Will wind energy blow down electricity prices?



If you live near or visit the sea, there may be a change of scenery coming your way. Fast forward three years or so and there will rows of turbines as tall as the Eiffel tower whirling away their giant arms near the coast as they convert kinetic wind power into electricity.

Love them or hate them, offshore wind farms will lessen our dependence on fossil fuels, lowering carbon emissions and maybe cut the price of our eye-wateringly expensive electricity which has contributed significantly to the cost-of-living crisis.

It’s a case of better later than never: Ireland has been very slow to take advantage offshore wind farms, despite the fact that we are ideally placed to benefit as a windy island in the Atlantic with a sea area seven times our land mass. The plan is to boost the amount of energy derived from renewables – currently around 40%c to 80% by 2030.

Following the wind-energy auctions last month workers from four wind farm firms will be erecting turbines in the Irish Sea off the coasts of Dublin, Meath and Louth and near Sceirde Rocks off the Galway coast. But, given previous experience, with hold ups over planning and grid connections, this may not happen quickly. Also lack of foresight and planning means we don’t have a port suitable for building and servicing turbines.  Belfast or Liverpool have been mentioned as the most likely to benefit at present.

These offshore installations, in plain sight about five km off the coast, will have fixed foundations, and there will be another auction later this year to bid for offshore farms off the south coast. When operational in projects worth €9bn together. offshore farms will generate up to a third of our electricity and create an estimated 3,000 jobs initially with 400 permaent roles. While it would be more environmentally friendly to install floating turbines further offshore, particularly in scenic tourism areas like Sceirde Rocks their deployment still lies in the future when they are expected to generate 10% of offshore power by 2040 and 40% by 2050.

Good new so far but the big question for consumers is whether offshore wind power will really result in lower prices. Both Iceland and Norway which have been investing in renewable ahead of us, have significantly cheaper electricity Iceland is about 50% cheaper and in Norway it’s about 30% cheaper. But I wouldn’t hold my breath over hopes for future price reductions.

Ireland already is among the most expensive counties for electricity in Europe according to Eurostat, with prices before tax and charges at 60% above the European average.

According to the Government’s Climate Action Plan, up to 80% of Ireland’s electricity is to come from renewables by 2030, this will need major investment in the national grid of between €500m. and €2bn. This money will probably be recouped through higher network tariffs which will be passed on to consumers. While wind is free, wind turbines are expensive to develop and it takes a year to a year and a half for the investment to be recouped from sales to the consumer.

The Government could move Ireland from being a laggard to a world leader by investing some of the billions of the country’s tax windfall in offshore wind energy so that we meet our own energy needs more quickly, prices come down and we become an exporter of electricity but maybe this is an overly imaginative idea.

The way prices are structured favours producers by de-risking their enterprise against inflation and times when the wind blows and there isn’t demand. These risks are borne by the consumer and, when prices are below the guaranteed price, consumers top up producers and in theory when the reverse happens the producer is meant to pay back the consumer.

Remembering how the Government was forced last year to step in to subsidise consumers’ soaring electricity bills and the industry’s poor reputation for efficiency it seems a consumer watchdog would be a good move.

Consumer do have some wriggle room to bring bills down by switching between the 11 or so suppliers. The average annual electricity bill per household came to €2,023 this April. Under the cheapest plan this would come to €1,768 according to Daft. More than a third of customers never switch, surprising since they could save up to €500 a year by switching.

Some comfort there at least…

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