I had a conversation with CER on legal implications of the PSO levy.

My question was whether they can take me of the grid if I deduct the amount that they force me to pay to subsidize the Idiotic peat-> electricity production in Brian Cowen’s Constituency.

Interestingly, the gentleman was very much in line with my thinking.

The term they use is de-energizing, and he confirmed that they would de energize me if I would start to deduct from the next invoice.

I thought, if a couple of thousand people would agree to do the same, this would make an impact and put pressure on Minister Ryan, but…. well….

Best
Georg

On the other hand I agree the burning of turf is a jobs for the biffos issue, if it was important, we’d keep it til it was needed.

—-

Wind power has several bad points for the running of a national grid, the main one being that it don’t blow for about a week every winter we our peak electricity demand is, so we need to have backup conventional power to cope with this. This unused backup capability has to be paid for. THe more wind, the less time the backup generation capacity is working to actually generate power and earn it’s keep.

OK. I imagine there is a probability that the outcome wrt the level and structure of prices which the Minister and the CER are seeking to engineer would replicate the outcome of a genuinely competitive market, but I would expect it to be very low.

The CER intends to remove price regulation of ESB CS sometime after Oct. once some - not very onerous - conditions are met. The market will then be deemed to be competitive, so why not let it work? Why indulge in this specific engineering of the level and structure of prices?

“Is this not what happens in a deregulated market?”

I wish I could share your confidence that the Minister and the CER will be able to replicate the outcome of a genuinely competitive market - particularly when the primary objective is to ensure that the two state-owned participants in the market can gouge enough cash from consumers to finance the Minister’s policy desires.

You mean 200,000 by 2020 right?

It is my understanding that Renault and Nissan together have announced global production capacity of 500,000 EV units per year. So that’s essentially one manufacturer.

Then there is BYD in China with 8000 engineers and the advanced plans for the introduction of the E6 (range 200-250 miles), BMW, Ford, Coda, Mercedes Blue Zero, Mitsubishi iMiEV. Toyota, Subaru etc. I could go on an on for quite a while.

So in sum, it is far very implausible (despite the customary certainty in ESRI) that Ireland would have have a high proportion of these vehicles given we are currently one of the only countries which will have the infrastructure and that our supports are far more generous than those available elsewhere.

The plan is to have 200,000 all-electric cars on the Irish roads by 2010. Nissan plans to supply 50,000 Leafs per year to the European market. Renault has not announced any numbers, but Bursa has a capacity of 360,000 cars per year — for the Megane, the Clio and both versions of the Fluence. Other companies are sitting on the fence. Ireland would have an implausibly large share of the market.

And the point is?

Is this not what happens in a deregulated market?

This is the CER’s decision on the ESB’s regulated prices from around this time last year:
http://www.cer.ie/en/electricity-retail-market-decision-documents.aspx?article=0398d6dc-b24a-4c48-84f4-2ed88c1ef947

The Executive Summary (quoted below) outlines the machinations that have taken place over the last year or two (and the decision that engineered the 2009 decline in prices you cite).

“The Commission for Energy Regulation has approved the regulated tariffs of ESB Customer Supply, the Public Electricity Supplier, to apply from 1st October 2009 – 30th September 2010. This decision will result in an average reduction of 0.2% for all regulated categories of customers.

The regulated retail tariff year was aligned as an annual review for the public electricity suppliers in both the Republic of Ireland and Northern Ireland from 1st October – 30th September. However, the dramatic increases in fuel prices in 2008 meant that the Commission undertook a number of tariff reviews. An Interim review in July 2008 resulted in an average increase in regulated tariffs of 17.5% and in December 2008 an average decrease of less than 1% in the final retail tariffs. The December review took into account falling forward fuel prices at that time and also the €315.4m ESB rebate and an €87m PSO related rebate which was returned to all customers over the 9 month from 1st January 2009 – 30th October 2009.

In April 2009, in light of the worldwide economic recession and the difficult economic circumstances facing Irish consumers, the Commission issued a Direction to ESB Networks to re-profile approximately €120m of networks revenue. This action effectively reduced retail tariffs to all customers by approximately 10.3%. This decision was taken to bring forward anticipated reductions, to benefit all consumers, on the basis of forward fuel prices at that time. The Commission noted that in bringing forward the 10.3% price reduction, to apply from the 1st May 2009, there was likely to be no scope to reduce regulated prices any further from October 2009. This has proved to be the case for domestic consumers, where many households will see no net change to the average annual bill.”

