Wind farms will be paid for electricity they cannot supply under the terms of the Government’s latest renewable energy aid scheme, it has emerged.
Eamon Ryan, Minister for the Environment, Climate and Communications, this week announced details of the third onshore wind Renewable Energy Support Scheme (RESS 3) designed to attract wind farms capable of generating up to 3,500 megawatts of electricity in total.
A new term included in RESS 3 will compensate wind farms when the system “curtails” or prevents them from supplying some of their available electricity.
A Department of the Environment, Climate and Communications spokesman confirmed that wind farms given contracts under RESS 3 will be compensated for electricity they are unable to supply for “reasons of curtailment or oversupply”.
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According to industry body Wind Energy Ireland (WEI), this happens most often when there is more wind-generated electricity available than the national grid can manage.
Currently, the grid can handle a maximum of 75 per cent wind power, while Irish wind farms have the capacity to supply up to 90 per cent of total electricity needs.
Consequently, there are times when grid operator EirGrid automatically limits output from all wind farms, which in turn cuts the revenue they earn, a WEI spokesman explained.
Wind farms will be compensated at the “strike price” – which takes into account fuel and running costs – that applies at the time that their electricity supplies are limited.
The department’s spokesman said the measure was aimed at limiting generators’ risk from potential losses when their supplies are curtailed.
“This de-risking should translate into lower auction bids, through the removal of risk premia and, in turn, lower costs to consumers,” he added.
WEI has argued for this measure in the past. It maintains that wind farm operators add the potential cost of curtailed supplies to their prices when they bid for supply contracts through the RESS system, driving up the eventual cost of electricity.
Its spokesman said it was likely that the electricity market operator would cut the maximum bid allowed for supply contracts in RESS 3. Previous rounds have capped bids at €120 per megawatt hour (MWh).
It said the measure would result in lower bids for contracts in RESS 3. The price set by the last such auction, in May last year, was €97.87 per MWh.
“That was the highest of any auction in Europe,” its spokesman said, adding that this was because wind farm operators priced in likely curtailment losses and other risks when they bid.
Including compensation for curtailment would also encourage EirGrid to develop the grid to take on more wind power, as this would limit likely payments from the scheme, he argued.
RESS auctions are meant to favour the cheapest generators by offering contracts to wind farms offering the lowest prices for their electricity.
As the auction sets the price they will receive, generators factor in inflation, curtailment and other risks when calculating their bids.
Previous RESS rounds did not include compensation for curtailment.
