Wednesday, 24 December 2014

Growing calls to scrap wind subsidies

Wind energy is the only source of energy in Ireland that receives a market price subsidy for electricity generation. This is known as REFIT (Renewable Energy Feed In Tariff) and is subject to EU State Aid clearance. The only fossil fuel related EU State Aid in Ireland was for the Northern Irish gas pipeline, a vital piece of infrastructure that links up Britain's gas reserves to Ireland. The current REFIT is due to expire in 2017 and it does not makes sense, considering our relatively high electricity prices and the fact that wind energy is now a mature technology, to renew it. In April 2014, the European Commission adopted new rules on State Aid given to renewables :

The European Commission has adopted new rules on public support for projects in the field of environmental protection and energy. The guidelines will support Member States in reaching their 2020 climate targets, while addressing the market distortions that may result from subsidies granted to renewable energy sources. To this end, the guidelines promote a gradual move to market-based support for renewable energy.

It remains to be seen how the Irish government deal with these new rules as some flexibility in their adoption has been granted.

There are many distorting claims made by lobbyists such as wind is free, but the fact is that wind energy currently receives a fixed market price plus a 15% kicker thanks to REFIT. Another claim made is that fossil fuels also receive subsidies. Again, this is a distortion - no fossil fuel generation receives a fixed subsidy on the market price in Ireland. All sources do however receive tax breaks, which is a form of subsidy.

A recent NERA report comparing the taxation and subsidy regimes applying to oil, gas, coal,
wind, and solar power in the EU28 and Norway during the period 2007-2011 has found
that EU28 (+Norway) governments receive far greater revenues from oil, gas and coal than these
energy sources receive in the form of direct subsidies or other transfers. Oil is by far the largest
contributor to government revenues. In contrast, wind and solar power are net recipients of

There are now growing calls from many independent organisations and companies around the country to abolish REFIT once it expires in 2017. The only groups now proposing the continuation of the scheme are those who stand to profit from it. Below is a list of organisations now advocating its abolition with the relevant quote from their submissions on energy policy made in July 2014.

Boliden Tara Mines

Of particular importance to us as large energy users would be clear definition of the ongoing
requirement for support schemes such as the Capacity Remuneration Mechanism for
electricity generators, the Public Service Obligation levy and Renewable Energy Feed-In
Tariff (REFIT). These support measures, which were seen as necessary in the context of
energy policy direction in 2007 and have largely achieved their objectives in the intervening
period, should be subject to review in the context of the dramatically changed energy
environment and the disproportionate burden which they impose on large energy users.

Bord Gais

Also, although REFIT and priority dispatch have worked well to drive the initial investments required, they are not sustainable support structures in the long-term as we seek to diversify our low-carbon resources and to integrate our market(s) with the wider European market(s). As discussed earlier, a single carbon price (perhaps through a carbon floor price in the absence of a robust carbon price) with equal access to markets for all technology on a cost competitiveness basis may better support diversity in Ireland’s sustainability solutions. 


We fully support Government’s target of 40% RES by 2020 and the EU regulations
that underpin it as we believe that both provided a really strong kick start to the RES sector and
the wind sector in particular. However we believe that further RES targets beyond 2020 and
accompanying support schemes should be discontinued for mature technologies such as Wind
and Solar. Instead we believe that continuing decarbonisation of the electricity sector should
be driven by a strengthened EU –ETS. Our reasoning behind this is as follows:
 - By 2020 the RES industry will have operated on the back of subsidies for some 20 years
and there comes a point when such subsidies should be discontinued both in the interest
of producers and of consumers.

Forfas / Enterprise Ireland / IDA

An increasing share of Ireland’s generation capacity is subsidised.  This is not sustainable.  It is critically important for the effective functioning of the all island electricity market that renewable generation capacity is subject to market forces to the greatest extent possible.  As a mature technology, price supports for new onshore wind projects should be discontinued when REFIT 2 ends in2017.  Enterprise opportunities in emerging energy technologies should be funded through funding mechanisms for R&D, if deemed competitive, rather than by energy customers;

Indaver Ireland

In developing any future support mechanisms, the recent European Commission State Aid Guidelines must clearly be taken into account. These require that supports move increasingly towards providing only a market premium, and being made available through competitive bidding.

