Northern Ireland electricity customers paying price to keep lights on
Northern Ireland electricity customers have been facing a risk that there would not be sufficient electricity in a very cold winter in 2015-16 and also in 2016-17. The arithmetic has been clear for some time. New emissions standards, agreed across the EU, mean that some of the older generating units at Ballylumford have reached the end of their acceptable service. Similarly, Kilroot power station will face emissions constraints which reduce its capacity.
Those changes would have been manageable provided, first, that the undersea Moyle Interconnector to Scotland was performing at its expected 500mw capacity and, second, that the cross-border electricity grid was strengthened with a new 400kva link across the centre of Ireland linking the NIE grid from Moy, in Tyrone, to a new grid through Co Cavan.
Each of these positive assumptions has faulted. Both failures carry important implications for the security of electricity supply and also for extra costs to be paid by Northern Ireland consumers as part of their bills.
The Moyle Interconnector has developed serious faults which mean that it can operate only at half capacity. New undersea wiring is needed and interim contracts to allow capacity to be restored are being put out to tender. Because of the unusual contract with Mutual Energy (a non-profit distributing co-op), Northern Ireland electricity customers have given Mutual Energy a guarantee to make up the functioning costs of the Moyle Interconnector if they exceed the revenue which it earns.
The reinstatement of the interconnector will bring extra charges to customers which the Regulator admits are currently not quantified. For Mutual Energy, this is not a blank cheque but is an unknown and will later be approved by the Regulator if the arrangements are judged to have been suitably competitive. As an outsider's guess, over several years this bill may reach some 'tens of millions'.
The larger failure for electricity customers lies in the frustration of the delay in gaining of planning approval for the high capacity cross-border grid. For security of electricity supply in Northern Ireland, the merits of this have been known and undisputed (for their importance) for several years.
After earlier efforts to gain planning approval of the section in Northern Ireland were deemed flawed, yet another effort is being made in 2015.
Eirgrid is finally making its planning application, south of the border, later this year.
The cost of this delay is already running into 'tens of millions', north and south.
Because orderly planning and technical reliability have been missing, an expensive Plan B has now been agreed.
At a further cost to customers, the agencies with statutory responsibility have agreed to accept a bid from AES, the owners of Ballylumford, that two generating units that would otherwise be decommissioned will be retained and re-equipped to meet the new higher emissions standards.
As a result, AES has contracted to keep the two units on the grid operating with a capacity of up to 250mw.
The contract will pay AES £8.9m each year for three years starting late in 2016: a total of £26.7m. To give this cost a better contextual setting, the Regulator points out that it is less than 1% extra on average electricity bills. For large users the extra bill is rather more off-putting.
In summary, the Department of Enterprise, Trade and Investment and the Utility Regulator have agreed an extra electricity generation contract that should mean that power cuts can be avoided (provided we have normal winter months).
There was no easy or obvious alternative. Other radical alternatives, installing compressed air storage or modern battery storage units, do not seem to have been costed and might have needed longer for more detailed assessment.
The lights should now stay on.
The official agencies deserve few compliments for the fulfilment of their obligations.
The all-island single electricity market has failed to deliver. Customers will pay more.