So customers who stayed with the regulated ESB business saw prices largely unchanged this year, but customers who switched to BGE experienced their cross-subsidised price reductions - and other competitors had to follow suit. We don’t know precisely where prices are going from October, but we do know that the PSO levy will be applied, that the bulk price may be lower and that the CER wants to increase transmission tariffs and reduce distribution tariffs. In addition, the Minister wants more ‘re-balancing’ - charging small volume consumers more and big volume consumers less.

I expect big users will get whatever price reductions will be required to keep them quiet and smaller volume consumers (the big majority in numerical terms) will pick up the tab.

Fair enough. I think you have raised some interesting points which I would like to explore further myself. I’m not an expert on wind, but I would say that from discussions with officials from across public and private sector that the received wisdom on meting wind target varied from positive to “too early to tell”.

I would also describe ocean energy targets are ambitious, not daft. There are demonstration plants springing up for a few years (eg: http://www.pelamiswave.com/our-projects/agucadoura). SSE are developing a 200MW tidal energy farm in Scotland. So it is at plausible we could have significant wave/tidal power on stream by 2020. Whether it is likely or not is another question.

ESRI were telling us a few months ago that our EV targets were also impossible to meet due to production capacity constraints. Nissan Renault and others now beg to differ.

To get back to NREAP, perhaps one valid criticism is that it added little new. For some reason a decision was taken not to include some of the work which is being done on how to meet targets for heat etc. Perhaps there was no political sign off on the measures being proposed. I’m not sure.

“Which targets won’t be met and why not? I don’t see your problem.”

1. The capacity factors for onshore and offshore wind as installed capacity increases is wishful thinking in the NREAP - take a look at the 2009 & 2010 Generation Adequacy Reports to see the decline. 2010 is already considered another “poor wind year”.

2. Including Ocean Energy is just daft as Richard alluded to above.

The above are used to meet your targets and clearly are not realistic. I note from table 10 (the Modelled one !)that 5MW of Geothermal is planned for 2020 !

Just to be clear, if you read the Eurostat methodology, the ‘industry’ prices actually refer to non-residential prices and they cover from the very small consumers to the largest. Throughout 2009 there were price reductions in all bands - the four largest I’ve given above. The two smallest bands which I didn’t give, fell by 4% and 10%. Residential electricity prices fell by approx. 9% in the bands that have over 80% of the consumption and up to 12% reduction for smaller consumers.

The Minister is reported as saying “we’ve brought prices down by about 25%”.

He didn’t say that this applies only to (largish) industrial consumers. What about everybody else? The spin-machine often gets more mileage out of smaller sound-bites.

The MNCs (and other players in the traded sector) are getting restive as they can see what is going on and the Minister is looking to buy their silence by hosing everyone else.

Ok the point I was making is that because you didn’t know the genesis of the Minister’s 25% you assumed that it was an “unevidenced assertion” and based on spin. Clearly, in this case, it was based on evidence.

I’m not denying that prices to the industrials have gone down, but I would still contend that it is at the expense of households and small businesses and that the underlying transmission and distribution costs are excessive.

And so far as jc (and similar Green evangelists) is concerned, I find it is impossible to engage effectively when any scepticism about the implementation of the Green agenda (or suggestions of alternative means of implementation) is dismissed as government-bashing and denial of scientific evidence.

There should be enough evidence that centrally imposed diktats, involving multitudes of targets and instruments - and that frequently involves bribing people with their own money to comply - are unlikely to be successful.

…and is Pete Seeger still wielding the axe to cut the supply?

You raise a very important issue. But in the medium to longer term it should not pose a problem.

However, it does highlight glorious imbecility in gas system planning. In the late 1990s a major study (Gas2025) established what we have now. LNG import got very cursory treatment and was dismissed. (For some reason, BGE has never liked it.) BGE won the chest-beating contest to build IC2 - as opposed to the alternative of reinforcing SNIPS.

The logical sequence should have been, given SNIPS and IC1, reinforce SNIPS (with a North-South interconnector - which has been built in any event), LNG import and, then, if required, build IC2, but to Wales.

The pattern of gas supply has changed dramatically in Britain with supplies from the north (St.Fergus) that feeds Moffat in decline and new supplies from LNG (2 in Wales and one in Thames estuary), Norway (to the east coast) and interconnectors to Bacton (East Anglia) supplementing declining indigenous supplies. Pulling all of the Irish supplies off Moffat does raise scheduling, investment and operational issues.