Irish Hotel Federation (IHF)

IHF recommends that the PSO system be abolished in terms of the current revenue
collection mechanism. Where such support is needed, the cost should be borne by
the Exchequer because the supposed benefits are available to the entire society.

 As noted above in the context of prices, the PSO system and other systems of supporting
alternative sources of energy need a fundamental review to ensure the most effective
approach is being adopted. The IHF considers that whatever subsidies and supports are
temporarily justified to support renewable energy sources, should be financed by the
exchequer rather than user levies. The IHF again refers to the need to ensure that alternative
sources such as wind farms do not diminish the scenery aspect of the Irish tourism product.
Wind farm and wave energy development should take account of possible impacts on

Lagan Cement

The policy behind the aggressive development of wind energy needs to be framed on
a commercial cost competitive basis. It should be envisaged that wind energy can be
built and operated without any government/ end user subsidy. 

National Competitiveness  Council (NCC)

From Irish Times Article, 3rd December 2014 - The Government should wean the renewable energy sector off State supports, says the National Competitiveness Council (NCC), and it warned against promoting over-investment in new electricity generation capacity.

In a report to be published on Wednesday, Ireland’s Competitiveness Challenge 2014, the State’s competitiveness watchdog says price subsidies for onshore windfarms should be scrapped in 2017 as it is a “mature technology”.

“It is critically important... that renewable generation capacity is subject to market forces to the greatest extent possible,” it said.

The NCC, whose members include the heads of Google and Paypal in Ireland as well as several other employer and trade union representatives, said the focus of the electricity market should be on delivering new electricity for the cheapest possible cost.

The following are those advocating a reduction or a review of REFIT rather than its discontinuation :

Rusal Auginish (Combined Heat and Power)

The Green Paper references Ireland's Strategy for Renewable Energy. Renewable energy is
important for delivering a low carbon economy and it has already received substantial support e.g.
REFIT. We would urge caution about the govemment putting all its eggs in one basket so to speak
and a mix of energy sources should be considered, in particular LNG and further indigenous gas. We
do agree with continued support for "Renewables" but not for the mature technologies which should
compete in the market based on the value they deliver i.e. carbon savings. A possible approach couldbe that any additional costs incurred by non-renewable generators as a result of non-reliable,
intermittent, non-synchronous generation should be borne by the renewable generators directly (hencewhy they are subsidised). Otherwise, the failure to adopt this approach is effectively a Govemmentcharge / tax on the energy consumer i.e. a further cost to the energy consumer to support renewable generation.

Page 59 of the Green Paper discusses a new support scheme for renewables from 2016
and the paper notes that onshore wind is now becoming a mature technology and hence less support isrequired. Aughinish supports a reduction in support for mature renewables.

SLR Consulting 

The REFIT price is an appropriate support mechanism that gives an element
of revenue certainty to the developers of renewable projects. However, it should be
adjusted for new projects in the future to take account of the reduced cost of
renewable technologies.

Competition Authority

Renewable generation of electricity through wind turbines provides sustainable energy from an indigenous source, but it is not without costs. While renewable energy can provide cheap wholesale energy prices, it can raise the cost of conventional generation, which will always need to be available for days when wind doesn’t blow. The approach to subsidising renewable energy could be fine-tuned to prevent over investment in wind projects which may not be necessary. For example, the length of the guaranteed price of 15 years under REFIT seems very long as technology can change a lot in that time and the long period can increase costs. The cost implications of individual policy decisions should be recognised in the formulation of future energy policy.

[Note: I have contacted TCA to clarify their position and would urge others to do the same. When/if I receive a reply it will be posted on here]

Association of Irish Energy Agencies (AIEA)

 A clear long term transparent carbon tax inflation methodology should be utilised that reflects the UK’s REFIT system that decreases REFIT as targets are achieved.

