Electricity regulator Mr Tom Reeves has urged the Minister responsible for energy policy, Mr Dempsey, not to extend further financial support to the wind energy industry.
In comments likely to be controversial with the wind energy lobby, Mr Reeves said there was no need to further "stimulate the sector at this time". He makes his comments in a letter to Mr Dempsey, the Minister for Communications, Marine and Natural Resources.
Mr Reeves said he supported the target of 13.2 per cent of all energy coming from the renewable sector, but he questioned whether further support was the best way of achieving this.
Mr Reeves is chairman of the Commission for Energy Regulation (CER).
Mr Dempsey is currently considering whether a support mechanism is needed to reach the 13.2 per cent target by 2010. Some wind energy companies want a guaranteed price for their power.
At present, many wind companies benefit from contracts agreed as part of the Alternative Energy Requirement (AER) competition. Under this competition, wind energy companies can win 15-year contracts with the ESB for the supply of power.
The price of wind tends to be higher than conventional power so the ESB is compensated for the difference via a public service obligation (PSO) levy.
Mr Reeves said the AER was impinging on competition generally in the sector. He cited the case of one supplier. "This supplier had reached agreement with a number of developers and their bankers on long-term contracts only for the developers to avail of an opt-out clause in the contracts when it became clear last week that they would be offered AER contracts with preferential terms," said Mr Reeves.
Mr Reeves said he remained "unconvinced of the need for additional support at this time". Instead, he said, there was "significant appetite" for onshore wind farms and many self-financed plants, known as merchant plants, were viable.
He said the cost of the PSO on the consumers was considerable. Every €20 million paid out by the PSO added 1 per cent to the price of electricity. "In addition, increases in the PSO will have a negative impact on competition as they erode the margin for independent suppliers to compete on."
Last night, wind industry representatives expressed anger at Mr Reeves' letter. Mr Thomas Cooke, chairman of the wind energy group Meitheal Na Gaoithe, said ESB peat plants received more than 80 per cent of the PSO and that was what Mr Reeves should be concentrating on.
He said the large number of wind energy projects seeking connection to the grid had been caused by the regulator. "CER and ESB National Grid called a moratorium on connections and caused a panic. The indications by Government of supports for renewables have also caused a massive rise in development, as shown by this number," he said.
