UNIVERSITY OF ULSTER

John Lynch

Adequacy of the onshore wind energy measures in place in support of Irelands target of 40% of electricity consumption to be sourced from renewables by 2020

SCHOOL OF THE BUILT ENVIRONMENT

Submitted: July 2010

ENE 802J MSc Thesis

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UNIVERSITY OF ULSTER SCHOOL OF THE BUILT ENVIRONMENT Academic Year 2009-2010

John Lynch

Adequacy of the onshore wind energy measures in place in support of Irelands target of 40% of electricity consumption to be sourced from renewables by 2020

Supervisor: Dr Philip Griffiths

Submitted: July 2010 This thesis is submitted for consideration for the degree of Master of Science (MSc)

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The views expressed in this dissertation are solely the views of the author and may not reflect the views or policy of any particular entity unless explicitly stated or referenced.

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I.

ABSTRACTIreland has set itself a very ambitious target for the generation of electricity from renewable energy sources. The target is for 40% of total electricity consumption to be generated from renewable sources by the year 2020. The attainment of this target is of national importance as it is key to reaching the countrys binding RES target of 16% set by the EU. A very large share of the 40% target will be generated from wind energy. As Ireland moves towards achieving the 40% target by 2020, the Irish electricity power system will increasingly have to cope with significant challenges in accommodating very large amounts of intermittent and variable power generated primarily from wind energy. One of the direct key challenges posed is the delivery of the required network infrastructure. Another is to facilitate renewable generation and to make it sufficiently attractive so as to entice wind powered generation into the electricity market. Another key challenge is to provide sufficient reward to retain other types of generation technology which complement wind energy. This includes conventional generation which can quickly and flexibly vary its output on request from the system operator. Additional generation will be needed to ensure that the electricity system remains stable during and at the end of this transition to greater wind energy penetration. Substantive measures are already in place to address some of the known challenges and obstacles to achieving the target. At the time of undertaking this project less than one year ago there was no single report publicly available which assesses the broad spectrum of factors or measures which together contribute to the attainment of the 40% target. There are many Irish and international publications which address a single particular challenge. An example of this is the recent Facilitation of Renewables Study [Ecofys 2010] which examines the impact on the stability of the electricity power system of high penetration of renewables. However, there is a deficit of publications which identify all the particular challenges which apply to Ireland and evaluate the adequacy of the measures in place, or planned, to address the challenges. This study aims to identify and assess the adequacy of the measures and actions to be taken which have been recommended by Irish and international industry stakeholders, expert consultants, energy regulators, system operators, academics and policy makers. The combination of installed wind power and consented wind power provides for connection of about 6,500 MW of wind power by 2020. This study finds that this is more than adequate to meet the 40% RES-E target. In fact, this may be sub-optimal as excess wind power makes conventional plant uneconomical, increases curtailment and potentially destabilises the power system. The future is less certain as the penetration of wind powered generation increases. The greatest uncertainties and challenges include the stability of the power system, the financial viability of conventional generators, the level of curtailment, the adequacy of interconnection and the level of public acceptance. Coincidentally, many of the findings of this study mirror the issues and actions identified and detailed in the recently drafted National Renewable Energy Action Plan [NREAP 2010] which is currently in preparation by the Department of Communications, Energy and Natural Resources. . 4

II.

ACKNOWLEDGEMENTSThanks to Professor Neil Hewitt and the University of Ulster for accepting me on the MSc in Renewable Energy course. Thanks to my supervisor for this project, Dr Phil Griffiths, for his direction during this work. Thanks to Caitriona Diviney of IWEA who initially suggested the general topic for this dissertation and willingly shared her views. Many thanks to work colleagues many of whom have unwittingly been subjected to my questions, probed for information and have tested my comprehension. Thanks to my three children, Aoife, Laoise and Barry, who have foregone many hours of computer games on the PC and have nevertheless humoured me and patiently allowed me the time and space to complete this study. Finally, thank you to my wife Mary for the moral support and encouragement in helping me to complete this project.

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III.

TABLE OF CONTENTSi. Abstract .................................................................................................4 ii. Acknowledgements ................................................................................. 5 iii. Table of Contents ................................................................................... 6 iv. List of figures ......................................................................................... 9 v. Abbreviations ....................................................................................... 10 1. INTRODUCTION ................................................................................... 13 1.1 Background ................................................................................... 13 1.2 Published Work in this Area........................................................... 13 1.3 Relevance and importance ............................................................. 15 1.4 Contribution .................................................................................. 15 1.5 Objectives ...................................................................................... 15 1.6 Adequacy ....................................................................................... 17 2. LITERATURE REVIEW.......................................................................... 17 2.1 Background - Wind Potential in Ireland ......................................... 18 2.2 Target increased from 33% to 40% ................................................. 18 2.3 Electricity demand ......................................................................... 20 2.4 Conclusion of Literature Review ..................................................... 20 3. RESEARCH METHODOLOGY ............................................................... 21 3.1 Scope ............................................................................................. 21 4. BACKGROUND AND STATEMENT OF PROBLEM ................................. 21 4.1 Background and context ................................................................ 21 4.2 Energy Flow in Ireland ................................................................... 21 4.3 Challenges universal ................................................................... 22 4.4 Challenges Variability and Availability ......................................... 23 4.5 High and Low Winds - Availability .................................................. 23 4.6 Intermittent and Variable ............................................................... 24 4.7 Capacity Credit of Wind Powered Generation ................................. 25 4.8 Outlook for Generation Adequacy .................................................. 26 4.9 Irelands Particular Energy Characteristics .................................... 27 5. POLICY, TARGETS & LEGISLATION ..................................................... 28 5.1 Irish Government policy and targets .............................................. 28 5.2 40 % RES-E Target ........................................................................ 29 5.2.1 Current level of wind energy penetration in Ireland ................. 29 5.2.2 Potential for wind energy in Ireland ......................................... 30 5.2.3 EU binding target .................................................................... 31 5.2.4 Target based on energy produced ............................................ 32 5.3 A projection to 2020 of the energy generated from wind ................. 33 5.3.1 Energy Requirement Forecast .................................................. 35 5.3.2 Benchmarking how Irelands traget compares ....................... 37 5.3.3 Optimal Penetration Level of Wind ........................................... 39 5.3.4 Conclusion on RES-E target .................................................... 41 5.4 Institutional arrangements and market structure .......................... 42 5.5 Market Share ................................................................................. 43 5.6 Applications for connection to the network .................................... 45 5.7 The legislative context .................................................................... 45 5.8 Existing Support Schemes ............................................................. 46 5.8.1 Feed-in tariffs .......................................................................... 46 5.8.2 Green Certificate System ......................................................... 46 5.8.3 Tendering Systems .................................................................. 47

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5.8.4 Effectiveness of Support Schemes ............................................ 47 5.8.5 AER Scheme ............................................................................ 47 5.8.6 REFIT in Ireland ...................................................................... 48 5.9 The Role of the Energy Regulator ................................................... 49 5.10 Regulation 28: Security of Supply ............................................... 49 5.11 EU 3rd Legislative Package .......................................................... 50 5.12 Steer from EU on support schemes for wind ............................... 51 5.13 Regulatory uncertainty impact on costs ...................................... 51 6. COSTS AND RETURN ON INVESTMENT .............................................. 53 6.1 Installed Costs of Wind Farms ....................................................... 53 6.1.1 Wind power costs..................................................................... 53 6.1.2 Financing wind energy ............................................................. 54 6.1.3 Trends in wind farm costs ....................................................... 55 6.1.4 Experience factors and learning curves ................................... 55 6.1.5 The Installed Cost of Wind Energy ........................................... 56 6.1.6 Production Costs of Electricity ................................................. 59 6.2 The price of wind energy ................................................................ 62 6.3 The current economic environment; contraction in energy demand 62 6.4 Production Cost Trends ................................................................. 62 6.5 Discussion and Conclusions .......................................................... 64 7. THE ELECTRICITY NETWORK AND INTERCONNECTION .................... 66 7.1 Scope ............................................................................................. 66 7.2 Actions from the All-Island Grid Study ........................................... 66 7.3 From sequential to group processing ............................................. 67 7.4 The group processing approach (Gates) ....................................... 68 7.5 Gate Process .................................................................................. 69 7.6 Gates 1 , 2 and 3 - Wind Generation Expansion ......................... 69 7.7 Gate 3 & Conventional Plants ........................................................ 72 7.8 Acceptance of Connection Offers .................................................... 72 7.9 Permits and Licences for Generation .............................................. 74 7.10 Plans to develop the network ...................................................... 74 7.11 Dynamic ratings of transmission lines ........................................ 74 7.12 Interconnection benefits, policy and outlook ............................ 76 7.12.1 Current interconnection ....................................................... 76 7.12.2 Interconnection under Development ..................................... 76 7.12.3 Benefits of Interconnection ................................................... 77 8. STABILITY AND FLEXIBILITY OF THE POWER SYSTEM ...................... 79 8.1 Operating Reserve and System Flexibility Options for Increasing Wind Power ............................................................................................. 79 8.2 The need for flexibility .................................................................... 81 8.3 Storage Options for System Flexibility ............................................ 84 8.4 DSM as source of flexibility ............................................................ 85 8.5 Hydropower ................................................................................... 85 8.6 Conventional Thermal Flexible Plants ............................................ 86 8.7 System Flexibility in Ireland - Discussion ...................................... 87 8.8 Operational Constraint for Stability Reasons ................................. 88 8.9 Conclusions re Flexibility and Stability .......................................... 89 9. DESIGN OF THE WHOLESALE MARKET FOR ELECTRICITY ............... 90 9.1 Electricity Market Arrangements .................................................... 90 9.2 Market Payments and Price............................................................ 91 9.3 Constraint Payments ..................................................................... 92 9.4 Existing efforts to achieve high wind penetration ........................... 92 9.5 Wind Forecasting ........................................................................... 95 9.5.1 Variability Versus Predictability of Wind Power Production ...... 95 7

