Market Status: Ireland - Credit crunch adds to growing frustration

IRELAND: After a year that fell short of the expected record in terms of new capacity installed, 2010 may turn out to be not much better for Ireland's wind sector. Nonetheless, a respectable 220MW of new projects were completed in 2009, bringing total wind capacity to 1.27GW.

With Ireland more severely hit by the economic downturn than many of its European neighbours, finance for projects has been hard to come by. The difficult lending climate is compounded by uncertainty over grid access and variable transmission charges. "The whole policy framework in Ireland is up in the air at the moment, with many areas under review," comments Michael Walsh, CEO of the Irish Wind Energy Association (IWEA). "There are so many changes and so many big risks that it makes the banks uncomfortable."

One of the areas in need of urgent attention is transmission charges. Walsh points out that in parts of the network the charge for use of the electricity system can change every year. Some projects have seen an 8% variance in the cost of their charges over three to four years. "That's (up to) 8% off your gross revenue, which turns a project that was very viable into one that's borderline or going into default," says Walsh. "It's had a huge impact."

Grid access is another ongoing problem. System and network operators Eirgrid and ESB are currently preparing to offer connections to 3.9GW of planned renewables projects under Gate 3 - the country's latest round of connection offers. But in the period up to 2017, only 1.1GW of onshore wind projects will be granted firm access to the network. "We are getting into areas of the country where grid access is more limited; that is a big part of why the project rollout is slow and will be for another couple of years," says Walsh. A large amount of capacity will have to wait until 2018 to 2020 to gain firm access.

Developers could opt for non-firm access in advance of reinforcements to the network, but this would mean that projects will occasionally be constrained by the system operator from feeding power to the grid. "But the question is, what will the constraint levels be and how will developers get finance for their projects when they can't be sure how much they will be allowed to generate," says Gavin Jones of Wind Prospect, which manages the development and construction of some 20% of all the wind projects in Ireland on behalf of a range of smaller independent clients.

Another problem for smaller players is the 10% deposit of estimated grid connection costs that has to be paid in some cases many years before the network connection will be built. That is a lot of money to be putting up so far in advance of receiving an income from the project. "The market is favouring larger operators who have more funds at their disposal," says Jones.

Indeed, as the list of projects completed in 2009 shows, the proportion of independent players who for years have dominated the Irish wind business has greatly reduced. Utilities have been moving into the sector in recent years and buying up projects and companies, the latest being the acquisition by Bord Gais of SWS Energy at the end of 2009.

"It's becoming a difficult environment for small independents and that's a worry," adds Walsh. "Financing arrangements are becoming more difficult. Banks are looking for more equity going into projects; that's something that the bigger guys are better able to manage than the smaller guys."

Nonetheless, the level of interest in wind development in Ireland remains huge. In addition to the 3.9GW awaiting Gate 3 connection offers, a further similar amount of potential capacity did not make it into the Gate. Walsh says that with Ireland's rich wind resource, it would be "criminal" if the country fails to meet its target. "The potential is there and the projects are there," he says. "If the commercial framework is tightened up a bit and Gate 3 can be made to deliver, we can do it."

Projects that came online in 2009
Boggeragh Mountains, Cork Eneco Vestas 57
Inchincoosh Bord Gais Nordex/Vestas 41
Lisheen Mines, Tipperary Bord Gais Vestas 36
Coomacheo extension, Cork SSE Renewables Siemens 18
Cark extension, Donegal SSE Renewables Siemens 9
Flughland, Donegal Bord Gais Enercon 9
Derrynadivva, Mayo Ecopower Enercon 8
Sorne 2, Donegal Bord Gais Enercon 7
Meenbog, Donegal SSE Renewables Siemens 7
Knockastanna, Limerick SSE Renewables GE 6
Projects less than 5 MW Various Various 22

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