Tuesday, 27 February 2018

Are wind farms financially viable into the future ?

Loss making wind farm sells for € 22 million

Lisdowney wind farm in Co.Kilkenny is quite small at 9MW but it sold for a whopping 22.5 million last week to Greencoat Renewables. Although the company is solvent, the published accounts show it made a loss in 2017 of € 262,000 and € 59,000 the previous year. The accumulated losses now stand at €374,000. “This acquisition is in line with our strategy of acquiring high-quality wind farms in the Republic of Ireland, ” said Greencoat Capital.

There are signs that the days of lucrative profits for wind farm companies may be over. Gaelectric, one of the largest renewable companies in the country, are winding down and laying off staff. Windfarms owned by SSE Airtricity are also in financial difficulties. According to published accounts, Gartnaneane wind farm in Cavan and Meentycat in Donegal are both insolvent i.e. unable to pay their debts as they fall due. The financial statements state that both companies "are dependent on ongoing financial support from a fellow group company". Airtricity claims to provide 100% green energy to Irish homes, although quite how it separates the green electrons from the gas and coal generated electrons in the grid remains a mystery. 

The National Development Plan for 2040 states that ESB, Bord na Mona and Coillte are currently planning to invest in renewable energy technologies. These companies have about 15% of the overall operational wind farm fleet in the State. They plan to continue to invest, predominantly in wind generation, over the coming years.  

Derrybrien wind farm, one of the largest in Ireland, and owned by ESB made losses last year. Should these state run companies still be investing in unprofitable ventures ?

Liam Halligan points out in the Spectator that the era of easy money may be over and that it's no bad thing. Is there a big crunch on the way for wind farm companies ?
Ultra-low rates have also kept thousands of ‘zombie’ companies alive, so we have firms able only to pay debt-interest rather than clear actual debts. Around a quarter of a million struggling UK firms are in this situation, kept on life support by unnaturally low rates. Unable to invest and expand, they tie up resources that should be channelled into healthier firms. This helps to explain the low productivity and wages that have cursed the UK economy in the past ten years.

29 comments:

  1. I am sorry to go off topic, but I will keep it short. There is a rumour doing the rounds that while Europe is gripped by freezing cold, the Artic is basking in a heatwave. This is untrue. The most northerly weather station in Greenland is Cape Norris Jesop close to the North Pole. The temperature is published daily. The temperature to day is -21 degrees C. (or minus 6 degrees F.
    "Google search Cape Norris Jesop temperature". The green leftie scam artists simply lie and hope they are not caught out.

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  2. On the subject of wind farms: For some reason investors believed the hype on capacity factors. The believed Eirgrid that they would achieve above 30% for on - shore, when my studies and Professor Gordon Hughes of Edinburgh found factors in the order of 24% for the UK and Ireland. Professor Hughes also found drastic fall off in factors due to ageing turbines. The result is wind farms are not producing enough electricity to make a profit and pay off their capital costs. A close look at the ones listed above show no dividend was paid in recent years and there is no hope of a dividend being paid. Not only that investors have already lost tens of millions of Euros paid in as capital for which there is no hope of recovery.
    Most accounts complain of low factors but also of the problem they call reduced take off. This is curtailment or refusal of purchasers to buy their power due to excess of excess of none synchronous power. If that is happening now, what will happen when another 1,500 mW of wind is added to the system plus more solar? It will still be the same sized cake to divide up. It will be interesting to watch Gaelectric's fire sale. If they fail to attract buyers for their wind portfolio, them the carrying value of wind farm will be discovered to be overstated. The fixed assets i.e. turbines will be found to be worth a lot less then thought with only scrap value after about 15 years. This would mean that unless the capital sum is recovered in the first 10 - 15 years, it can never be recovered. Once the output of a turbine's electricity falls below break even point, it is a loss maker for ever more. The wind industry certainly defies logic, only a massive increase in subsidies paid for by consumers can save it. My guess is that the Irish government will take this option which will drive prices to over 30 Euro cent. There is no consumer resistance at present. There was for water charges, why not for electricity? That is the question.

