Wind Taken Out of Government's Plans - NAMA for Wind Beckons

by Owen Martin

All Island Wind (in green) Vs Demand (in red) for the past two months - above and below graphs

The capacity factor for wind was 13% over the past two months according to data taken from Eirgrid's dashboard

There have been unprecedented low levels of wind energy in the past two months as the two charts above reveal.  The unusual hot and calm weather is due to a large area of high pressure in the Atlantic Ocean which is blocking the prevailing south westerlies :

High Pressure region in the Atlantic

Some green campaigners are saying that this is caused by "more energy in the climate" due to climate change, but actually in this case there is less energy. Cloudless skies, no wind, no rain, it looks like a climate devoid of energy to me. 

There is now around 4,500MW of wind installed on the island of Ireland, enough capacity to meet almost all summertime demand. However, as can be seen in the graphs above, wind has had a dire performance with a capacity factor of about 13% over the past two months. In other words, they've only performed at 13% of potential output. Historically, they have a capacity factor of 27% in Ireland. Most, if not all, wind farms will be making large losses. The longer this calm weather continues, the closer we get to a bailout for wind, or as Colm McCarthy put it, a NAMA for wind.

How much would a NAMA for wind cost ?

A megawatt of wind energy capacity costs somewhere in the region of € 1-2 million. So 3,500MW of wind (in the Republic of Ireland) would cost about  €5 billion to bail out. If we take a discount of about 50% for serviced debt and a haircut for shareholders, this means the cost to the taxpayer would be €2.5 billion.  This is roughly equal to the total wholesale cost in electricity bills, which comprise 50% of an average bill. So a NAMA for wind could cost the consumer about half of an average annual electricity bill. 

Brookfield Renewables Sale Part 2

Canadian company Brookfield Renewables sold two wind farms to Greencoat Renewables last week - Knockacummer and Killhill. I took a look at Knockacummer in my last post. This time I will examine Killhill.  Things don't look any better from a financial point of view.

Killhill is outside Cashel in Co.Tipperary. It has sixteen Enercon 2.0 MW turbines and was commissioned in 2014. The latest accounts show operating profits for 2015 and 2016 but a net loss for both years after interest is accounted for. In fact, since it came into operation, it made a loss every single year  and now has accumulated losses of nearly € 900,000. It had net current liabilities of €3.2m and was completely dependent on financial support from Brookfield, the parent company, to meet it's debts. There were about €37m of loans outstanding by the end of 2016. 

Im speculating, but it could be that the banks will be paid out of the sale proceeds leaving the company completely financed by equity under Greencoat. This could account for the apparently large, but undisclosed, sale price of both wind farms. 

Canadian Company Sell a Loss Making Wind Farm for a Profit to State Backed Investors

A wind farm sold for a profit in the region of €7 million last year made a net loss of € 4 million in the latest accounts filed with the companies office for 2016.

The wind farm, Knockacummer, in Cork, has a capacity of 87.5MW, was commissioned in 2013 and has thirty five 2.5MW turbines. It was sold by Canadian company Brookfield Renewables.

It paid interest of € 12m (at 7.5%) in 2016, which was 54% of it's turnover. The interest was higher than it's operating profit which turned the profit into a net loss. It also made a net loss in 2015. 

At 31st December 2016, it was carrying Accumulated Losses of € 5.7m.

It's outstanding loans stood at €145m at end of 2016. €3.8m of which was written off by Brookfield during the year. The company was financed by loans from Brookfield, which in turn was financed by external loans. 

The buyer was Greencoat Renewables. Last year, the Irish State, through ISIF and AIB, acquired a 33% stake in the company. Which could potentially rise to 49%. 

Greencoat also bought another loss making wind farm, Lisdowney, last month. 

One has to question as to why the Irish State is helping to purchase loss making wind farms. Are we looking at another NAMA in the making ?

Poor winds see wind farms make losses

Bad news for wind farm investors - poor winds in the past month see wind farms make losses

The weather for the past 30 days was characterized by quite a lot of high pressure activity, dry weather and low winds. Total output for wind farms in the Republic of Ireland for this period was 280,329 MWhrs. Data from SEM-O for the year 2013/14 shows that wind farms earned € 83 per MWhr and had costs (including depreciation) of € 24.9 million per month.