However, with Shannon LNG slated to come on stream and Corrib (when will we see it?) emerging sometime, it is likely that the capacity in IC2 (and, possibly, some of that in IC1) will be redundant. This will reecue the importance of Moffat, but BGE and the CER are determined to recover the costs of the interconnectors even though they will be only partially used.

This will insert a significant and unnecessary cost wedge between the bulk price in Britain and that in Ireland.

The simple solution is to write-down the value of IC1 and IC2 to reflect their likely future use, integrate the operation of the transmission systems on both islands, extend the existing British transmission pricing system to the Irish system and have a single bulk price on both islands.

ww.energy.eu is not official EU, it’s a commercial undertaking. Time series data on gas and electricity prices are available for free on Eurostat’s website.

The tax exclusive price movements for electricity in Ireland for the 12 months to the end of 2009 were;
IC -17.5%
ID -24.3%
IE -23%
IF -23.5%

I can just picture the Minister saddling up to get on his high horse as Paul did to jc in an earlier post;-)

Many thanks for highlighting the Eurostat data. The EU now has a new energy portal which presents industrial and household fuel prices on a monthly basis - but it is a subscription service:
http://www.energy.eu/#industrial

Snapshot comparisons of prices often conceal more than they reveal. I prefer to look at movements in the components of final prices excluding tax over a period of time. It allows the possibility of disentangling possible drivers and generating more effective cross-country comparisons.

In the Irish context, the fall in gas prices, given the dependence on gas-fired generation, has benefitted Ireland more than most. And competition in the larger volume industrial market has also helped, though, in the case of the ESB and BGE, prices have been subsidised by excessive profits in their network businesses. (I’m not sure what this is doing to their competitors who are not similarly blessed with such a slush fund, but I suspect it’s not making life easy.)

And the Minister has required the CER to ‘re-balance’ prices - higher prices for households and small businesses; lower prices for big industrials. And more re-balancing is due in October. (I’m not sure to what extent the initial re-balancing impacts on the Eurostat data cited.)

Although Ireland doesn’t provide it to Eurostat, Eurostat occasionally presents breakdowns of the components of final prices. Some preliminary digging I have done suggests that Ireland’s transmission and distribution costs are way out of line and this, more than anything else, pushes up Irish prices.

The Minister and the CER are making every effort to bring down prices for the big industrials, but it is at the expense of households and small businesses.

By the way, during the same period our nuclear cousins in France experienced an 11% increase in electricity in Band ID.

Many thanks for the detailed clarification. It highlights the immense complexity - and associated costs - of the entire SEM project - and we are examining just one relatively minor aspect. It does raise a major question about the ability of legislators in both jurisdictions to exercise any effective scrutiny of this complex project on behalf of their voters. An enormous amount has to be taken on trust and this is never a good way to proceed in a democracy. One doesn’t need the example of the continued government and official assurances that everything was for the best of all possible worlds in the lead up to the banking fiasco to be sceptical of the assertions being made by the Minister and the CER. These may not be the same people who brought us Pearl Harbour, but they come from the same stable and have the same mentality.

I accept your point that the ETS windfall wasn’t used directly to offset PSO costs, but perhaps one of the reasons that electricity wholesale prices were high enough to avoid this is that they included the full costs of carbon - some of which was extracted by the generators as a windfall gain. Wholesale prices have come down, primarily, given Ireland’s dependence on gas-fired generation, because gas prices have fallen in western Europe. This is purely fortuitous and has nothing to do with the efforts of the Minister or the CER - and they have fallen for everyone else as well.

The Minister is at pains to point out that the PSO levy is not a new tax. This is true, but the point is that the Carbon Levy is a new tax which has extracted some of the unearned surplus that was previously sloshing around in the system. And yes, I agree that the windfall was used previously to prevent prices rising too high, so I think you will agree that, were the Carbon Levy not in place, it is likely it would be used to offset the PSO cost and avoid the imposition of the levy.

I have grave doubts about the benefits of the entire SEM project to consumers - particularly as the Irish market is so small in the context of the EU/ERGEG’s feeble attempts to create a UK-France-Ireland regional electricity markets, serious policy and market failings in the UK electricity market and France’s atavistic distaste for market mechanisms and preference for national champions (EdF & GdF/Suez) - but that, perhaps, is for another day. What is clear is that, on top of high bulk prices, there sits an excessively expensive transmission and distribution system. This is what is driving excessively high final prices. The PSO levy is largely unnecessary and primarily politically driven, but it pales into insignificance when compared to the excessive costs of transmission and distribution.

though I would still love to know how he gets his 25% price reduction.

