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.

Monday 19 February 2018

National Development Plan Short on Sums

Last week, the Government announced their plans for long term infrastructure spending that we, the already overtaxed taxpayer, will have to pay for. As is usual with these big PR events, they are big on glossy brochures but short on facts and critical analysis. Somehow the cognitive dissonance of Ministers announcing investments in airports while at the same time allocating €22bn to help fight "climate change" was lost on most of our media.

In this article, Pat Swords explores one part of the plan - electric cars.

This week our 'rulers' announced their plan for 2040. Let's just focus on one 'trendy' aspect:
So lets look at some simple sums, not a strong point of our glorious rulers, but relevant for plans which are meaningful and don't end up as an awful mess. To put the above into perspective, the CSO figures tell us that we have some 2 million cars in this so called 'Republic'. I accept that if one has enough money to buy a top range Tesla, one gets a 100 kWh battery pack, which on a good day can do something close to 400 km. This is what one is entitled to expect from what is a 'car' after all. However, the problem is when one needs to recharge it, as a domestic house is typically only set up for 7 kWh. So if you turn off all your other electrical appliances and wait 14 hours, you'll be ready to go again. Not very practical is it?

However, not to despair as they are going to build out new charging infrastructure for us instead. Well that 100 kWh battery may theoretically be 'supercharged' in something like 30 minutes, but let's assume that such a charging point can charge three such Teslas in an hour. This means that it has to deliver 300 kWh in an hour equivalent to 0.3 MW. So if we build a thousand of these, we then need a 300 MW power station to supply them. By international standards, this is a medium sized power station, which would be comfortably able to cover 10% of the average demand currently on the Irish grid. 

So in simple terms if you want to be able to charge 3,000 electric cars in an hour, which is only 0.15% of the number of cars out there, you need a new 300 MW power plant, which is a large enough to cover 10% of the current country's demand. It's pretty obvious that unless you string up the country with new power stations and pylons, none of this is going to work, unless the public is prepared to spend a lot of their hard earned cash on electrical vehicles, which they will just have to park most of the time, as they don't have the hours to stand in line, awaiting an opportunity to get a charge in at one of these new 'charging infrastructures'. 

This is actually some pretty basis stuff and you would think that before they go off announcing their grandiose plans, they would have thought about it first. After all the data is published and readily available, such as from the SEAI's annual publications:

Transport uses some 42% of energy consumed in Ireland, more than double that which goes into electricity generation. If that energy demand is to be switched from fossil fueled vehicles to electric vehicles, then the electricity infrastructure we have would need to be more than doubled, even allowing for the fact, that the current grid is somewhat lightly loaded at night. Think about this one, you get an allocated slot to drive your Tesla to the new charging infrastructure to hook it up between 2.30 and 3.00 am - is this progress?.

And what of the alleged CO2 savings ? 
If you were to buy a Fiat Punto, which does 120 g of CO2 per km, you could drive it for nearly 170,000 km before you would have emitted the same 20 tonnes of carbon dioxide. 

When one does simple sums, none of this makes the slightest sense, not least as to the why? We don't have an urban air pollution problem in our cities and the weather is just doing its own thing, claims of weather doomsdays are just wild speculation and with each increasing year it is clearly obvious how wildly speculative those claims are. So in essence electric vehicles are a trendy solution to a problem, which has never been assessed and quantified and actually doesn't currently exist. So why do we end up with this dysfunctionality? After all the Government's own procedures highlight:
  • Regulations and their implementation often result in considerable costs to the public service, to citizens and to businesses. It is important that these costs are taken into account.  Regulatory Impact Assessment (RIA) is a tool to assess the likely effects of a proposed new regulation and involves a detailed analysis to:
  • (i) ascertain whether or not the new regulation would have the desired impact and
  • (ii) to identify the costs and benefits associated with the regulation.

Can't find a Regulatory Impact Analysis for this Project Ireland 2040 and above announced regulatory changes with respect to vehicles in Ireland. However, there was a Strategic Environmental Assessment completed for this Project Ireland 2040, but there is no assessment in it at all with respect to what has now been adopted above with regard to electric vehicles:

Theoretically the Lisbon Treaty, which we voted for, states in its Article 3 that we have a  right to a "highly competitive social market economy". As far as I'm concerned, what car I choose to buy is my business and why should I be dictated to by some barmy ideological politician? I would also recommend that one spend some time talking to older Eastern Europeans about the 45 years they spent behind the Iron Curtain and subject to the rigours of a planned economy there. This whole proposal is an outrageous abuse. It is not the State's entitlement or function to intervene in the free market in this manner, not least as it doesn't have a single scrap of analysis to justify the position it has now adopted. 

After all oil in 2014 was $110 a barrel and due to the technology advances brought on by fracking, has reduced to a value consistently around $55. While we have not seen all of that benefit, due to the degree of tax on these fuels, we have seen quite a benefit due to the market forces, which control supply and demand of this energy source. On the other hand, the electricity market in Europe is totally distorted by political intervention, costs have soared out of control and we saw how recently Viridian with two perfectly good power stations in Dublin simply decided to walk away from them, as the electricity market place is such a distorted mess here. So why on earth would anybody in their right mind want to be forced by the State to buy a vehicle, for which the facilities to refuel it are completely inadequate and the fuel supply is from a completely distorted market place lacking in transparency and demonstrating no shortage of political interference? In other words cronyism and a lack of accountability, which is breeding corruption.  