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  3. Wind farms must be financially viable into the future as they are the cornerstone of both Ireland’s Transition to a Low Carbon Energy Future 2015 - 2030 and the National Development Plan to 2040. Rest assured that the Department of Finance will have conducted an in-depth cost benefit analysis before the adoption of a wind energy reliant energy infrastructure.

    It is not just the ESB, Bord na Mona and Coillte are currently planning to invest in renewable energy technologies. The 2017 Update published by the Ireland Strategic Investment Fund (ISIF) on 22 January 2018 tells us on page 10 that it has invested €76 million in Greencoat Renewables. The €22.5 million for Lisdowney Windfarm is just a fraction of the national investment.

    Page 15 confirms Government Policy to driving a resilient and renewable focused energy landscape, to which end ISIF has to date invested in funds and businesses which own and manage 376MW of renewable energy which generates clean renewable electricity for over 165,000 homes. That is tax Euros working to phase out all that dirty CO2.

    Read the update at:
    http://isif.ie/wp-content/uploads/2018/01/ISIF-2017-Update-H1-2017-Economic-Impact-Report-22.01-Changes.pdf

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  4. "EirGrid Response: We use the average historical performance of metered wind turbines located across Ireland. The historical performance is shown in Figure 5.1 of the Generation Capacity Statement 2016 - 2025"

    Typically wind turbines in Ireland are in or around 5 times the hub diameter apart. Wind wake at this sort of distance reduces the output of wind turbines impacted by 40%. Wind turbines with a hub diameter in excess of 90 meters should have a separation of 15 times the hub diameter to prevent output loss. As wind farm density increases in a given area the wind energy available for conversion to electricity drops by up to close to 100%. Depending on density. Your capital costs are virtually the same no matter where you commission. But your output could be close to zero. As wind turbines increase in size using the current Irish separation distances average output should fall significantly. Leaving Eirgrids historical averages extremely optimistic. Making the repayment of capital costs incurred almost impossible.Added to that is the fact that wind turbines loose capacity factor as they age. Be wise steer clear of wind farm investments.

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  5. Meet Sustainable Nation Ireland (SNI) which promotes green finance provides a unique opportunity to build on Ireland’s reputation as a centre of excellence for niche international financial services and as a hub for innovative technology-driven international financial services (IFS). Eoghan Murphy TD, Minister of State for Financial Services and Chair of the IFS2020 Joint Committee, says the IFS2020 strategy constitutes the Government’s long term vision for the development of Ireland’s IFS sector.

    Strategic Priority 4 is to develop job-creation opportunities from emerging IFS sub-sectors and new markets, where measure 37 is for SNI to focus on promoting and positioning Ireland as an international hub for green finance as part of the IFS 2020 action plan, while raising awareness of this responsible and sustainable investment area by:
    • Promotion of Ireland as a centre for green finance including the establishment of Europe’s first dedicated Climate Finance Accelerator through its on-going relationship with Climate-KIC, the further development of key international partnerships, and the co-hosting of the Global Sustainable Capital Forum in Dublin in December 2017.
    • Supporting the establishment in Ireland of a new low-carbon investment fund focused on investing in Irish cleantech SMEs at a regional level, by extension supporting regional job growth.

    Government interest in wind energy investment is alive and well!

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  6. If you feel ,like I do, that most of these semi states are past their sell by date. Then you should welcome the government policy. As it will load all these semi states with unsustainable debt.It is highly unlikely that they will survive. Bearing in mind that Enercon Wind Farm Services Ireland Limited have already settled a nuisance damages case. It is said that they paid "punitive damages". So their debts plus any court awards for nuisance should obliterate these semi states financially. Good riddance.

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  7. Lisdowney commissioned in 2007

    A 10-11 year old wind farm still valued at 2.5 million per MW Name Plate Capacity

    Assuming a Capacity factor of 30% average ( generous for aged turbines) it would equate to an revenue stream of 9 x 8766 x 0.3 x €70/MWh = €1656774 per year a gross yield of 7.3%

    Neglecting operating costs Operating costs, rates, interest rates, spare parts, 13.69 years revenue would be required to recover the purchase price of €2.5 million per MWh of these second hand 10-11 year old wind farms. Either the productive life must exceed 24 years or prices must rise or they will repower ( replace with bigger turbines).