This means when one does the maths, wind farms suffered a loss of € 1.6 million over the past 30 days.  Bad news for investors and the green energy revolution.

With a couple more months like this, we could be seeing, as Colm McCarthy once predicted, a NAMA for windfarms.



Sources: 

SEM COMMITTEE Generator Financial Performance in the Single Electricity Market (SEM) 19th December 2014

Eirgrid Smart Grid website

€20 billion committed to under Ireland's Renewable Energy Action Plan

What follows is an analysis by Pat Swords, an environmental engineer, on the costs committed by the Irish government in their Renewable Energy Action Plan (NREAP). The bailout of Anglo Irish Bank ended up costing the Irish people around € 29 billion, so the costs committed under NREAP, mainly for windmills and pylons, will come to at least two thirds of that of the infamous bank. The wind industry and other interested parties require vast long term subsidies to make these huge capital investments viable and the Irish people have been signed up to pay up for generations once again. At the end of this programme, when the subsidies finally come to an end, we will have no choice but to setup a NAMA for windmills, as Colm McCarthy the economist pointed out, adding more billions to the cost. 

There are also many costs to society that can't be so easily valued - for example the loss of jobs as big industry moves out. Consider this letter to the Energy Regulator from Kerry Group, for example, who are trying to fight in a very tight competitive international market with domestic policy dragging them down in a whirlpool of electricity levies, charges and subsidies while their competitors benefit from cheap fuel prices (and by the way - no, fossil fuels do not receive the equivalent of REFIT). 

And what cost to put on tourism and bloodstock jobs ?

The costs committed to in Ireland's Renewable Plan 

by Pat Swords BE CEng FIChemE CEnv MIEMA


Ireland's Renewable Energy Action Plan (NREAP) was prepared in 2010 without any proper assessment of costs and impacts.  For instance if we take Table 10 on page 138, it gives us the bottom line, i.e. 4,094 MW of onshore wind and 555 MW of offshore:

Link to Ireland's Renewable Energy Action Plan (NREAP)

If for Ireland at €2 million per MW onshore (workings provided below) and at least €3 million per MW offshore, that is as near as be dammed €10 billion. Then we have the East West Interconnector at €0.6 billion, with more and even longer interconnectors to come to the UK and France - see page 79 of the NREAP -  so we can conservatively lob in another €3 billion for interconnectors. 

We also have Grid 25 at some €4 billion and potentially rising:

•  We will ensure completion of the ongoing capital investment programme in transmission and distribution networks by 2010 and oversee further extensive investment in a programme expected to total €4.9bn up to 2013;
• See Page 21 of: http://www.dcenr.gov.ie/NR/rdonlyres/B0D3D168-3DCD-43E9-8D87-F4666239049F/0/EnergyWhitePaper12March2007.pdf 

Not only is there over 800 km of high voltage in Grid 25, but as the All Island Grid Study demonstrated, there is an additional 5,000 km of medium voltage grid connections required to connect all these wind farms to the high voltage grid - see here and here.

So clearly there is already a billion euros gone to ESB for the medium voltage networks, in addition to Grid 25 which is Eirgird and the high voltage network.

So we are now well in excess of €18 billion for turbines, interconnectors, high voltage grids and medium voltage grids.

Then there is the roll out of smart meters, which are on page 77 of the NREAP. So we can throw in another billion or two there.

If we look at (former Green Party leader) John Gormley's Carbon budget:

• The target is underpinned by analysis conducted in the recent All Island Grid Study which found that a 40% penetration is technically feasible, subject to upgrading our electricity grid and ensuring the development of flexible generating plant on the electricity system. 

So we have to mothball our current base load CCGTs at 55% efficiency to replace them with open cycle fast response gas turbines which are only 35% efficient. So given that a CCGT costs £0.9 million per MW installed (see page 16 below) and an open cycle plant (OCGT) about £0.6 million per MW installed (see page 26), and we are going to require at least 1,000 MW of fast response power to balance the grid fluctuations, there is going to be no change out of another € billion.

