Sunday, 8 February 2015

Whats In Your Electricity Bill - Part 4: The costs of the UK Interconnector

The Valve Room of the Eirgrid East-West Interconnector in Batterstown, Co.Meath.

The East West Interconnector went operational from April 2013 and allowed Ireland to import electricity that could be produced for less in the UK, with around 40% coming from (relatively) cheap coal generation. It's claimed that this lowered electricity prices here by 9% but I have yet to see that passed on in my own bill. It cost € 600 million to build with € 300 million coming from an ECB loan and € 100 million provided by an EU grant. Investments by Eirgrid and commercial banks made up the rest. So about € 500 million must be recovered from electricity bills.

In a utopian world, we could export all our wonderful wind at a high price to UK but what has happened in reality is that we only export small amounts occasionally at night for a very low price. Of course, it is grid power that we export, not wind power per se. There is a provision in the grid code to allow export of power to the UK at  -€100 MWh - that's right at a negative price, whereby the Irish consumer subsidizes the UK consumer to take our excess energy. A lot of energy commentators make the mistake that electricity grids operate like any other export market but in reality supply must be managed so that it exactly matches demand and supply must be forecast days ahead. If you've suddenly got too much supply, then you have to constrain this extra supply off. If a surge of wind power occurs in Ireland at the same time as the UK as often happens , then you are going to have to pay the UK consumer to take your wind power as the UK grid will need to constrain off their gas plants at expense to them. The Danes sometimes have to pay up to € 200 MWh so that neighbouring Nordic countries will take their excess wind power, which at the moment amounts to approx 50% of total wind power produced in Denmark.

But there was also another unintended consequence of the interconnector known as Make Whole Payments.

Make Whole Payments (MWP)

This payment is designed to make up any shortfall in costs for generators incurred during scheduled production not recovered through Energy payments. It appears that these costs were relatively small up until 2013. But we can see from the below chart that the costs have risen exponentially since April 2013, when the East West Interconnector came into operation :

Source: SEM-O document on Make Whole Payments - Modification Proposal Form, 14th November 2014

During 2011 and 2012, the average monthly MWP was € 14,000. This has now increased to over
€ 800,000 per month. Figures available from SEMO show that the MWP total for the year 2014 (January to December 2014) was circa € 4.7 million. The vast majority of this increase was attributable to interconnectors - Moyle and EWIC (in blue below):

Source: SEM-O document on Make Whole Payments - Modification Proposal Form, 14th November 2014

It seems this is due to costs arising out of trading between the two markets in Britain and Ireland. This cost is paid by suppliers (i.e. Electric Ireland, Energia etc) to the relevant generators and ultimately passed on to consumers.  It's about time these costs are passed on to the wind energy sector who are pushing these expensive "solutions to our problems"


  1. On a calm day all traditional fossil fuel generating plant is needed, as if there was no wind turbines at all. Wind farms start to generate at wind speed above 12.5 miles per hour and must be shut down for safety above 34 MPH. Rated capacity is reached at 33 mph. Wind cannot be used for base load (45%) and it can only be allowed into the grid at portions below 50%. Imported electricity is the same as wind, the combination must be kept below 50%. Wind needs fast acting fossil fuel gas/diesel plant to back it up and to replace wind should wind speeds drop off unexpectedly, or become dangerously high. The amount of back up plant needed is close to 100%. Because no more than 2,500 mw of wind electricity can be allowed into the system in Ireland at the time of winter peak demand, the maximum back up capacity required is 2,500 mw. (5,000/2). At lower wind speeds, wind output is less and if (say the maximum) 50% wind electricity is mandated by government at all times, wind capacity must increase to supply it even if there are low wind speeds.. At a quarter output, it would take 4 x 2,500 = 10,000 mw of wind capacity to supply at winter peak. Two variables crop up with 10,000 mw of wind. 1) If wind speeds increase to half capacity, 5,000 mw will have to be constrained down. 2) Demand will be below winter peak most of the time and as low as 2,000 mw on a summer's night. On a very windy summer's night, only 1,000 mw of wind can be sold, so 9,000mw must be constrained off and paid for. All plant receives capacity payments, of which wind gets about 13 million euros annually per 1,000 mw installed. So: 6,200mw of ordinary plant + 2,500 mw of back up fast plant + 10,000 mw of wind = 18,700 mw. All must be paid enough to survive financially, We only need 6,200 mw. So we must pay for the surplus. The capital cost is massive and must be recovered and the infrastructure required would be very expensive. Remember wind does not displace equal amounts of fossil generation, the actual saving is tiny, and in this scenario, it would be below 20% of wind output. The parasitic power for 10,000 mw of wind and 2,500mw of back up plant is in to order of 10% to 20 % of capacity. Current 2,000 mw of Irish wind farms consume power equal to the consumption of the town of Drogheda.(10,000 people). Extra fuel would be required to supply this which on a calm frosty night could be in the order of 12,500 @15% = 1,875 mw, all supplied from base load. So instead of generating 3,000 we would need 4,875 mw. It is reasonable to say that this scenario would leave consumer bills @ at least 6 times above normal and possibly more. This would have such a crippling effect on the economy that a collapse would ensue, but as contracts are being signed right now, the taxpayer and consumer would be paying. A mass move to home generation would force government to shift the cost to taxation resulting to a flight of industry to lower cost countries and mass emigration with accompanying hardship. The politicians who are doing this will be long gone. The strange thing is that successive Irish governments prioritised education this past 30 years, yet only a handful can see the danger of this policy. Note: all debate of this nature are prevented by Government, say they appear to know what they are doing. Crazy.

  2. If you or I did it, it would be called gambling with the future. Fortunately, the good and great are wiser than you or I. Lucky that people have such short memories . . . .