9.5.2 Output forecast error due to weather patterns ......................... 95 9.5.3 Variations within the Hour ...................................................... 97 9.5.4 Prediction and Scheduling ....................................................... 97 9.5.5 Conclusion ............................................................................ 100 9.6 Gate Closure Times ...................................................................... 100 9.7 Curtailment ................................................................................. 102 9.7.1 Constraints............................................................................ 102 9.7.2 Curtailment : ......................................................................... 103 9.7.3 High curtailment scenario ..................................................... 104 9.7.4 Conclusions: .......................................................................... 106 9.8 Investment in the grid .................................................................. 107 9.9 Firm access to the network .......................................................... 107 10. SOCIAL ACCEPTANCE AND ENVIRONMENTAL CONSIDERATIONS ... 109 10.1 Noise & Sound .......................................................................... 109 10.2 Conservation of Birds and Habitats .......................................... 110 10.3 Planning Considerations ........................................................... 111 10.3.1 National planning policy and implementation ..................... 112 10.3.2 Expiration and Extension of Planning Permissions ............. 113 10.3.3 Alignment of Planning and Grid Access .............................. 113 10.3.4 Strategic Infrastructure Process ......................................... 114 10.3.5 Discussion and Conclusions............................................... 115 10.4 Social awareness and acceptance ............................................. 115 11. BRIEF OVERVIEW OF OFFSHORE CHALLENGES ............................. 117 11.1 Offshore Wind Farm Characteristics ......................................... 118 11.2 Availability of Wind Farms ........................................................ 118 11.3 Offshore Wind in Ireland ........................................................... 118 12. STORAGE........................................................................................... 120 13. IMPACT OF HIGH WIND PENETRATION ON CONVENTIONAL PLANTS 122 13.1 Societal Costs of High Levels of Renewables .............................. 122 13.2 Discussion regarding the future viability of conventional plants 124 14. DISCUSSION OF ADEQUACY of EXISTING MEASURES ..................... 125 14.1 General challenges.................................................................... 125 14.2 Challenges identified by CEER .................................................. 126 14.3 Challenges and actions identified by IEA .................................. 127 15. CONCLUSIONS AND SUGGESTIONS FOR FURTHER RESEARCH ..... 132 15.1 Further Studies ........................................................................ 134 16. REFERENCES .................................................................................... 136 APPENDIX Power of the Wind ................................................................ 140 Power of the Wind Formula ................................................................... 140 16.1 Wind properties Height, Turbulence and Roughness .............. 141 16.2 Relationship of Wind Speed with Turbine Height ...................... 142 17. GLOSSARY ......................................................................................... 144

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IV.

LIST OF FIGURESFigure 1.1: Electricity Domain: Key Contributors to high RES-E................. 14 Figure 4.1: Flow of Energy in Electricity Generation, 2008 ......................... 22 Figure 4.2: Percentage frequency of Wind Direction in Ireland ................... 26 Figure 4.3 : Capacity credit of wind powered generation. ............................ 27 Figure 5.1: Installed Renewable Capacity in Ireland up to March 2010 ...... 29 Figure 5.2: Europe wind map at 80m ........................................................ 31 Figure 5.3: National overall targets for the share of energy from RES in final consumption of energy 2020....................................................................... 32 Figure 5.4: Total Energy Requirement (TER) to 2020 ................................. 35 Figure 5.5: Denmark - Interconnection to neighbouring countries ............. 38 Figure 5.6: Current Wind installation density MW/1,000 km2 in Europe 39 Figure 5.7: Integration of main energy players in Ireland ........................... 44 Figure 6.1: Cost structure of a typical 2 MW onshore wind turbine installed in Europe ................................................................................................... 54 Figure 6.2: Using experience curves to illustrate the future development of wind turbine economics until 2015. ........................................................... 56 Figure 6.3:: Total investment cost by country, ............................................ 58 Figure 6.4 Wind energy costs, discount rate and capacity factor ................ 59 Figure 6.5: Lifetime generation costs by technology (/MWh) .................... 61 Figure 6.6 Projected 2020 generating costs (/MWh) for various technologies. ... 61 Figure 6.7: Trend in turbine production cost. ............................................. 63 Figure 6.8: Expected annual wind power investments from 2000 to 2030 . 64 Figure 6.9: CO2 costs and fuel costs avoided by installing wind energy ...... 64 Figure 7.1: Renewable Generator Capacity in Ireland ................................. 70 Figure 7.2: Geographical distribution of Gate 2 and Gate 3 Wind farms ..... 71 Figure 7.3: Wind curtailment with increasing interconnection ................... 79 Figure 8.1: Plant load factors in Ireland reduce as wind penetration increases .................................................................................................... 87 Figure 9.1: Forecast Vs. Actual on Global Wind Day 2010 .......................... 96 Figure 9.2: Wind forecast and Actual on a windy day ............................... 96 Figure 9.3: Decrease of the forecast frror of prediction for aggregated wind power production, due to spatial smoothing effect ...................................... 99 Figure 9.4: Time between closure of forward market and real-time delivery ................................................................................................................. 101 Figure 9.5: 2020 curtailment scenario low summer night valley ............. 105 Figure 10.1: Comparison of the Irish wind atlas with Natura 2000 Candidate Sites ........................................................................................ 111 Figure 10.2: The planning process ........................................................... 113 Figure 12.1: The effect a large amount of storage could have on a typical daily electricity demand profile (source: EirGrid) ....................................... 120 Figure 13.1: Societal cost for different levels of RES-E penetration .......... 122

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V.

ABBREVIATIONSBETTA CAES CCGT CER CER CHP CHP COE DCENR DCMNR DETI ERA EREC ESB ETS EU-ETS EWEA GAR GHG GW GWEC IEA ITC IWEA kW MW NIAUR OCGT PAC PHES PPA REFIT RES British Electricity Trading and Transmission Arrangements Compressed Air Energy Storage Combined Cycle Gas Turbine Commission for Energy Regulation Commission for Energy Regulation Combined Heat and Power Combined Heat and Power Cost of Electricity Department of Communications, Energy and Natural Resources Department of Communications, Marine and Natural Resources Department of Enterprise, Trade and Investment in Northern Ireland Electricity Regulation Act European Renewable Energy Council Electricity Supply Board Emission Trading Scheme EU Emissions Trading Scheme European Wind Energy Association Generation Adequacy Report Greenhouse Gases Gigawatt = 1x109 Watts = 1000 MW Global Wind Energy Council International Energy Agency Incremental Transfer Capability Irish Wind Energy Association Kilowatt = 1x103 Watts = 1000 W Megawatt = 1x106 Watts = 1000 Kw Northern Ireland Authority for Utility Regulation Open Cycle Gas Turbine Pumped Hydro Accumulation Storage Pumped Hydro Energy Storage Power Purchase Agreement Renewable Energy Feed-In Tariff Renewable energy sources

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RES-E RES-H RES-T SEAI SEI SEM SEMO SMP SRMC

Electricity generated from renewable energy sources Heating and cooling from renewable energy sources Transport powered by RES-E or fuel from renewable energy source Sustainable Energy Authority of Ireland Sustainable Energy Ireland (now SEAI) (all-island) Single Electricity Market Single Electricity Market Operator System Marginal Price Short-Run Marginal Cost

