Ireland goes for fixed purchase prices -- Tendering dropped in favour of German approach

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Ireland's wind industry has welcomed the government's plans for a fixed price support mechanism for renewable energy to enable the country to meet its 2010 renewable energy target. The "feed-in" tariff is the same concept used in Germany to stimulate a market for wind turbines. In Ireland it replaces the Alternative Energy Requirement (AER), a competitive tendering system the government acknowledges has failed to deliver the capacity needed to meet Ireland's goal of 13.2% of electricity from renewables.

Noel Dempsey, Irish minister for natural resources, says he is determined to meet the target. But this will require over 1400 MW of renewable energy capacity. With only 650 MW on the system at present, the country needs to double its achievement over the next five years, he says.

The new mechanism must avoid the shortcomings of the AER and ensure an appropriate return for the equity invested in renewable projects, says Dempsey. "At the same time I am conscious that support mechanisms add costs into the system and must ultimately be paid for by the consumer," he says. "In setting the levels of a new support mechanism I will ensure that the interests of all consumers are taken into consideration and that the competitive position of the economy will be maintained in years to come."

Speaking at the Irish Wind Energy Association (IWEA) conference in Dundalk last month, Dempsey promised that full details of the new system will be released shortly. IWEA has been arguing for a feed-in type mechanism for years. The association says it looks forward to the details of the new legislation.

The big question, however, is the price that generators can expect under the tariff. Some seasoned wind developers expect the price to fall within the range of EUR 0.052-0.058/kWh. "It's going to be tough," says one. "It's going to be the toughest feed-in tariff there is."

In opting for a fixed price system, Dempsey follows the recommendation of the Renewable Energy Development Group, set up to look into renewable energy strategy and a new mechanism to take over from the AER. He ignores, however, the advice of energy regulator Tom Reeves, who argues against any support of renewables. Reeves says Ireland can meet its target on the basis of merchant plant -- where owners sell output at going market rates -- and without the need to further stimulate the sector at the cost of the consumer.

Support needed

Dempsey rejects Reeves' analysis. There is no stand-alone renewables development of any scale anywhere in the European Union, he points out. "I am satisfied that we still require a support mechanism to develop renewable energy technologies to ensure the required level of capacity actually gets developed."

To ensure that projects are built without delay, developers will need to have planning consents and an offer of grid connection before applying for support. To date, Ireland's Electricity Supply Board has contracted for all renewables output under the AER.

But in a significant move, Dempsey proposes introducing more competition into the Irish electricity supply market by extending the off-take arrangements to companies other than ESB. "The finer detail of establishing this process is the final gap we are working on and I am confident that we will be in a position to move forward and announce full details of the new scheme to the market within a matter of weeks," he told the conference in early April.

The minister also intends to develop new targets beyond 2010. Ambitious yet realistic goals will be developed as a priority after the new support mechanism is finalised, he says.

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