Friday 9 February 2018

Wind Farm that caused huge landslide makes losses for ESB

Photo : Irish Examiner

The Commission claims also that the construction of the wind farm required the destruction of large areas of coniferous forest amounting to 263 hectares.
 The Commission adds that, after the landslide which occurred on 16 October 2003 and the consequent ecological disaster, when the mass of peat which was dislodged from an area under development for the wind farm polluted the Owendalulleegh river, causing the death of about 50 000 fish and lasting damage to the fish spawning beds, Ireland carried out no fresh environmental impact assessment of this construction before the resumption of work on the site by the developer in 2004 [European Court Ruling 2008].

The construction of Derrybrien wind farm in 2003 caused a huge landslide resulting in the ecological disaster described above by the European Courts of Justice. Ten years later, Ireland still has not complied with their ruling and the EU are now seeking to impose fines on Ireland of €2 million.  

The wind farm was the largest in Europe at the time with 70 vestas turbines (of 0.85MW each) giving a total output of 59.5MW. It began operation in 2006. Ten years later in 2016, the accounts show that the wind farm was making a loss of €2.3 million. Turnover dropped by 25% to €5m and operating costs increased by 17% to €6.3m from 2015.  The company is owned by ESB and €20m in loans are still outstanding to them. It cost €64m to build. 

The above graph compares the load factor (actual output / maximum output) for Derrybrien and the national average as published by Eirgrid since 2010. The load factor has dropped significantly in the past two years to 23% in 2016, which was less than the national average of 28%. Not great for a wind farm located in the windy west of Ireland.  It could be that these particular wind turbines lose capacity over time. The first indication of a loss in capacity occurred in 2015 after eight years of operation. The national average was high at 33% whilst Derrybrien had a load factor 20% less at 26%. 

A loss of wind turbine capacity means higher maintenance costs and this is reflected in the accounts where operating costs have increased to €6.3m from €5.4m in 2016.   

The obvious question that needs to be asked about all this is are the massive environmental impact of wind farms built in such delicate areas worth it ? Whilst ESB will probably absorb  these losses who finally pays ? ESB is 95% owned by the Government

National Load Factors - Page 24 here.

Load factors for Derrybrien wind farm for 2015 and 2016 as per published accounts, other years were estimated based on annual turnovers.

Sunday 4 February 2018

Power Stations to Close

New Single Electricity Market rules now in force will see capacity payments cut by 30%.  In some cases, the power stations may not receive any capacity payment at all.

The inevitable consequence of this is the closure of older power stations and less dispatchable plant available to keep the lights on. Dispatchable plant is plant that can be switched on quickly when required. Renewables like Wind energy are not dispatchable because their output is uncontrollable. Ireland (All Island) currently has about 10,000MW of dispatchable plant and about 4,000MW of wind energy. About 1,000MW of capacity will not qualify for capacity payments. This leaves around 9,000MW of dispatchable plant remaining.

Dispatchable plant MW
Remaining dispatchable9,046
Max demand (2010)6,878
Capacity margin2,168
Minimum new data centres1,136
Capacity margin after data centres1,032
Reserve Generation500
Capacity Margin Net Surplus532

When everything is accounted for, including periods of high demand such as occurred in winter 2010 and planned data centres, there is a capacity margin of 1,032MW. Reserve generation is required incase a power station trips out. Currently this is about 500MW. This leaves a net capacity margin of 532MW.

This is quite tight but what happens if Viridian shut down not one but both of their gas power stations in Dublin (they have notified the Regulator that they will close both).  

This would leave a capacity margin of just 132MW. It would be lunacy to allow this to happen as blackouts would be inevitable in a harsh winter.  Dublin would be at most risk where there is a requirement for two large power stations to be on load at all times (three if the UK interconnector is out). 

While it would reduce costs, a blackout would come at a greater cost. 

And what of Northern Ireland ?  Where is the surplus power to come from to export to the North through the North South Interconnector ? The new auction will result in the closure of power stations in the North (Kilroot and part of Ballylumford). Northern Ireland is already at risk of power shortages.

But don't worry the Energy Regulator knows what they are doing I hear you thinking ? Well, I will just leave this here :


Look for Tuesday 30th January "Electricity Supply".

The interviewer asks the Regulator how much power do the Viridian power stations supply in percentage terms ? It's worrying that the Regulator had not checked this very important statistic. She replies that they are 800MW capacity so out of 9,000MW, it would be a bit less than 10%. But the 9,000MW is not demand, it's total capacity (capacity must be higher than demand). She also never mentioned the little problem of a minimum requirement for power stations in Dublin. Again, something I thought she should know. 

1) SEMO Auction Results - http://www.sem-o.com/ISEM/General/Capacity%20Market%20-%20Final%20Capacity%20Auction%20Results%20Report.pdf

2) Eirgrid Constraints in Dublin Region -  http://www.eirgridgroup.com/site-files/library/EirGrid/Operational-Constraints-Update-January-2018.pdf

3) Planned Data Centres - http://www.iwea.com/industryreports

4) Maximum demand all time - http://smartgriddashboard.eirgrid.com/#all/demand