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February 2014 - Your complimentary edition

ENERGY TIMES THE

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Record wind generation Dec 2013 Over the past number of years we have seen wind energy play an ever more important role in meeting Ireland’s electricity demand. December 2013 proved to be one of the windiest months of recent times and a record month for power generation from wind energy. A new record for the amount of wind energy generated in Ireland was recorded at 6.30pm on 17 December 2013 when wind generation stood at 1,769 MW; this accounted for 40% of electricity demand at that time. The previous record for wind generation was 1,564 MW recorded on 20 November 2013, providing 45% of the total system demand. Overall a record 24% of Ireland’s total energy mix was generated from Irish wind energy in December 2013, compared to 22% in December 2012.

What this means for power prices This huge contribution of wind energy helped reduce the monthly average wholesale electricity price by 5% compared to the previous month (November 2013) and by 2% compared to December 2012. The continued integration of wind energy into Ireland's electricity network is expected to reduce prices further over the coming years. Although wind generation is generally higher during the day, a higher percentage of system demand is met by wind energy during the night when commercial and domestic demand is at its lowest. In December 2013, night prices were 43% lower than day prices in 2013, providing an incentive to use more electricity during off-peak hours.

2013 NBP in Review: How a late cold snap in Q1-13 & low storage levels led to high prices for the remainder of the year! Joanne Daly, Senior Analyst

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joanne.daly@vayu.ie

Prices at the National Balancing Point (NBP) climbed during the early part of 2013 and remained elevated for the rest of the year due to supply concerns and low storage reserves. Cold weather at the start of 2013, combined with fewer LNG deliveries and numerous unplanned outages on pipeline supply sources, meant that Britain was particularly reliant on gas in storage to meet demand. Withdrawals from storage continued well into April, which is the start of the traditional injection period, with summer demand boosted by the need to replenish stocks. The average Day-ahead closing price for 2013 was 68.15p, compared to 60.22p over 2012, continuing the trend of rising prices on the NBP. This year on year increase was heavily influenced by the use of stocks early in the year, as total gas in storage dropped to just 3% of total capacity

David Gascon, Electricity Manager david.gascon@vayu.ie

On 22 January 2014 the European Commission unveiled its proposals for the 2030 Climate and Energy Policy Framework. The objectives send a strong signal to the market, encouraging private investment in new pipelines and electricity networks or low-carbon technologies.

Wind Energy is now a vital part of Ireland’s fuel mix

What are the targets for 2030?

Ireland currently has 1,844 MW of installed wind energy capacity. 96% of this total capacity was utilised on 17 December 2013 when wind generation was at its record high of 1,769 MW. The importance of wind energy in Ireland will continue to grow over the next number of years and there is a target in place to supply 20% of Ireland's energy from renewable sources by 2020. Wind energy will be the primary source of this energy and could mean that up to 3,400 MW of wind generation capacity will be installed.

energy and climate objectives applicable beyond 2020 up to 2030:

Keith Deacon, Energy Analyst keith.deacon@vayu.ie

The 2030 Framework provides predictable and certain

A greenhouse gas emissions reduction target of 40% below 1990 levels, to be achieved through domestic measures alone (i.e. without the use of international credits). This will ensure that the EU is on the cost-effective track, set out in the Commission's low-carbon Roadmap, towards meeting the 2050 objective of an 80-95% emissions cut. The target also sets a strong example to the international community in the negotiations on the new global climate agreement to be adopted in 2015. The target will result in stronger benefits in terms of energy independency, the EU's external fuel bill, health impacts, employment and competitiveness. To achieve the target efficiently, it is projected that Emissions Trading Scheme (ETS) emissions would need to be cut by around 43% from 2005 levels,

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Currently, storage stocks are approximately 15% higher than levels at the same point last year. This, combined with unseasonably low demand in the UK, has allowed prices to weaken across both the prompt and near curve. This softening of prices can be attributed to the erosion of risk premium associated with what happened in Q1-13 and, and now the unlikelihood of that repeating. The influence of oil on longer-dated contracts waned further in 2013, with traders more frequently sighting shifts on the pound relative to the euro as the key driver behind moves on the far curve. The acquisition of two UK-based shale gas licences by French oil and gas major Total, could lead to commercial shale production in the country sooner than previously expected. Analysts now think shale gas could be produced within five years in the UK, which means the fracked gas could in theory affect contracts on the current NBP curve such as Winter-18.

whereas the non-ETS sector would reduce less, by around 30% compared with 2005.

