Monday, 9 November 2015

Wind Energy Will Cost Households €227 per year

Irish Energy Blog can reveal that by 2020, wind energy will cost each household € 227 per year. This calculation includes grid upgrades, another interconnector, new fast acting back up plant and other system costs required to integrate high penetrations of wind into the system.

The cost for SMEs and large industry is calculated to be higher at around €377 but higher again for large industry users.

Export prices for wind are considered to be zero or as good as zero as in Denmark. There is no impact on wholesale prices because gas generation will still be required and will be the last form of generation taken under the merit order system (therefore setting the price for everyone).

So this charge will be equivalent to another property tax charge for most households. By this stage, the plan is to install smart meters in every house which will further push up the cost of electricity during peak times.


Wind Subsidy

Electricity Demand by 2020 is estimated to be about 29,000 GW. Wind energy will need to generate 37% of this demand. Assuming it will, (but of course there is no certainty that it will), then wind will be generating 10,730GW by 2020. There is no sign that the price of fossil fuels will recover in the next few years. The low price of gas means that wholesale prices are now about €30-35 / MWh. This means that wind receives a subsidy in the region of € 50 / MWh.

10,730GW x € 50 / MWh = € 536 million. 

This is roughly in line with this blogs previous calculation based on how the PSO Levy is calculated :

PSO Levy could increase by € 550 million by 2020

Grid 25

Grid 25 is a new grid to be built around the country primarily for renewable generation. The cost has changed over the years but 3.5 billion is still a good estimate.

Payable over 20 years - this works out at €175 million per year.

Transmission Lines

New lines required for transporting the energy generated by wind to the grid was recently estimated by the CER to be € 1 billion.

Payable over 20 years - this works out at € 50 million per year.

DS3 Programme

The DS3 Programme is a programme designed to enable power stations run on the grid behind high levels of wind energy. It is estimated to cost € 200 million. I have thrown in an additional €100 million for extra wear and tear to generators as a result of increased cycling and running on low loads. These figures are most likely conservative.

Payable over 5 years - works out at € 60 million per year.

Constraint Costs

I have estimated this to be an additional €100 million per year. These are payments made to generators to come offline to allow wind energy priority access to the grid (or to switch on if there is too little wind). There are also curtailment  payments to wind generators when there is too much wind energy for the grid to handle. The former will increase in the future, the latter is expected to decrease depending on the success (or not) of DS3.

Open Cycle Gas Generators (OCGT)

OCGTs are fast acting plant but less efficient than CCGTs. Eirgrid are planning to connect two of these to the grid to act as back up for wind farms. I have estimated the cost at € 1 billion.

Payable over 20 years - works out at € 50 million per year.

A second interconnector to UK / France - I have put the cost at €600 million. This will be used to export surplus wind energy and import cheaper nuclear electricity.

Payable over 20 years - works out at € 30 million per year.

Total costs are € 1 billion per year.

The CER in their PSO Decision Paper give household energy costs at 37.61% of total bills. So €376 million of this bill will be paid by households and €624 million by SMEs and industry.

With 1.6 million households in the country this works out at € 227 per household per year.

1 comment:

  1. So in effect as the wind speed varies between low and high on a particular day, fossil plant is paid to come off line to allow wind in and when the wind blows so strong that wind goes above 50% of demand the surplus is paid to halt production. So on such a day we have fossil paid to stop and wind paid to stop and as the evening demand reduces these payments increase. Meanwhile, capacity payments are paid to all generators to be available when needed and when needed some of them are paid to produce nothing? Am I correct? Can I point out the the old Irish Song I mentioned here previously, but which appears to explain it best.
    Three long weeks I spent up in Dublin,
    Three long weeks to learn nothing at all,
    Three long weeks I spent up in Dublin,
    Learning new steps for Lanigan's Ball.
    She stepped out and I stepped in again,
    I stepped out and she stepped in again,
    She stepped out and I stepped in again,
    Learning new steps for Lanigan's Ball.

    Fossil stepped out and wind stepped in again,
    Wind stepped out and fossil stepped in again,
    Fossil got paid not to step in again
    Learning to dance the energy ball.
    Google "The Bards Lannigan's ball you tube"