This should drop significantly as the new renewables contracts come in.
At the moment, basically every electricity supplier in the country bids to provide power. When the auction is finished, all suppliers who were successful in their bids gets paid the same rate, which is the highest successful price in the auction. This worked OK across Europe until the price of natural gas spiked massively (thanks, Russia), and now if there is any gas in the mix, suppliers are all being paid at that same very high top rate, which is why we’re paying ~40c for power. This is being clawed back to some extent by emergency windfall taxes, but that’s messy and administratively complex.
Ireland has moved to a ‘contract for difference’ model for renewables, which means that irrespective of the actual top-line cost in the above market, the renewables suppliers will receive only the contracted amount, and will remit the rest as a Public Service Obligation levy payment. These PSO payments are distributed to customer bills, reducing the effective cost of the electricity. In my last bill, for example, the PSO levy cost was -€25, reducing the bill to me as a customer.
For the 3.1GW of offshore wind in the ORESS1 auctions earlier in the year, for example, the contracted price is 8.6c/KWh. Depending on power usage, this will work in the following way :
1. Power auction returns a price of 8.6c : Renewables providers get paid 8.6c. The effective cost to consumers is 8.6c.
2. Power auction returns a price of 25c : Renewables providers get paid 25c, but return 17c to the PSO fund. The effective cost to consumers is 8.6c.
3. Power auction returns a price of 4c : Renewables providers get paid 4c, and the State tops up the cost to 8.6c from the PSO fund. The effective cost to consumers is 8.6c.
4. Power is exported across the interconnectors to UK/France at 15c : Renewables providers get paid 15c, but return 6.4c to the PSO fund. This is free money for Irish consumers.
As more and more renewables are integrated under these contracts, and more interconnects are brought online, the price of power will reduce very significantly.
As a last note, the model also directly encourages State investment in things like battery storage, pumped storage and hydrogen production, as effectively any power produced below the contracted price is free to the State at that point in time. Having facilities to either timeshift it or consume it become more attractive due to this.
3 comments
Moar renewables please
This should drop significantly as the new renewables contracts come in.
At the moment, basically every electricity supplier in the country bids to provide power. When the auction is finished, all suppliers who were successful in their bids gets paid the same rate, which is the highest successful price in the auction. This worked OK across Europe until the price of natural gas spiked massively (thanks, Russia), and now if there is any gas in the mix, suppliers are all being paid at that same very high top rate, which is why we’re paying ~40c for power. This is being clawed back to some extent by emergency windfall taxes, but that’s messy and administratively complex.
Ireland has moved to a ‘contract for difference’ model for renewables, which means that irrespective of the actual top-line cost in the above market, the renewables suppliers will receive only the contracted amount, and will remit the rest as a Public Service Obligation levy payment. These PSO payments are distributed to customer bills, reducing the effective cost of the electricity. In my last bill, for example, the PSO levy cost was -€25, reducing the bill to me as a customer.
For the 3.1GW of offshore wind in the ORESS1 auctions earlier in the year, for example, the contracted price is 8.6c/KWh. Depending on power usage, this will work in the following way :
1. Power auction returns a price of 8.6c : Renewables providers get paid 8.6c. The effective cost to consumers is 8.6c.
2. Power auction returns a price of 25c : Renewables providers get paid 25c, but return 17c to the PSO fund. The effective cost to consumers is 8.6c.
3. Power auction returns a price of 4c : Renewables providers get paid 4c, and the State tops up the cost to 8.6c from the PSO fund. The effective cost to consumers is 8.6c.
4. Power is exported across the interconnectors to UK/France at 15c : Renewables providers get paid 15c, but return 6.4c to the PSO fund. This is free money for Irish consumers.
As more and more renewables are integrated under these contracts, and more interconnects are brought online, the price of power will reduce very significantly.
As a last note, the model also directly encourages State investment in things like battery storage, pumped storage and hydrogen production, as effectively any power produced below the contracted price is free to the State at that point in time. Having facilities to either timeshift it or consume it become more attractive due to this.
Half of that was my last ESB bill