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1. INTRODUCTION1.1 Background The binding EU 2020 national RES target for Ireland of 16% requires that 16% (or more) of the final national energy used will be derived from renewable energy sources. In order to meet this Ireland has set itself a target that by the year 2020, at least 40% of total electricity consumption will be sourced from renewable sources. A very large share of this will be generated from wind energy. 1.2 Published Work in this Area The literature relating to the penetration of wind powered generation reveals the existence of copious studies and publications on technical and economic aspects of wind energy and various findings on the potential problems, the challenges and the actions needed to achieve high levels of wind energy penetration. Some of these are generic publications by international organisations such as the European Wind Energy Association or the International Energy Agency. It is clear from the literature that the challenges and solutions to high wind energy penetration are specific to each country or control area which is being studied. This is because of the particular geographical, meteorological, electrical, infrastructural, regulatory, fossil fuel dependency and market characteristics of each country and in particular for Ireland. Whilst the international literature does not generally address Irelands specific needs, some of the information or analysis can be informative and applied to Ireland. There has also been a plethora of studies and reports on (or closely related to) Irelands migration from 95% fossil fuel energy dependency towards a more sustainable climate friendly, low carbon scenario. However, these existing reports almost exclusively present one particular compartmentalised aspect of the full picture and do not tell the full story. It may also be the case that some reports have a bias towards a particular conclusion. A lot of studies are focusing on the economics of high wind energy penetration and the adequacy of existing (or planned) market design. The studies and modelling of the power system is revealing potential power system stability issues which will require different performance and services from conventional plants and the modification of system operation and planning standards. The review of the literature published to date, as summarised in Chapter 2, has revealed many challenges to wind energy penetration in general and to 40% RES-E penetration in Ireland in particular. In this context, Figure 1.1 below illustrates the many factors identified in this study which contribute directly or indirectly to the security of supply, sustainability and competitiveness of the electricity domain in Ireland. These three key considerations and all of the factors identified are not isolated but are interrelated.

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Figure 1.1: Electricity Domain: Key Contributors to high RES-E Most of these factors are indentified in Figure 1.1, all of which impact on the achievability of high levels of wind energy penetration and are discussed in this paper. Some are identified as being of more critical importance than others. These key elements are given greater consideration and have, for the purpose of this study, been categorised as follows:

Policy, targets and legislation; Costs and return on investment; The electricity network and interconnection; Stability and flexibility of the power system; Design of the wholesale market for electricity; and, Social acceptance and environmental challenges.

This study collates fragmented information on: a) the current status of installed wind farm capacity; b) the international and domestic challenges which have been identified by energy experts and key stakeholders; c) the measures and actions which are already in place or planned in Ireland to meet the challenges, and, d) the adequacy of the identified measures and actions to achieve the stated target.

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1.3 Relevance and importance In order to meet the EUs binding 16% RES target by 2020 Ireland has opted for a mix of measures which includes a RES-E target of 40%. The scope for significant contributions from the transport (RES-T) or heat sectors (RES-H) over-and-above their existing contribution is very limited. Therefore there is a strong imperative to reach the 40% target and to identify and address all challenges which are presented. 1.4 Contribution The study outlines some of the specific issues and challenges that relate to grid-development and grid-access as a consequence of the transition from a traditional, stable, tried-and-tested generation portfolio dominated by fossilfuelled conventional generators to a new power system dynamic featuring a delicate balance of renewable and conventional generators. 1.5 Objectives The title of this study is:

Adequacy

of the onshore wind energy measures in place in support of Irelands target of 40% of electricity consumption to be sourced from renewables by 2020

This study will be progressed by accomplishing the following objectives: 1. Areas to be studied will include: i. ii. iii. The potential and the expected generation of onshore wind farms in Ireland; A projection to 2020 of national electricity consumption; Adequacy of the Irish grid and power system to absorb the wind power and to export the excess, whilst providing a safe, secure and reliable supply of electricity; Social pressures for and against growth of wind energy or associated infrastructure; Environmental influences which affect penetration of wind energy; The capability of the wholesale electricity market to facilitate and promote wind energy; and, Adequacy of energy policies, regulatory issues, the financial environment and support mechanisms.

iv. v. vi. vii.

Outputs: 2. Compilation of the power system characteristics distinguishes Ireland from other countries. which uniquely

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3. Analysis and comparison of the current penetration and future targets of other countries and the extent to which they share any of the key challenges faced by Ireland 4. Identification of Irelands key challenges by distillation of the existing, published roadmaps, recommended actions, studies and challenges as identified by Irish and international stakeholders including; expert consultants, energy regulators, system operators, academics, policy makers and industry players. 5. Authors assessment and conclusions as regards the adequacy of the measures and actions which have been identified. Suggestions for futher studies are also identified. The measures1: In this study the term measures is used to collectively represent all of the following elements:

With Reference to:

The measures the EU and Irish energy and electricity legislation, policies, targets, support and the policy decisions and directions which shape the electricity domain by a) EU, b) government and c) regulators Support Schemes and market design the (grid) codes and planning and operating standards the rules or code (the design) of the electricity market the plans and strategies the directives, bills, acts, frameworks and instruments which directly impact on the energy and/or electricity sector and indirectly such as planning and environmental the guidelines, strategic bills, policies and EU directives

Policy

Return on Investment Power System Market Network Legislation Planning & Environment

Definition [Collins Dictionary] Measures n. degree or extent; a particular action intended to achieve an effect1

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1.6 Adequac y In assessing the adequacy of the measures and actions to achieve the stated target it is informative to examine the definition in the context of energy: Adequate adj. Just enough in amount or just good enough in quality, such as meets the needs In many instances this study will specifically examine the adequacy rather than the capability of the measures in place or planned. This is because capability is only a measure of whether the action will meet or surpass the target whereas adequacy is a measure of whether the action is sufficient to meet the need without exceeding it. This is important from an economic point of view as one of the three pillars of energy policy is competitiveness. The task of installing the 4,000 (or so) MW of wind generation capacity to achieve 40% RES-E is only half the battle. The other big challenge, and less obvious perhaps, is the knock-on impact on the running regime and viability of other conventional plants and the detrimental impact on the stability of the power system. Security of supply can effectively be bought. The grid can, at a price, be designed, reinforced and operated with lots of headroom and minimal risk. Any excess imposes unnecessary costs onto the electricity domain which in-turn translates into higher tariffs for the end-customer. Likewise the electricity market can reward unnecessary generator characteristics or outputs. The biggest challenge is to find and strike the right balance between security of supply and competitiveness as Ireland moves from 95% fossil fuel dependency2 towards sustainability.

2. LITERATURE REVIEWThe literature reveals the existence of copious studies and publications on technical and economic aspects of wind energy and various soundings on the potential problems, the challenges and the actions needed to achieve high levels of wind energy penetration. A review of the literature shows that there is a wide range of challenges and opportunities facing this sector of a technical, economic, logistical and environmental nature. In particular, it shows that the challenges and solutions to high wind energy penetration must be tailored to the country or control area which is being studied. This is because of the particular geographical, meteorological, electrical, infrastructural, fossil fuel dependency and market characteristics of each country and in particular for Ireland.

SEAIs published energy statistics [SEAI 2010] states (provisional) that the contribution of renewable energy to overall energy demand in 2009 was 4.7%. i.e. 95.3% from fossil fuels.2

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However there are few published studies or reports which take stock of all of the relevant measures which are in place, identify the challenges and major risks and identify the critical actions needed to overcome the challenges to achieving high wind energy penetration. Ireland is entering unchartered water as it will be at the forefront of the move to very high levels of penetration of wind into an small electricity market which is quite isolated electrically. There are many unknowns and every detailed study seems to unearth more question (and potential problems) than answers. The review below illustrates this, firstly by summarising the main focus area of key studies to date, mainly in the economic field, and then examining what measures are in place to achieve 40% RES-E. In this way, it highlights where there appear to be gaps in the actions being taken or a lack of knowledge which is specific to Irelands case. 2.1 Background - Wind Potential in Ireland The worldwide potential for the harvesting of wind energy into electricity has been studied and documented in detail. The worldwide growth in generation capacity from wind energy is staggering. The Global Wind Energy Council predicts [GWEC 2009] that in 2014, four years from now, global wind capacity will stand at 409 GW. Ireland is recognised as having one of the best wind profiles in the world for the generation of electricity. Indeed, in 2004 SEI calculated [SEI 2004] that there was approximately 30 GW of national accessible wind resource in Ireland. This is substantial, considering that less than 1.5 GW of wind generation capacity is currently installed There has been much analysis over recent years of energy policies, of the risks, of the electricity market and of the infrastructure to assess the viability of harvesting this natural resource of free fuel. According to many reputable sources the overwhelming consensus around 2006, including the view of the Global Wind Energy Council [GWEC 2006], was that existing control methods together with back-up capacity could deal with penetration levels up to around 20%. 2.2 Target increased from 33% to 40% The Irish governments White Paper on Energy [DCENR 2007] set out the government policy for the share of national consumed electricity to be sourced from renewable generation. The RES-E target was set at 33% by 2020. Subsequently, in 2008 this target was revised to 40%. This new target was set as a result of the outcomes of various studies, one of the most significant being the All Island Grid Study [AIGS 2008]. The study assessed the technical feasibility and relative costs and benefits associated with various scenarios for increased shares of electricity sourced from renewable energy in the all island power system. This indicated that wind penetration of 42% is possible in Ireland without imposing additional costs on the end customer.

