Pulling the plug on renewablesLast updated on 11/05/2016
When I first started to compose my thoughts for this article on renewable energy, there was still a hope that the Department of Energy and Climate Change in London would cut us some slack on support for new onshore wind farms. It wasn’t a big ask. Letting the Renewables Obligation (RO) scheme run on here for a year longer than in Great Britain wouldn’t have imposed a huge burden. The closure date of 2017 would, after all, only have been what was originally planned.
But the request proved too much for DECC. They weren’t prepared to let Stormont socialise the costs across all UK consumers and without that concession there was no realistic prospect of going it alone. The bill would have been prohibitive because the new wind farms, like earlier projects, would have had to have been supported for twenty years. That adds up to a very big sum. Close to £80m added on to household power bills alone.
Perhaps the Industry Minister should have checked out better the financial and political risks before he indicated a few months ago that he was minded to keep the RO going for wind during that extra year. If so, all he is really guilty of is giving some false hope. Without access to DECC’s deep coffers, he had no choice but to bring down the shutters at the same time as in GB.
Now the Renewables Obligation Scheme will close for onshore wind projects in April 2016. There are these grace periods to facilitate developers who through no fault of their own cannot meet the deadline. A consultation document issued by DETI suggests that almost 500 megawatts of onshore wind capacity will get approval before the RO closes in its entirety. That would enable around 30% of our electricity needs to be generated from renewable sources.
Other forms of renewable generation including solar, which are installed over the next eighteen months, will continue to qualify for support. Their contribution is not negligible but pales in comparison with wind generation.
After the RO closes, there’s no expectation there’ll be very much new onshore wind generation brought onto the system. That’s because little confidence exists that there’ll be the money there to support new installations. It was once thought that cash would be available under DECC’s new subsidy scheme which is based on Contracts for Difference. But now it’s far from clear that onshore wind developers here or in Great Britain will be eligible to apply for it. And if they can, how much money will be made available by DECC to support the operation of new turbines? Not a lot given the warnings that the budget to underpin renewable generation is under severe strain. And without a big pot of money, the chance of a successful application by a wind developer here will remain slim.
Prospects for other smaller forms of renewable generation have depended on our getting access to the Feed in Tariff support system already operating in Great Britain alongside the Renewables Obligation Scheme. An application by Northern Ireland to join FiT was considered by DECC but has now been refused.
Does any of this matter? It does to all those people whose jobs depend on the installation of turbines, solar panels and the rest. Hard to put a number on this but one green energy business reckoned thousands of posts are at risk.
On the other hand the fewer the subsidies being handed out, the lower the burden on consumers who have to foot the bill for renewable energy through higher electricity bills. Not that we ever did pay our fair share of the costs by the way. In truth, however it came about, we secured for ourselves a good deal with the Renewables Obligation Scheme. In essence it represents a large subsidy to Northern Ireland from consumers in Great Britain. But then we have a track record in getting GB citizens to support our upkeep.
All in all I suspect that outside the renewable energy industry and the green lobby generally, few will be too worried about any of the threats to subsidies. But complacency I think would be a mistake. More and more international firms are demanding renewable electricity to power their operations. For example US computer firm Apple had said that its new data centre in Athenry in Co Galway will be wholly powered by renewable electricity. Media reports have suggested the data centre will require 300 MW of capacity to support its iTunes, Maps and Siri services. While the company has not indicated what source of renewable generation, it favours, onshore wind looks a probably contender. That could mean investment of over £300 million in wind farm development.
The implications are clear. If Northern Ireland wants to be in a position to attract these multi nationals, we will need to have the renewable power available. That means continuing investment in this sector. So how to achieve that end?
I would just echo the thoughts of leading energy lawyer Richard Murphy of Pinsent Masons who argued last month that the current difficulties presented an opportunity to wholly re-think how we support the renewables industry. He said with the devolved powers over energy and the existence of the Single Electricity Market, an all-island mechanism to underpin green energy development could be created. His suggestion has real merit. It should be investigated.
First published in the Irish News