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Irish raise renewable energy target as EU debate heats up

Irish minister for communications, marine and natural resources Noel Dempsey has set a target to treble the contribution made by renewable energy from 5percent to 15percent of electricity produced by 2010.

His announcement came at the launch of a new publication called Renewable Energy Development 2006. The report provides a broad overview of current policies in the field of renewable energy and serves as a concise introduction to the topical issues and challenges in the area.

Combined heat and power

As such, it considers alternative technologies including combined heat and power (CHP), ocean power, wind power and the family of bioenergy technologies.

“The CHP, Biofuels, Bioheat, Greener Homes and REFIT (renewable energy feed-in tariff) packages are all part of an emerging support infrastructure to encourage all sectors of the economy to switch to renewable fuels or sustainable energy generation. Our support programmes and the accelerated liberalisation programme for green electricity have more than doubled the capacity of renewable energy powered electricity generating plants connected to the electricity network in the last two years,” he said.

“We have set an ambitious target to treble the contribution by renewable energy sources from five per cent of electricity produced in recent years to an annual production target of 15percent by 2010.

“It is the role of government to provide a stable business environment to encourage the development of renewable energy projects in Ireland that will meet this target,” concluded the minister.

There are currently more that 50 windfarms connected to the Irish electricity network. In all there are 860MWs of renewable capacity connected to the national grid which includes biomass, hydro and wind-powered technologies. Dempsey’s new target will require growth in the sector to more than double to 1650MW by 2010.

However, the Irish decision has raised a number of important issues according to leading online business data and analysis provider Datamonitor. It points out that the proposed increase is supported by the

recently-announced REFIT programme, but that this method of financial support raises more questions than answers over the economics of Irish green power.

The REFIT programme has replaced the alternative energy requirement (AER) as the main mechanism for funding renewable capacity in the Irish Republic. Under the previous AER programme, says Datamonitor, project developers bid prices at which they were willing to sell electricity from renewable energy projects to the Electricity Supply Board (ESB) for 15years. The lowest priced bids up to capacity limits received contracts with the ESB, and the contracts obliged the ESB to purchase the electricity produced for up to 15years at these prices.

This guaranteed revenue stream was sufficient to allow developers to secure bank debt to finance the necessary capital investment. The ESB was compensated for the net additional costs it incurred from a public service obligation (PSO) levy funded by electricity consumers. The PSO levy, which cost domestic customers E26 in 2005 and is clearly marked on customer bills, has been falling in recent years; the 2007 PSO levy will be zero.

Datamonitor goes on to point out that the clear change under the REFIT programme is the ability of project developers to freely negotiate with any electricity suppliers in the liberalised electricity market. Rather than a bidding process, the purchase price is negotiated directly between the generator and supplier, the consumer is protected by imposing price caps beyond which compensation to suppliers will not be paid. The current cap for large-scale wind projects is E57MWh. Under the programme contracting suppliers will still be compensated for the net additional costs incurred from the PSO levy funded by electricity consumers.

“Interestingly for 2007 the PSO levy will be zero, this logically implies that the ability to compensate the net additional costs of suppliers of renewable energy will be seriously impaired, and if this is the case, are the additional costs of the renewable energy expansion to be funded from elsewhere? Or does this imply that the renewable market is sufficiently mature in Ireland that there are no additional costs associated with renewable energy?” queries Datamonitor.

Blowing a gale in Europe

Meanwhile, the European renewable energy industry associations have called for the European Commission to acknowledge the European Parliament’s decision to prioritise research in renewable energy. The Commission, they say, has recently ignored the European Parliament’s decision to strengthen the research budget for renewables and energy efficiency.

In a plenary meeting in mid-June, the European Parliament voted to dedicate two thirds of the non-nuclear energy research budget under the European Union’s Seventh Framework Programme for Research (FP7) to renewable energy sources and energy efficiency.

The move comes following a decline in both the absolute spend on renewable energy research and the relative spend compared with the other non-nuclear energy technologies over the past two Framework Programmes.

The European Commission takes the opposite view to the EP, and has decided to ignore the democratic decision of the Parliament in its amended proposal for the programme.

“We are hearing many fine words about the importance of renewables and energy efficiency. Now that decision time has arrived, there is silence. We do not understand the position of the European Commission and its priorities for research over the next seven years” said Christian Kjaer, chief executive of the European Wind Energy Association (EWEA) which represents manufacturers, component suppliers, research centres, national associations, developers, owners, utilities and financiers.

“Last month, the European Parliament expressed the will of European citizens to reverse decades of unbalanced focus on fossil fuel energy research. Europe has the opportunity to move closer to an energy future based on known and predictable costs, derived from clean and indigenous energy sources free of all the security, political, economic and environmental disadvantages associated with the current energy supply structure.”

The Parliament agreed that non-nuclear energy research should total E2.4bn over the seven years of the programme (2007″“2013). Over the next five years, the average annual research budget for energy would then be as follows:

* Total energy research: E920m.
* Nuclear energy research: E580m (63percent).
* Non-nuclear energy research: E340m (37percent):
* Of which two thirds goes to renewables and energy efficiency: E226m (25percent).

Greater research investment would help renewable technology’s contribution to the Lisbon Strategy, says the EWEA. A strong research base is essential for Europe to keep its global leadership in the renewables market. It would stimulate private industry to get more deeply involved, and to collaborate more closely with the public sector.

“Strong research investment in renewable energy technologies and efficiency measures would also be a concrete answer from European decision-makers to the current concerns about security of supply and climate change,” it concludes.