Economic Issues and Intermittency
The economic viability of the plans to increase wind energy in the Irish electricity system and to begin exporting wind derived power to other countries has not been adequately assessed. A full, independent Cost Benefit Analysis (CBA) of the proposed export and domestic projects is required to ascertain if the proposals represent a net benefit to Irish society or a net loss.
“When making its decision in relation to an application under this section, the planning authority shall be restricted to considering the proper planning and sustainable development of the area” In order to consider sustainable development the planning authority will have to assess the economic, social and environmental sustainability pertaining to any proposed project. Government policy states that: ‘The Government’s overriding energy policy objective is to ensure competitive, secure and sustainable energy for the economy and for society’. In order to ascertain the economic viability of increasing the penetration of wind energy into the electricity grid the Irish government needs to conduct a Cost Benefit Analysis (CBA) of the overall project.
This, to date, has not been done. Many issues arise from increasing wind penetration which are pertinent to economic analysis. These include:
- Wind power is a capital intensive means of producing electricity. It costs one and a half million euro per 1MW of Wind Capacity. (Colm McCarthy).
- To accommodate Ireland’s ambitious Renewable Energy Targets, up to 23% of wind may have to be constrained off, but would still have to be paid for under current regulations.
- Reinforcement of the existing grid connection will be necessary
- Due to the intermittency of wind, a back-up source of energy is required. This is referred to as “Spinning Reserve”. Back-up coal and gas plants cannot be turned off and must be kept running to provide electricity as soon as the wind stops or varies. These back-up plants operate at 50% of normal efficiency and produce more CO2 per megawatt of electricity produced than if they were running at full capacity.
- The Renewable Energy Feed-in Tariff (REFIT) for wind plants, paid to the generator, will add substantially to the generation costs.
- Change in use and sterilisation of land will potentially reduce current revenue sources.
- As the marginal cost of producing wind energy is low relative to other sources, wind energy can potentially displace other clean sources such as gas, in favour of cheaper, dirtier sources such as coal.
Wind power is intermittent, which makes the management of electricity systems increasingly difficult if the share of wind power in total system capacity approaches or exceeds the minimum level of demand during the year (base load). It is expensive and inefficient to run other sources of power so that their output matches fluctuations in demand. This is because the backup sources achieve much lower levels of thermal efficiency, that is, the proportion of fuel that is converted into electricity, when running for extended periods as ‘spinning reserve’ than when operating all or most of the time.
The problems of intermittency could be addressed by investment in storage systems, long distance transmission or transferring electricity demand from peak to off-peak periods by adapting pricing policies. There is some research on storage options being undertaken at present, but this is not part of the current plan in Ireland. Also the proposed interconnectors to Britain and France could potentially smooth out wind availability across a large area.
However, to date, this is theoretical. There is significant risk that annual CO2 emissions could be greater by increasing wind energy in the system than by investing in combined cycle gas plants. The outcome will depend on how much wind displaces gas generation used for either base load demand, middle of the demand curve or peak demand. For example, CO2 emissions increased by 3.6% in Germany in 2012 despite having the second highest wind energy penetration in Europe.
One Irish study, ‘A Cost Benefit Analysis of Wind Power’ by Eleanor Denny, found that ‘the carbon dioxide reduction benefits of a carbon price can be completely outweighed by the added cycling costs….When a carbon price and wind generation are combined, the cycling costs are increased further,’ and ‘It was found that even with 3000MW of installed wind generation, the cycling costs can still exceed the value of the saved carbon dioxide emissions.’
Fitzgerald, J., Denny, E., & O’Mahoney, A., 2014. An Enterprising Wind: an Economic Analysis of the Job Creation Potential of the Wind Sector in Ireland. View
Hughes,G., 2012. Why is Wind Power So Expensive? View
The Irish Academy of Engineers 2011. Energy Policy and Economic Recovery 2010-2015 Dublin. View
Wind is intermittent and requires a permanent backup called “Spinning Reserve”. When the wind is blowing, gas and coal plants continue to run in the background, in reserve, ready to come in on short notice when the wind dies. Spinning Reserve can quarter claimed fuel savings.
