RECAI: Country focus
Hit or miss. The long-awaited, delayed, and potentially transformative Ireland/UK renewable energy export pact has stalled, with both governments realizing the regulatory, economic and policy challenges are too complicated to ensure a fully functioning solution by 2020. Ireland, meanwhile, is on track to reach 40% renewable energy domestic penetration by 2020 and is hungry to export surplus wind energy to neighboring markets.
Countdown on hold. The proposed trade agreement – the first of its kind in Europe – under which Ireland would export up to 5GW of excess wind power to the UK, had a promising start when the two governments signed a memorandum of understanding in January 2013. However, progress has slowed, despite a number of wind developers stating that from a technical and financial perspective, the initiative is entirely achievable at a competitive cost for the UK consumer, provided regulatory certainty existed around offtake and use of the proposed interconnector.
Plans aplenty. A number of developers have secured grid capacity in the UK for Irish energy imports and, anticipating an export market, have been developing large wind sites in Ireland. However, while the Irish Energy Minister has said Irish wind energy exports are “inevitable after 2020”, the lack of regulatory certainty has led to a number of developers putting major projects on hold.
Benefits to Ireland. A recent report by consultants Poyry, Cambridge Econometrics, and the Irish Wind Energy Association (IWEA), indicates that deploying 5.4GW of wind capacity by 2030 solely to meet domestic needs would give the Irish State at least €1.8b (SUS$2.5b) additional tax revenue, save €700m (US$960m) a year in fossil fuel imports, and decrease CO2 levels by 35% – without increasing costs for consumers. Exporting 9GW could generate an additional cumulative tax revenue of €8.4b (US$11.4b) by 2030.
The other side. For the UK, which wants to slow the pace of its own onshore wind development, importing wind power will help achieve clean energy targets more cost-effectively than nuclear and CCS. Wind energy from Ireland may also be cheaper than UK equivalents because Ireland has better onshore wind resources and shallower waters for offshore projects. Access to the UK market is crucial for these developers, and the interconnection cost is likely to be a deciding factor.
Beyond 2020. It is unclear how significant the 2020 milestone really is, though. Rationale has always centered on the UK meeting near-term targets, but the deal will still make sense beyond this. The EU’s proposed target of 27% renewable energy consumption by 2030 will also favor a more integrated market based on economically efficient export deals, precisely because it is not binding on specific Member States.
Blazing a trail. The reasons for the delay, or whether the deal will go ahead at all, are unclear. However, Ireland is continuing to show its potential for renewable energy market integration to bring down energy costs.
Also in this article:
- Kenneth Matthews, CEO of IWEA reveals what Ireland’s experience can tell us about the building of economically viable renewables markets.