Electricity systems must provide a margin of capacity over and above the peak demand level. This capacity must be constantly available, so intermittent forms of generation, such as wind and solar power, do not qualify. Plants which can be dispatched at the will of the grid operator, such as gas or coal, or hydro, will do fine.

There are no hard and fast rules about the necessary capacity margin, but many grid operators would be uncomfortable unless they had dispatchable capacity of around 115% or 120% of peak demand. This ensures a low probability of blackouts due to plants going offline, which is more frequent occurrence than you think.

In Ireland, peak demand is still below the level seen in 2008. But three large new gas-fired plants have been commissioned since the bubble burst and the margin of dispatchable plant capacity is now over 150% of peak demand.

In addition, there is an extensive and growing collection of wind farms around the country which are available on an intermittent basis. In total, power generation capacity when the wind blows equals roughly double peak demand.

No more gas plants are likely to be built for many years. When the wind blows, they get switched off and the builders of new gas plants must regret their optimism. But new wind farms continue to be built and indeed there are clamorous demands from the big wind energy companies to build yet more, along with transmission lines to carry their power.

Given the unprecedented excess capacity in the system, this looks rather odd. There is a simple explanation: the wind companies face a guaranteed price, courtesy of the electricity consumer, which is index-linked and subject to upward-only review.

There is an extra wrinkle. Since wind capacity is now very large, it is sometimes necessary to decline offers of power from wind farms in the interests of system stability, but wind farms get paid anyway if they are “constrained off”.

Oversupply

As wind capacity grows ever larger, these curtailment payments are likely to become more frequent. So it is possible to finance new wind farms even in an over-supplied market. In effect, the risk is not borne by the wind farms, but by consumers at large who are effectively underwriting a NAMA for wind farms.

But surely wind is a good thing, endorsed by the Government, the media and all responsible people who care for the planet? When the full costs are taken into account, including the costs of harmful carbon emissions from fossil fuels like coal and gas, wind may indeed be a good thing. But only up to a point and that point is rapidly being approached in Ireland.

At the margin, it costs virtually nothing to operate a wind farm once it has been built, so the wind farms will always be run where technically possible. This means roughly one hour in three in Irish conditions. Their full capacity is already approaching one-half of peak demand and they tend to be all available at once – the wind blows across the whole country or not at all.

The cheapest fossil fuel right now is coal, so the large Moneypoint station is normally kept running. When the wind blows, it is the gas plants, which have emissions sharply lower than coal or turf, which get switched off. Constant cycling of these plants, designed for continuous operation, shortens their lives and reduces their efficiency. As a result, the emission savings from wind operation are less than one might imagine.

There is an additional hidden cost. Wind farms are perforce widely scattered throughout the country. Under Irish rules, the wind generators do not pay the full costs of the extra transmission capacity they necessitate. The bill is passed along to the consumer. The direct costs of the price guarantee and the special deal on curtailment are thus not the full story. The system must be viewed as a whole and wind imposes substantial system costs which moreover increase in nonlinear fasion as wind penetration rises further.

Since the Irish bubble burst in 2008, investment in the Irish electricity system has continued apace. Extra generation capacity, resulting in the current extraordinary excess over demand, along with transmission investment and the new interconnector to Wales, has cost somewhere between €4bn and €5bn. This is one explanation for the relatively high electricity prices here, now about a quarter above the European average.

Objections

Communities around the country have been raising objections to new wind farms and to new transmission lines, some of which are needed only because of wind farm expansion. If the new investments were likely to deliver serious economic benefits, for example lower electricity prices and low-cost emission reduction, the environmental headaches might have to be endured. But what if the economic and emission benefits are illusory?