Spinning Reserve is the single largest factor that impacts on the viability of wind energy and is a simple phenomenon. Wind is intermittent and supplies energy for approximately 25% of the time or for one hour in four. For the other 75% of the time when the wind is not blowing, coal and gas plants provide the majority of our electricity. When the wind does blow, it is given priority onto the grid and these coal and gas plants continue to run in reserve in the background ready to come in on short notice as soon as the wind dies down. The efficiency of the gas plants used to provide this backup is lowered due to constant cycling below optimum designed running load and also the use of lower efficiency open cycle plants. There are also unquantified issues related to higher maintenance costs for these conventional plants.
There are multiple studies which have examined Spinning Reserve (Valentino et al; 2012. Udo; 2011; Bentek 2010. Denny. 2007). Many like the Valentino study are based on predictive models that attempt to establish and account for multiple variables which may have an impact on their accuracy. Other studies such as the Bentek report are supported by lobby groups (Petroleum Association of Mountain States) which may have an impact on their objectivity.
The Udo study provides a unique and detailed independent insight of the Irish grid based on actual usage and outputs. This study found that Spinning Reserve caused a 12% wind penetration to produce only a 4% CO2 saving. However, more alarmingly, when the wind penetration increased to 34%, the study found that the CO2 saving only increased to 6%. Furthermore, this study took no account of the carbon footprint resulting from manufacture or construction of turbines.
It is common for energy analysts to base their calculations on the assumption that a unit of energy produced by wind replaces a unit of fossil fuel (SEAI. 2014). Spinning Reserve can quarter these claimed fuel savings.
Udo. 2011. Wind Energy in the Irish Power System. View
BENTEK. 2010. How Less Became More. View
Valentino. 2012. View
SEAI. 2014. Renewable Energy in Ireland 2012. View
Denny. 2007. A cost benefit analysis of wind power.
Wind and Electricity prices
Proponents and developers of wind energy argue that wind is a cheap resource and can reduce electricity prices. Wind only works with a permanent back up source and when this is included, wind energy costs can be double that of gas (Taylor and Tanton. 2012). Leading energy economist professor Gordon Hughes described it is “an extraordinarily expensive and inefficient way of reducing CO2 emissions”
Proponents and developers of wind energy argue that wind is a cheap resource and can reduce electricity prices. Wind only works with a permanent back up source and when this is included, wind energy costs can be double that of gas (Taylor and Tanton. 2012). Leading energy economist professor Gordon Hughes described it as “an extraordinarily expensive and inefficient way of reducing CO2 emissions”
It is the international norm that consumers are entitled to electric power on demand and without restriction. Electricity is difficult and expensive to store which means grid operators must continually balance the supply of power to exactly match the minute by minute demand.
In calm conditions Ireland must be able to supply 100% of its electricity from sources which can supply when demand requires it. (These are often called dispatchable sources: they include gas, coal and hydro but not wind). In addition, enough reserve capacity must be in place to provide cover for maintenance and breakdowns. Ireland is well equipped with a substantial 7,658 MW (Eirgrid and Soni. 2012. p29) of coal, gas and hydro plant available in the republic to meet a peak demand of 5,000 MW.
Ireland currently has 2,000 MW of wind energy installed and it is projected that an additional 1,500 to 2000 MW of wind generation capacity will be required to meet the 2020 target set by the EU (Garrigle et al. 2013).
This additional wind capacity has implications for electricity costs. Although the marginal cost of wind is often described as zero. The OECD explains how this is not the case:
“Electricity generating power plants do not exist in isolation. They interact with each other and their customers through the electricity grid as well as with the wider natural, economic and social environment. This means that electricity production generates costs beyond the perimeter of the individual plant. Such external effects or system effects can take the form of intermittency, network congestion or greater instability but can also affect the quality of the natural environment or pose risks in terms of security of supply. Accounting for such system costs can make significant differences to the social and private investor costs of different power generation technologies” (OECD. 2012)
The extra costs that wind energy create come in the form of constrained payments, guaranteed minimum payments per unit of electricity, priority dispatch onto the grid, the cost of back up power, and extra grid/transmission costs.
These extra costs combined are estimated to increase the cost of wind-power by 50% to 100% (The Energy Collective. 2013). The Taylor and Tanton (2012) report concurred when they
concluded that in the US, these factors combined increased the estimated cost of wind electricity from the 8 cents per kilowatt-hour to at least 15 cents per kilowatt-hour (kWh) if wind were combined with natural gas and 19 cents/kWh if wind were combined with coal. The danger for Irish consumers and businesses is that our rate will rise from the current rate of 20 cent/unit to the Danish rate of 29.5 cent/unit. The Danish have the highest wind penetration rate in Europe.