Energy & Climate Goals for 2030!

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in April. By comparison, at the same point in 2012 all storage sites combined were about half full, while injections had already started. This supported near curve contracts heading into the summer period.

A minimum of 27% will come from renewable energy in any consumption above 1990 levels. This would come with significant benefits in terms of greater reliance on indigenous energy sources and in terms of energy trade. Such targets will also continue to drive growth in the renewables sector, e.g. with a share of renewable energy in the electricity sector increasing from 21% today to at least 45% in 2030. Energy efficiency is a key component of the 2030 framework, and the Commission will return to this later this year, following its assessment of progress made towards meeting the 2020 target provided for in the Energy Efficiency Directive, to be concluded in 2014. European Heads of State including An Taoiseach Enda Kenny will further discuss these proposals in March. Following this, formal EU legislation, which will clarify how this will be translated at the national Member State level is expected to be proposed at the end of this year. The full package of the European Commission documents are accessible here.

customer survey In November 2013 we asked our customers to give us feedback on a number of areas: from their overall satisfaction with Vayu, to their impression of the services we offer, and how we compare in these areas to competitors. Our Customers said:

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best 2013

February 2014 - Your complimentary edition

small workplaces

green isle of envy:

Devan Hughes, Energy Analyst devan.hughes@vayu.ie

the facts and fiction of wind energy in Ireland Chinese proverb says “When the winds of change blow, some build walls, the others build windmills”, and the question of our time is, “What will Ireland do?”. The following article is a one sided view of the debate currently going on in Ireland, in our next edition we will look at things from the other, discussing the cons of wind energy and the reasons people are concerned. A couple of years ago I used a term to describe what Ireland had the potential of being. That term was “Europe’s Battery”. Now it would seem our Government and policy makers have caught up to that way of thinking.

The people of Ireland have long since watched as foreign countries basked in the wealth of fossil fuels. Saudi Arabia, the UAE, the USA, Qatar, the list goes on. Green with envy as it were, and all the while sitting on our very own untapped and unlimited source of energy. In Ireland’s current situation, with high unemployment, a crippled construction industry and continuing debt issues, you would think that the Irish people would welcome this new industry with open arms. But you’d be wrong. There appears to be a cloud of negative opinion surrounding the wind energy sector in Ireland. This phenomenon is leading to disruption in not only the flow of investment into this sector; but it hampers the necessary legislative changes needed to progress a new and emerging industry. In this article, I’ll attempt to test this negative opinion and see how much of it is truly justified. To do this here is an outline of some of the biggest myths surrounding wind energy and an examination of the science behind them.

Myth 1: “Wind Energy is more expensive than conventional energy.” Fact: With the ever increasing efficiency of new technology the cost of generating electricity through wind has fallen substantially. This has resulted in wind energy becoming a major price competitor with fossil fuels. The Irish Wind Energy Association released a report in 2011, the “Impact of Wind on pricing within the Single Electricity Market”, which found that an

11.5% reduction in electricity prices could be achieved through delivering 45% of the overall generation mix from wind by 2020. Wind provides a strong hedge against the uncertainty of future energy prices; with wind we will always know the cost.