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A subsequent modelling study conducted in 2008 and published in January 2009 by the regulators [SEM-09-002] suggested that increased wind penetration in 2020 would broadly be beneficial from an economic point of view and increasingly so the more wind there is on the system. In parallel with the aforementioned studies the government was analysing and apportioning the EUs binding 2020 overall RES target of 16%. On foot of this national targets were set for the growth in the share of energy sourced from renewables in the transport (RES-T), heat (RES-H) and electricity categories (RES-E). Informed by various studies and reports, including the aforementioned, it was decided by Government late in 2008 that the RES-E target of 33% could be extended to 40%. Also in 2008 the CER, published in December its Gate 3 decision paper [CER/08/260] which directed the system operators to issue by mid-2011 connection offers to 3,900 MW of renewable generation in order to meet the revised national target of 40%. In the same context, EirGrid published [Grid25 2009] their long-term development strategy for the grid up to 2025. It is designed to address the challenges posed for the transmission of electricity in Ireland in order to meet such challenging renewables targets. Many studies and reports, such as EirGrids Generation Adequacy Report [GAR 10-16], Transmission Development Plan [TDP 08-12] or Forecast Statement [Forecast 10-16] have traditionally assessed the near-term adequacy of the network or the generation portfolio to meet the needs of the system in order to provide a safe, secure and reliable system. These assess adequacy for the forthcoming five to seven year period. However, there is no report which systematically and periodically (perhaps updated every few years) assesses the longer term needs of the system or of the adequacy of the market design, the system stability or energy policies. In addition, the adequacy of the generation portfolio could be assessed with regard to not only the generation of energy but to also the maintenance of the stability of the system. In 2009 EirGrids GRID25 strategy document [Grid25 2009] for the development of the grid infrastructure up to 2025 is a step in the right direction. Subsequent studies are unearthing potential challenges. One example is the recent Facilitation of Renewables Study [Ecofys 2010]. This study has indicated that there are system stability issues which will need to be addressed in the migration to a high penetration of wind energy. For system stability and operational reasons it is also likely that wind generation will have to be curtailed to an extent which was not previously anticipated. A possible interpretation from the Ecofys study is that the type and mix of the current conventional portfolio is quite inappropriate in a system with very high wind powered generation. Whilst these challenges may have previously been suspected the study goes some way towards identifying the nature of

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potential problems and takes a step forward in broadly quantifying possible maximum capacity limitations of wind energy. Stand-alone studies (some preliminary) have been carried out on the adequacy of: a) the infrastructure; b) the design of the electricity market; c) the planning framework administered by local authorities and An Bord Pleanala; d) the generation portfolio; e) the stability of the power system. There have also been some observations questioning the adequacy of the existing mechanism for balancing supply with demand in an environment with significant share of variable and somewhat unpredictable generation such as wind power. A concept of power system flexibility is emerging which needs to be developed and defined. The requirements for system flexibility need to be quantified and mechanism for the most economic and effective procurement of flexibility needs to be identified. However, the dynamics of wind energy penetration, system stability, system supports needed, market design and the arrangements for the remuneration of conventional or supporting technologies all need further extensive and intensive work. 2.3 Electricity demand The decision [CER/08/260] to issue nearly 4,000 MW of grid connection offers to wind powered generators and the associated plans to reinforce the grid to accommodate these wind farms was made in 2008 prior to the economic downturn. The economic downturn has put a dampener on the projected increase in electricity consumption to 2020. Accordingly, the wind powered generation capacity on the system in 2020 may far exceed the 40% target. This could have a detrimental effect as: a) the profitability of all wind farms on the system is reduced as excess wind increases the level of curtailment b) the capacity payments to all generators is diluted c) conventional plants have even less runtime; and, d) the grid reinforcements as currently envisaged may be excessive 2.4 Conclusion of Literature Review There are many challenges to be overcome as Ireland migrates from 95% fossil fuel dependency to a more sustainable and climate friendly space. Some of the problems and issues are emerging as a result of various separate and fragmented incremental studies on different aspects of the new wind rich electricity environment. Many actions have already been identified. There is a need to take stock of: the current status; of Irelands particular energy characteristics and needs; of the changing pattern in electricity demand; of the emerging challenges and issues; of the actions and plans and decisions in place or being developed. The aim of this study is to collate this information into a single report so as to better understand the adequacy of the measures which exist to meet the known challenges at this time.

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3. RESEARCH METHODOLOGY3.1 Scope This study focuses on the penetration of wind energy in Ireland. A similar study on an all-island basis would be difficult and possibly quite meaningless. There are some common structures in place in Northern Ireland, such as the all-island market for the wholesale trading of electricity. However, there are many more areas which are distinct and different, such as governance, legislation, targets, regulation, system operation, system ownership, energy policies, targets, planning authorities, etc. Therefore, a completely separate study on Northern Ireland would be more appropriate. This study focuses on wind power only as wind powered generation will constitute the vast share of the RES-E target of 40%. The study is restricted to the contribution of large wind farms as it is these which dominate the impacts on the electricity market, the power system stability, the planning challenges and the attainment of the 40% RES-E target. The study does not include a review of the performance of wind turbine technology or wind farm design as it is a proven, mature technology and these issues are already covered extensively in various studies, text books and publications. This study concentrates on onshore wind energy because offshore wind energy has different characteristics to onshore. Offshore is technologically less mature than onshore wind. The planning regime, support schemes, grid integration, availability and most particularly the levelised cost are different to onshore.

4. BACKGROUND AND STATEMENT OF PROBLEM4.1 Background and context In order to understand the challenge of the 40% RES-E target it is necessary to understand the context, such as the current energy flows in Ireland, the challenges posed by the intermittent and variable nature of wind and the energy related characteristics which are specific to Ireland. These issues are outlined in the chapter. 4.2 Energy Flow in Ireland Figure 4.1 below shows the flow of energy in electricity generation in Ireland for 2008. Of the total primary energy inputs into electricity generation in Ireland only 45% are converted into consumed electricity at users premises. The remaining 55% corresponds to energy lost in transformation and transmission.

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Figure 4.1: Flow of Energy in Electricity Generation, 2008Source: SEAI [SEAI 2009a]

Some of the key observations are: in 2008, renewables accounted for 6.4% of the energy inputs to generate electricity (up from 5.1% in 2007) with wind contributing 4% of total inputs. Wind generation increased by 23% in 2008. energy inputs to electricity generation increased by 1.3% in 2008 while at the same time final consumption3 of electricity increased by 3.1%. electricity generated from renewable energy accounted for 11.9% of gross electricity consumption in 2008, up from 9.4% in 2007. Ireland is on target to exceed 15% RES-E in 2010.

4.3 Challenges universal The delicate and precise balance between the electricity generated and the electricity consumed must be maintained at all times; total electricity generation across the network must, at every instant match the sum of: the sum of the loads/consumption at every point; plus electricity exported over the interconnectors; plus electricity stored (e.g. pumped hydro storage or compressed air, etc.); plus losses on the system.