Kore Energy (energy procurement services)

Of particular importance to large energy users would be clear definition of the ongoing requirement for support schemes such as the Capacity Remuneration Mechanism for electricity generators,  the
Public Service Obligation levy and Renewable Energy Feed‐In Tariff (REFIT).  These support
measures, which were seen as necessary in the context of energy policy direction in 2007 and
have largely achieved their objectives in the intervening period, should be subject to review in
the context of the dramatically changed energy environment and the disproportionate burden
which they impose on large energy users.

Apart from the usual lobby groups and state boards, Bord Na Mona, Carlow Kilkenny Energy Agency, Cork Institute of Technology (some form of subsidy), Coillte, Cork City Energy Agency, Energia, Energy Cork, Matheson, RES and SSE Airtricity want the lucrative subsidy to continue. There are others who want it expanded to small community owned wind farms and other sources of renewables.

Let's hope the Irish government push the red button this time before things go out of control.........


  1. I was a debate in Maynooth a few weeks ago. I asked Eamon Ryan to clarify the Green Partys position on REFIT. He replied that it "could" be abolished. You can hear it here on Part 3

  2. This comment has been removed by the author.

    1. I removed a comment due to typo errors. The traditional way to measure generating plant is "capacity credit" the amount of other plant which can be displaced. In my videos val martin ireland you tube, I show that the amount displaced is in the order of 4% decreasing to 1.6% with increased levels of wind. All the cost of incorporating wind is carried by the consumer which is a subsidy in itself. The higher energy costs is another subsidy paid for by all users, most of whom have to burn more fuel to earn the extra cost of power. The cost on competitiveness, jobs wildlife and tourism is an additional cost as is the hardship caused to the poor without power. For every Euro in direct subsidy there could be over 10 euros in indirect subsidies in monies worth. My calculations indicate that all new wind capacity installed in Ireland will be net consumers of electricity , like washing machines. Then there is the issue that large turbines have a shorter life span than the manufacturer states and the fossil fuel used to make, install and decommission turbines is not counted. Remember if we applied the same accounting system to financial accounting of businesses, household and public expenditure as we do to wind energy, our income would be all disposable, no taxes, no insurance costs, no food costs, no transport costs. All money would be coming in to spend of luxuries. Cars would run for ever, it would be happy days. P.S. add the 60 million bail out recently given to Mainstream renewable power from the Irish pension fund which is a subsidy. Its a bubble in which the victims have no choice but participate because the legal planning safeguards have been bye passed by corrupt governm

  3. @ Owen Martin: Asking Eamon Ryan about energy policy is like asking an astrologist about rocket propulsion systems. Although there might seem like there is a link, there's none in reality. The commerce grad student who started a cycling company while unemployed thinks he's an expert in the energy industry...

    Time for REFIT to go for both offshore and onshore. The Irish consumers have been milked enough. The taxpayers are propping up enough "private" companies without supporting the wind speculators as well.

  4. I think the things you covered through the post are quiet impressive, good job and great efforts. I found it very interesting and enjoyed reading all of it...keep it up, lovely job..
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  5. Really like your posts.
    Just a small point, and I'm not an expert in this field so take it with a pinch of salt;
    The OECD has identified what may not exactly be classified as direct subsidies, but which are still financial helpings nonetheless. E.g. VAT reduction, excise exemptions (note: I know that electricity is included in this, however I don't know if this included locally generated or interconnector) and pretty huge exploration & development write-offs, which are definitely not available for other industries.
    Note: report is a bit old, but still gives you a feel for things:

    1. In Ireland govt taxes make up between 50 - 60% of final petrol / diesel price. While subsidies account for approx 50% of the final price of wind energy. There are all kinds of exemptions for assets, oil companies get write offs, thats true, but investors who provide the capital for wind turbines get tax breaks. Over the lifetime of the asset, oil is a net contributor, wind is a net recipient.