The feed in tariff or REFIT scheme underpins investment in renewable energy to meet Ireland's legally binding renewable target, by providing sufficient certainty to developers to finance projects through the guarantee of a minimum price for wind exported to the grid over a 15 year period. Such schemes are common across EU Member States.
The original REFIT scheme for which state aid approval was obtained in 2007 has supported a significant expansion in wind energy in a relatively short period. In March 2012, my Department launched the next phase of the REFIT scheme for onshore wind, known as REFIT 2.
While similar in many respects to the first scheme, some dimensions of the scheme have been re-designed to ensure support costs continue to be cost efficient. Under REFIT 2, when the electricity market payment exceeds the combination of the REFIT reference price plus balancing payment, no payment from the Public Service Obligation levy is made under the scheme. Currently the average market payment in the Single Electricity Market is broadly similar to or slightly higher than the REFIT reference price.
The structure of REFIT 2 means that if the market payment rises above the REFIT reference price plus balancing payment due, for example, to high fossil fuel prices, there is no support cost for wind on the system under the scheme. Conversely, at times when a large amount of wind is available on the system, the wholesale electricity market price is reduced meaning that consumers pay less for all electricity. The ESRI and the Commission for Energy Regulation (CER) have demonstrated that wind provides a useful hedge against high fossil fuel prices.
To be eligible for the REFIT 2 scheme, projects must be built by 31/12/15. No decision has been taken as to what, if any, support scheme will apply to onshore wind projects after that date. The costs of developing onshore wind will be kept under review as the technology continues to mature over the next number of years. In compliance with the third International Energy Market Directive, the structure of the all island electricity market will require change. Decisions on how renewable energy development will be encouraged in future will be taken in the context of developing the new electricity market structure.