The latest changes to the REFIT scheme will boost the development of wind farms providing green energy to the Irish National Grid, according to Minister for Communications, Energy and Natural Resources, Pat Rabbitte. Speaking at the recent Irish Wind Energy Association Annual Conference, Rabbitte said that renewable energy generators needed policy certainty if they were to have the confidence to invest and that the changes to REFIT would encourage investment between now and 2017. Since 2003, approximately 1,250 turbines in 150 wind farms across 22 counties have been commissioned with a total capacity of 1,738 MW. This has been facilitated by support schemes for wind energy, the most recent of which REFIT 2 was launched in 2012. Wind energy has been the largest driver of growth in renewable electricity, contributing most towards the achievement of the target for 2020 to deliver 40% of electricity demand from renewable sources. Early estimates for 2012 indicate the current level is about 20%. However, in terms of the 2020 renewable electricity target, Ireland is 630MW behind where the National Renewable Energy Action Plan has outlined it should be in 2012. The target will not be achieved without an increase in wind energy build from an historic average of 180MW per year to at least 250MW per year. [login type="readmore"] The timely development of a healthy pipeline of potential wind projects is essential if Ireland’s 2020 renewable electricity targets are to be achieved. Non-achievement will result in compliance costs and emissions permit purchases. “The Sustainable Energy Authority of Ireland has estimated that these could amount to around €100 million to €150 million per annum for each percentage point shortfall in renewable energy, and a further €250 million in emissions permit purchases,” explained Rabbitte. “It will also undermine Ireland’s opportunity to potentially export renewable energy to the UK to assist in meeting their 2020 renewable electricity targets.” DISPATCH AND SCHEDULING In this regard, he said, the recent conclusion of the SEM consultations on dispatch and scheduling presented an opportunity to push ahead with the wind-farm developments that Ireland needs. Eirgrid has indicated that it was in a position to commence issuing constraint reports in respect of Gate 3 since last month. This will allow developers make decisions on their Gate 3 offers. However, a significant portion of Gate 3 is now likely to connect post 2015, outside the timeframe for projects to be operational under the current terms and conditions of REFIT 2.
“I’m aware that grid deposits for Gate 3 offers, which may be significant, will be required once constraint reports issue and that developers who are due to build post 2015 are understandably concerned about the lack of certainty as to what support scheme they can access and are seeking certainty,” said Rabbitte. “Therefore, being cognisant of the absolute need to meet our 2020 targets, and recognising the obstacles faced by developers and their need for policy certainty, I’ve taken a decision on support scheme flexibility.” In relation to REFIT 2, its terms and conditions will be amended so that while the measure will continue to be open for applications until 31 December 2015, projects must be built and operational by 31 December 2017, and the support for any project cannot exceed 15 years and may not extend beyond 31 December 2032. “Following industry consultation, I also intend to replace the terms ‘fully commissioned’ and ‘operational’ in REFIT 2 with a new definition for ‘connected’ and to include the same new definition for ‘connected’ in REFIT 1. The new definition of ‘connected’ will, inter alia, require the REFIT PPA to be commenced on the basis of having at least 75% of installed capacity within 9 months of 31 December 2010 or the date to which a project has been granted an extension in time – in the case of REFIT 1; and having at least 75% of installed capacity within 9 months of 31 December 2017 – in the case of REFIT 2.” In terms of the REFIT 1 backstop date, the Department of Energy, Communications and Natural Resources sought State aid clearance from the EU Commission to extend it for a two-year period up to the end of 2027. A decision is expected on this in the near future, according to the Minister. MARKET DISTORTIONS As renewable energy becomes an increasing share of Europe’s energy mix, the dependence of a significant portion of the energy market on support schemes gives rise to market distortions. Onshore wind, in particular, is a technology that is increasingly being viewed as almost competitive with thermal technology. The December 2012 Council Conclusions signal Member States’ acknowledgment of these issues. In 2011, the European Commission in a communication on renewable energy already signalled to Member States that renewable support schemes should gradually converge and as part of this, project developers need to be exposed to at least some market risk. They also noted that “the choice of instruments should however be clearly framed in order not to create confusion and engender negative consequences for investors”. “So, it is now timely for Government to design a new support scheme that takes account of the structure of the target market that will operate in Ireland from 2016 onwards,” said Rabbitte. “We’re starting on a trajectory of revising and reducing price supports for new onshore wind projects over time, while recognising the need for a predictable and transparent policy framework. “Following consultation with stakeholders, I’d intend to make the design details of the new scheme available as early as possible ahead of its introduction to coincide with the start of the Target Market.”