The discrepancy between significantly higher increase in the electricity consumption despite a much smaller increase in the fuel input could be on account of a) higher usage (dispatch) of more efficient OCGT conventional plant and b) higher penetration in wind. Indeed, it is likely that in coming years we will see decreases in energy inputs despite substantial increases in electricity consumption.3

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In addition: a) the electricity must be supplied to meet all points of consumption, where the demand may change suddenly and in large amounts without notice; b) the electricity must be transported within the safe carrying capacity of the wires, transformers and protection equipment; c) the reliability of supply must be kept at very high levels. Reliability of 99.975% is typically required in most systems, i.e. approximately 2 hours of service interruption is acceptable4 each year. To achieve this level of reliability requires protection, control equipment and a level of redundancy. All of this leads to reliability accounting for 50% of the cost of most Transmission and Distribution systems [Willis, 2004]. The above challenge is common to every power system and system operator of electricity throughout the world and systems and operating policies procedures and systems have been developed and refined to cope with it. In addition to the above, new challenges are posed by increasing levels of wind penetration. These challenges are widely acknowledged and documented by energy experts, academics, system operators, regulatory authorities, international energy agencies, wind energy associations and state enterprises. The ambitious RES-E targets for Ireland are pushing beyond the current safe frontier of knowledge and experience. 4.4 Challenges Variability and Availability Ireland is at the frontier in terms of seeking to explore the limit to which wind energy can be economically, technically and safely extended without sacrificing system security or the quality of supply. The ambitious limits are more difficult for Ireland because of the unique combination of characteristics5 which compound the difficulty. Ireland is leading the way in relation to exploring and experiencing some of the challenges in extremis which will be experienced to a lesser extent by other power systems. 4.5 High and Low Winds - Availability The wind speeds at which wind turbines commonly operate are between 2.5 to 25 m/s. Thus, wind power can become unavailable at times of low wind speeds, but also at times of very high wind speeds when wind turbines need to be shut down in order to avoid damage to equipment. Thus, for entire grid system control areas, power generation will gradually decrease at mean wind speeds higher than 25 m/s. The annual power output of a given turbine varies greatly with location. Capacity factors of up to about 45% can be achieved for individual wind farms and for many offshore wind farms. The capacity factorGeneration adequacy is essentially determined by comparing electricity supply with demand. To measure the imbalance between them, a statistical indicator called the Loss of Load Expectation (LOLE) is used. When this indicator is at an appropriate level, called the generation adequacy standard, the supply/demand balance is judged to be satisfactory. The accepted generation adequacy standard for Ireland is 8 hours LOLE per year. 5Refer to section 4.9.4

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for wind powed generation in Ireland, in aggregate, averaged over the year, currently6 works out at 31%. Wind energy is typically variable on time-scales from minutes to hours but can also be seasonal. Geographical distribution across the grid control area partly compensates for short term fluctuations. 4.6 Intermittent and Variable Wind is an intermittent7 and variable resource and unfortunately the electricity generated from wind powered generators cannot be adjusted to match demand like a conventional power station. During winter anti-cyclones, characterised by periods of cold settled weather when wind speeds are typically very low, electricity demand is often highest. This is one example of an extreme situation, during which the wind power generated irrespective of the installed wind power capacity will make a very small contribution to the nations electricity demand. In this situation the country still needs a full conventional portfolio of generating plants to meet electricity demand 8. During the milder conditions associated with cyclonic Atlantic weather systems wind output is often highest. Also, during any given day, electricity demand9 varies enormously. It is lowest during the middle of the night when most people are in bed, work-places empty, and industrial output is at its minimum. This winter, output from Ireland's wind farms was particularly low, and often failed to reach 5% of total system demand. On occasion, output from wind powered generation was below 1% of total demand. The average for the period from the start of December to the end of February was about 9%. This should not be taken to imply that 11 times the current installed capacity of 1,100 MW would have met Ireland's electricity requirements during this period, as an installed capacity of 1,2000 MW would have led to massive oversupply on occasion, whilst still only contributing a small fraction of electricity requirements during periods of settled weather. Despite the intermittent nature of wind powered generation it is a valuable source of zero-cost, carbon-freefuel. The variable output from wind energy poses new but not insurmountable difficulties for power system operation at moderate to high levels of wind penetration (e.g. circa 20%). However, the challenges posed by increasing wind powered generation increases disproportionately with the level of penetration. Some of the challenges are universal whereas others apply more to some power systems depending on their particular circumstances. The particular characteristics of the electricity sector in Ireland are described in Section 4.9.

The capacity factor for wind, in aggregate, varies from year to year and is particular to each transmission system control area. Refer to section The Cost of Wind Energy 7 Some proponents of wind powered generation argue that wind power is not intermittent in nature but rather that it is variable in output. This paper suggests that it is both intermittent and variable and has poor unit-commitment. 8 Net demand may be somewhat reduced by interconnector imports and demand side reduction. 9 Refer to intra-day demand profile Figure 12.16

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4.7 Capacity Credit of Wind Pow ered Generation Generation adequacy is a measure of the capability of electricity supply to meet the electricity demand on the system. The capacity credit of a generation unit is a measure of its contribution towards generation adequacy (i.e. maintaining the demand-supply balance). The amount of conventional plant which can be removed from the system whilst maintaining the generation adequacy is taken to be the capacity credit of wind. This capacity credit has been determined by subtracting a forecast of winds half hourly generated output from the customer electricity demand curve. The use of this lower demand curve results in an improved adequacy position. Analysis of wind data has established that this capacity credit is roughly equivalent to its capacity factor at low levels of wind penetration. However, the benefit tends towards saturation as wind penetration levels increase. This capacity credit is determined by considering to what extent a half-hourly forecast of wind-generated electricity, in aggregate, subtracts from the national electricity demand curve. The use of this lower demand curve results in an improved generation adequacy position. In contrast, as stated in EirGrids Generation Adequacy Report [GAR 10-16] the forced outage probabilities for all thermal and hydro units are assumed to be independent of each other. Therefore, the probability of these units failing simultaneously is negligible. For example, a wind powered generator which has a name plate rating (full output capability) of 1 MW may provide a capacity credit of only 0.2 MW or even lower with high wind penetration. As illustrated in Figure 4.3 below. The perfect generation unit, from a generation adequacy perspective, is one which is always available and capable of being dispatched by the Transmission System Operator to contribute towards meeting the totality of instantaneous electricity consumption at all times. In practice, all generators of every type (renewable and conventional) are imperfect and provide less than the capacity credit provided by a perfect plant. There are a number of possible reasons for this: 1. The generation unit is unavailable for a number of hours due to planned maintenance or mechanical failure; 2. The primary energy source (e.g. fossil fuel for conventional or thermal plant - wind for wind powered generators - water for hydro, etc) is not available; 3. The generator cannot run at full output due to energy storage limits (e.g. pumped storage, hydro); 4. The output from the generation unit cannot be delivered to the customer at certain times due to the physical inability of parts of the network to transport the electricity (i.e. constraints) due to limitations such as exceeding the capacity of transformers or protection devices or the ratings of the wires.

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In Ireland the prevailing wind direction is between south and west as illustrated in Figure 4.2 below.

Figure 4.2: Percentage frequency of Wind Direction in Ireland(Circled number = % calm) Source: Met Eireann

There are periods when the outputs from almost all wind-powered generators are low (or conversely, high) at the same time. This characteristic of simultaneously low output causes the capacity credit to saturate with increasing penetration of wind. Therefore at high levels of penetration of wind powered generation the incremental generation adequacy benefit of additional wind powered generation capacity on the system approaches zero. This is illustrated in Figure 4.3 below; with 5,000 MW of wind capacity on the system the capacity credit reduces to 500 MW. Hence, the capacity credit provided by wind powered generation in Ireland may be less than other countries against which it is often benchmarked. 4.8 Outlook for Generation Adequac y According to EirGrid [GAR 10-16] the generation adequacy situation is strongly positive for the next seven years. A surplus of at least 700 MW is observed for all scenarios studied for each of the seven years. This is due to the commissioning of new generation, increased interconnection, improved generator availability and a reduction in the annual growth in electricity demand.

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Source: EirGrid

Figure 4.3 : Capacity credit of wind powered generation. Nevertheless, the unprecedented growth in wind energy over the coming decade in Ireland will change the entire context for the assessment of generation adequacy. Whilst generation adequacy is not a problem in the short or mid-term it may become an issue as it becomes necessary to maintain and financially support a large capacity of conventional generators in tandem with possibly 6,800 MW or more of wind powered generation capacity. 4.9 Irelands Particular Energy Characteristics Ireland has specific energy and electricity characteristics which differentiate it from other countries: The fact that there is a single Transmission System Operator and single Distribution System Operator differentiates Ireland from many other countries who have to deal with the additional interactions, alignment and co-operation of several organisations. With regard to energy, Ireland has very little indigenous active fossil fuel reserves; extremely high reliance on imported fuels. In 2009 Ireland imported 95% of its energy; Irelands only significant indigenous source of energy from fossil fuel is peat which is being run down. Currently, peat fired power stations have a legacy priority dispatch in the historical interests of security of supply. Peat is on par with coal in terms of its CO2 emissions and is likely to play a diminishing role in meeting Irelands electricity needs; With regard to electricity generation Ireland has no nuclear power and minimal potential for further development of hydroelectric power;

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Ireland is poorly interconnected with other electricity or gas regions or jurisdictions. Currently, the single electricity interconnector serving the island of Ireland is the Moyle Interconnector. This is a 500 MW interconnector but has limited available capacity (also refer to Section 7.12). The best wind power generation sites are located along the western coastal region which are distant from the main centre of demand (greater Dublin area). Compared with 39% 48% 61% 49% in Member State France Sweden Poland Sweden Denmark

Technology or Source Nuclear Hydro Coal + Lignite Renewable

Factor % of primary energy consumption As % of gross electricity consumption % of primary energy consumption RES 2020 target

Ireland 010 2.3% 9% 16%

Interconnection 0 MW >4000 MW Table 4.1: Sources of Energy: How Ireland is different(Source [RES2020])

Table 4.1 above further demonstrates some of the individual characteristics which differentiates Irelands energy and electricity environment from other countries. Clearly, each country has individual energy characteristics which necessitates bespoke solutions to address energy related challenges..

