeds of 8.4 m/s and above will be viable in the next AER. "So we will not be able to develop all the sites with planning [consent] under AER VI," he said.

Cowhig called for AER VI to be implemented as soon as possible. It offered a lifeline to the industry if it was done properly, he said. But he warned there is no guarantee that it will be any more successful than previous AER competitions. Potential sticking points are that developers will bid in prices that are unrealistically low, some sites have no feasible connection to the grid and some may be unable to obtain consents for connection lines in time to build under the tight timescale imposed on AER VI projects.

meeting targets

To meet the government's 2005 target, 209 MW of wind a year will need to be installed in 2003, 2004 and 2005 -- a 15-fold increase in the installation rate, he said. This is not feasible under current mechanisms. "Ireland should take a lead from countries like Germany to implement policies so that the industry can take off." Cowhig reiterated IWEA's demand for a fixed feed-in tariff system to replace the AER.

Ahern conceded that the AER mechanism is not enough to achieve the 2010 target. By early summer, he said, he expects to launch a consultation document for a new support mechanism. "We need to allow AER VI to bed in, but I have a completely open mind about how the new pricing mechanism can be structured," he said. "The sector needs certainty, so I want to provide you with that certainty."

The government has played a game with competitions which have not done much to encourage the industry, accused Jeremy Sainsbury from Natural Power Consultants. "Unless there is a package of policies that can be seen as a long term commitment to the industry, the government could not possibly achieve its targets. It's easier to reign back a healthy industry, than to bump-start an old car down the road."

Looking ahead at other mechanisms for reducing emissions, O'Sullivan pointed out that Ireland is preparing to implement the European emissions trading directive. "Once it is implemented, it will drive prices [for conventional electricity] in favour of renewable energy." The government also proposed a carbon tax in its last budget, he added. "We in the Department of Environment are very much pushing for carbon taxation," he said. "We are looking at ¤7.50 per tonne of carbon and are also proposing that over time it should be increased to ¤20 per tonne." The finance department was expected to circulate a consultation paper in April.

grid connection

One of the biggest obstacles to wind development remains grid connection, said Tim Cowhig. Weak grid infrastructure in some locations, high cost of connections and the length of time it takes to get a connection are all delaying projects that already have planning consent.

From consultants Garrad Hassan, Paul Gardner explained that large amounts of wind generated power could be accommodated by the existing transmission system without need for reinforcement. Outlining the findings of Garrad Hassan's study of wind penetration into Ireland's transmission system (Windpower Monthly, April 2003), he warned that to allow network operators to accept higher proportions of wind onto the system, the grid code needs to be amended to allow more flexible operation of the system. "Deferring transmission system reinforcement is a very useful thing to do," he remarked.

Econnect's Paul Glendinning agreed. He presented the case for active network management. Research by Econnect shows that network operators can double the amount of wind generated capacity added to the system through installing generator automatic voltage control, he said. This provides a solution for weak grids without the need for reinforcement, it enables the connection of larger capacity wind farms and allows owners to repower sites with higher output turbines. Glendinning explained that Econnect is to install the system into a location on the Irish network and at two sites in Britain in 2003.

upgrading go-ahead

Ahern announced that a program to upgrade the grid to accommodate the connection of wind projects is at last to go ahead. He told the conference that the Irish energy regulator had agreed to the government's proposal that Ireland's grid operator, ESB Networks, should underpin the investment. "The new reality of the public finances necessitated that some means other than Exchequer funding needed to be sourced," he said. "I am delighted that the Commissioner for Energy Regulation has responded positively to my request and that this worthwhile investment which is critical to your industry can proceed."

oSome 240 people attended the IWEA's annual conference held at the Rochestown Park Hotel on the outskirts of Cork. This year's two-day event attracted fewer individual developers, but the finance community appeared in greater numbers than ever before. Fourteen companies exhibited -- a record for Irish wind events, but several exhibitors expressed disappointment that most stands were in the main conference hall, which most delegates abandoned at coffee and meal breaks.

The conference was preceded by an information evening held by the Renewable Energy Information Office for people wanting to learn about the wind sector or landowners and farmers interested in developing wind farms.

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