Renewable energy commitments "could cost extra €200m"

The Republic's renewable energy commitments could add €200 million a year to the cost of electricity, the Irish Academy of Engineering warns in its latest bulletin.

The organisation’s warning follows a recent call by economist, Colm McCarthy, to abandon plans to build more wind farms in order to comply with an EU policy that has failed.

The Irish Academy of Engineering bulletin says that commitments that the State entered into in 2007 relating to the amount of renewable power on its electricity generating system are now driving policy.

“This could lead to the addition over the next decade of more than 3,000 mega watts (MW) of wind power on to a system that has already excess capacity,” the academy says.

It warns that this could displace around 1,000MW of existing gas- or coal-powered plants, that at current prices could add €200 million to the annual cost of electricity.

€1 to €2 billion extra spend

The organisation also states that it would involve spending an extra €1 billion to €2 billion to integrate this level of wind power onto the national electricity grid.

The academy calculates that adding this extra wind power onto the system would cut the asset value of existing electricity and gas companies, including State-owned ESB and Ervia, by approximately €1 billion.

It states that existing wind power plants, combined with those under construction and other forms of renewable energy, are enough to comply with the Republic’s current commitments to the EU.

Marginal benefits

“Overall environmental benefits under existing policy are marginal because the emission reductions from renewable are being offset by gas-fired plants that must be run in back-up mode and the increased use of coal,” the academy says.

It claims that the EU policies that led to the current situation are recognised as misjudged and are being superseded by more pragmatic and economically viable policies to cut greenhouse gas emissions.

The organisation’s criticisms of renewable energy policy follow Mr McCarthy’s remarks, at the Dublin Economics Workshop conference. He argued that it was contrary to the national interest to incur substantial economic costs in complying with an EU policy that has failed and which is in the process of being abandoned.

"There has been a big cut now in the renewable energy subsidies in Spain, in Germany, and there's a big second cut coming in the UK, and it's quite possible that we will end up in dutiful compliance with a policy everybody else [HAD]realised simply hasn't worked," he said.

Mainly wind farms

Renewable energy generators, made up mainly of wind farms, will receive €92 million from the €335 million in the public-service obligation payments that will be collected from every electricity customer in the State.

The payment is designed to bridge the gap between the actual price of power and the rates guaranteed to a number of electricity producers that include wind farms, peat-fired plants and two commercial generators, Tynagh Energy and Aughinish.