Myth 2: “Wind Energy is heavily subsidised by the electricity consumer” Fact: This seems to be mainly due to a misunderstanding of the REFIT scheme and PSO levy. The REFIT scheme provides a guarantee to onshore wind farms of a minimum price for electricity generated and exported over a 15 year period. However; this only applies where the wholesale market price falls below a certain point. The Public Service Obligation (PSO) levy is a charge to all electricity consumers’ bills that exists to support renewable and indigenous energies. In fact, approximately 27% of every 1 euro generated by the PSO levy is used to subsidise renewables, including wind energy with most of the rest supporting certain peat and gas generation. The purpose of the levy is to ultimately promote security of supply for the Irish consumer. When the wholesale price of electricity is high there is little or no payment from the PSO to wind farms. There are also times when wind farms contribute a surplus to the PSO and once you take into account the reduction in wholesale prices there is a tangible saving delivered to consumers overall.

Another factor to consider is that at the end of that 20 year life cycle the area can be restored to its original state at a low environmental & financial cost. In comparison to the long lasting effects of power generation from fossil fuels and nuclear power stations, wind farms are essentially reversible whereas others have drastic irreversible effects on our environment.

Myth 5: “Wind Energy has failed in other countries” Fact: Wind energy continues to grow at an incredible rate worldwide. In the past twenty years it has been extremely successful across European countries such as Denmark, Spain and Germany. In 2012 the EWEA produced a report that showed how the wind industry in Europe has grown more than twice that of the EU’s overall GDP between 2007 & 2010, despite the economic turmoil we have found ourselves in.

Myth 3: “Wind farms are noisy” Fact: For anyone who has visited a wind farm and stood directly in front of a turbine the answer is yes, it is quite noisy. But, and there is a big but, current planning permission guidelines prohibit a turbine to be built unless it is at minimum 500m away from the closest dwelling. To give us an idea of the difference in sound at that distance the National Health and medical Research Council of Australia in 2010 conducted scientific research into the noise levels of wind farms in comparison with other surroundings. The results showed that a wind farm at a distance of 350m had a sound pressure of 34-45 dBA. Now for those of us who are not sound engineers the comparison is that of a quiet bedroom that has an average dBA of 35. This means according to that analyses, at 500m, the noise level of a turbine would be 30% less noisy than a quiet bedroom.

Myth 4: “Wind farms take more energy to build than it can ever produce” Fact: Today the average wind turbine is estimated to pay back the energy used to manufacture it in 3-5 months after installation (source: IWEA). However, if we take into account the construction of the site & energy used in transportation the payback period can be anywhere between 1-3 years. With a lifetime of approx. 20 years this provides a significant contribution to reducing our carbon footprint.

The list could go on, but I think we are starting to get the picture. It would appear that the arguments often used to condemn wind generation in Ireland are rarely based on factual information but rather “village hear say”. Now personally I don’t blame the villagers for this. I feel the blame lies squarely on the shoulders of the industry itself for not presenting the facts in a clear and effective manner to the people of Ireland, thus allowing for a suspicious and fearful atmosphere to develop. I’ll finish by saying this, if we truly wish to bring our country back to a position of financial health, and continue to repair the international reputation we once held, we must strive to create a social and legislative environment whereby sustainable and environmentally friendly industries, such as wind generation can flourish and evolve in our country. However, it is clear that only if we ensure social & community responsibility on the part of policymakers and planners that we can seize these opportunities and future generations will know, not only are we well known for our green lands, we can be famous for the green energy we produce.

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This information is the proprietary information of Vayu Limited (Vayu) and must not be disseminated by the recipient to any third party without Vayu’s express prior written consent. Vayu does not make any (and expressly disclaims any) warranty or guarantee, whether express or implied, whatsoever in respect of the information and the information is provided on an “As Is” basis at the recipient’s sole risk. Vayu nor any of its officers, employees, agents, affiliates, subsidiaries or shareholders make any warranty with respect to, and no such person shall have any responsibility or liability to the recipient for, (i) the accuracy, completeness or reliability of any of the information, or (ii) for delays in the provision of, or for not providing, any of the Information. Neither the provision of the information nor any of the contents of the information, either (i) constitute an offer by Vayu to enter into any transactions and / or (ii) shall they be relied on for any decision made by the recipient. Vayu is not an adviser or fiduciary of the recipient and the recipient shall take all such independent advice as it shall deem fit before entering into any transactions.

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