Not all wind farms will benefit from surging electricity prices this winter, says industry body

Gas volatility maintains pressure on electricity costs

All wind farms will not benefit from surging electricity prices this winter, the industry’s representative body says.

Homes and businesses face high electricity bills this winter on the back of surging natural gas prices, which rose as much as 6 per cent on Wednesday as European and Asian countries scrambled to stockpile supplies of the fuel.

Regulators recently calculated that wind farms will earn €330.23 a mega watt hour (MWh) on average for their electricity over the 12 months from October, six times the €53.66 MWh they would have received two years ago.

However, industry body Wind Energy Ireland says that deals these businesses have with other electricity generators will bar many of them from benefiting from the high prices that their power will fetch on the wholesale market.

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Most of the Republic’s wind farms are guaranteed either €72.69 MWh or €75.24 MWh for their electricity under the State’s Renewable Energy Feed-in Tariff (REFIT) support scheme, while they do not have to buy gas to generate power.

Justin Moran, Wind Energy Ireland’s director of external affairs, acknowledged that while wholesale electricity prices will be high this winter, driving up household and business charges, many wind farms will not profit from this, despite their lower generating costs.

Wind farms must have deals to sell power to other electricity generating businesses to operate. Mr Moran explained that these agreements’ terms determine how the parties divide any upside between the guaranteed REFIT price and the wholesale market price.

He pointed out that wind farms’ contracts may split the difference between the guaranteed and wholesale price 50/50, or they might only get a percentage, and possibly no share at all.

Consequently the generators buying wind farms’ electricity output also benefit from the fact that their power is cheap, he added. “There is that nuance in there that a lot of people do not know about,” Mr Moran said.

The Republic’s wind farm owners include big power companies that supply homes and businesses such as ESB, Energia and SSE Airtricity, as well as Bord na Móna and publicly quoted Greencoat Renewables, which do not have retail energy supply businesses, but sell to the wholesale market.

Before the current crisis drove energy costs up, wind farms only received the minimum prices guaranteed under the REFIT scheme.

Wholesale prices normally fell below those levels, so homes and businesses made up the difference through a public service charge on their bills.

Mr Moran noted that wind power helped take some heat out of energy inflation. Official figures show that in February, the average wholesale electricity price was €175.23 MWh, but on days when wind-generated electricity was widely available, this fell to €134.25 MWh.

European gas prices prices climbed 6 per cent early on Wednesday, when the cost of the quantity of gas needed to generate one MWh of electricity reached €236.

The price of the fuel has doubled from already high levels since June. International gas prices determine Irish electricity charges, as the fuel is used to generate about half the power used here every year.

Stockpiling in the US, Europe and Asia ahead of winter drove the latest round of increases. Europe faces likely shortages of the fuel as Russia has cut supplies through a pipeline that provides about 40 per cent of the continent’s needs.

Barry O'Halloran

Barry O'Halloran

Barry O’Halloran covers energy, construction, insolvency, and gaming and betting, among other areas