Dáil Éireann Debate, Wednesday - 29 September 2010
1585 Deputy Leo Varadkar asked the Minister for Communications, Energy and Natural Resources in relation to the REFIT scheme, the reason applicants are required to enter a Power Purchase Agreement with an electricity supplier; the reason the electricity supplier is paid the 15% balancing payment; and if he will make a statement on the matter. [33226/10]
Amharc ar fhreagraThe REFIT scheme, which guarantees a minimum price for certain classes of renewable electricity generation, is designed to underpin the business case for investors in the renewable generation sector. A key component of the scheme is the requirement for Power Purchase Agreements (PPAs) between renewable energy generators and suppliers. The PPAs create certainty for generators and incentivise suppliers to purchase renewable electricity.
Payments, including the 15% balancing payment, are made to the suppliers who enter commercially negotiated Power Purchase Agreements with generators of renewable electricity. Under a PPA, the supplier undertakes to purchase all the output from a renewable energy generator at contract prices which are fixed between the generator and the supplier at the commencement of each individual contract for 15 years, irrespective of the open market pool price.
The supplier also assumes the market interaction role between the individual generator and the pool market and incurs additional costs in respect of this which are also reflected in the balancing payment.
In designing the REFIT scheme, my Department concluded that in order to ensure suppliers' critical participation in developing renewable generation capacity in the liberalised electricity market, a proportionate balancing payment mechanism was necessary. There has been a steady increase in total capacity of renewable projects on the system since the introduction of the REFIT scheme.
The CER decision paper for the 2010/2011 PSO decision shows that for the PSO periods of 1st January 2007 to 30th December 2007 and 1st January 2008 to 30th September 2008,, the PSO levy was set to zero to be recovered in subsequent years because the amount to be collected each year was relatively small. It was considered that the administrative burden of collecting these levies would have been excessive. For the 1st October 2008 to 30th September 2009 PSO levy period, a negative PSO levy of €13.9m was determined based on a high forecasted benchmark price of €112.25/MWh. The PSO levy was set to zero because PSO legislation does not provide for a negative PSO levy amount. For the 1st October 2009 to 30th September 2010 PSO levy period, a small positive PSO levy was determined, which facilitated the PSO levy being set to zero.
1586 Deputy Leo Varadkar asked the Minister for Communications, Energy and Natural Resources regarding the interconnection with the UK, if there will be a restriction on the sale of REFIT subsidised electricity to the UK at a price lower than the subsidised floor price cost; and if he will make a statement on the matter. [33227/10]
Amharc ar fhreagraArticle 35 of the Treaty on the Functioning of the European Union forbids any quantitative restrictions on exports and all measures having equivalent effect. This Article would prevent Ireland or any Member State from placing any restrictions on the export of electricity whether the power benefits from a feed in tariff or otherwise.
Under the terms of the Renewable Energy directive, the renewable value of generation stays in the country of generation except in the case of formal written agreement between any Member States to allow transfer of the statistical value of that generation between them. That formal agreement has to be notified to the Commission by both Member States for any such transfer to be accepted by the Commission.
There is currently no such agreement in place between Ireland and any other Member State.
Cross-border transactions within the electricity sector are regulated by EC Regulation 1228/2003. Under this regulation users (ie generators) of an interconnector can only be charged for utilising interconnector capacity when demand is greater than availability. At other times, EirGrid as the interconnector owner and operator will recover the cost of the interconnector through transmission charges.
It is also the case that it is impossible to distinguish the flow of electricity across interconnectors by reference to the original source of supply or generation.
1587 Deputy Leo Varadkar asked the Minister for Communications, Energy and Natural Resources if a financial study has been undertaken to confirm the REFIT scheme is capable of delivering the required amount of renewable energy to achieve the 40% by 2020 target; if so, if he will publish that study; and if he will make a statement on the matter. [33228/10]
Amharc ar fhreagraA range of international, EU and national analysis underpins the case for support schemes, such as REFIT, for renewable electricity technologies to provide greater certainty for investors thus facilitating the financing of the investments. As set out in Ireland's National Renewable Energy Action Plan (NREAP), it has been estimated by the Commission for Energy Regulation and EirGrid that between 4630MW and 5800MW of renewable generation is required, depending on economic growth assumptions and electricity demand projections, to ensure 40% of electricity consumption from renewable sources by 2020.
Together with the 10% renewables target for the transport sector and the 12% renewables target for the heat sector, meeting the 40% electricity target will ensure the achievement of Ireland's legally binding EU target of 16% of all energy consumption from renewable sources by 2020.
Together with existing operational renewable electricity capacity of 1,750MW and capacity which has already signed connection offers of around 1,200 MW, there are 4,000 MW of applications under the Gate 3 scheme which are currently being processed. This indicates that the 40% target will be achieved and that the REFIT scheme is operating effectively to assist this objective. In addition to the REFIT scheme, undertaking the requisite investment in the transmission and distribution networks and timely planning and connection processes are critical to ensuring that the necessary level of renewable capacity under GATE 3 is delivered to meet the target.