    Capital Costs and auction prices are falling( auctions @ $0.03 /kWh for onshore wind) but not in Ireland http://www.irena.org/-/media/Files/IRENA/Agency/Publication/2018/Jan/IRENA_2017_Power_Costs_2018.pdf

    In Italy a Company that made a loss for 5 years in succession would be considered a Dormant Company see page 33

    https://assets.kpmg.com/content/dam/kpmg/pdf/2015/09/taxes-and-incentives-2015-web-v2.pdf

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  8. In reply to puzzled electron and other comments. Unfortunately we cannot rest assured any official agency of the Irish State carried out any cost benefit analysis whatsoever. They have been begged to do it and are legally required to do it under Directive 2001/42/EC. Public participation is mandatory and never happened. I agree that all official bodies connected with the Irish State are fully committed to investing every available cent into this technology. The National Pension Reserve Fund gave the last 92 million Euros it had to Gaelectric. There is no hope of recovering any of it.

    I have expressed horror at such a wasteful plan, but I go further above to show that there is one serious flaw to it which no amount of enthusiasm can fix. The comment above about load factors in the order of 30% is delusional. I have proved (as has professor Hughes) that average factors are 24%. There are better factors on best sites, but these don't go above 27%. All the company accounts looks at, show factors under 25%. Next, factor in decreasing factors as turbines age and they cannot rise into profit at all. Where they do rise into profit, they can't re-pay any loans as they fall due and none paid a dividend. Any decrease in factor due to age makes matters worse. Capital outlay cannot be repaid under the present REFIT scheme. The The Chinese balked at Gaelectric's 2nd sale. They did cherry pick 14 wind farms, leaving the rest. Why? Why would any investor put money in 2nd best stock? The residual value of a wind farm is scrap value. A further problem is that as renewable capacity increases the power can't all be bought, further reducing revenue. It all boils down to the fact that wind is a highly expensive form of electricity generation and cannot ever displace conventional forms of generation. It can't stand on its own 2 feet and this is a fatal flaw. Something has to give, just as something had to give as the Celtic Tiger collapsed and the "Taoiseach Bertie Ahern said "nobody told him". In my opinion, nothing short of a massive increase in subsidies to wind can save the industry. Note that solar is int there demanding a slice of the cake too. We are looking at the highest electricity prices in the world withing 5 years. Whether that will be politically sustainable, I cannot speculate. I can't help wondering why Greencoat Renewables is now the favourite for public money grants, and Gaelectric is not? What is the difference?

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  9. You all know there is a severe winter storm. 5 inches of snow in Cavan. There is a good strong winter wind blowing from the South East. Everything the Met Office have been forecasting has been correct so far. My cows decide to calve in the middle of it LOL.

    They give wind speeds @ 25 knots. (28 miles per hour). It is actually higher speeds at tree top level than at ground level. My estimate is that wind farms should be yielding a factor of 80% capacity. I am allowing for the fact that they may not want them running at full capacity. Maximum wind output for all time was 2,826, showing that there must have been a lot of wind capacity added in the past few years.

    I estimated conservatively that (the republic's) wind farms would now be producing a nice 70% factor. 1,833/2826 = 64%. This is 6% short of potential output. It is obvious that at least 6% is being constrained down. Lets say they would be making a nice profit @ 70% giving 10% profit, the loss of 6% brings this down to 4% in the best wind conditions there can be. I expect curtailment to drop as demand rises later this morning.

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  10. In relation to Johns figures on the likely annual turnover of Lisdowney. A number of years after commissioning, Lisheen 1 had a capacity factor of 15.54%. Lisheen 1 is up the road from Lisdowney .Derrybrien in 2012 the Cost of Sales was 87.87% of turnover. It made a profit that particular year. Since 2010 Gort Wind Farm ( Derrybrien) lost close to €2m. Recalculating your figures leaving ,out assumptions, Lisdowney turnover would be €883,612.8. Your cost of sales would be in the region of €741088.05. Figure out the profits your self. Mind you if we took year 2016 for Gort Wind Farm(Derrybrien) , for the % cost of sales figure, you would be making considerable losses.

