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Report Launched on Impact of Wind on Pricing within the Single Electricity Market

01 March, 2011

Wind energy generation will deliver savings to Irish consumers of €100m by 2020, the most detailed analysis to date into the value of the sector has revealed.

The report, commissioned by IWEA (Irish Wind Energy Association) in conjunction with Wind Skillnet, was compiled by international strategic and analytical consultancy Redpoint Energy Limited and found that an 11.5% reduction in wholesale electricity prices will be achieved through delivering 45% of the overall generation mix from wind by 2020. The publication of the report today coincides with the launch of a Windskillnet training course on the outcomes of the analysis.

Titled ‘The impact of wind on pricing within the Single Electricity Market’, the analysis focussed solely on the impact that wind generation has on two components of consumer bills; wholesale electricity prices and renewables support.

Through Redpoint’s modelling it examined the potential impact of varying levels of wind energy on wholesale electricity prices and the resulting cost of power to the consumer. The study reveals that wind generation is already having a significant impact on energy costs, with the total savings to consumers set to reach €36.6m in 2011. Wind energy currently accounts for approximately 12% of Ireland’s electricity needs.

Under the scenarios studied, consumers are shown to pay less through the support mechanisms than the savings they make from lower wholesale power prices.

“Our analysis shows that increased levels of wind generation will displace coal and gas-fired generation, and reduce the costs of electricity production,” said Phil Grant, Director, Redpoint Energy. “Wholesale energy prices and therefore costs to consumers fall as the volume of wind energy increases. Although renewables generation across the island of Ireland require a subsidy from the consumer, on the basis of the commodity prices assumed in this analysis, the reduction in consumer costs is greater than the subsidy paid. If oil, gas and coal prices actually turn out to be higher than assumed in the analysis the relative savings to the consumer from having wind on the system could well be even greater.”

Commenting on the report, CEO of the IWEA, Dr. Michael Walsh, said, “This report demonstrates that wind generation does not add cost in today’s market, nor indeed in the future. In fact, it reduces the cost of generating electricity plus the price to the end user.

“We have separately quantified the costs to the consumer of developing new transmission lines to connect wind generation. Comparing the costs expected in the Grid 25 development plan with a business-as-usual scenario we find that customers will save almost €100m per year. This is because the saving in wholesale process of €256m greatly outweighs the costs of PSO support of €52m and the annual costs of new network of €108m in 2020.

“In simple terms, meeting our renewable energy targets will result in lower prices, lower emissions, greater fuel security and the opportunity to create thousands of new jobs. We now call on the government to introduce a co-ordinated energy and enterprise implementation plan to ensure we capture our share of these new European industries.

“The report reaffirms the current strategy for 40% of all electricity to be produced from renewable energy by 2020, with the majority of that coming from wind. Given the current unrest in Libya and other oil-rich nations across the Middle East, the report is a timely reminder of not alone the need but the value in developing our excellent natural energy resource. It shows that wind will save consumers money in the event that oil prices remain stable but will, crucially, save them even more if oil prices were to increase. Therefore, it enables the consumer to hedge against inevitable rises in oil prices..

“Whilst there has been a rapid growth in generation from renewable sources over the last five years, the report is further evidence of the importance of accelerating development of wind energy projects. Not only do we now, in this report, have the most compelling proof to date that wind is a credible and viable energy source but it will also have an increasingly beneficial financial impact on the end users. “

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