Retailers pay more than fixed price -- Ireland selects 600 MW under new feed-in tariff law

Over 600 MW of projects have secured support in Ireland's new subsidy system, under which a fixed premium price is paid for electricity from renewables. Wind is the big winner with 50 out of the total 55 projects, or 98% of the entire capacity.

Known as the Renewable Energy Feed In Tariff (REFIT), the new EUR 119 million support system is expected to boost the green share of electricity generation to 15% by 2010 and bring renewables capacity up from 860 MW to 1469 MW. The REFIT replaces Ireland's Alternative Energy Requirement (AER), which required project developers to compete for power purchase contracts in a series of size-specific tenders, with the lowest prices selected.

According to natural resources minister Noel Dempsey, the 600 MW will reduce imports of fossil fuels by more than four million barrels of oil equivalent each year, helping the country's trade balance by over EUR 100 million. It will also save over EUR 20 million in avoided costs of greenhouse gas emission permits up to 2010. "I have set an ambitious target to treble the contribution from renewable energy sources from 5% of electricity produced in 2004 to an annual production target of 15% by 2020," says Dempsey. "There is now solid year-on-year growth in the indigenous renewable energy sector." In 2004, installed wind capacity was 339 MW, he points out. "By the end of 2005 this had risen by 46% to 496 MW. A further rise to 736 MW is expected by the end of the year."

Under the REFIT, the 55 projects will receive a minimum price for 15 years, pegged to the rate of inflation. Large wind (over 5 MW) will receive EUR 0.057/kWh, small wind EUR 0.059/kWh, hydro EUR 0.072/kWh, landfill gas EUR 0.07/kWh and other biomass EUR 0.072/kWh. In a further departure from the AER, project owners may contract to sell their power to any licensed electricity retailer.

Cheap at the price

To encourage retailers to buy power under the REFIT, they will receive an added incentive of around 15% of the EUR 0.057/kWh reference price for large wind. But the Irish Wind Energy Association's Maureen de Pietro points out that with high current fossil fuel prices, wind is already cheaper than many other sources of generation. This is creating a rush among electricity retailers to buy up wind capacity, with wind generators negotiating prices higher than the reference price.

For some 25% of the new capacity, the REFIT contracts replace contracts awarded under the 2003 AER. Projects which have been held up in the queue for grid connection can now benefit from the full 15 years of support.

The wind projects are being developed by a wide spread of interests, from landowners through construction companies, independent power producers and investors to vertically integrated electricity generators and retailers. Projects range in size from 0.6 MW up to 48 MW at Airtricity's Bindoo wind farm. Airtricity is the biggest developer, accounting for over 30% of REFIT capacity.

According to Eugene Dillon of the natural resources ministry, support under the new program was granted to every applicant with site permits and grid connection offers. The REFIT will become effective when it receives clearance under EU competition rules governing the allocation of state aid to industrial sectors, expected before the end of the year.

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