‘Heads must roll’: Industry and experts argue energy crisis of ‘our own making’

This is how one of the directors of the Commission of Regulation of Utilities described Minister Eamon Ryan’s reaction to a request the regulator had just made.

This is exactly what Noteworthy set out to do in our LIGHTS OUT investigation as we examined how we have ended up in a situation where Ireland is in the middle of another bleak winter energy forecast. The problems we are now facing seem a million miles away from the mid-2010s when there was little concern about future power gaps in reports from State bodies. At that time, there was a large surplus of over 1,000 MW of energy capacity – enough to provide electricity for 1 million Irish homes for a year.

Now, we are looking at a situation over this winter where we face a potential risk of insufficient generation to meet demand for periods totalling up to 51 hours, well outside the eight hours per year risk level we have adopted in Ireland. This is vital as we have limited interconnection to other EU countries, and, as Ireland undergoes its ambitious transformation to a renewable first electricity system, efficient gas-fired power is needed now when wind and solar output levels are low.

The CRU is responsible for the design and rules of the Capacity Remuneration Mechanism and EirGrid operates the auctions on its behalf. All the pieces appeared to be lining up, yet, according to Walshe, “with great regret” he and his business partner had no choice but to “pass on the baton and sell Grange to new owners” after years seeking to finance and build the plant as there was no obvious route to market at that time.

However, various letters, consultation submissions and presentations shared with our team show that, as early as 2014, Walshe consistently warned the CRU, EirGrid and the Department of Climate that this was simply not possible. The warnings were frequent and regular over the years, with Walshe and his partners outlining clear recommendations for separate auctions and longer contracts for new entrants and higher price caps.The CRU told Noteworthy that the “current market design was the subject of a State Aid clearance process by the European Commission and is in line with EU requirements for such capacity mechanisms”.

He also gave a presentation to the Department of Climate in February 2018. The presentation stated that even though the price cap is roughly 30% higher than for refurbished plants it would still be “impossible to win capacity contracts” for new entrants. According to Muireann Lynch, a senior research officer with the institute, a low clearing price is “not necessarily an issue in and of itself” as, in theory, it should provide a “very strong” signal for power providers to retire older plants, while also reducing the cost to the consumer.

The EAI’s concerns were still alive and kicking last December, when it told the Department and the CRU that its members consider the current situation “alarming”, “avoidable” and “a direct result of a regulatory approach that has failed to anticipate the growing signs of system shortage”. Just enough capacity to meet peak demand Another issue playing into investor confidence, according to Lynott, is the under-procurement of capacity. Authorities have “consistently erred” on the side of minimising the cost for the customer by procuring just enough capacity to meet peak demand, he said.

EirGrid has publicly stated that it disagrees with “fundamental aspects of the report”. The State’s electricity operator stressed that the capacity system – designed by the CRU – is “not fit for purpose”, but stood over its own demand projections. This is backed up by a recent ESRI analysis that found peak demand levels since 2017 “have been broadly in line with those projected”.

The lack of such a requirement, Walshe said, worked to the detriment of “shovel ready” new entrants with all consents in place, such as Grange. Much of the shortfall relates to the failure of the ESB to build a number of projects in Dubin – two in North Wall and three in Ringsend, Poolbeg and Corduff. These had secured capacity in a 2019 auction and were supposed to make just over 400MW of power available for this coming winter.

Were we not on restricted move last year?

noteworthy_ie ‘Heads must roll’ - now EamonRyan we both know this is Ireland… probably get a promotion!

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