Wind energy's status as poor relation of the sector may be about to change, writes Emmet Oliver.
For an industry that is growing by up 6 per cent annually and producing historically high profits, there are a lot of people in the energy sector unhappy with their lot.
The ESB is concerned it will be broken up following recommendations in a Government-commissioned report. The company, while profitable, prides itself on being a "vertically integrated utility", which means it has distribution, generation and retail arms. Senior management are worried it will be broken up into smaller units and have no chance to compete internationally.
Private sector energy providers, most notably Viridian, believe the Irish market is seriously handicapped by a dominant incumbent (ESB), which has managed to evade true competition from more efficient and nimble rivals.
The renewable sector meanwhile, which in Ireland mainly means wind energy, is deeply frustrated at its status as the poor relation of the fossil fuel generators. Airtricity, the largest wind-energy company, believes Government thinking tends to be filtered through an ESB prism, leading to short-term decisions that favour those using oil, gas and coal.
Even the regulator of the sector, the Commission for Energy Regulation (CER), is unhappy with its position. The main commissioner, Tom Reeves, has spoken on several occasions about his lack of power to cut back the ESB's dominant position.
He has also written to the Government about the level of subsidies paid to renewable companies. He claims they are too generous and are distorting the market. On both issues the Government has so far done little.
Argument rages about the kind of subsidies available to renewable providers, but many windfarms around the State are voting with their feet regardless. Over 3,000 megawatts of wind power are sitting idle trying to get connected to the national grid. About 1,200 megawatts have been connected or are in the process of being connected.
Wind energy is good for Ireland's balance of trade - we will not have to import any of it. But because wind is unreliable and does not blow all the time, conventional plants have to be built to back up the wind-energy capacity. As one observer said yesterday: "In an ironic way the more wind energy you add the less secure your system is."
Finally, consumer groups and business interests appear to be disenchanted with the outcome of electricity deregulation. It has ended in the worst of all worlds - rising prices and no competition in the domestic sector.
If the main stakeholders in the energy sector are less than satisfied, the Government does not appear to be in a rush to soothe anyone's woes.
Over at the Department of Communications, officials are studying the contents of a report on the electricity sector by consultants Deloitte. This report has cost €1.2 million, including VAT. Despite this call on taxpayers' funds, the report is not being published by Minister for Communications Noel Dempsey.
He says the report will instead form part of an overall energy policy to be unveiled in the summer. Leaked details of the report show that it recommends a major sell-off of ESB plants and a break-up of the company into its constituent parts.
As if all this wasn't enough, on April 4th next the EU Commission is expected to issue infringement proceedings against the Government over how the renewable sector is regulated in the Republic.
The Government looks set to fall foul of a directive (2001/77/ EC) on the promotion of renewables. This directive makes it quite clear that renewable energy companies must be given equal access to the national grid as conventional generators. It is understood the infringement proceedings are being brought on the foot of a complaint by Airtricity, which is part of the NTR group, although the company has declined to confirm this.
The directive says access to the grid system must be based on "objective, transparent and non-discriminatory criteria". With some wind generators waiting for over two-and-a-half years to access the national grid, the wind energy lobby claims it is being placed at a serious disadvantage.
Two new conventional generation plants - Aughinish Alumina and Tynagh Energy - had no problems in getting grid connections.
According to information seen by The Irish Times, the basis of Ireland's infringement is that it has discriminated between wind generators and other generators with regard to the connection to the grid. But the infringement proceedings are likely to draw attention to other regulatory barriers to the development of wind energy. For example, several wind energy firms complain that conventional generators are allowed by the CER to have a larger return on capital than wind generators.
When the commission writes to the Government, its defence is likely to be security of supply. Put simply, the Government is likely to say that if conventional generators have been fast-tracked in comparison to wind operators, it is purely to ensure security of supply.
Whether this argument will wash with Brussels remains to be seen. The directive in question is very pro-renewables and even suggests that renewable companies might be provided with "priority access to the grid system".
The Minister, Noel Dempsey, is very supportive of the sector, but the two main bodies that operate the system on a day-to-day basis, the CER and ESB National Grid, have tended to be viewed with suspicion by the wind energy lobby.
The decision that irked the renewable sector most was taken in December 2003, when a controversial moratorium was placed on all grid connections by ESB National Grid. This decision, according to the wind energy lobby, seriously damaged the sector, which has yet to fully recover.
The CER's constant message - that the sector is benefiting from overly generous subsidies that distort competition - sends some conspiracy theorists among the wind energy lobby sector into overdrive. As a result complaints from the wind energy sector have tended to be regarded as flimsy, but with the commission taking up its case they will now be taken more seriously.