He may be referring to Eurostat, who reported a fall of 24% for 2009 in the ex VAT price of electricity for Irish industrial electricity customers in the largest market band: Band ID (2,000 - 20,000 MWh. This figure was quoted by the NCC as evidence that industrial electricity prices were now in line with the rest of Europe and not a threat to competitiveness.

You can look at the numbers here: http://epp.eurostat.ec.europa.eu/portal/page/portal/energy/data/database

Ossian

Gas is the fuel for approx 60% of our electricity on an annual basis but is at times responsible for over 85%. We have approx 2 days gas storage in the depleted Kinsale fields and no LNG plants. The gas-fired CCGT fleet can run on distillate, but sites are required to hold only 5 days liquid fuel. In the event of a gas interruption distillate would deplete faster than we could source supplies.

The SEM isn’t helping. Our oil running plant which could presumably use the strategic oil reserve is old and unreliable. As part of Endesa’s limited portfolio, the oil-fired Great Island and Tarbert stations only have a future in the SEM if they are decommissioned and converted to gas turbine sites. Meanwhile the Moneypoint site is getting limited running in the SEM and the new Aghada (ESB) and Whitegate (BGE) will only increase our gas dependence.

Any talk to PSO contributing to energy security in this context is a joke.

“The PSO levy is just one, relatively small, example of the dysfunctionality of energy policy and regulation in Ireland. In fact, electricity consumers have being paying it for years via the ESB’s ETS windfall that the ESB was extracting, without as much as a by your leave, from all consumers. It used to, very generously, donate some of this to net out the cost of the PSO. This avoided the need for the levy and I think you can see, given the current controversy, why this was all very convenient for the Minister and the CER.”

I think its worth adding some further clarity on this issue. Between 2005 - 2007, the CER allowed ESB Generation very little revenue for ETS allowances - if you check the Bulk Supply Agreement rulings of the time (published on the CER website) you should find that about €1 - 2m in total over the period allowed, hardly an overwhelming windfall in the context of ESB Generation’s overall revenue in that period. ESB was not “extracting” a windfall gain duirng this period. Once the SEM was put into place, the bidding rules required all generators to bid their full costs, including the cost of carbon. This did indeed give rise to a windfall gain for a period, to both ESB Generation and to other private generators, and this would have been clearly understood at the time, explicitly set out in the SEM documentation. I think it understandable that the issue of windfall gain was left to one side in the context of establishing a single market between the two jurisdictions - the attendent structural and legislative changes to be put in place were probably sufficiently complex on their own. During the past few years, the PSO has been put at zero by the CER because the level of the wholesale price for electricity in the SEM was higher than, for instance, the guaranteed floor price for renewable electricity and accordingly no “out of market” costs arose. Of course it could be argued that the inclusion of the price of carbon is an element in the higher wholesale price, but then that’s an element of pricing the externality, imperfect though it may be.

ESB may have applied some of the ETS windfall in the post-SEM period to offset electricity price increases - recall the price reductions in recent times - but it would not have been offset against the PSO, there would have been no need.

The fact that the windfall gain is now being addressed deals with a remaining anomaly post-SEM, and in any event will only be necessary until the end of 2012 - from 2013 onwards all electricity generators will have to pay for all of their allowances through ETS auctions, hence no windfall gain.

The point is the Minister can’t play it straight - though I would still love to know how he gets his 25% price reduction. (This is the kind of unevidenced assertion that gets regurgitated by the government spin-machine until it becomes gospel.)

The Green agenda is being financed by ’stealth’ taxes. If the Minister were to come clean about how much his desires are likely to cost over the next decade I think there could be enough of a backbench FF revolt to overturn the applecart.

I was interested in Richard’s point that some work has been done on the total economic costs of significant wind generation, but there is no agrement on the estimates because there isn’t an agreed set of assumptions. The problem is that the kind of analysis required takes time, effort and competent resources - and this costs money. But who is going to fund this? You’ll find no takers in the government or public sector sphere. And do you think any private sector players would want to p off the Powers That Be?

If we couldn’t import another car from tomorrow the current stock could be made to operate successfully for years, ditto for clothes. The same is not true for energy. If energy imports were interrupted we’d be in the dark ages within days or weeks.

Energy security is a major issue. Wind and peat may not be useful in guaranteeing energy security, but comparisons with cars and clothes devalue the seriousness of the issue. Similarly, the importance of Kinsale and Corrib gas fields to the country’s winter comfort is underestimated in general….hence the govt’s ability to ignore Corrib’s paralysis for all these years. Let’s pray for continued tranquility in Russia and the Ukraine.