What are wind curtailment and constrained payments?
Wind curtailment is an intentional reduction in overall wind power output ordered due to the risk of instability on the electricity grid from non-synchronous generation as well as other reasons such as managing grid stability and reserve requirements. As installed wind turbine capacity on the power system increases, this will result in an increased frequency and magnitude of wind curtailment events becoming necessary (Garrigle et al. 2013)
Constrained payments are a feature of the electricity market. Electricity suppliers are often scheduled to supply a certain amount of electricity at a particular time. When this power is not required, the supplier is paid a constrained fee to compensate for the cost of starting up the plant, staffing it, etc. Without wind generation, constrained payments can be kept to a minimum by fine tuning scheduled generation with expected demand. The intermittent nature of wind energy increases these curtailment costs which are eventually borne by consumers.
Table 1 shows a comparison of electricity costs in Ireland and France. In 2003 Irish and French consumers paid the same rate for electricity but by 2012 Irish consumers were paying 50% more than the French. This resulted in Irish consumers paying an additional €11.5 billion for electricity over 10 years.
Ireland currently has 18 % wind in the system and the third highest electricity prices in Europe at 20 cent per unit.
OECD. 2012. Nuclear Energy and Renewables: System Effects in Low Carbon Electricity Systems. View
Eirgrid and Soni. All Island Generation Capacity Statement. 2013 – 2020. p29 View
Garrigle et al. 2013. How much wind energy will be curtailed on the 2020 Irish Power System? School of Engineering. View
Ireland’s back-up generation capacity analysis
Despite the rush for wind energy in Ireland, we still have a sizeable conventional generation capacity. It is clear from Eirgrid’s reports that rather than de-carbonizing our electricity system, wind energy has resulted in an increase in conventional, mostly fossil fuel, generation.
Between 2006 to 2013, conventional electricity generation increased by 829MW and wind capacity by 1,174MW. This gives a ratio of 1MW of wind to 0.7MW of conventional generation. If the East West inter-connector is included at 400MW, then this ratio becomes 1MW wind to 1MW conventional. In other words, for every 1MW of wind that was added to the system, 1MW of conventional plant was built as back up. These increases in capacity came despite reduced electricity demand which fell 5.5% during this period.
Eirgrid envisage that the current installed wind capacity must double to reach the 40% target for wind. Using the conservative ratio above (1MW : 0.7MW), this means a further 1,260MW of conventional generation would need to be built. However, Eirgrid have forecast much less than this, estimating that 369MW extra conventional capacity would be required. In 2007, their capacity forecasts for 2013 turned out to be under-estimated by 428MW. This forecast assumed demand would rise significantly when in fact it fell. Therefore, capacity requirements were, in fact, grossly under-estimated. These inaccuracies in their forecasts are most likely due to the unpredictability associated with increased wind penetration.
Dalkia, a Demand Side Unit operator who manage the supply of power from diesel generators, state that “As the amount of renewable generation increases, the TSOs [Transmission System Operators] will need to keep higher levels of operating reserve available.”
Because back up power must match the intermittency of wind, sources of power such as oil and gas plants which can be ramped up and down quickly are preferable. Therefore there may be a reluctance to close fact-acting polluting plants e.g Tarbert heavy fuel oil plant, which was due to close in 2013 and will now remain open until 2021.
So, (paradoxically) while Ireland tries to meet its renewable targets, this heavily polluting plant will be kept running. The new plant additions (and reluctance to close old ones) mean that any fossil fuel or CO2 savings due to wind are made at inflated levels of fossil fuel generation. In a system without wind, lower levels of conventional capacity can be maintained.
The purpose of Grid 25 is not only to connect the huge array of wind farms, but also to facilitate the back-up capacity required to minimize risk to supply due to increased levels of wind penetration. It was designed at a time when demand was forecast to rise by as much as 60%, now a completely unrealistic prospect. Therefore, the only rationale for Grid 25 at present is wind energy – an unsustainable source of energy due to the additional capacity that must be built as back-up.
