Belfast Telegraph

Friday 18 April 2014

Electricity crisis looming, but the powers to be fail to quell concerns

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A risk to the security of electricity supply from 2016 has been identified by the electricity system operator for Northern Ireland, according to SONI. This crisis has been predictable for several months and a remedial action plan has not yet been agreed.

To the credit of the regulator and department, there is an open admission of a worsening situation. There is less credit for the regulator and department in the understatement of the need for urgent action.

The cause of the crisis is that, by 2016, there will be too little operational electricity generation capacity in Northern Ireland to cope with major capacity 'outages'. In addition, there are obstacles to importing alternative supplies.

In 2016, three generating plants at Ballylumford will close because of EU rules on emissions from large combustion plants. Later this decade, for similar reasons, capacity will be closed at Kilroot.

The new major cross-border interconnector from Tyrone to Cavan, which initially sought planning permission in 2009, awaits the resumption of a contested planning hearing in 2013.

For Northern Ireland customers, this delay verges on the inexcusable. Even with planning permission, the link would not be available before 2017. This link is estimated to cost £90m which, when operational, would be partly factored into regulated electricity charges.

After an unexpected electricity failure in 2011 and later further faults, suspicions were aroused that the connector to Scotland, the Moyle Interconnector, was inherently faulty. The Moyle inter-connector has now been assessed as no longer suitable for 'conventional cut and slice repair'. Mutual Energy, owner of the asset, has told the regulator that the existing cables 'would appear to have been ruptured when ... movement bent the cable causing cracks which allowed seawater to enter and create an electrical short'. It then adds that 'there may be ten more potential areas offshore that could be (so) affected'.

Mutual Energy has suggested to the regulator that 'the best solution is to lay new low voltage submarine cables' alongside the existing cables. The project might cost a further £60m and would normally take 4-5 years. With some streamlining of the processes, it might be available late in 2016 but 'a more prudent base case would be autumn 2017'.

The critical question now is, can the crisis be averted, if so, how? Secondly, why are the responsible agencies responding so slowly? Third, are there questions about the sustainability, ownership and financing of the Moyle inter-connector?

The best answers, long-term, are the building of the Tyrone to Cavan high-capacity inter-connector, along with agreement on a sustainable repair and re-organisation of the Moyle system, with a revision of the regulatory regime so that new investment can be attracted.

Those remedies are easily stated: less easily implemented. For the Cavan to Tyrone link, ministers in the Executive need to shorten the expensive consequences of the local planning system.

A short-term repair of the Moyle system is apparently possible and merited. However, the role of Mutual Energy must be clarified. The repair might cost £60m and Mutual Energy foresees that, within the financial arrangements agreed with the regulator, in the next two years Mutual would need to find funds to face unexpected additional costs of £30m.

These additional costs are, effectively, a transfer of part of the unexpected extra costs on to local customers as well as the continuing costs of the current agreement.

As a small stand-alone mutual company, Mutual may need to borrow extra capital and, to secure that borrowing, may seek a revenue guarantee from the regulator.

Extending the financial reassurance to Mutual does raise questions of taking advice on how to minimise these consumer risks.

For the reassurance of the public, the regulator and department conclude their recent review saying 'action will continue to be taken to advance proposed options to manage risks and an update .. will be provided over the summer months'.

Is that good enough?