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  11. Does your website have a contact page? I'm having problems locating it but, I'd like to shoot you an email.
    I've got some creative ideas for your blog you might be interested in hearing.
    Either way, great blog and I look forward to seeing it improve over time.

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    1. irishenergyblog@gmail.com

      Delete
  12. Eirgrid was not publishing wind data these few days. This morning (2 March) wind is giving 57.7%. There are strong winds blowing constantly.

    1695 for a demand of 3039. 1695 / 2750 capacity = 61% Any factor above 80% is good, but a drop to 61 % in the best demand wind conditions is a disaster. Load factors could be as low as 22% in a full year.

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  13. Roger Andrews provides a précis for laymen at Energy Matters on the cost of 100% renewables set out in the 2018 study by Jacobson et al. 2018. The headline numbers from this study are:
    100% decarbonisation of energy by 2050;
    • Thirty-fold expansion in total world wind, water and sunlight power capacity;
    • Seventy-fold increase in wind and solar capacity;
    • 16,000 terawatt-hours of energy storage.
    Roger fills in the blanks using numbers taken from J2018 as examples, and points out the effort involved would be truly heroic as well as massively costly. This exciting stuff for the academics at Aalborg, Berkeley and Stanford (we have met those faculties before).
    Their rationale as set out in the abstract includes:
    • Elimination of 47 million annual air pollution deaths;
    • By reducing water vapour, the wind turbines proposed may rapidly offset ~3% global warming while also displacing fossil-fuel emissions.
    Can we afford it? And more to the point, can we afford to allow Ireland to be the guinea pig for a headless gallop over the cliff?

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  14. For the most part of this year, wind has been reaching up to 60% of total demand for electricity on the grid. In the last few days, storm Emma has been bashing Ireland with a near shut down of activity and big snow drifts. There have been several blackouts blames of major faults which were not specified. Since then the wind speeds have been excellent which should have allowed wind to remain at about 60%.

    This is not happening, penetration of the order of 47% are more normal. Right now the Dash Board shows it at 43%. Something must have happened. My guess is the faults were due to over penetration of wind. Whether it can be restored again is not known. It represents a major loss in income for wind companies as it is. Several hundred mW is being refused and this receives only a small payment. Bad news for wind companies incomes.

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    1. In cold climate regions, up to 20% (IEA Ice Class 5) of wind farm annual energy production can be lost to icing (https://community.ieawind.org/task19/home). This can be greatly reduced by ice protection systems, the installation of which is a business case design decision. The WIceAtlas map (http://virtual.vtt.fi/virtual/wiceatla/) shows that most hilltop wind farm sites in Ireland are at intermediate risk level (IEA Ice Class 2) with parts of Wicklow, Galway, Mayo, Leitrim, Donegal and Northern Ireland in the moderate to severe risk level (IEA Ice Class 3-5).
      The main challenges for standard turbines operating in cold climate environments are production losses and potentially increased loads due to icing, which in turn could lead to increased risk of premature mechanical failure and financial losses. Additional challenges arise from the potential for increased noise emissions and safety issues from ice throw. In addition, ice on wind turbine blades can cause aerodynamic and mass imbalances, and with long exposures can increase the loading of components, reducing the turbine’s life time as well as increased noise nuisance levels.
      In certain regions and countries, such as Germany and Belgium, a wind turbine with iced blades cannot be operated due to ice throw safety reasons. Additionally, some rules and regulations require that icing or vibration alarms cannot legally be reset without a visual observation of the conditions of the rotor blades. It may be that the current lower levels of wind energy generation capacity in Ireland are attributable to icing losses or icing instability on wind turbines that are not equipped with ice protection systems.

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  15. "The Mason and colleagues’ studies reinforce the notion that integration of variable renewable energy sources into existing grids can be cost-effective up to penetrations of around 20%, after which integration costs escalate rapidly [120,121]. An upper threshold to economically rational amounts of wind generation capacity is also found in simulations for the United Kingdom [27]. Any further installed wind-generating capacity makes little difference in meeting electricity demand in times of low wind supply. While the cost-effective threshold for integration of variable renewable electricity will vary among grids, 100%-renewable studies such as these reinforce that penetration thresholds exist and that alternative dispatchable genera- tion supplies are required to meet the balance of supply [9,27,104].

