Electricity exports could mean Irish pay 'subsidies'

Current financial supports for wind energy could result in Irish consumers subsidising British electricity users if plans to export power to Britain go ahead, according to a recently published report.

Electricity users in the Republic, from householders to industries, will pay a total of €35 million extra over the next 12 months to cover the cost of the price supports given to wind farms and other alternative energy generators.

Paul Gorecki, research professor with the Economic and Social Research Institute (ESRI), argues in a recently published report that failures to address a number of questions raised by the system will result in Irish consumers paying "implicit subsidies" to British electricity users if power is exported from here to Britain.

Mr Gorecki's report examined the benefits of integrating Ireland's electricity system with the EU via interconnection with Britain and mainland Europe. It concluded that it would be likely to lead to a fall in wholesale prices.

Interconnection would make it possible to both import and export power. Part of the argument for connecting Ireland and Britain's electricity systems is that it would allow Irish generators to power to Britain when it is not needed here.

In light of this, Mr Gorecki believes the current system of price supports, paid specifically to wind farms and other renewable energy generators, should be re-examined.

The Republic aims to generate 40 per cent of its electricity needs from wind power by 2020, the highest such target in the EU. One argument put forward by the energy industry for supporting the development of wind farms is that excess wind energy can be exported to Britain via interconnectors.

Proponents of wind and renewable energy believed that exporting electricity was a good thing in itself, Mr Gorecki said.

"However, if exports of electricity from renewable sources are heavily supported by electricity consumers through a series of not-altogether transparent mechanisms, it is not clear that this is a sensible policy," he said.

The supports come in the form of guaranteed prices paid for the electricity generated by wind farms. If the market price falls below the guaranteed level, the additional cost is passed on to electricity users in the form of a public service charge, which is levied on all bills. According to Mr Gorecki, this system leads to consumers insuring the guaranteed price.

The Commission for Energy Regulation has calculated that an extra €35 million is needed over the next 12 months to cover the cost of price supports given to wind farms.

This will form part of a €92 million public service charge that will be imposed on all electricity bills over the next 12 months. The €57 million balance will be used to pay subsidies to peat-fired plants and Tynagh Energy and Aughinish Alumina.

Policy makers needed to look at how the current supports should be changed to take into account that wind farms were paid for electricity, even when it could not be used, said Mr Gorecki.

In the report, Mr Gorecki also asked if any mechanisms were in place that would allow Irish consumers to benefit from the subsidies that they would, in effect, be passed on to their British counterparts.

Mr Gorecki also said the supports given to wind generators should be balanced against the need to attract investment in conventional power plants. He suggested the possibility of introducing supports to reward plants for flexibility.

Last week, a contractor hired by EirGrid, the independent State company that manages the national grid, began laying a new electricity interconnector between the east coast and Wales.

This will have a capacity of 500 megawatts, the equivalent of an average-sized power plant and is due to be completed late next year. An existing line connects the Antrim and Scottish coasts. An EirGrid report produced two years ago makes the case for more interconnection with Britain and raises the possibility of linking directly with France.