Breezy Airtricity looking to develop biggest wind farm yet

Joining forces with State forestry company Coillte, SSE Airtricity says €240m will be invested in Galway development

Stephen Wheeler, managing director of SSE Airtricity. “Our model can’t just be about selling electricity, it’s actually providing an essential service to our customers.” Photograph: Cyril Byrne

Stephen Wheeler, managing director of SSE Airtricity. “Our model can’t just be about selling electricity, it’s actually providing an essential service to our customers.” Photograph: Cyril Byrne

 

SSE Airtricity is on course to building the biggest wind farm in the State. The local subsidiary of British utility, Scottish and Southern Energy, is joining forces with State forestry company Coillte to develop a plant close to Moycullen about 22km outside Galway city that the two partners say will deliver enough electricity to power 84,000 homes.

The company signed off on the project three months ago and began initial building work on its element of the project shortly afterwards. “In total it will be 168 megawatts [MW] when it’s built,” says SSE Airtricity managing director Stephen Wheeler. “It’s going to take the next 24 to 28 months to build in Galway. We’re looking at an investment of around €240 million in total.”

Wheeler remarks that the site is in a “beautiful part of the country”. However, that is one of the main objections people have to wind farms: they intrude on the scenery. He agrees that – for this and many other reasons – the industry faces “a massive challenge” in gaining social acceptance.

So, how did SSE Airtricity and Coillte get planning for the project over the line with relatively little fuss? Wheeler explains that the companies began engaging with local people early in the development stages.

“This is not about arriving when the turbines are going up,” he says. “It really means going and talking to locals, being clear about our plans, being clear about what we are developing. It’s not about having the soft conversations, it’s about the honest conversations, this is what we’re developing, this is how we’ve chosen to develop this.”

Wheeler says the majority of people in the areas where it has built farms have bought into the company’s projects. Alongside the engagement, SSE Airtricity makes other commitments to the communities involved.

“We’re not there for the short term, we will be there for the long term. We’re talking 25, 30 maybe 40 years where we are a part of the community,” he adds. So the company has assured people that a significant portion of the long-term jobs involved go to locals.

“To date, we have contributed over €1.2 million to communities where we established wind farms,” he says. This money comes from a community fund, which is basically a proportion of wind-farm revenues that is set aside for spending in the localities in which where they are built.

“In some areas the company has retro-fitted homes, putting in new insulation, changing old hearing systems to new, more efficient, ones and aiding people with cutting energy consumption and thus their bills.

“Another part we are looking at, and we are trialling in the North at the moment, is educational bursaries, where we put up scholarships for local kids to go to college,” he adds. In all, SSE Airtricity expects to be putting €2 million a year into its community fund by 2020.

On a broader scale, Wheeler argues that the industry as a whole needs to step up to the challenge posed by opposition to plans to build large numbers of pylons in rural areas. This does not involve SSE Airtricity directly, as it is part of the redevelopment of the national grid. However, that will be key to ensuring that projects such as the Galway Wind Park can sell the electricity that they generate.

Population centres

Wind-farm development means that more electricity is generated far away from the population centres where it is needed.

National grid operator Eirgrid takes this into account in its plans to redevelop the system. However, the wave of protests across the country last year has slowed its progress, creating potential difficulties down the line for companies such as SSE Airtricity.

The delays are real. One element of the plan, the North-South interconnector, which runs from Meath to Tyrone, is going back into planning four years after a public hearing into its original application collapsed following the discovery of a mistake in the documents.

“It’s always a challenge,” Wheeler acknowledges. “Even if you look at the North-South interconnector, which is a really important piece of infrastructure, there are obviously concerns. I would commend Eirgrid, though, on how they have approached the whole thing. They have really gone for the open consultation, I think they’ve learned from that what works.”

Wheeler has direct experience of just how emotive an issue this can be. When he was running in a half-marathon sponsored by his company last year, he found anti-pylon protesters had turned up to line parts of the route.

“This is an issue where we need leadership, where we need open discussion and we need early engagement,” he argues. “Ultimately, this is about keeping the lights on, this is about having an infrastructure in place that supports and enables the transition from having a heavy carbon to a low-carbon system.”

Airtricity is firmly associated with wind in many people’s minds. It is Ireland’s biggest generator of renewable electricity, with plants that have a total capacity of 544MW. To put that in context, most gas-fired power stations in the country have capacities in the region of 400MW. It also remains the largest wind farm developer in the market.

However, since SSE bought it in 2008 for €1.88 billion, the company has grown from focusing on developing wind energy, while supplying businesses and the wholesale market, to a fully-fledged utility. It now sells electricity and gas to homes as well as businesses and has more than 800,000 customers across Ireland.

Its total generating capacity stands at more than 1,800MW. It has a boiler business and is responsible for maintaining 300,000 street lights for 90 local authorities. Staff numbers are approaching 900, based between offices in Dublin and Belfast and at its various power plants and wind farms.

Wheeler says that SSE Airtricity has spent more than €2 billion on developing the business since early 2008. Airtricity’s Irish operation accounted for €880 million of the figure that the Scottish company paid for the company. Wind farms in Britain accounted for the balance.

