How should we decide what generation sources we use in the future?

Ireland’s energy policy, and the way Irish electricity generators decide their power generation sources, are largely based on EU policy and on commercial considerations relating to energy cost, security of supply and sustainability. All new sources of energy and power generation have to balance tests of cost-effectiveness, reliability of supply and environmental impact.

A key part of the EU and Irish energy policy framework is driven by the need to avoid damaging climate change. In 2008 the EU member states collectively decided to reduce greenhouse gas emissions from energy by 20% by 2020. New, more demanding targets are proposed for 2030 and the Irish Government’s Energy White Paper has advanced an 80% emission reduction trajectory to 2050.

At the same time as the European Union’s Emissions Trading Scheme (EU-ETS) was created in 2009 the Union adopted the 2020 country-specific targets for renewable energy ¹. The Government decided that Ireland’s overall target of 16% renewable energy in energy demand would be partly met by a 40% target for renewable energy in electricity (Table 1). Setting a higher target for electricity, than for example in transport where Ireland’s target is 10%, has been the norm across the EU ². A 12% renewable contribution to heat (thermal requirement – heating and cooling) is the third part in achieving the overall target. The practical question Ireland faced was how to apportion and meet the renewable energy targets for electricity and heat from renewable sources.

An All-Island renewable energy resource study was commissioned to evalute the options and technologies in terms of resource availability, cost of development, security of supply and environmental impact. The conclusions placed the focus on wind and certain biomass applications where there were resource utilisation or other environmental and energy benefits (Table 2) ³. For example, the recovery of landfill gas for power generation uses a waste stream of methane which is a greenhouse gas with a global warming potential twenty-five times that of CO₂.

The policy for the depoyment of renewable energy in electricity has been implemented with the release of tranches (a specified amount of power in MW) of power purchase agreements guaranteeing, through the Renewable Energy Feed-In Tarriff or REFIT scheme, minimum prices for electricity from renewable energy sources such as wind, biomass, CHP and hydro.

In recent times, the impact of the EU 2020 policy on the affordability of energy in Europe, in comparison to the United States and our other trading partners, has put a new focus on cost-effectiveness. If cost is a key factor in how we make our decisions, at the moment fossil fuels are often cheaper than alternatives. However, fossil fuels have external costs in the form of greenhouse gas emissions which are causing climate change along with other detrimental health and environmental effects from nitrous oxides and particulates.

In addition, the supply of fossil fuels is not always guaranteed: We imported over 85% of our oil and gas in 2014 ⁴ and these supplies could be interrupted by international events. Past oil crises that led to disruptions to our oil supply and economically damaging spikes in prices brought about a resurgence of coal use, but also gave a new impetus to energy efficiency.

More recently the high fuel conversion efficiency, lower greenhouse gas emissions, and new gas-fired combined cycle technology led the move to natural gas for electricity generation. This was greatly assisted by the speed with which the new Combined Cycle Gas Turbine (CCGT) plants could be financed and built.

The introduction of emissions trading for the power sector at a European level ⁵ in the form of the EU- ETS has left the choice of energy for power generation in the hands of the market. Government regulation and policy still influences the choice of fuels through market rules and price support for renewables and peat. Electricity demand, the price of carbon emission permits, and the ability of new plant with new technology to compete taking account of the fuel price outlook are among the factors weighed up by investors in making their power generation technology and investment choices.