5. POLICY, TARGETS & LEGISLATION5.1 Irish Government polic y and targets The achievement of renewable targets and the associated support for renewables are a matter for the Irish government. In 2007 the Irish governments White Paper on Energy [DCENR 2007] established government policy for the share of electricity (measured by output) to come from renewable sources of generation, The RES-E target for the year 2020 was set at 33%. In 2008 this target was subsequently revised to 40%. In December 2008 the CER, published [CER/08/260] its Gate 3 decision paper, which dictated the issuance of connection offers to 3,900 MW of renewable generation on the basis of meeting the revised national target of 40%. In the same context, EirGrid published [Grid25 2009] their long-term development10

Not including the contribution from imported electricity via Moyle interconnector

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strategy for the grid up to 2025. It is designed to address the challenges posed for the transmission of electricity in Ireland in order to meet such challenging renewables targets. More recently, the Department of Enterprise Trade & Industry in Northern Ireland consulted [DETI 2009] on a similarly challenging target. The renewables agenda is firmly established at both a national and an all-island level consistent with the obligations under the EUs climate change package and the significant role for renewables in this context. 5.2 40 % RES-E Target This section examines the current level of penetration of wind energy in Ireland, the future potential for wind energy penetration and the binding target imposed by the EU and how it translates into a government policy target for renewable energy (including wind). It also discusses the notion of an optimal penetration level of wind followed by some conclusions. In considering the 40% target this paper presents - based on readily available data - firstly a projection of the possible energy generated from wind by 2020 and secondly a projection of the expected consumption of electricity by 2020. The resultant projections are then discussed in the context of the 40% target. 5.2.1 Current level of wind energy penetration in Ireland According to recent statistics from SEAI [SEAI 2010] the share of electricity generated from renewable energy sources (RES-E) in 2009 was 14.4% (provisional) which means that Ireland has already surpassed the EU interim target of 13.2% RES-E by 2010. There has been a steady increase in the capacity of wind powered generation in Ireland in recent times. As illustrated in Figure 5.1 below the capacity has increased from about 200 MW in 2004 to almost 1400 MW at the end of 2009.

Source: EirGrid March 2010

Figure 5.1: Installed Renewable Capacity in Ireland up to March 2010

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Table 5.1 shows recent statistics for the capacity of wind powered generation (both onshore and offshore) connected to the electricity network in Ireland. The installed wind powered generation capacity (onshore and offshore) of 1379 MW is almost equally divided between the capacity connected to the electricity distribution system (694 MW) and the electricity transmission system (685 MW). Monthly electricity demand Maximum (Winter evening peak) load all time 2010 Maximum load 2010 Minimum load Installed Dispatchable Capacity11 Installed wind capacity Connected Renewable Capacity12 2,320 GWhr February 2010 4,950 MW 4,950 MW 1,804 MW 6,209 MW 1379 MW 1,687 MW on Thursday 07 January 2010 on Thursday 07 January 2010 on 03 May 2010 As at 31 May 2010 May 2010 As at 31 May 2010

5 April 2010 Maximum Wind Output 1,120 MW Table 5.1: System Statistics and Records for IrelandSource: [EirGrid Stats]

5.2.2 Potential for wind energy in Ireland As can be seen from the wind map of Europe, illustrated in Figure 5.2 below, Ireland has excellent potential for the onshore and offshore generation of electricity from wind. The areas with the best wind profiles are predominantly close to the west coast of the country. The transfer of the electricity generated from wind farms, which are predominantly located in areas where the grid is weak and distant from the main large urban load centres, presents a challenge. The strength and availability of the wind means that a typical wind turbine located in Ireland should have a high energy yield with the result that wind farms located in the optimal regions in Ireland should have relatively low energy production costs which is likely to enhance their financial viability and bankability. The costs of wind energy are discussed in greater detail in Chapter 6.

Includes conventional thermal, large hydro and pumped storage; commissioning units (e.g., new Aghada CCGT) not included 12 Includes wind, large & small scale hydro and other (e.g. biomass and landfill gas) - based on installed distribution & transmission capacity.11

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Figure 5.2: Europe wind map at 80mSource: 3TIER, Inc

5.2.3 EU binding target In December 2008, EU leaders reached agreement over an energy and climate change 'package' to deliver the EUs ambitious objectives of slashing greenhouse-gas emissions and boosting renewable energies by 20% by 2020. The package is designed to reduce the Union's dependency on imported fuels and set the pace of "a new global industrial revolution". The EUs Climate and Energy Package, adopted in April 2009 provides a framework to promote increased sustainability in energy and transport markets in the EU. The new Renewables Directive 13 sets an overall EU binding target of 20% of energy consumption from renewable sources in the EU by 2020. The binding EU 2020 national RES target for Ireland of 16% (refer to Figure 5.3 below) requires that 16% (or more) of the final national consumption in electricity, heat and transport be derived from renewable energy sources.

[Directive 2009/28/EC] of the European Parliament and of the Council of 23 April 2009 on the promotion of the use of energy from renewable sources13

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.Source [EWEA 2008] Figure 5.3: National overall targets for the share of energy from RES in final consumption of energy 2020 The Renewables Directive 2009/28/EC [2009/28/EC] requires each Member State to produce an action plan showing how they intend meet their renewable obligations. Ireland has recently published a draft of the action plan for consultation. This plan is called the National Renewable Energy Action Plan (NREAP). Ireland has elected to set national targets for RES-E, RES-H and RES-T as shown in Table 5.2 below in order to meet the EUs binding 16% RES target. Category Electricity Heat Transport Overall RES-E RES-H RES-T RES Target for Ireland 40.0% of consumption 12.0% of consumption 10% 16%

Table 5.2: 16% RES Target for Ireland 5.2.4 Target based on energy produced It is important to differentiate between a penetration level based on electricity/energy produced as opposed to (for instance) total registered capacity. To demonstrate the difference it is instructive to study the 2008 figures in EirGrids Generation Adequacy Report [GAR 10-16]. Total aggregated generation portfolio capacity (all types) in 2009 was 8059 MW. Total aggregated wind-only generation portfolio (registered) capacity was 1400MW.

Therefore, as a percentage of generation capacity:

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The total aggregated energy (GWhs) generated by wind in 2008 was approximately 2,450 GWh [GAR 10-16] out of a total electricity requirement of 28,830 GWh for the year. As a percentage of consumed electricity:

This demonstrates that the target based on energy rather than capacity is much more onerous. 5.3 A projection to 2020 of the energy generated from w ind As shown in Table 5.3 below as a result of pre-existing schemes and Gates14 1 and 2, approximately 2,800 MW of renewable generation was either already connected by the end of 2008 or financially committed to connecting over the next few years. Wind Capacity (MW) + Connected at end of 2008 + Contracted at end of 2008 + Other live offers Total pre-Gate 3 + Estimate of additional capacity to achieve 40% target + Plus supplementary 1,007 1,418 123 2,548 3,000 900 Renewable Energy Capacity (MW) 1,273 1,443 123 2,839 3,000 900

Total 6,448 6,739 Table 5.3: Capacity connected or with/due connection-offers to connect CERs 2008 Gate 3 policy document [CER/08/260] reckons that an additional renewable capacity of circa 3,000 MW needs to be connected by 2020 to facilitate achievement of the Governments 40% renewable target. To allow for the possibility of non take-up of offers a supplementary 900 MW of capacity was included, thus proving for a total of 3,900 MW of renewable generation in Gate 3. It assumed that approximately 5,800 MW of renewable generation will be needed to reach the 40% target.

