State company ESB effectively deterred rivals from building new power plants by offering to construct gas-fired generators at costs too low for potential competitors to match, according to new claims.
A document passed to Fianna Fáil TD Barry Cowen, citing publicly available information, shows that ESB sought payments of €46,150 a megawatt (MW) for new power plants, when it took part in an auction to recruit new electricity generators in 2019.
ESB emerged with 10-year contracts for new power plants, in North Wall, Poolbeg, Ringsend and Corduff in Dublin, from the auction, which national grid operator Eirgrid ran in conjunction with regulators in the Republic and Northern Ireland.
The information document points out that the price at which the ESB offered to build the plants was far below the €138,450 per MW maximum specified for the auction by the Commission for Regulation of Utilities (CRU) in the Republic and Utility Regulator in the North.
“ESB bids in the auction were so low that it prevented others from building new capacity,” the document maintains.
It also points out that before the auction, the ESB told the Single Electricity Market (SEM) Committee – made up of Eirgrid and CRU representatives – that the maximum price specified for the auction by regulators was too low.
Margins ‘too tight’
The State company said it was concerned that the margins earned from the €138,450 price would be “too tight to deliver a new entrant”.
Mr Cowen pointed out that the ESB’s subsequent low bids were in complete contradiction to the State company’s own representations to the regulators.
ESB has not yet built the power plants. The company had to abandon plans for North Wall, where it intended installing generators with a total capacity of 216MW, when a supplier was unable to provide parts that met EU standards.
In a statement on Monday, the company said that planning and licensing delays had held up the other three, which would have produced 201MW in total, but added it was “continuing to develop these projects for a later date”.
Mr Cowen maintained that the information raised “serious concerns” about the ESB’s own role in the electricity supply crisis facing the country.
“The note details steps taken by the ESB which had the effect of market foreclosure,” he argued.
The TD has raised the issue several times in Dáil Éireann since October. Mr Cowen also put it to Taoiseach Micheál Martin and Minister for the Environment Eamon Ryan at recent Fianna Fáil parliamentary party meetings.
Battery storage units
However, he added that he feared neither party took heed of the concerns raised.
ESB Generation and Trading, the division responsible for the bids, said it would not comment on the pricing.
“All projects which ESB secured for 2022/2023 were progressed once the award was made and four of these are under construction now, for delivery on target,” the company said. ESB also won contracts for a series of battery storage units in the auction.
Auctions held since 2018 have yielded new generators with the capacity to supply 209 MW of electricity, while demand is expected to grow by 1,000MW up to winter 2023/2024.
Eirgrid ran the T-4 2022/2023 auction in 2019, offering 10-year contracts to any company prepared to build new electricity generators.
Companies were meant to bid for “capacity payments”, paid monthly to electricity plants that commit to being available to generate power when needed.
The sums are tied to each generator’s capacity, while the auctions favour the companies who seek the lowest payments.
Eirgrid and CRU this year warned that the shortfall between electricity supply and demand could grow from 260MW in 2022/2023 to 1,850MW in 2024/2025. It plans further auctions and other measures to ensure energy security.