Fixed price contracts to clear backlog -- Irish minister considers fast track for permitted 200 MW

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Latest consultations between the Irish government and the renewables industry have moved the country a step closer to a regime of fixed price contracts for renewable energy. Last month the Department of Public Enterprise (DPE) told renewable energy trades associations that is was seeking their views on "adjustments" to a fixed price per kilowatt hour based on prices of contracts offered under the previous Alternative Energy Requirement (AER) system of renewables support.

The DPE is considering one of the key recommendations of the government appointed Renewable Energy Strategy Group. Last year in its report "Strategy for Intensifying Wind Energy Deployment," the group urged a fifth round of the AER. But it advised fixed price contracts for all projects with prior planning consent instead of the fiercely competitive auctions for contracts that characterised previous AER rounds. Prices should be based on projects commissioned under AER III, but adjusted to take account of more recent developments. The aim is to encourage a swift deployment of the 200 MW of wind farm projects in Ireland that already have planning consent.

Energy minister Joe Jacob has not formally agreed to the strategy group's recommendations, but his department's officials are now sounding out the renewables industry to determine what the level of the "adjustments" -- and therefore the final price -- would be. The strategy group had suggested the AER III price be corrected to allow for payment of charges and levies introduced by the electricity regulator, and that it should be linked to the consumer price index. Other adjustments could take account of development and capital cost changes since AER III. In its consultation with trades associations, the DPE stresses: "The appropriate revised price must be a product of objective adjustments rather than a desire to achieve a particular price per kWh."

Under AER III, wind -- the cheapest renewables technology in Ireland -- received prices between I£0.221/kWh and I£0.227/kWh. The DPE expects a modest upward adjustment, but if the industry's demands are too high, Jacob could decide to continue with its auctions of AER contracts. Industry comments were invited by the end of January.

Against the plan

The prospect of attractive fixed price contracts for wind projects does not appeal to all industry players. Green power trader Eirtricity fears that wind energy producers will opt for high priced contracts under the new-look AER rather than contracting with electricity traders (Windpower Monthly, December 2000). Eirtricity's managing director, Eddie O'Connor, claims the AER will scoop all green energy supplies at prices the company is unable to match.

The Irish Wind Energy Association (IWEA) counters that the price offered to producers by Eirtricity is too low because it is discounting prices to the final consumer. "That is borne out by the fact that there are no contracts being signed with them," says the IWEA's Aidan Forde. "There is a bit of bad feeling in the industry because Eirtricity tried to kill off AER V," he adds. He explains that the IWEA is keen to see AER V implemented to spur the development of some 200 MW of wind energy projects that already have planning consents but so far no power purchase contracts.

This concern would appear to be shared by the government. After nearly three years of consultations over its renewable energy policy, Joe Jacob now appears impatient to increase renewable capacity in Ireland. In November, he announced he is to streamline administration of the AER process to minimise delays in delivering renewable plant and expects to be able to support new projects as early as the summer. "Under previous programs the delay from the announcement of support to commissioning of generating plant was measured in years. I am endeavouring to reduce that to months."

Grid upgrades

To allow the anticipated extra renewable capacity to be accommodated into Ireland's electricity network, the Department of Public Enterprise is following another recommendation by the Renewable Energy Strategy Group. It identified the serious shortage of grid capacity as a key obstacle to greater deployment of renewable energy and called on the government to invest National Development Plan funding into upgrading the grid where there are existing -- or anticipated -- bottlenecks. To help it identify the location of grid upgrades, the DPE invites potential developers to inform it of their proposed renewable energy projects.

Meanwhile, the DPE is notifying the European Commission's Competition Directorate of its plans for support to renewables to ensure they comply with EU rules on state aid. Immediately after it gets the all-clear from Brussels -- expected in March or April -- it intends to announce the next round of AER V.

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