After years of saying it would not, it took the plunge and entered the Republic’s domestic electricity market in 2009. It bought the street-lighting business, ESB Contracts, from the State company in December of that year. In 2010 it became dual-fuel supplier in retail markets across the entire island when it began supplying gas to households on both sides of the Border.

Taoiseach Enda Kenny recently cut the ribbon on a new 464MW gas-fired generator the company built at Great Island, Co Wexford. The plant is on one of four sites that SSE Airtricity bought from Spanish utility Endesa in a deal valued at €500 million in June 2012. Endesa had acquired them from the ESB three years earlier for €450 million.

The new plant cost more than €350 million to build. The old ESB power station on the site continued running right up to the day that its replacement began producing electricity commercially over the Easter weekend. When the company did the deal with Endesa, it did so with a view to developing Great Island.

“We saw the opportunity, we saw the importance of that to supporting our retail base,” Wheeler says. It is, he adds, the core asset in its thermal power plants (those not powered by wind) which have a total capacity of almost 1300MW. The others are gas or oil burners located in Kerry, Mayo and Offaly.

 

Domestic market

While there are now four suppliers in the domestic market – the others are Bord Gáis, Energia and ESB – and six serving businesses, Wheeler points out that 55 per cent of customers have never switched, which means that there should be plenty of scope to recruit new clients.

 

“The opportunity is to target and win in that part of the market. Fundamentally we have to be competitive on price,” he acknowledges. After that, it is service. In this case that means responding to customers, but Wheeler also argues that it involves helping them, even to the point where the company aids them in being more efficient and cutting electricity use.

So, why show customers how they can get by with less of your product? “Ultimately this is about a sustainable business. Our model can’t just be about selling electricity, it’s actually providing a service, an essential service, to our customers.

“Electricity, gas are key components of that, but so is energy efficiency. It’s part of our business plan, it’s an area that we see as a real, key growth area.”

Energy prices and affordability are big concerns for both households and businesses. Wheeler says his company is the leader on price and offers the cheapest pay-as-you-go option in the market, which he says benefits the worst-off customers most.

However, the company is a big beneficiary of the public service charge that is tacked on to every electricity bill in the State. Consumers pay €5.36 a month – €10.72 on bimonthly bills – while small businesses pay €18.47. Larger companies and organisations pay according to their use, but actually shoulder a bigger burden than the other groups.

Part of the €335 million collected from the charge goes to wind and other “green” generators, implying obvious benefits to SSE Airtricity. This is paid under the State’s Renewable Energy Feed in Tariff (Refit) scheme, which guarantees a price to these companies for the electricity they supply.

Wheeler points out that the system is meant to support the development of renewable energy technologies, mainly to ensure that the Republic meets its obligations under EU and other treaties designed to cut greenhouse gas emissions.

The Government wants 40 per cent of energy needs to come from renewable sources that now supply 22 per cent, by 2020.

“Different technologies require supports,” he argues, adding that the current scheme, Refit Two, provides less support than its predecessor, which he agrees makes sense.

“Ultimately, when you look at all the energy issues, the biggest challenge facing the energy industry is affordability, so it’s incumbent on all of us to look at how we can actually reduce costs.

“Refit Two lapses in 2017, there has been no discussions or public consultations around what comes after Refit Two. I think that’s going to be an interesting step for the country and for the industry,” he says.

Wheeler feels that the Republic’s subsidies are not out of line with the rest of Europe and deliver appropriate returns to investors. He argues that it has been a success, as the State has thus far met its renewable targets. “I think, from a standing start, we have done incredibly well in that regard,” he says.

There is a still a lot of work to be done. Wheeler believes the Republic is “nowhere near” making the transition from a high-carbon to a low-carbon electricity system that is part of Government policy.

“Wind and other renewable sources, as they become available, should be supported, and that will come in the form of Refit Three, or whatever is to be,” he says.

Ultimately as technologies develop and mature, they will need less support and therefore, Wheeler predicts that the industry will move away from them.

“As an industry, that’s what we should be aiming for, as I said, affordability is the biggest challenge for this industry, and we need to address that, and I believe we are addressing that.”

CV: Stephen Wheeler
Name: Stephen Wheeler.
Position: Managing director, SSE Airtricity.
Why is he in the news? The company recently completed a €350 million investment in a new gas-fired power plant in Wexford and has begun work on what will be Ireland’s biggest wind farm, in Galway, where it and Coillte will spend a total of €240 million.
Background: Wheeler trained as an electrical engineer in University College Dublin and spent 10 years working for some of the industry’s heavy hitters, including Siemens and ABB, in far-flung places such as Egypt, the Philippines, the United States and Portugal, before coming back to Ireland and joining Airtricity in its early days.
Family: Married to Anne-Marie, they have three children, Kate, Conor and Lucy.
Something you would expect: He has an MBA, which he began in 2008, just as the financial crisis struck.
Something that might surprise: He is gearing up to run his fourth Dublin City Marathon, appropriately enough, as SSE Airtricity sponsors the event.