Fairways Hotel, Dundalk, Ireland, 7 April 2005
“Renewable energy is at a very important stage of development in Ireland. It is no longer a niche player and is rapidly becoming an essential component of our electricity industry,” said Minister for Communications, Marine and Natural Resources, Noel Dempsey T.D., speaking this morning at the Irish Wind Energy Association Annual Conference in Dundalk.
“Ireland has a renewable energy target of 13.2% of consumption coming from renewable generated electricity by 2010. I am determined to see that we, at the very minimum, achieve the target. To ensure that we achieve this target means that we have to have just over 1,400MW of renewable capacity built and operating on our electricity system by 2010,” said Minister Dempsey.
The Minister said that given the scale of development required to achieve this target we still require a support mechanism to develop renewable energy technologies. “The purpose of a support mechanism is to adequately incentivise the building of new capacity onto the system. In setting the levels of a new support mechanism I will ensure that the interests of all consumers are taken into consideration and that the competitive position of the economy will be maintained in years to come,” he said.
“I will be changing the type of support mechanism used from a competitive tendering system to a fixed feed in tariff system. This support system will be designed specifically to encourage new capacity development and will only apply to newly built projects. I will also be changing the minimum conditions necessary to apply for support, by adding a valid grid connection offer to the existing conditions applied to AER VI to ensure that projects that qualify for support are actually in a position to build within a reasonable timeframe, added the Minister.
“I am determined that we will take an ambitious, yet realistic approach to developing new targets and I have specifically asked that the Renewable Energy Development Group concentrate on this area as a priority after the new support mechanism is finalised,” he concluded.
Full text of Minister’s Speech Follows
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Speech by the Minister for Communications, Marine and Natural Resources, Noel Dempsey T.D., to the Irish Wind Energy Association Annual Conference, Fairways Hotel, Dundalk
Thursday 7 April 2005
Thank you for inviting me here today. I appreciate the opportunity to address the wind energy industry directly.
Renewable energy is at a very important stage of development in Ireland. It is no longer a niche player and is rapidly becoming an essential component of our electricity industry. Renewable energy contributes to a number of key energy goals for Ireland.
It contributes to our security of supply by reducing dependence on imported fuel sources and increasing indigenous fuel supply. It contributes towards meeting our environmental challenges by generating cleaner, mainly carbon free electricity. It also contributes to local and regional development by virtue of its distributed location throughout Ireland.
Ireland has a renewable energy target of 13.2% of consumption coming from renewable generated electricity by 2010. I am determined to see that we, at the very minimum, achieve the target. To ensure that we achieve this target means that we have to have just over 1,400MW of renewable capacity built and operating on our electricity system by 2010. At present we have just over 650MW on our system, comprised of 341MW of wind, 250 MW of Hydro with the balance made up of different forms of biomass. This means that we have to more than double the amount of renewable capacity on the system over the next five years.
As wind technology is at the forefront of renewable energy technologies, it is a fact that this technology will make the largest contribution in terms of achieving our 2010 targets. I recognise that there are some technical challenges to be addressed to help accommodate the development of renewable capacity. In this regard, I am pleased to see the very active participation of the industry representatives in the Renewable Energy Development Group established by my Department, the grid code groups established by the CER and the system and turbine modelling work being carried out by National Grid. The value of the work undertaken by all parties can clearly be seen and demonstrated.
The moratorium was put in place when the capacity amount of 800MW of wind either built or with valid connection offers was reached. By the end of next month following the CER and National Grid ‘gate 1’ connection process, we are likely to have in the region of 1,300MW of capacity in this category.
This progress clearly demonstrates the value of all parties working together in an open, transparent and consultative manner and this can only be beneficial for the future development of the industry as a whole. Much discussion has taken place about the type of any support mechanism for renewable energy or even if any mechanism is required at all.
Improvements in wind turbine technologies and use of bigger turbines in recent years have resulted in the costs particularly of onshore wind generation coming more in line with traditional electricity generation costs.
While there is a certain amount of non-Government supported or merchant plant on the Irish system, I am mindful of the concerns raised by industry in terms additional capacity being built on a merchant basis.
There is widespread international support given to developing renewable energy technologies and there is no evidence of stand-alone development of any scale anywhere in the European Union. Given the scale of development required to even achieve our target, I am satisfied that we still require a support mechanism to develop renewable energy technologies to ensure the required level of capacity actually gets developed.
The purpose of a support mechanism is to adequately incentivise the building of new capacity onto the system. The support must ensure that there is sufficient return in a project to repay borrowings and provide an appropriate return for equity invested. At the same time I am conscious that support mechanisms add costs into the system and must ultimately be paid for by the consumer. In setting the levels of a new support mechanism I will ensure that the interests of all consumers are taken into consideration and that the competitive position of the economy will be maintained in years to come.
I am aware that the market is waiting for an announcement on a new market support mechanism and I want to assure you that I will be announcing the details of this mechanism shortly.
In recent years the AER support mechanisms have been by way of competitive tendering rounds offering up to 15-year off-take contract for the successful bidders. While this system has been successful in keeping costs to a minimum and resulted in an impressive array of projects consented for support, it does not adequately ensure that the projects will all actually be built. It is my intention that the new support mechanism will address the problems of the current system and ensure that successful projects come to fruition.
For this reason, I will be changing the type of support mechanism used from a competitive tendering system to a fixed feed in tariff system. This support system will be designed specifically to encourage new capacity development and will only apply to newly built projects.
I will also be changing the minimum conditions necessary to apply for support, by adding a valid grid connection offer to the existing conditions applied to AER VI to ensure that projects that qualify for support are actually in a position to build within a reasonable timeframe.
To date all existing offers of contract have been placed with ESB PES. However, I am conscious that in a fully liberalised market, in order to ensure a more competitive marketplace, that the new scheme will be extended to other supply companies. The finer detail of establishing this process is the final gap we are working on and I am confident that we will be in a position to move forward and announce full details of the new scheme to the market within a matter of weeks.
A very important area I want to mention is the whole area of targets and ambition for the development of renewable sources of energy going forward beyond 2010.
I am aware that the Renewable Energy Development Group has prioritised its work to date in developing the new support mechanism given the importance of reaching our 2010 target, however, I am determined that we will take an ambitious, yet realistic approach to developing new targets and I have specifically asked that the Renewable Energy Development Group concentrate on this area as a priority after the new support mechanism is finalised.
It only remains for me to wish you well with the rest of the proceedings here this morning and I now hand you back to the Chair.
Thank you for your attention.
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