Who pays for the North South Interconnector and why?

Guest post by Pat Swords. 

Is the North South Interconnector worth the investment, who pays and who benefits ?  

The amount of money we are paying in our electricity bills for grid expansions and the lack of reasons why, is starting to reach epidemic proportions. The recent Energy Green Paper in its Figure 5 shows the breakdown of the domestic electricity rate, in which transmission and distribution, i.e. the grid, amount to some 34% of the domestic electricity price (an additional VAT at 13.5% is then applied).

So we can deduce that nearly a third of what we pay on our final bill is going to fund the grid. As such then, one should be highly concerned, when in 2011 Newspaper articles entitled "Ireland's big hope or just hot air" are published. These summarise the position of the Irish Academy of Engineering with respect to the proposed roll out of the renewable energy programme and supporting grid infrastructure.

As the article highlights:

• Between now and 2015, billpayers will also pay at least €1.4 billion in grid development and improvement costs that are necessary for the development of more wind farms, according to grid operator Eirgrid.
• In addition, there is the €500 million cost to billpayers of the East-West interconnector, also needed to facilitate more wind energy, it says.
• Another aspect of all this, perhaps indicating the true total cost of all of this wind energy, is that the ESB in 2008 announced plans to invest €11 billion in the grid and a further €11 billion in renewables and smart meters by 2020, although ESB sources say this strategy may be revised. 

Therefore, we are looking at potentially some €13 billion to be spent on the grid, both for high voltage (Eirgrid) and medium voltage (ESB), in order to facilitate all of this renewable programme. This is a staggering amount of money. Indeed to put it in its context, if we go back to Figure 5 in the Green paper, some 46% of the domestic rate is the wholesale price and 80% of that is fuel for the power stations. In other words, a third of what you pay in your final bill is fuel for the power stations. Yet it can quite easily be calculated, that if there was no wind energy, Irish thermal power stations could be kept running for a fuel cost amounting to some €1 billion per year. 

If one was to use simple maths and ignore such issues as that some electricity is sold at a lower rate to industry, one gets the simple answer, in that if we didn't progress all this grid expansion to facilitate renewables, we could have free electricity instead for four years. Note: This is not an unreasonable conclusion, there is no such thing as a 'free lunch' and all these billions for investment in renewable infrastructure has to come out of unnecessarily soaring electricity bills.

So let's examine the roll out of the North South Interconnector and particularly what's in it for us the consumer in the Republic of Ireland. Why should we be paying for this 400 kV line running 103 km through the Republic and a further 34 km through N. Ireland? In essence, it doesn't take a genius to figure out, that as more three quarters of the infrastructure lies in the Republic, we are the ones with the biggest cost exposure. As to what this cost exposure actually is can be seen in the European Platform Against Wind Farms (EPAW) submission on the North South Interconnector:

 http://westcorkwind.com/images/Adobe/EPAW_N-S.pdf

As Section 6.6 of this clarifies; Jenny Pyper, who is the Chief Executive of the Utility Regulator in Northern Ireland, stated to the Oireachtas Committee on the 16th June 2015:

• I should apologise for the absence of a crucial bullet point which provides the total project cost of the North-South interconnector, including overhead line, land acquisition, substation and other costs. The total project cost is €286 million

• It is important to understand that, while the security of supply concerns do not directly apply to us - we probably have more comfort in the Republic in terms of the capacity available for generation - there is an argument that we have an excess that cannot flow to Northern Ireland because the second interconnector is not available at the moment, which is imposing costs on consumers. This extra cost, which we think at minimum is about €10 million per annum, is the primary concern from the Republic's point of view.

So let's think this through; the Republic of Ireland doesn't need to import any power from Northern Ireland, as it has a surplus of generation capacity. Jenny Pyper is claiming that the presence of the interconnector would lead to greater efficiencies in thermal power plant generation, which would amount to some €10 million per annum. This is complete peanuts in an all island electricity market, which pays each year some €2.75 billion to generators, to which grid costs, etc.have to be added before the final consumer price is arrived at. Furthermore, it is generally recognised that the economic lifespan of high voltage transmission systems is 45 to 50 years, so the simple payback on this proposed North South Interconnector project would be in the order of half its expected lifespan. In engineering terms this is simply absurd.

So why are we doing this, when clearly the bulk of the economic and environmental costs are to be picked up by the consumers in the Republic of Ireland, who have absolutely no need for this investment? 

It doesn't take long to figure out that all of this investment is for the 'Glory' of even more renewables. As Section 4.1 of the EPAW document shows:

• The governments of Ireland and Northern Ireland have both set targets of meeting 40% of electricity consumption from renewable sources by 2020. This is expected to be achieved mainly by significant amount of new wind generation capacity in both jurisdictions. The RIDP project is required to facilitate the connection of wind generation in Donegal in Ireland and in the west and north of Northern Ireland, where the renewable resources are largely located. The additional grid transfer capacity provided by this North South 400 kV interconnection project is essential to allow access to a larger market for the new renewable generation, particularly for Northern Ireland wind generation in times of high wind conditions and low local demand. This project therefore indirectly allows the connection of 600 MW in Northern Ireland, i.e. the equivalent of the additional grid transfer capacity initially provided by the link.

So what does this mean in real terms? Well first of all the power generation situation in N. Ireland is in a complete crises, as nobody will invest in the conventional generation necessary to keep the lights on. This is described in detail in Sections 5.2 and 5.3 of the EPAW document, but in simple terms why would one put hard earned cash into a conventional generation plant there, when the market place is to be turned over to the new renewable generators and the power stations in the Republic of Ireland. The latter to have improved access through the capacity of this new interconnector. The whole thing is actually quite nasty, Government funded renewables and interconnectors are putting conventional plants out of business in N. Ireland and the fact that there are no longer sufficient conventional generators left in N. Ireland is then being used as the justification for those same projects. Yet if those State sponsored schemes weren't there, there would be plenty of companies interested in the N. Ireland power generation market. 

In fact you couldn't make it up, consumers in the Republic of Ireland are now to finance ill-conceived interconnector projects, which would never happen without massive subsidies, while the alternative makes absolute 100% sense. Finance nothing and let N. Ireland have a proper vibrant electricity market, in which its own electricity consumers finance the necessary convention power generation it requires. Not only is this proper economics and provides the security of supply that N. Ireland requires, but it prevents the completely unnecessary scarring of the Irish countryside with over 137 km of massive pylons, associated medium voltage transmission lines and more than 300 additional wind turbines in N. Ireland alone.