| 12.9°C Belfast

Issues must be tackled on renewables policies


Economist and energy market analyst John Simpson said the recent £297m turnover was 11% higher than a year earlier and over 90% higher than the year before that

Economist and energy market analyst John Simpson said the recent £297m turnover was 11% higher than a year earlier and over 90% higher than the year before that

Economist and energy market analyst John Simpson said the recent £297m turnover was 11% higher than a year earlier and over 90% higher than the year before that

The rapid expansion of electricity output from renewables is a remarkable story, particularly for the investors and employees of the newly established businesses. However, the recent developments have revealed problems and a sub-optimal allocation of resources.

On-shore wind farms are the fastest increasing part and the principal source of renewable electricity generated in Northern Ireland. The prospects for beneficial further expansion could be good if critical policy questions are tackled.

Arlene Foster, as minister for energy policy, which is significantly devolved from Westminster, has underscored the recent successful development of renewable energy with the report that in 2013 renewables accounted for 17% of all electricity consumed in Northern Ireland. The minister reported that around 230 companies generated revenue from renewables valued at some £620m.

Such is the rate of expansion that the renewables sector has been faced with supply connections problems. Rapid expansion has created problems of 'balance'. Each developer must obtain planning permission, solve the problems of linking to the electricity grid, agree a contract with an electricity supplier who will purchase the electricity generated and manage the commercial benefits of the renewable obligation certificates (ROCs) which can be sold or traded.

The degree of imbalance in the current marketplace points to the need for policymakers and the service providers to make changes.

The renewables sector is bringing in a range of new technologies at a rate which is ahead of the capability of the grid to absorb the supply partly as a result of an unrefined target to generate 40% of energy from renewable sources by 2020. The target could be achievable, if related infrastructure and planning services become more responsive and if the bias in the current incentives in favour of projects with small or very small capacity was removed.

At the annual conference of the Northern Ireland Renewables Industry Group last month, the main stakeholders heard evidence of some of the difficulties. At present there are reported to be plans approved and awaiting implementation for 647mw of additional capacity (which would nearly double the current capacity) facing delays in obtaining permission to connect with the electricity grid and a further approximately 600mw awaiting planning permission.

Weekly Business Digest

Margaret Canning’s selection of the must-read business stories straight to your inbox every Tuesday morning

This field is required

This success story also reveals a potential criticism. The rush to invest in renewable capacity is incentivised by the financial support of the ROCs. Northern Ireland, influenced but not controlled from Great Britain, is operating a regime that is too generous to the point that it has produced more profitable small investment businesses than are needed to meet current targets. Critically, part of the problem may be that micro and small wind-farm units are attracting too much of the market place because they are sustained by ROC criteria that are too generous.

The capacity to connect viable wind farms is proving a problem. Northern Ireland Electricity, still arguing with the Regulator about investment plans, faces major technical standard questions in how to manage connections largely in its 11kva network but also at the level of 33kva. NIE, logically, would prefer to focus more on connecting larger renewable projects.

However, the battle with the Regulator means that extra funds for investment are being delayed and the details of the connection policies are in dispute.

From 2017, Northern Ireland will link into the Great Britain Electricity Market Reform programme.

Renewable capacity will switch to earning returns based on UK-wide strike prices in a system where new generation is incentivised by contracts for difference (CfD). At the same time, European guidelines mean that the all-island Single Electricity Market must be reshaped.

In the period from early 2014 to 2017, Northern Ireland has an interim opportunity to reconfigure its allocation of ROCs for new capacity.

This points to an urgent call for a reassessment by DETI along with a clearer acceptance by the Regulator of an agreed investment plan for NIE.

The present renewables policies are seriously flawed.