Fixed prices threaten market growth -- Irish green trader campaigns for commercial access to customers

Ireland's legislative and regulatory regime is proving to be ideal for the development of a commercial market for green power. Since the partial opening up of the Irish electricity market in February, the country's leading supplier of green power, Eirtricity, has already contracted 40 MW of wind power. Today it sells renewable electricity to 4000 small businesses throughout Ireland, with annualised sales of over IR£12.5 million (EUR 16 million).

With the launch of Ireland's liberalised power market, renewable suppliers were the only sector to be given access to all electricity consumers -- both domestic and business. Suppliers of "brown" electricity are confined to competing for the country's 320 largest electricity users -- 30% of the market. Renewables are also granted priority access to the grid and fair prices for "top-up and spill" in Ireland's balancing market.

Eirtricity was the first green trader to enter Ireland's deregulated electricity market and claims to undercut the tariff offered to business by the Electricity Supply Board (ESB) by 10%. The company's 40 MW of green power is supplied from three main sources -- from Eirtricity's own wind plant, from output contracted with independent wind farm operators and from wind farms in Northern Ireland. "This is from a standing start in March," comments the company's managing director, Eddie O'Connor. "If I had more plant we could sell twice or three times that."

Eirtricity has a further 30 MW of wind plant under construction. In the past year, the company has seen its staff grow from two to 45. It is a joint venture between National Toll Roads, a major investor in infrastructure assets, which owns 51%, and Future Wind Partnership, a wind development company.


The company's ambitions extend beyond Ireland, to mainland Europe where it hopes to be one of the largest traders of green credits. In early November, only two months after concluding its first ever trade in green credits on its home turf with Waterford Crystal (Windpower Monthly, November 2000), Eirtricity struck its first international deal for a sale of green credits with Hamburgische Electricitats-Werke AG (HEW), one of Germany's largest electricity generators and part of the Vattenfall Group of Sweden.

The deal with HEW (box) foreshadows plans for a Europe-wide market in green credits which are still taking shape. It puts the Irish wind industry firmly on the European map, adds O'Connor. "Market-based approaches are the best way of ensuring that the full potential of the Irish wind resource is realised and in doing so, we can make major progress towards meeting our Kyoto obligations without reliance on the type of levies that are in place in other countries, levies which can hamper the competitiveness of electricity supplies."

The deals with HEW and Waterford are motivated as much by the desire to be at the forefront of green credit trading, as an exploration of the issues involved. However, while they involve as yet only small amounts of power, a major constraint on the company's expansion plans will be the lack of renewable energy plant if the Irish government adopts the proposals of its Renewable Energy Strategy Group for two further rounds of the Alternative Energy Requirement (AER).

Strategy condemnation

O'Connor is scathing in his criticism of the group's strategy paper -- published in July (Windpower Monthly, September 2000), saying it is "nothing short of a disgrace." He points out that under its recommendation for support for large scale wind, generators would opt for the fixed price contracts on offer rather than contract with green traders. "Our biggest concern is that the state is going to start competing against us, offering outlandishly high prices," he explains. "It would lock up all supplies of green energy just when Eirtricity was trying to get going."

He adds that while the company could not match the fixed prices proposed by the strategy group, it does offer good returns to producers: "We have got to be good for the industry. We are going to be around for a long time so it won't be in our interests to do exploitative deals with producers. We want them to go out and build more wind farms so that we will have something to sell."

POLICY Dispute

He accepts that continued subsidies are needed for many small schemes below 5 MW. "But we have to differentiate between those that need economic support and those that do not." With Ireland's excellent wind resource, wind energy today can be completely commercial, he says, pointing out that in October Eirtricity opened the world's first merchant wind plant -- its 12 MW wind farm at Culliagh in Donegal, built and funded entirely in the private sector.

Eirtricity's views, however, are at odds with those of the Irish Wind Energy Association. The IWEA, which had two representatives on the strategy group, welcomed the group's recommendations. It was a conflict of interests that led O'Connor to step down as IWEA chairman. "I could have stayed on, but somebody needs to say that paying high prices to people who can make good money in the open market that was created last year is wrong. We had to have the freedom to be able to say that."

He adds that Eirtricity sees the future in terms of trading and offering people a choice. "A lifetime in business has taught me that companies that put the customer first are the companies that are going to win. But we see the IWEA as standing for high prices for the customer. The price of electricity will go up if the government's plans for big wind farms go ahead. And we don't want any part of it."

While Eirtricity will be lobbying fiercely at home, it also intends to take its message to Europe. O'Connor wants to see the European Commission and European Parliament taking more account of customer's interests. "We need to find ways of offering European customers a green choice. We need to make green power economically and you need to redefine the economics if the economics aren't right." He points to the vast subsidies to fossil fuels and the external costs of brown energy. Green credits are an attempt to redress the costs in renewables' favour. "Somebody has to be in there articulating that view. We believe that if you let the customer know what options they have and offer them a green alternative, you will see a radical transformation of the renewables industry in Europe."

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