Wind generations not increasing wholesale electricity prices

23 Feb 2011

The growing levels of wind generation on the Irish electricity network is not increasing wholesale electricity prices, a new study published by EirGrid and the Sustainable Energy Authority of Ireland (SEAI) suggests.

The report by grid operator EirGrid and the SEAI, employs detailed modelling tools to examine the wholesale prices in the Irish electricity system in 2011, which has a total annual value of an estimated €2bn.

The analysis revealed that wind generation lowers wholesale prices by more than €70m. This almost exactly offsets the costs of the public service obligation (PSO) levy and other costs related with the generation of wind energy. The study shows that wind energy is not contributing to higher wholesale electricity prices on the Irish electricity system. 

Wind generators have high capital costs, but they have no short-term costs as they do not consume fuel. The study has discovered that by displacing higher-cost fossil-fuel generation, wind energy tends to reduce the wholesale cost of producing electricity. When balanced against other costs, the overall cost impact of wind is less than half of 1pc, which is within the study’s margin of error.

“This detailed analysis answers an important question, that exploiting our strong wind energy resource comes at no additional cost. It is right that we keep a focus on energy costs, and it is very good news to see that we can capture the benefits of wind energy without having to pay extra for them. And as fossil fuel prices increase the economic benefits become more significant,” said Dr Brian Motherway, chief operations officer of the SEAI.

The increased use of wind energy on the Irish electricity system increases Ireland’s security of supply and in the long-term ensures a more diverse fuel supply.

Dermot Byrne, chief executive, EirGrid, said “reliable, economic and sustainable power is crucial to Ireland’s future. Renewable energy can play an important part in the energy mix but it is important to continuously look at the effect on prices of all sources of energy, in the interest of consumers. This report is a significant contribution to that.”