Analysis: Energy Minister's green initiative will be a tonic to a developing industry in Ireland and help reduce carbon emissions, writes Barry O'Halloran
Energy Minister Eamon Ryan's announcement that electricity generated by offshore wind farms will get a generous price support, is the answer to the industry's prayers.
The measure is one of those sought by a lobby group, the National Offshore Wind (NOW) association of Ireland, set up last year to further the sector's cause. Not surprisingly, the group welcomed the news yesterday.
Mr Ryan said that offshore wind power producers will be guaranteed €140 per megawatt (MW) hour. So, for every megawatt of electricity they generate over a period of one hour, they will be guaranteed a support of €140 from the Government. (According to industry calculations, one MW is enough to power 1,000 homes).
Wind-produced power commands about 64.5 cent per kilowatt (KW) hour, or €645 per MW/hour on the market. The price includes existing supports for electricity produced by inland wind farms that are worth about 5 cent per KW/hour.
The support is in line with payments made in Germany and less than the €200 MW/hour given in Britain and the North.
However, consumers and businesses will pay for it, as the cost is factored into their energy bills.
The Minister says the logic behind supporting wind farms is that we need to get more renewable energy on our system to meet agreed targets.
The cost of building offshore wind farms is high, about €2.25 million per MW, twice what it takes to build a gas-fired power station. But they produce cheap power. According to Airtricity executive, Mark Ennis, once wind-generated electricity becomes available on the Irish national grid, the overall electricity price falls by 10 per cent. A German government survey calculates that €3 billion worth of green energy supports has saved €9 billion in fossil fuel bills.
However, the consumer may not be getting the best part of the deal. According to reports this week, the British system is generating lots of cash for wind farm operators, but is not speeding up the development of new ones.
And there is another factor at play. Just two months after selling its US business to German energy giant, Eon, for €1 billion, Airtricity agreed to sell its European operations for €1.87 billion to Scottish and Southern Energy (SSE). Big utilities such as Eon and SSE last year woke up to renewable energy, not because they want to save the polar bear's habitat, but because it presents opportunities to make money.
The first comes from the reality that consumers are partially underwriting prices. The second is that, as these companies emit huge amounts of greenhouse gases, they can use their green energy activities to cut their emission bills. Thus they get two sources of revenue.
The fact that big players are moving into the industry indicates that policies to promote green energy are working. But it also means that the business is maturing and presents lucrative opportunities for anyone involved. In fact, the last thing it probably needs is a helping hand paid for by consumers.
