IEA WIND TASK 26 PROJECT MEETING: THE VALUE OF WIND ENERGY TO IRELAND 26 May 2014 Patrick Mohr
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IEA WIND TASK 26 PROJECT MEETING:
THE VALUE OF WIND ENERGY TO IRELAND
26 May 2014
Patrick Mohr
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PÖYRY MANAGEMENT CONSULTING
(c) grafikdienst.com
Pöyry offices
Pöyry Management Consulting
offices
A division of Pöyry – a global consulting and engineering company
Over 200 energy market experts in 13 offices across Europe
Active in the Irish market for over 17 years
Independent advice on commercial and strategic decisions
Informed and high quality regulatory and policy advice
Underpinned by a pan-European market modelling capability
Lead consultant for the development of the SEM’s
Trading and Settlement Code
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WE HAVE EXTENSIVE EXPERIENCE IN IRELAND
We have worked for many different clients on a wide range of issues
Strategic advice
Asset Valuations
Retail market
Gas market
Regulatory advice
Scenario analysis
• Development of Irish market strategy for incumbent
• Market entry strategy for new entrant
• Smart Energy action plan for Londonderry
• Market report purchased by over 20 clients annually
• Advised on all major generation asset transactions in recent years
• Provision of curtailment and market revenue projections to wind assets
• Due diligence and advice for new entrants
• Valuation of retail businesses
• CER smart metering roll-out strategy
• Development of wholesale gas market rules
• Gas storage valuations and gas retail strategies
• Valuation of gas distribution networks
• Development of wholesale electricity market rules
• Implementation of European Target Model
• Demand side vision for the Island of Ireland
• Development of electricity generation portfolios (Eirgrid)
• Impact of Wind intermittency study (Multi client)
• The value of wind energy to Ireland (IWEA)
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WHY THIS STUDY? WHY NOW?
• There remains concerns in some quarters over the value of wind energy to Ireland
• Without renewable commitments, Ireland is unlikely to need any new generation capacity until post-2020
• Strong and growing local opposition to pylons and turbines
• Doubt whether wind investment will provide higher/lower costs to citizens
• To date, the debate on this issue has been based on assertion or partial analysis
• Given the complexity and importance to Irish energy policy, the issue deserves a robust, non-partial,
evidence-based assessment, quantifying the direct effects on electricity prices and the consequent
indirect effects on the wider economy
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WIND SCENARIOS
• No Wind Effort (Post 2014) (No Wind) is our baseline scenario in which no further
wind development occurs in SEM beyond that which is already assumed to be
under construction through to the end of 2014. GB continues wind deployment but
does not meet its 2020 renewable target until 2025.
• Domestic Wind Scenario (Domestic) delivers sufficient wind capacity to meet the
RoI and NI 2020 renewable targets. Wind capacity continues to grow through to
2030 proportionally with demand growth. GB continues wind deployment but does
not meet its 2020 renewable target until 2025.
• Export Wind Ambition (Export) assumes domestic renewable targets are met as
in the Domestic Wind scenario, and enables GB to hit its 2020 target through export
wind capacity constructed in RoI.
SEM GB SEM GB SEM GB
No Wind Effort (Post 2014) 2 GW 9.8 GW 2.4 GW 17.5 GW 2.4 GW 25 GW
Domestic Wind Scenario 2 GW 9.8 GW 5.2 GW 17.5 GW 7.9 GW 25 GW
Export Wind Ambition 2 GW 9.8 GW 5.2 GW 22 GW 7.9 GW 34 GW
2012 2020 2030
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Modelling interaction between Pöyry and Cambridge Econometrics
• Study integrates two types of model – energy market and macroeconomic
• Structure of power market and interconnection creates lots of complexity
• Results include analysis of wholesale prices, retail prices, investment costs, fossil
fuel consumption, electric interconnector flows carbon emissions, GDP,
employment and more…
CE macroeconomic
modelling
Assumptions
• Carbon prices
• Fossil fuel prices
• Electricity demand
• Capital costs
• System costs
Energy inputs to CE
• Electricity prices
• Electricity imports/exports
• Power sector fuel demand
• Capital investment
Macroeconomic
resultsEnergy market
results
Pöyry energy market
modelling
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• Merit order effect dampened – the nature of an interconnected market
• Gas remains the marginal source of generation
• Interconnection with GB dampens market price differentials
• Carbon price differential between GB and SEM emerged as a key driver of interconnector value and SEM prices
• Wind self-financing as wholesale price rises above REFIT floor
• Lower wholesale prices and higher system costs broadly offset each other
• Investment in supporting infrastructure required to enable wind growth
• Requirements to maintain security of supply are already incorporated in wholesale prices
• Net benefits of wind development results in an increase in household disposable income
7
LIMITED IMPACT ON CONSUMER BILLS
SEM supplier wholesale price (€/MWh) Household electricity bills (€)
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IMPROVEMENT IN ENERGY BALANCE OF PAYMENTS
• Ireland is currently dependent on energy imports for 85% of its needs
• Deploying wind capacity reduces dependence on imported fuels by reducing gas imports and improving
electricity trade position
• Net transfer to the Irish economy with energy import bill falling by €282m in 2020 and €671m in 2030
Balance of payments ROI (€m)
• Financial shift lags the physical
switch
Net electricity exports from SEM (TWh)
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NET ECONOMIC BENEFITS TO THE IRISH ECONOMY
• The major capital investment associated with the wind deployment programme, together with the net
transfers from the balance of payments, add an indirect stimulus to the Irish economy
• Figures account for displaced investment, the assumption we make to ensure our scenarios are unbiased
Net impact
on jobs
Expected economic consequences Economic impacts
2021-2030 2013-2020
Overall employment impact
• average additional 1,150 jobs over the period 2013-2020 and 1,600 jobs over the period 2021-2030
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GROWING THE WIND ENERGY SECTOR
• How do you capitalise on this growing capability
and skillset in the workforce?
1. 2030 energy policy
2. Increase the domestic content of the supply chain
3. Target export industry potential
Direct wind and grid employment O&M employment
• Large construction business over a two
decade period
• Continually growing sector
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EXPORT POTENTIAL
• The scale of the wind resource in Ireland provides an opportunity to grow the industry
directly for the export market
• Export projects funded through direct foreign investment will lead to much larger
employment benefits and economic growth with no direct impact on Irish energy prices
• To make the economic case to UK, the cost of developing wind in Ireland and connecting it
to the GB electricity grid must be lower than the cost of the marginal source of low-carbon
generation necessary for the UK to hit its renewable targets.
• If you did an efficient deployment of renewables to meet 2020 targets you would build
onshore wind in Ireland over offshore wind in GB
• It may be more difficult to make the political argument as the UK may wish to invest in GB
wind
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• Available to download on IWEA news website
THE VALUE OF WIND
ENERGY TO IRELAND
www.poyry.com COPYRIGHT©PÖYRY
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