Targets and market integration

Renewable energy policy in Ireland has been driven by two issues in recent years: binding targets from Europe and the scale of resources in a limited size of market.

Renewable energy has been driven by European policy. Ireland and other member states set 2010 electricity targets and these where later developed into all-energy targets which then led to the 20:20:20 targets in the Third Energy Package. The latest initiatives, driven by climate policy, necessitate tackling cross- cutting issues. Although much of the focus to date has been on decarbonising electricity there is significant potential for renewable energy use in heating and transport.

Europe has significant renewable energy resources: the Nordic countries have huge hydro resources; central and eastern Europe huge biomass potential; and Ireland and UK significant wind resources. There has been a move towards exploiting offshore resources which makes sense in countries such as UK, Germany and the Netherlands where the ability to meet renewable targets onshore are limited. In the Irish context onshore wind is a cheaper and proven technology that should meet Ireland’s targets. However, exploiting offshore resources offers the potential for exporting.

There will be enough onshore wind energy on the system to meet Ireland’s 2020 target, with the Gate 1 and Gate 2 projects, and the Gate 3 offers. Some projects in Gate 3 are experiencing planning difficulties and others are affected by network constraints, but Gate 3 was sized to meet 2020 targets when demand was forecast to be much higher.

Support

At present the Department of Communications, Energy and Natural Resources has applied to DG Competition for two state aids: the extension of the onshore REFIT rates; and a new biomass rate. The REFIT rates for offshore wind and ocean energy will be finalised in the autumn of 2011. The objective of the varying rates is to achieve a balanced portfolio of renewable resources and not just onshore wind. The recent increase in natural gas prices has also helped the economics of renewable technologies.

The different REFIT technology bands reflect the different stages of commercial deployment for each of the technologies. Ocean technologies, wave and tidal, attract the highest rates as they are still at the pre-commercial testing phase. As the technology gets nearer to commercial levels any support will be reduced accordingly. Waste-to-energy support follows the definition in the EU Renewables Directive and applies only to the biodegradable fraction of any waste stream.

Challenges

In addition to the necessity of meeting national targets, there is a challenge for the renewables sector to be adequately rewarded in an electricity market that faces fundamental change by 2014. There is now a move towards greater market compatibility of power markets across Europe. The obstacle will be to get the design and structure of any integrated market to clearly facilitate renewable generation that undermine it. The bigger regional markets, which will include a North West European market, need to assist interconnection and network investment to accelerate increased levels of renewables. There are significant compatibility challenges in integrating the Irish Single Electricity Market with the market in Great Britain.

Any market changes should avoid the boom and bust cycles that will hinder the development of renewable sources. The increase in renewable energy capacity has seen the emergence of new types of energy companies in the Irish market, that are knowledgeable and ambitious, including BGE and Viridian.

Some have sought aggressive development overseas including Airtricity and Mainstream Renewable Power. Even in the midst of a severe economic downturn renewable energy companies and energy infrastructure providers have been able to attract private sector capital.