Eirgrid Generation Adequacy Report 2007-2013. More
Eirgrid Generation Adequacy Report 2009-2015. More
Eirgrid Generation Adequacy Report 2010-2016. More
Eirgrid All-Island Generation Capacity Statement 2014-2023. More
Dalkia; The Virtual Power Plant. More
Eirgrid Grid 25 – A Strategy for the Development of Ireland’s Electricity Grid and a Sustainable and Competitive Future (2008). More
Fuel Poverty and Wind Energy
High fuel costs contribute to fuel poverty, whereby someone is unable to afford to heat their home to a level that is healthy and safe. Wind energy causes electricity prices to rise. This represents a transfer of money from the poor to the rich; from the consumers to wealthy power companies.
The measure of fuel poverty is the proportion of disposable income, usually 10%, spent on energy in the home, including heat and light. Fuel poverty in Ireland appears to be driven by poor housing conditions, energy inefficient housing, rising fuel prices and low income (Goodman et al, 2011). The Survey of Income and Living Conditions 2008 in Ireland found that when the head of household was aged less than 65, 13.6% were in fuel poverty on this measure. When the head of household was aged 65 and over this rose to 25.3%. When the head of household was aged 65-74 years, 23.2% and aged 75 and over this rose to 39.8% (CSO, 2010). Wind energy has been described as “an extraordinarily expensive and inefficient means of reducing CO2 emissions” (Hughes, 2012). It is likely that increasing the amount of electricity supplied by wind in Ireland will lead to higher electricity prices. There are various reasons for this increase, including; the cost of a back up sources of energy for when the wind does not blow; guaranteed minimum payments to renewable energy suppliers; constrained payments (payments to the supplier when the power is not required); grid upgrades; and subsidies to wind farms. These extra costs combined are estimated to increase the cost of wind-power by 50% to 100% (The Energy Collective. 2013). The Danish, with the highest wind penetration rate in Europe pay 29.5 cent/unit in comparison with the current Irish rate of 20cent/unit. The Minister for Energy Pat Rabbitte T.D has stressed that the only long term solution to the problems of fuel poverty lie in the quality of housing. “We have far too many poor quality, draughty homes in Ireland. The priority for Government is to improve the thermal efficiency of as many of those homes as possible” (SEAI, 2013). However, government policy on renewable energy will potentially push many more households into
fuel poverty. In Britain, research suggests payments to wind power companies through the Renewables Obligation (RO), a premium paid to renewable energy generators to help them compete with established players in the energy market, mean 50,000 more households are in fuel poverty than would otherwise be (Hennessy, 2012). A German consumer watchdog has found that because of the sudden increases in energy bills caused by the Green taxation that solar and wind need to survive, fuel poverty and fuel debt are becoming serious social issues (Keil, 2012).
Goodman et al., Fuel Poverty, Older People and Cold Weather; An All- Island Analysis.Central Statistics Office (2010) View
Central Statistics Office (2010) Survey on Income and Living Conditions 2009. View
The Telegraph.2012. “Subsidies for onshore wind farms to be axed by 2020” View
Kiel 2012. Germany – Renewable Energy is destroying the economy. View
C02 Global Context
There is consensus among the majority of climatologists that global warming is causing the Earth’s atmosphere to heat up and that Greenhouse Gas Emissions (primarily CO2) from human activity are the primary cause. Renewables particularly wind energy is seen as a part of the solution.
The effect of Carbon Dioxide on the atmosphere
Carbon dioxide (CO2) makes up the largest share of Greenhouse Gases. The addition of man-made Greenhouse Gases to the atmosphere disturbs the earth’s radiative balance, that is, the balance between the solar energy which the earth absorbs and that which radiates back into space. This is leading to an increase in the earth’s surface temperature and to related effects on climate, sea level and world agriculture.
In 2013, 36 billion tonnes of CO2 were produced globally, an increase from 22 billion tonnes since 1990. Half of these emissions are absorbed and used by our forests and oceans. The other half is emitted into the atmosphere. Ireland is responsible for approx 0.15% of global CO2 emissions.
The total CO2 produced globally in 2013 was 36 billion tonnes.