Expert advice suggests that Ireland has the capability to achieve its national targets for renewable electricity from onshore renewable generation alone, with capacity to spare, he continued. This means that there is potential for projects of scale onshore that are aimed at export markets. It also means that Ireland’s offshore wind resource can be developed as an export opportunity. “In January of this year, the UK Secretary of State for Energy and Climate Change Edward Davey and I signed a Memorandum of Understanding on energy co-operation. That sent a strong signal of our shared interest in developing the opportunity to export Gigawatts of green energy from Ireland to Britain,” said Rabbitte. “Of course, a key objective, from an Irish Government perspective, is to realise the potential for investment, jobs and growth.” By way of background, under the 2009 EU Renewables Directive, both Ireland and the UK must plan to ensure that, between now and 2020, there is a steady, progressive and measurable increase in the amount of renewable energy consumed in our electricity, heat and transport sectors. Both countries have been assigned binding targets about the proportion of renewable electricity they must produce. The targets are challenging, not least in the British context where the Government foresees increasing tightness in future years, in terms of the ability to meet growing demand, as a fifth of the existing generation capacity in Britain is due to be closed down. EU DIRECTIVE The EU Directive provides a mechanism whereby renewable energy produced in one country can not only be exported to another, but can also be counted towards meeting that other country’s national target. The electricity so exported is subtracted from the renewable output of the exporting state. This would not, of course, be permitted if the exporter was failing to meet its own binding targets. Up to now, while there has been physical flow of electricity across borders, the renewable value of the electricity remained in the country where it was produced and could not be counted towards another country’s target. Under the Directive, a formal Inter-Governmental Agreement between the two Member States is required, under which the Governments agree that a certain proportion of renewable energy produced in one country is counted in the other. “It’s worth stressing this point, because it may not be emerging with sufficient clarity from some of the headlines we read. We’re operating here under the terms of a 2009 EU Directive, which sets out the ground rules for this exercise. We’re talking about identifying one or a series of what the Directive refers to as ‘joint projects’. “The Directive specifies that it’s for the Government on whose territory the project is sited to identify a specific project to the Commission and to specify how much of the energy produced at that project is to be regarded as counting towards meeting the targets in the other country. “Electricity production is a commercial operation and we very much expect commercial operators to bid for these projects. But it’s for our two Governments to co-operate on the design of what it is we want the market to provide. It may be that none of the products currently on offer will meet our specifications. If so, it’ll be for the developers to adapt their projects accordingly.” The Memorandum of Understanding has triggered detailed analysis of how Irish renewable energy resources, onshore and offshore, might be developed to the mutual benefit of Ireland and the UK. An agreed programme of work is already under way so as to prepare for the Inter-Governmental Agreement. This programme includes economic analysis, addressing policy and regulatory questions and dealing with grid issues. The ambition is to settle on an Inter-Governmental Agreement by the end of this year, or at least by early 2014. Such a tight timeline is essential if potential projects are to start exporting wind energy to the UK by 2020. ECONOMIC BENEFITS “For Ireland, there are very clear economic benefits,” Rabbitte continued. “Significant employment opportunities will arise if we can properly exploit this opportunity. As an example, employment creation arising from a 3 Gigawatt project would be expected to be in the order of 3,000 to 6,000 job years in the construction phase, with the actual number dependent on the construction schedule to 2020. "There would be of the order of €1 billion of construction cost spending on Irish civil engineering works over two to three years. There would also be additional jobs created in the ongoing maintenance of turbines over a 20-year operating life. Further employment opportunities would arise if turbines or components were manufactured in Ireland. “There are also potential significant interconnection benefits, enhancing security of supply, allowing for increased intermittent wind generation and facilitating the operation of the single market,” said Rabbitte. Any new wind farms will of course be subject to the Planning Acts, including the requirements for public consultation. The Department of the Environment, Community and Local Government is currently undertaking a focused review of the Wind Energy Development Guidelines, the Minister concluded.