Green Economy Expo 2010

Brian Britton – NOW Ireland

21st May 2010

Offshore Wind – Securing Ireland’s Energy Future

NOW Ireland

The National Offshore Wind Energy Association of Ireland was established in 2007 to promote the development of Ireland’s substantial offshore wind resource and to ensure that our island leads the way in building a sustainable, green economy.

Set up by Ireland’s five largest operators

• Oriel Windfarm Limited• Airtricity• Codling Wind Park• Saorgas Energy Limited• Fuinneamh Sceirde Teo

• Potential investment of over €8bn.

• Capacity of over 2680MW from existing lease areas with potential for a further 4000MW.

NOW Ireland – Objectives

• To position offshore wind in the Irish energy debate.

• To Promote the implementation of a framework in Ireland which supports offshore wind deployment.

• To raise awareness of the capacity of offshore wind.

• To ensure that the National Grid is developed in a manner which facilitates the development of offshore wind.

• To assist member companies to progress licenses and leases.

• To harness existing lease potential.

• To promote co – operation and best practice in industry.

Ireland has huge Offshore Wind Resources

With more renewable energy generating capacity than required

Strongestpotential

Very highpotential

High/mediumpotential

Medium/lowpotential

Simplified map based on Risø National Laboratory, Denmark, 1989

Overview of The Oriel Windfarm Project

• An offshore wind farm in the North Irish Sea.

• Wind farm Capacity:

Capacity up to 330 MW

55 Turbines

Sufficient energy to provide for 250,000

homes

550 jobs during construction

60 long term high skill operation and

maintenance jobs

• Foreshore Lease expected

• In Gate 3 - The current grid connection process

Identifying a Suitable Location for the Development of an Offshore Windfarm

An area in the North West Irish sea was selected as the most suitable location for the Oriel Windfarm Project due to its:

• excellent wind resource

• <30m water depths at >5km from shore

• good seabed sediment conditions

• shelter from high wave loads

• low tidal streams

• grid access North and South

Bathymetry: Red = 15m, Blue = 30m

Oriel Windfarm Project Timeline

•Preliminary Feasibility Started 2001

•Foreshore Licence Oct 2005 - Oct 2007

•EIA Jan 2006 - Jan 2007

•Application for Lease Feb 2007 - ??

•Grid Connection Offer April 2011

•Pre Construction planning and procurement 2011 & 2012

•Construction 2013 & 2014

•Operation Commencing 2015

Drivers for Offshore Wind Development in Ireland

• Danger of security of supply - At the end of a long pipeline

• Fuel price risk - 92% of fuel imported

• Renewable Energy Targets - 40% of electricity from renewables by 2020

• Oil price today - $80 per barrel in the worst recession in 60 years

• Economic imperative - using our natural resources

• What is needed to kick start the industry

Barriers to Offshore Wind Development in Ireland

Issue Solution Status

1.Licensing Regime Strategic Infrastructure Act New Legislation drafted

2.Grid Connection Gate 3 Process for initial projects Grid Modelling underway.Some Projects

with consent outside the Gate

3.Refit 14c/kWh announced February 2008 Terms and Conditions

published September 09

Ireland will not meet its Government Policy target of 40% of electricity from renewables or our EU Obligations by 2020 if we don’t have a significant element of offshore wind on the system by 2020.

Phase 1: Ireland’s RES-E 40% Target

The government has indicated in its NREAP that it will require 6,500 MW by 2020

• WE have about 1,500 MW on line

•We are building about 200 MW a year

•Many of the onshore projects will not be built, due to planning and financial constraints.

•The scale afforded by offshore wind power is needed to meet our renewable energy targets.

•Any excess can be exported

.

How do we kick start the offshore wind industry in Ireland?Use a Two Phased Approach operating in tandem

Phase 2: Export Opportunity

Offshore projects, exceeding requirements

- Scale Exceeds Ireland’s current needs

What do we do?

-Export

How?

-EU Single Electricity Market

-EU coordinated grid structure

-EU price system for exporters

Export Opportunity – Energy

• EU Renewables Directive issued June 2009 allows:

o EU inter state trading.o Requires individual member states plan to reach targets by June 2010.

• Affords a country like Ireland with its massive offshore wind and ocean resource the opportunity to export.

• coordinated planning for the industry 20/30 years outrequired.

• Mechanism for export then needs to be developed by stakeholders in Ireland with objective of:

o Protecting the consumero Encouraging export development

•There is over 100,000MW of offshore wind capacity under development in European waters.

• The European Commission expects the creation of 2.8m jobs by 2020 from renewable energy industry in Europe.

•Siemens have predicted that there will be €300bn invested in the offshore wind industry alone in the next 20 years.

•The UK is planning the installation of 33,000MW of offshore wind generation capacity over the next 10 years.

Offshore Wind Projects in Development in Europe

Export Opportunity - Supply Chain

Export Opportunity - Supply Chain

• The biggest supply chain market for offshore wind in the world is 40 miles across the Irish Sea

Licensing and Grid Connection: UK versus Ireland

2010 2014 2020Q1 ‘09Q4 ‘08 Q4 ‘09Q2 ‘08

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Government support Mechanisms are an important factor for Potential Investment

Support system

Total revenue

Level of support

Duration of support (years)

Market electricity price estimate

(€/MWh)

Grid connection

paid by (€/MWh) (€/MWh)

Belgium Hybrid green certificates

150107 20 35-50 Both

(variable) Germany Feed-in-Tariff 150 150 12+81 Not relevant Government

Netherlands Likely: Tender plus premium payment Unknown Unknown Unknown, likely

15 35-50 Developer

UK Green Certificates 123 -150 83

Asset lifetime 30-50 Developer (variable)Index linked (variable)

Ireland Feed-in-Tariff, tax incentive 150 140 up to 2025 Not relevant Developer 1 In Germany, offshore wind producers receive a high FiT for the first 12 years, and after that a lower tariff, depending on project circumstances (water depth and distance to shore)2 This level is valid for the normal support level of 1.5 ROC/MWh. For those projects that will receive 2 ROCs per MWh under the UK Governments economic stimulus measures, the level of support will be higher, at around 100 EUR/MWh, and total revenue will in that case end up around 150 EUR/MWh.

Building the North Sea Oil and Gas Industry

• Industry started 1965

• Challenge was en par with the moon landing

– Large structures far from shore

– Hostile climate

– Limited similar experience

– Questionable economic returns

• Well orchestrated effort by key stakeholders on all key areas:

– Government

– Oil companies

– Suppliers

– Academics and researchers

• Fiscal regime to incentivise investment:

– First era had exceedingly generous terms

– Currently:

• Accelerated tax depreciation of 72% of all investment

• 50% tax on net income

What one saw was:

– National income far exceeds the government support

– The technical and operational challenges were surmountable

– Norway built a sought-after competence that is now exported internationally

• Offshore wind seems to have several parallels

Europe’s gas infrastructure (1979)

Europe’s gas infrastructure(2000)

Source EWEA

Source EWEA

Source EWEA

Source EWEA

Source EWEA

Conclusion

• Offshore Wind presents a substantial opportunity for Ireland

– To achieve energy security– To reduce carbon emissions– To develop a new export product– To grow a green economy

• The Oriel Windfarm is going to be a major first step in achieving this

– Generating 330MW 5% of Irelands annual electricity consumption– Avoiding 600,000 tonnes of carbon– Creating 610 jobs– Using our most abundant resource to secure a better future for

Ireland

• One consented wind farm will restart the offshore wind industry