China – 10 billion tonnes
USA – 5,000 million tonnes
India – 2,000 million tonnes
Europe – 4,300 million tonnes
UK – 500 million tonnes
Ireland – 40 million tonnes
DCENR. 2012. Strategy for Renewable Energy 2012 – 2020. View
CO2 Emissions – Ireland
The European Union has set targets for the reduction of CO2 emissions that all member states must achieve by 2020. Ireland is responsible for 0.15 % of global CO2 emissions and is obliged to reduce this by 16% (DCENR. 2012). Wind energy is viewed as a key part of achieving this reduction.
The purpose of developing wind energy for the domestic Irish market is to reduce our CO2 emissions and cut the importation of fossil fuels. The Sustainable Energy Authority of Ireland (SEAI) released a report in Feb 2014 titled “Renewable Energy in Ireland 2012” (SEAI. 2014) which claimed that renewables had saved Ireland €200 million per year in fuel imports with wind responsible for 61% or €122 million. This equates to a saving of 2% in the €6 billion fossil fuel importation bill.
The simplified analysis used by the SEAI assumed that for every unit of energy produced by wind, a unit of fuel and the resultant CO2 was saved. However, in the report the authors disclose that no allowance has been made for “Spinning Reserve”. They say “The methodology………ignores plant used to meet the associated reserve requirements of renewables.……the method does not account for such cycling effects”. They refer to it as “a simplified analysis”. (SEAI. 2014. p.49)
When CO2 savings are calculated properly by including the fuel used by “Spinning Reserve”, it is found that the savings can fall to approximately one quarter of those claimed (Udo. 2011). This would mean that a reduction in our annual CO2 emissions of 0.5% instead of 2% and a saving of €30.5 million from that €6 billion fossil fuel imports bill.
Wind currently provides 18% of electricity to the grid and with the planned construction of an additional 1,800 MW between now and 2020, this is set to increase substantially. This increased wind penetration will require an even greater spinning reserve support and result in minimal CO2 savings and possibly increases in CO2 emissions if the carbon footprint of the turbine manufacture and construction are included. This carbon cost is substantial and has been excluded from all calculations carried out by the SEAI.
1 – Ireland has approximately 2,000 MW of wind capacity installed at a cost of €4 billion not including the additional grid costs involved in collecting and balancing power from a widely dispersed source such as wind.
2 – This investment has resulted in a reduction of our carbon emissions of below 2% and possibly as low as 0.5%.
3 – Any increase in wind generation is unlikely to reduce CO2 emissions and may even increase them.
4 – Fuel import savings are negligible in the context of the capital investment made.
5 – Based on the above facts, claims that wind energy can improve energy security are without foundation and have no evidence base.
Valentino. 2012 View
SEAI. 2014. Renewable Energy in Ireland 2012. View
DCENR. 2012. Strategy for Renewable Energy 2012 – 2020. View
Udo. 2011. Wind Energy in the Irish Power System. View
Wind and Jobs
Wind Developers promise to create many jobs as a result of their proposed developments. To discover whether a net jobs benefit exists, a detailed economic analysis is required. Such an analysis would include not just the jobs created but also the jobs displaced in the energy industry, jobs displaced in impacted industries such as tourism, jobs displaced through reduced competitiveness and most importantly the subsidisation costs per job which in the UK are estimated at £100,000 per job*
The creation of new sustainable jobs is always welcome especially in rural Ireland where it has been historically difficult to maintain employment levels. Wind Developers promise to provide short term construction jobs and long term sustainable jobs. Mainstream claimed that 75,000 jobs could be created from exporting wind to the UK while Element Power claimed 15,000 were possible.
The following brief case study examines the reality of these jobs claims.
Element Power advertise that their proposed “Greenwire” project, which involves building a total of 40 wind farms over 5 counties would result in 3,000 long term sustainable jobs. That works out at:
1 Turbine = 4 long term sustainable Jobs.
Typical wind farm of 20 turbines = 80 long term sustainable jobs
Deloitte and the Irish Wind Energy Association (2009) reported that the majority of jobs provided by wind are in the manufacturing of turbines and that 1.5 jobs per MW was achievable, based on a survey of Wind Developers. The report details the type of jobs created (Figure 13) and reveals that ongoing jobs in operations, maintenance and support services provide 5 % of these 1.5 jobs with all the set up and development jobs involving financing, planning, construction and repowering making up 95% of the jobs.
This would reduce the claimed long term sustainable jobs from 3000 to 225 for that 750 MW project with all the other jobs linked to the development phase and contingent on ongoing development.