Link to future costs of mature commercial Nth-of-a-kind (NOAK) report 

So all in all over €20 billion plus was committed in capital investment alone. To that you have to add the operating costs, profit for the wind investors, costs of inefficient operation of the grid and for what?

If you go to the bottom of the DCENR's REFIT page there is a link to Part III Supplementary Information.

Part III.10

Supplementary Information Sheet on environmental protection aid

Emissions

Annual savings per 100 MWs installed Tonnes of oxide

Carbon Dioxide

0.19  ml.

So this was what was claimed back in 2007 as the justification for all this so called 'environmental protection'. In other words for each 1,000 MWs of installed capacity, 1.9 million tonnes of CO2 savings.

If we go to the latest NREAP progress report to the EU, see below, we can see that the Irish NREAP progress report dated February 2014 claims 1,763 MW of wind energy by 2012 and 2,738,072 tonnes of CO2 savings. If we look at Table 1 b, then wind was responsible for (4,247 / 5,659 ) or 75% of the renewable electricity, therefore 2.05 million tonnes of CO2 savings. 

http://ec.europa.eu/energy/en/topics/renewable-energy/progress-reports

So this is 2.05 / 1.763 = 1.17 million tonnes of CO2 savings per 1,000 MW of installed capacity.

However, we do know this claimed for saving is untrue, as the calculation method is false, in that it does not allow for all the inefficiencies induced on the grid. See page 29 of the NREAP progress report:

• The limitations and caveats associated with this methodology include that it ignores any plant used to meet the associated reserve requirements of renewables. These open cycle plants will typically have lower efficiency and generate increased CO2 and NOx emissions compared with CCGT and these emissions should be incorporated into the analysis. The purpose of presenting a simplified analysis here is to provide initial insights into the amount of fossil fuels that are displaced by renewables and the amount of emissions thereby avoided.

As they have been 'stung' by criticism of fraudulent claims, the SEAI produced yet another one of their reports. This time where they claim their modelling allows for inefficiencies on the grid, such that for 2012, wind saved 1.5 million tonnes of CO2 - link to new SEAI report

So now we are at 1.5 / 1.763 = 0.85 million tonnes per 1,000 MW of installed wind capacity, which is less than half of what they claimed for when REFIT was initiated back in 2007 to fund the building of this infrastructure in this place. Furthermore, it has to be said that the report above is highly suspect, in that the modelling in it concluded that more ramping up and down of gas plants occurred, when there was no wind on the grid, yet it is well known that power plant operators are complaining that they are now ramping their plants more to compensate for wind energy input (see example here). Indeed, the whole grid is being redesigned, not with the goal of fuel efficient generation, but instead to prioritise fast response, as the documentation from the Irish grid regulator below shows (plant with fast response do not use fuel as efficiently as slower operating ones). So the SEAI paper above is not truthful:

• The management of variability and uncertainty is critical to a power system with high levels of wind penetration. Detailed analysis by the TSOs has shown that portfolios that are capacity adequate are unlikely to be adequate in terms of ramping over all the necessary timeframes to efficiently and effectively manage the variable renewable sources and changes in interconnector flows while maintaining system security - from All Island Project report. 

Not surprisingly, the ESB and other generators are against all of this:

http://www.allislandproject.org/en/transmission_current_consultations.aspx?article=11d55fa2-e9cd-454c-aaa5-d689d434db20 

So what are we actually doing, spending billions and billions, wrecking all of our grid and financial viability of our electricity services and all we can claim, using a dodgy computer model is that we have saved 1.5 million tonnes of carbon dioxide, which is nothing given that Ireland's own CO2 emissions are 58 million tonnes and global emissions are 35 billion tonnes per year.

So we saved 0.004% of global emissions, if we look at the UK Met office official data for global temperatures, with the vertical bars for uncertainty, then since we started all of this renewable gig in the EU in 1998, global temperatures have gone nowhere.

Are we mad, as we are certainly behaving that way?

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Workings for cost of onshore wind in Ireland

Reference document 

• The cost of onshore wind has been assessed internationally by a report completed for the German renewable industry, the main detail of which in relation to total investment costs (GIK -Gesamtinvestionkosten), can be found in the Table below: