ESB to reduce its generation capacity by 30%

The ESB has pledged to radically reduce its electricity generation capacity in return for permission to build new power station in Aghada, Co Cork.

In a move to foster competition in a market that was deregulated several years ago, energy regulator Tom Reeves reserved his right to direct the ESB to sell the new 400 megawatt (mw) plant if the ESB does not fulfil its commitment to divest or close 1,300mw of existing capacity by 2010.

The ESB said it had already obtained planning permission and environmental licenses to build a new gas-fired station next to its existing plant in Aghada. However, it needs Government approval to spend some €300 million on the construction of the new power station.

With competition slow to take hold in the market, Mr Reeves's initiative is designed to reduce the ESB's overall capacity by almost 30 per cent and provide access to the national grid to its competitors. However, the deal also means the ESB can build up modern generation capacity while reducing its reliance on older, less efficient plants.

Mr Reeves said the initiative would reduce the ESB's share of generation capacity on the island of Ireland to some 40 per cent by 2010.

"In conjunction with the establishment of the all-island single electricity market in 2007, this package of measures will ensure that no one company will have undue power or dominance over prices in the market," he said.

The ESB promised to immediately sell emergency generation plant with 208mw capacity at Rhode, Co Offaly, and Tawnaghmore, Co Mayo.

In addition, the sites of former peat-burning plant at Shannonbridge, Co Offaly, and Lanesboro, Co Longford, will be offered for sale immediately. The ESB closed these stations some years ago when it built more modern plants at the same sites.

While competitors will not be able to use the former plant, the sites come with connections to the national grid and the possibility that planning permission will be easier to secure.

In a statement, Mr Reeves's office said the ESB will also make available "other sites with a capacity of 300mw by end June 2007 and a further 700mw by 2010". The location of such plant is unsure at the moment, but it is likely to include an oil-fired station at Tarbert, Co Kerry.

There was no comment from the ESB last night on its commitment to reduce it generation capacity. It is believed that the State company has not yet held formal discussions on the initiative with its trade unions.

Mr Reeves's office said a detailed plan for the transfer of such will be agreed by next June. "This will include identification of the particular plants or sites to be closed or divested and the timings of these events," it said.

"In summary, these measures will result in the availability by 2010 of a significant land-bank of 'generation-ready' sites for independent power producers to develop, as well as reducing ESB's share in the generation market."