Gates 1 and 2 provided for the potential connection of 1,600 MW of RES-E. Refer to Section 7.4 for details of Group Processing and Gates.14

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Assuming 6,739 MW RES-E capacity achieved by 2020 Type Onshore Wind Offshore Wind Biomass Hydro Total A (potential) Curtailment @ 10% Capacity (MW) 5,589 785 150 215 6,739 Capacity Factor 0.31 0.45 0.5 0.7 Annual Energy Produced (GWh) 15,177 3,094 657 1,318 20,247 2025

Total B (delivery) 18,223 Table 5.4: Possible RES-E by 2020 based on existing grid access consenting Note: Total A - potential electricity generated in 2020 if all onshore and offshore wind farms are built, connected and fully operating at rated capacity but also factored by the capacity factor. Total B - indicates notional level of curtailment (including constraints) of 10% of potential/available wind powered generation The estimates above, or indeed in this section, do not take into account electrical power losses in transporting the electricity across the network or the impact of export/import of electricity over interconnectors or the possible additive impact of significant growth in electric vehicle usage. Whilst all of these have an impact they do not have a material impact on the big picture. In Ireland most of this electricity is expected to be generated from wind energy as shown in Table 5.4 above. If constraints and curtailment are also taken into account then the contribution from wind/renewable could be reduced. Estimates of the projected levels of constraints and curtailment up to 2020 are not publicly available and any attempts at estimation would be highly speculative as they are dependent on the status of many variables in 2020, including: i. ii. iii. iv. v. the portfolio mix; the take-up of Gate 3 grid connection offers; the availability of finance to fund Gate 3 wind powered generation projects; the completion of planned grid reinforcements; constraints as a result of system operational issues as detailed in Section 8.8;

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vi. vii. viii. ix. x.

the completion of planned interconnectors with Great Britain and the resultant exports and imports of electricity; the penetration of electric vehicles and the possibility of a significant distributed electric vehicle battery storage capability; the realisation of a multitude of pumped hydro storage projects which are at the planning stage; the increase in electricity consumption and the shifting of daily demand patterns as a consequence of electric vehicles15 and smart metering; the migration from oil fired space and water heating to electric or renewable heating (via pumps and solar).

Therefore, at the higher limit of projections, it is possible that circa 18 TWh of wind energy (offshore + onshore) could materialise. 5.3.1 Energy Requirement Forecast Based on the projected annual increase in demand of 3% per annum prior to the economic downturn in Ireland and the consequent sudden decrease in national electricity consumption up to 2009 the projected electricity requirement in 2020 was approximately 43,000 GWh (pre-downturn forecast) as shown in Figure 5.4 below.

Figure 5.4: Total Energy Requirement (TER) to 2020 Source: Adapted from EirGrids Generation Adequacy Report 2010 2016

The Irish Government has set a target of 10% of all vehicles in the transport fleet to be powered by electricity by 2020. This will represent some 250,000 electric vehicles on Irish roads over the next 11 years.15

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According to the data in the draft National Renewable Energy Action Plan [NREAP 2010] the expected increase in electricity consumption from 2010 to 2010 is 17% (or less depending on the success of energy efficiency measures) as opposed to the 70% increase16 previously assumed, as shown in Table 5.5 below. This corresponds most closely to the low demand scenario depicted in the Total Energy Requirement (adapted) projection in Figure 5.4 above. Expected Expected consumption consumption 2010 (ktoe) 2020 (ktoe) 2511 2937 % increase 17.0%

NREAP June 2010 Reference Electricity Consumption

Additional Energy Efficiency 2473 2813 13.7% Scenario Table 5.5: Expected Increase in Gross Electricity Consumption from 2010 2020 Using the consumption in 2010 indicated in [GAR 10-16] as the reference point and applying the growth in electricity consumption indicated in the recent renewable energy plan [NREAP 2010] from DCENR, as calculated in Table 5.5 above, the energy requirement in 2020 could be in the region of 30 to 32 TWh as shown in Table 5.6 below. This is lower than the LOW projection indicated in Figure 5.4 above. Expected Consumption 2010 (GWh) Electricity TER Energy Efficient Scenario 27,500 27,084 Expected Consumption 2020 (GWh) 32,16517 30,807

% increase 17.0% 13.7%

Table 5.6: Expected Electricity Consumption to 2020 Ireland electricity consumption rose by over 5% per annum from 1990 to 2007. Following a drop off in 2008 and 2009 it has started to rise again. It is difficult to predict how consumption will pan out over the coming 10 years. Some of the factors which could influence future consumption are: o Increase in awareness in energy efficiency measures implementation o Roll out of smart metering and changes to usage patterns o Price of electricity as:16

and

in

70% increase from 2004 to 2020 as depicted in Figure 5.4. Note: 2020 expected TER is based on 2010 Figure from [GAR 10-16] with NREAP % increase from 2010 to 2020 factor applied.17

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wind penetration increases more interconnection capacity becomes available fossil fuel price varies carbon costs are factored-in o Impacts on electricity consumption of migrations to different types of space heating such as (micro) CHP, ground-source heat pumps, etc. o Increase in electricity consumption as electric cars are promoted through advertising and subsidies. Also dependent on the roll out of charging point infrastructure and the availability of mass-produced economical vehicles Nevertheless, total electricity consumption in 2020 could be in the region of 30 TWh. 5.3.2 Benchmarking how Irelands traget compares Irelands 40% RES-E target is significantly more than the targets set by many of Irelands neighbouring countries, including the UK whose RES-E target is officially >30%. As discussed in section 4.9 each power system has its own individual characteristics which means that benchmarking is somewhat futile. Nevertheless, it is informative and there may be areas of commonality from which knowledge, studies and experience(s) can be shared. Some of these are presented as follows. It is not intended to be an exhaustive list. Wind Powered Generation Penetration (2008) 20% 9.3% 13.3% 2020 RES Target 30% 16% 31% 2.5% 15% >30%19 2020 RES-E Target 50% 18 40% -

State

Denmark Ireland Iowa Portugal UK

Table 5.7: Penetration of Wind Powered Generation In relation to Irelands challenges Iowa is interesting because it is comparable in many regards in terms of size, wind energy potential, population as shown in Table 5.8 below. However, it is very well interconnected and integrated with neighbouring states and power systems and hence can absorb higher penetrations of wind energy with relative ease.

In Denmark, the volume of electricity generated from wind power is expected to increase from 6.6 TWh in 2005 to 20.2 TWh in 2025, corresponding to 51% of electricity consumption. Source: [Energinet 2007] 19 According to the UKs Department of Energy and Climate Change [DECC 2009] their lead scenario indicated more than 30% of electricity generated from renewables by 2020.18

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Iowa Total Generation/annum Current Wind Penetration Population Wind Dispatch Factor Interconnection Electrically isolated 53 GWh 20% 3.0 million 33% Excellent No

Ireland 27 GWh 14% 4.5 million20 31% Poor Yes

Table 5.8:Ireland Vs Iowa power system characteristics Denmark plans to increase its wind energy penetration to 50% by 2025, relying on electric vehicles and heat pumps to absorb surpluses, plus extensive use of demand side management. However, it also is well interconnected as illustrated in Figure 5.5 below.

Source [Parbo 2008]

Figure 5.5: Denmark - Interconnection to neighbouring countries Interestingly, as can be seen in Figure 5.6 below, in comparison with Ireland, Denmark has six times the density21 of wind powered generation. Therefore Denmark should provide a good model and a source of lessons learnt which Ireland could draw on to explore the issues and challenges which arose in overcoming the social acceptance of high penetration of wind turbines and associated connection infrastrucure.

20 21

The population of Ireland and Northern Ireland combined is 6.2 million. Density is the wind capacity in MW per unit area of the country.

