I thank Senator Morrissey for raising this important issue in which a great deal of interest has been expressed by people anxious to provide renewable energy.
The green electricity market has been fully liberalised in this country since February 2000, under the Electricity Regulation Act 1999, some five years in advance of full market liberalisation. Renewable energy developers, including offshore wind developers, are therefore able to sell the electricity they produce on the open market. Consequently, any decision to invest in offshore wind projects is a commercial decision for individual developers.
In Ireland, electricity generation from renewable energy-based technologies is not as yet fully competitive with conventional fossil fuel technology, and in consequence, market support is required because these technologies operate from a higher cost base than conventional technologies. The Department administers the alternative energy requirement or AER programme, the underlying principle of which has to date been that prospective generators are invited to make a formal application to build, own and operate newly installed renewable energy based electricity generating plant, and to supply electricity from these to the Electricity Supply Board under a power purchase agreement of up to 15 years duration. The net additional cost to the ESB is charged to electricity consumers as a public service levy in each individual electricity bill.
On 7 April last, the Minister for Communications, Marine and Natural Resources, Deputy Noel Dempsey, announced the outline of a future support mechanism to be known as AER VII. This revised system will move away from competitive tendering to a fixed price proposal. In addition, the support which was previously tied to contracts with the ESB will now be available for supply contracts with any licensed supplier. AER VII will contain an overall quantitative limit so that a competitive element remains. The actual capacity limit in AER VII will be a specific term which will be of major interest to all potential applicants. It is appropriate that it is made accessible to all potential applicants simultaneously. The Department therefore is not in a position to announce a specific quantitative target until AER VII is formally launched.
The last competition, AER VI, included an offshore wind category for the first time. Following a study conducted by consultants Byrne Ó Cléirigh on behalf of Sustainable Energy Ireland, it was decided that support would be offered for two 25 MW demonstration projects. When the Minister, Deputy Dempsey, announced the latest round of the AER programme, he indicated that wind would remain the dominant renewable technology available to achieve our 2010 target. However, wind is an intermittent fuel source. Electricity is produced when the wind blows, which is not always necessarily when the consumer demands it. There are therefore management issues regarding the amount of wind which the network can accommodate at any time whether the project is onshore or offshore.
From the consumer's point of view, electricity produced onshore and offshore is identical. The difference is production cost. Offshore wind energy has a significantly higher cost base than onshore wind. Industry sources report that the cost of installing a megawatt of offshore wind capacity can be up to double the cost of the equivalent capacity being generated onshore. As a result, the cost of electricity produced from the offshore plants supported by AER VI will impose a significantly higher charge per unit on all electricity consumers than the onshore equivalent. Under the AER programme, additional costs are charged to all consumers as a public service levy. There is therefore logic in minimising that levy. While it is appropriate to facilitate demonstration projects to a judicious extent offshore in order to keep up to date with the technology, the fact that there is substantial unexploited potential onshore suggests that the latter should be favoured.
The European Union has addressed a directive to all member states to increase the consumption of green electricity by 2010. The obligation addressed to Ireland is to deliver a programme capable of increasing the amount of electricity from renewable energy sources to 13.2% or approximately 1,400MW of total consumption by 2010. It is acknowledged at EU level as a challenging target. It will require us to more than double existing capacity within five years. This is the minimum target the Minister is demanding. The overall target is to optimise the amount of renewable energy technologies which can be connected to the network while maintaining safe and reliable supply and reasonable retail charges for consumers.
