Electricity network constraints may keep worsening for years

The Government is facing a sharp warning that constraints on the electricity network will continue worsening for years to come even if it surmounts a looming crunch this winter that led to moves to seek out emergency generation.

The warning from national grid operator EirGrid will be issued in a formal “generation capacity statement” in mid-September, highlighting trends that have prompted growing concerns about the stability of power supplies.

Senior electricity market sources said the document will reflect anxieties discussed at the highest levels in the Coalition. “The problem is not going to go away. It’s going to get progressively worse,” said one market participant, echoing views widely held in the industry.

The report will raise the stakes for the Government after the Commission for Regulation of Utilities said there could be “rolling blackouts” if steps are not taken to curb new data centres.

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The sustained rise in demand from such centres – energy-intensive buildings that house computer systems for storing internet and business data – was the same as adding 140,000 new households to the network in each of the last four years.

Climate targets

The surge has led to anxiety about the continuity of supply as power stations using oil, peat and coal are wound down because of climate targets that require the State to drastically reduce carbon emissions. “There’s a huge amount of old fossil fuel plants coming off the system,” an industry source said.

The lack of certainty over future supplies in a growing economy is seen as a sign of dysfunction in the market, which was liberalised 20 years ago with the loss of the ESB’s monopoly. The aim then was to boost efficiency in the market through competition between electricity suppliers.

Although plans are in train to increase the use of wind power, the problem now is that more reserve gas-fired generation is needed to boost supply when the wind strength is inadequate.

Such concerns have prompted talk of Government moves to incentivise investment in new gas-fired plant, which is expensive to build and time-consuming.

One idea is to pay a premium for power they supply, in effect compensating investors for the fact that brand new plant would be used only as a back-up and would lie idle when the wind blows. “You’re building it under the premise that you’re going to be a second-rate citizen,” said the industry source.

Urgent repairs

Despite concerns about the outlook in coming years, there is some confidence in the electricity sector that a crisis can be averted this winter with the expected return in the autumn of two big power stations that have been offline for months for urgent repairs.

Fears that such power stations would not be ready for the winter prompted moves to procure emergency generation in Dublin but that plan was dropped after a legal challenge.

Now grid operators are working on a separate scheme to cut peak winter demand by incentivising up to 50 large industrial users to switch off the network if required in return for a financial reward.

The EirGrid report, which will examine the outlook for the next 10 years, will say the State faces up to half a decade of constraints because of the amount of time it takes to bring on new generation. “The really key piece is in the next five years,” the industry source said.

This annual statement is expected to set out in stark terms the increase in pressure on the network that recently led the utilities regulator, which oversees the market, to propose curtailing access to the grid for new data centres. Market participants expect that new data centres will be required to install their own emergency generation as a condition of gaining a connection to the grid.