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Source [EWEA 2008]

Figure 5.6: Current Wind installation density MW/1,000 km2 in Europe In the UK, National Grid (NG) envisages that some 32 GW of wind capacity will be connected by 2020, of which about 20 GW would be offshore and 12 GW onshore. If such a high share of offshore does transpire then it is likely to be staggeringly expensive and to drive up electricity costs and prices unless some novel groundbreaking technology or market solution and massive political will and endeavour can be quickly established. NG have assumed that UK electricity demand up to 2020 will not substantially differ from the current level. NG argue that the effect of economic growth will be offset by improved energy efficiency, reduced losses and an increase in small-scale embedded generation not visible to the grid. NG postulate that interconnections between networks, including trans-nationally, will be key, along with measures to reduce peak demand, enlist other reserve sources such as standby generators and, as a last resort, to impose demand side measures if necessary. As discussed above and in section 4.9, which details Irelands particular energy characteristics, it is not hugely informative to compare Irelands targets or plans or measures for RES-E with those of other countries although the knowledge, expertise and experiences of all can be leveraged in progressing Irelands bespoke strategy, plan and realisation of optimal RES-E. 5.3.3 Optimal Penetration Level of Wind In assessing the optimal penetration of wind one needs to consider and quantify and value the overall impact of high wind energy penetration on the three pillars of energy policy: competitiveness, sustainability and security. Unfortunately, because there is no existing or historic data to draw on and there are so many unknowns it is impossible to accurately evaluate the holistic purist cost-benefit to society and even to agree as to what factors need to be taken into account. In order to do so a value would have to be put on the following: The avoided costs of the impacts of reduced greenhouse gases and the consequent impacts on the environment

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Cost-reflective inclusion of all external costs for all generation technology types Net cost (costs - net of benefits) of the additional interconnectivity needed The value of lower reliance on imported fossil fuels The real additional/incremental cost of capacity payments to generators and power system stability measures (e.g. new or enhanced ancillary services) to complement the evolving penetration level of wind The overall year-round impact on the wholesale electricity market price when it is optimised to complement high wind penetration The cost of over-capacity of wind powered generation, including incremental curtailment and constraint costs. The additional/incremental cost of the network reinforcements required to accommodate

Whilst many studies are being carried out worldwide and in Ireland the process of establishing the 40% target appears to be somewhat arbitrary and aspirational. The process followed appears to be: Assess in 2007-2008 Irelands renewable potential (incl. wind energy) Take an initial stab at assessing the extent of the challenges based on available knowledge Carry out an extensive detailed studies (but limited nevertheless) of the capability of the grid to support several penetration levels up to 60% Select an ambitious target of 40% RES-E because RES-H and RES-T are too inflexible, too expensive and too difficult.

Following the commitment to the 40% objective many more detailed studies have followed. Many of these are predisposed to a positive outcome of RESE penetration of 40% or higher. The extent of the challenges and the cost implications will transpire as the transition to 40% RES-E evolves over time. Only time will tell if the cornerstones of competitiveness and stability are maintained in the transition to high RES-E. In order to determine the optimal solution for the benefit of society it is necessary to examine and evaluate the holistic costs and benefits of high wind energy penetration. Despite the fact that wind energy can be regarded as a source of free fuel there are costs associated with wind powered generation. These costs include: the initial capital and construction costs the ongoing operating and maintenance costs of the wind farms the capital costs and operating costs of the additional deep reinforcements to the transmission network required to facilitate high renewable penetration

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the cost of constraints and curtailment (discussed in Section 9.7) as the level of penetration of wind energy increases the capital cost and operating costs of electricity interconnection to Great Britain and/or France to complement high wind penetration (however this also improves Irelands security of supply the capital costs and ongoing maintenance charges for the local (shallow) connection to the network additional costs of providing reserve generation capacity additional costs incurred by conventional generators due to more frequent and stressful cycling of generators additional costs in operating the power system so that it remains stable and the power quality is maintained

The benefits include: Helps to reduce greenhouse gas emissions which reduce the environmental and health damage caused and helps to mitigate against climate change - and thereby assists hugely in meeting EU targets Capacity benefit so that somewhat less22 conventional capacity is required Reduction in imported fossil fuels; a significant quantity of which originates or traverses countries with variable political and economic stability Lower wholesale electricity prices23 (assuming optimal portfolio) Better long-term security of supply situation as the global supply of fossil fuels is depleted. Possibility of exporting electricity if interconnection with Great Britain improves significantly

It is difficult to separate the particular costs and benefits which accrue specifically from penetration of renewables from those which would have given rise to costs and benefits to the system in any case, even in the absence of high renewables. 5.3.4 Conclusion on RES-E target In order to understand the dynamic between the binding EU targets and the Irish Governments energy policy it is important to understand the distinction between: a) the binding nature of the EU-imposed 2020 target for Ireland of 16% of Irelands energy consumption to be derived from renewable sources (RES = 16%); and, b) the elective nature of the Irish Governments target (RES-E = 40% objective) of 40% of electricity consumption to be generated from renewable energy sources.It is questionable as to whether the capacity benefit resulting from high wind penetration results in less conventional capacity being needed. 23 According to Awerbuch [Awerbuch 2007] even small incremental additions of wind powered generation will provide sizeable cost and risk reductions in the context of an optimal generation portfolio mix.22

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It is up to each Member State of the EU to work out how to achieve the target imposed by the EU. The apportionment of the 16% target between various categories of energy usage is up to each member state. Ireland has, with somewhat limited information available, opted for a mix of measures which includes a RES-E target of 40%. Early studies, such as the detailed All-Island Grid Study [AIGS 2008] have indicated that it is possible to achieve high levels of wind penetration of 42%. It is not unreasonable to expect, based on the current plans and the projections above for 2020, that wind powered generation could provide 18 TWh out of total consumption of 30 TWh; i.e. RES-E = 60%. In fact, this does not take account of any additional generation from other renewable sources such as tidal, wave, biomass, CHP, etc. There is no doubt that the migration of the power system towards a portfolio with substantial renewable generation meets sustainability criteria. However, it is less clear as to whether it will lead to competitive prices of electricity for the end-customer once all of the system security and stability issues have been identified and factored into the cost in a truly cost-reflective manner. 5.4 Institutional arrangements and market structure The legal titles for the two jurisdictions on the island of Ireland are Ireland and Northern Ireland. This document refers to the Republic of Ireland or the Ireland to mean the Irish state. When reference is made to the island of Ireland or all-island it encompasses the combination of the two jurisdictions of Ireland and Northern Ireland. In Northern Ireland, the electricity industry was privatised in 1992 when the generation capacity was sold to four different firms who received longterm contracts. The transmission, distribution and retail sections of the industry remain vertically integrated within Northern Ireland Electricity (NIE) which is a private company. The transmission system is owned by NIE. It also manages the electricity supply business, builds and maintains the network and is also engaged in generation. Electricity Supply Board (ESB) announced in May 2010 that it had entered into discussions over the possible acquisition of Northern Ireland Electricity (NIE) from its parent Viridian. With the completion of the Moyle electricity interconnector to Scotland in 2002 and the construction of a new natural gas plant in 2005 Northern Ireland now has more than adequate electricity generation capacity for its current needs. The Northern Ireland electricity system had effectively been isolated from that of the larger market in the Republic for decades until connection between the two systems was restored in the late 1990s. A further connection between the two systems is due to be completed in 2012. When this is completed it will turn two weakly-linked electricity systems into an integrated electricity system for the island. The Northern Ireland electricity system is regulated24 by theUtility Regulator of Northern Ireland was up until recently called the Northern Ireland Authority for Utility Regulation (NIAUR).24

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Utility Regulator. It is completely independent of OFGEM, the energy regulator in Great Britain. The Republic of Ireland started liberalising the electricity market much later than Northern Ireland. The implementation of EU law meant that the market in the Republic was opened up to new entrants in generation and in supply. The strong growth associated with the Celtic Tiger period prompted a large steady increase in electricity consumption up to 2007 followed by a sharp decrease in 2008/9 (refer to Figure 5.4). At the same time the portfolio of generating plants was ageing, with several scheduled to shut down in the period to 2015. Deregulating the market at a time when extensive new investment was needed compelled the regulators to adopt a system of strong investment incentives. In the Republic the current arrangement is that the grid is owned by ESB, a wholly owned government company that is responsible for maintaining and extending the network. This company also owns a substantial share of the generation capacity on the island and is the major supplier of electricity in the Republic of Ireland. The management of the system in Ireland rests with EirGrid, the Transmission System Operator. EirGrid is a government agency which is also responsible for network planning. A joint study [NERA 2006] commissioned by the regulators in the two jurisdictions suggested that there were likely to be significant long-term benefits from developing an integrated electricity system on the island. A single electricity market was considered likely to be beneficial to the consumers since it would allow for a lower level of installed capacity for a given level of security of supply [FitzGerald, 2004]. It would also allow for more efficient dispatch and finally it would increase competition in the two jurisdictions [ESRI 2009]. In the case of the Republic of Ireland, the Electricity Supply Board (ESB) is still state owned. 5.5 Market Share At the end of 2004 the top three generators held 94 percent of the total wholesale market in Ireland and the ESB, the state-owned incumbent, was by far the dominant player [CER 2005]. The electricity supply market has been gradually liberalised culminating in full market opening in February 2005. As can be seen from Table 5.9, ESB PES share of the supply sector in the Republic has steadily decreased from 94% in 2000 to 41% in 2009.

Table 5.9: Suppliers Market Share since 2000 in the Republic4