    " Burden of proof: A comprehensive review of the feasibility of 100% renewable-electricity systems
    B.P. Hearda,⁎, B.W. Brookb, T.M.L. Wigleya,c, C.J.A. Bradshawd

    So the wind program was a waste of time and money
    "

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  16. The price of residential electricity in the EU is correlated with the level of renewable energy installed on a per capita basis. The data shows that more renewables leads to higher electricity bills.
    A quick look at http://euanmearns.com/green-mythology-and-the-high-price-of-european-electricity/
    Shows a correlation between expensive electricity and the installed capacity of new energy i.e. wind and solar.
    The most expensive electricity in Europe is in Germany & Denmark at 30 cent per kwh followed by Ireland at 25cent per kwh– the cheapest European electricity costs half of these prices. The green energy bubble in on life support courtesy of Government grants and paid for in electricity prices, tax breaks and grants for forestry, biomass and the list goes on. It is time to let the bubble burst.

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    1. Wind Energy has emerged as one of the cleanest, safest and cost effective forms of energy. However as with any new technology, a small percentage of the population may be wary of the development of wind farms. A vocal minority often make arguments against wind power which are usually little more than myths such as the cost. In fact, the cost of generating electricity from wind has fallen considerably over the past decade.

      This has left the Wind Industry as a leading competitor on price with fossil sources of generation. As fossil fuel prices increase and wind power costs fall, wind becomes even more attractive.

      The 2011 study by Redpoint Energy on behalf of the Irish Wind Energy Association found that an 11.5% reduction in wholesale electricity prices will be achieved through delivering 45% of the overall generation mix from wind by 2020. In simple terms this would mean a saving of €39 per household.

      Fossil fuels are not going to last forever and it is becoming harder to predict what the cost of these fuels will be in 5, 10 or 15 years time. Renewable energy provides a hedge against these uncertainties and with wind, the cost is always known.

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    2. Since about 2014 the price of fossil fuels has been very cheap. This resulted in the cost of wind being very high. Eamon Ryan in 2010 forecast that the opposite would happen, that fossil fuel prices would rise. So this huge saving in cost of fossil fuels was never passed on to the consumer except at the pumps. It was morally wrong to prevent these savings from taking effect on electricity bills by making consumers pay for heavily subsidised wind .

      It is not just the Pso levy wind benefits from, there is also the massive role out of pylons and grid infrastructure. The expensive demand side units and smart meters. The inteconnectors and other capital spending required to integrate large levels of wind. In Germany where wind speeds are lower the subsidy is lower than Ireland's which makes our support structure for wind very expensive . It should have been phased out over time.

      Wind is not a new technology, but a pre industrial revolution one.

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  17. The Beast from the East illustrates how we need to have just a little backup in our rush to all things carbon free. Easterly winds in winter usually bring Siberian cold to Ireland and the past few days have been no exception. Before you seal up your chimneys, install your powerwall and convert your home to heat pumps, it might just be prudent to consider how you will keep the family alive when electrical power is lost for more than a few hours. As our ancestors have done before us.

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  18. Using wind as a source of energy is not new technology. It was used to move ships for thousands of years and to grind corn for at least 200 years. It was abandoned when the steam boiler was perfected 150 years ago. Using it to generated electricity is going backwards.
    The claim that the cost of wind will come down as the technology improves is not borne out by the facts. Existing wind farms are not making enough money to pay debts as they fall due, nor a dividend. Any reduction in price will bankrupt wind companies. The more wind capacity there is the more it will cost to keep them viable. That can't be escaped. Recent evidence from Storm Emma shows that wind speeds were enough to yield at least 2,600 MW but this was rarely achieved. Output of 1,700 were more common. This must be due to curtailment as there were a number of blackout. Irrespective of the cause, it spells disaster for wind companies.