While construction and development jobs are welcome, they are transient by nature and a certain amount will require specialists from abroad. The Deloitte report points out that “all large scale turbines are imported from the continent and typically the turbine manufacturers use their own teams for the installation of the turbines rather than using local contractors”.
Conclusions of case study
Wind energy creates small numbers of long term sustainable jobs relative to the investment required using reports from the industry itself. Short term construction and development jobs constitute the large majority of employment offered. The wind industry seems to consistently exaggerate the jobs potential from wind energy. The most recent report by the ESRI (2014) and sponsored by turbine manufacturer Siemens and the Irish Wind Energy association (IWEA) claimed that 36,000 direct jobs could be created by wind energy were Ireland to construct an additional 10,000 MW of wind energy. This would mean building 4,000 more turbines in addition to the 1,200 already in place plus the substantial pylon and grid infrastructure.
The economist, Richard Curran (2014), found that every MW of wind results in just 0.09 jobs in repair, operation and maintenance. This would further reduce the long term sustainable jobs in the case study from 225 to 67.
Bigger Picture View
Jobs created by wind generation or any other energy production means must be paid for by electricity consumers. Professor Gordon Hughes (2011) says “job creation has no merit as a basis for judging policy…..total income or value added…is what matters”. He explains this by saying “why not employ 50% more workers to produce the same output and reduce all wages by one third”. Employing more people involves costs and we have a good example of this from the UK. In 2012 wind turbine owners received £1.2 billion (Mendick. Telegraph. 2013) in subsidies from consumers and employ 12,000 people, to produce an effective £100,000 subsidy on each job.
The impact of expensive electricity can impact jobs through reduced competitiveness and this is being felt in Germany where the BDI who represent 100,000 business including companies like VW, and ironically, Siemens have called on their Government to stop subsidising wind power as expensive electricity is reducing German competitiveness.
Jobs are not a measure of economic benefit. To accurately ascertain the net employment benefits to Ireland from wind development requires an independent economic rigor that must include jobs created, jobs displaced from existing energy producers, jobs displaced from impacted industries, jobs displaced from loss of competitiveness and the cost of each job through subsidisation by the consumer.
Wind Energy For Export
The debate on Wind Energy is not simply about the sustainable future energy needs of this small island nation. It is also about the development of industrial scale wind farms to generate electricity for export (initially to the UK).
Two privately controlled companies have had plans to create the largest wind farm clusters in Europe, concentrated across the midland counties (Laois, Offaly, Kildare, Meath & Westmeath). This will entail the construction of in excess of 2000 super sized wind turbines. Although recent announcements made by the Minister for Communications, Energy & Natural Resources suggesting that this Midlands project is now likely to be deferred (Irish Independent, March 7th, 2014), private companies are continuing to buy ‘options’ from farmers to build turbines.
Element Power, a division of Hudson Clean Energy Partners, has plans to develop the Greenwire project; and Mainstream Renewable Power are planning the Energy Bridge Project. In each case it is envisaged that connections to the UK power system will be via newly constructed private grid networks with undersea cable connections off Ireland’s southeast coast.
Such was the level of community opposition throughout the UK to industrial scale wind farms, that over 100 MPs signed a petition to halt wind farm development in the UK on the grounds of environmental impact and increased energy costs. Could it be that Ireland is now seen as a soft target?
Supported by the Irish Government, the principal beneficiaries of the export projects will be the development companies and their shareholders. Government and industry claims in relation to local energy usage, reduced energy imports, reduced use of fossil fuels, reduced CO2 emissions, sustainable jobs and cheap energy have not been backed up with figures. A transparent cost benefit analysis has not yet been released by Government.
What is certain is that the export project will impose the following on Ireland: industrialized landscape, environmental damage, increased energy costs, reduced competitiveness and displaced jobs, minimal (if any) CO2 savings, community division, noise & health issues and reduced property values.
In an attempt to bypass the conventional planning process which has regard to the concerns of the local authorities and all citizens, Element Power & Mainstream Renewable Power will argue that their export projects are of strategic importance to Ireland. As such, it is envisaged that these organisations will submit applications for “Strategic Infrastructure Development” during 2015, meaning that planning applications can bypass local authorities and go directly to An Bord Pleanála