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  19. With regard to wind energy being clean, safest , and cost effective fuels. Two recent report out of Sweden one and accident report , the other using Article 4 of The Machinery Directive, both concluded that wind turbines do not comply with the Machinery Directive. Fossil fuels have declined price by 50% or more in the last number of years. Thee Feed in price for wind energy has not been reduced but not only that the PSO has had an annual increase. The reduction in the wholesale price has no impact on retail prices .Which comsumers pay. Since That Redpoint Energy report in 2011 many fundamental technology deficiencies have been identified in these large bladed multi megawatt wind turbines. Wind turbines with close to 100 meter hub diameters , a nominal power of 12 meters per second and a cut out speed of 25 meters per second have, what is called in the literature, a high Wind Over Power Ratio(of 9 which is double the recommended ratio) . Reducing the ratio to 4.6 ,the recommended safe ratio, will reduce wind turbine output by up to 50%. High Wind Over Over Ratios create a high risk of Transitional Torque Reversals . Which will wreck their transmissions. As identified, in the Swedish Accident Report, wind shear over forests is higher than what is incorporated in their design.Which will cause increase fatigue in the tower increasing the risk of tower break up. Then there is the issue of Leading Edge Blade wear offshore and onshore. After 3 years or so operation blades from thousands of wind turbines have to removed and re-laminated. At a cost of up €2m per wind turbine. These wide hub diameter wind turbines should have a separation distance of 15 times their hub diameter to operate at maximum efficiency. May be it is about time the I.W.E.A. commissioned are more relevant up to date report on the economics of wind energy. Seeing as most wind farms find it difficult to make a profit.

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  20. 2,800 mWs of of wind is only producing 94 mW of power this morning. In effect it is producing nothing because its too feeble. http://smartgriddashboard.eirgrid.com/#roi How can there be a transition to a non-fossil fuel economy on a day like to day?

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  21. For Ireland only per dash board: Demand is now 4,025 with wind 937, there are good winds blowing. Not strong, just so you would feel it and tree tops are being tossed here. 32%.

    If it was decided to go for 50% wind on a day like to-day, we would need 4,025/2 = 2012 MW of wind energy fed into the grid. . Installed wind capacity is now 2,850 MW and to bring this to half demand to-day would amount to an extra 3,400 of wind.

    Proof. 2850 + 3400 = 6,250 X 32% = 2000 mw. OK.

    This is well over twice current capacity. I have examined the accounts of 8 winds farms and they are struggling. Many are not able to pay debts as they fall due. Some paid no dividend this last 2 years and some like Gartnaneanne and Gort are relying on a sugar daddy to keep going. ESB and SSE. So if the subsidy (revenue) cake stays the same. There will be over twice the number of companies with their snouts in the trough. They can't make money as things stand, how can they make money in the new situation? I might try to calculate the cost later.

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  22. To meet the 37% target for ever day there is zero or close output there must be a day with 74% or close 74% output. Output at such levels will be so chaotic it will crash the grid. A couple of gusts of wind over 90 kilometres and hour and up to 150 kilometres per hour will shut down a massive amount of wind capacity. Of course Eirgrid are so brilliant they can forecast when exactly this will happen. To the mini second no doubt.

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  23. This comment has been removed by a blog administrator.

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  24. Denis Naughten in an interview at Euractiv on Tuesday has said that Ireland is the global leader in taking variable renewable electricity onto the grid. He reports that Ireland can take a 65% loading on to the grid today, rising to 75% by 2020. The Celtic Interconnector with a capacity of about 700MW is key to providing additional stability on the grid, enabling more renewables onto the grid and allowing Ireland to export renewable electricity to provide stability to the French network.

    https://www.euractiv.com/section/energy/video/irish-minister-we-are-the-global-leaders-in-taking-variable-renewable-electricity-onto-the-grid/

    So whatever the financial viability of wind farms into the future, it looks like full-ahead for Government policy.

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  25. It is almost inevitable then that we go through another economic crash.Banks having to be bailed out again , the country side destroyed with junk engineering. What most poeple are unaware of is that wind turbines are NOT registered as being compliant with EU Law. The performance quoted by theses bankers , providing the cash for the scammers, are substantially higher than will in fact be realized. Their R.O.I’s are fictional . Almost all of their investments will loose significant amounts of money. To finish the idea that Eirgrid know what they are doing is laughable.

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