EirGrid has established a special purpose vehicle (SPV) to enable it to develop an additional 450MW of emergency electricity generation for winter next year.
The move will see the semi-state company that manages the country’s electricity transmission network become a developer of power assets for the first time.
Energy Minister Eamon Ryan directed the company this year to procure generation assets itself in order to address a looming energy shortage.
The move followed previous efforts by EirGrid to have 200MW of emergency power generation in place for this winter.
EirGrid sought tenders in May 2021 to provide 200MW of emergency power for the following winter. The contract was awarded to the ESB, but was subsequently challenged by another operator in the High Court.
The company had objected to the fact that EirGrid had not used an open procedure to award the emergency generation contract.
That resulted in the plan being temporarily shelved. However, a new tender process was subsequently run by EirGrid to secure up to 200MW of emergency power generation in time for winter 2022, and an additional 100MW due to come on stream for 2023-2024.
The issues surrounding the lengthy process in attempting to procure emergency generation systems last year prompted a decision to request EirGrid to directly establish a system itself.
However, as the terms of its licence don’t permit it to operate electricity generation assets, it’s almost certain that the semi-state company will have the power generation constructed and then seek an operator for it.
The Business Post reported last month that EirGrid was poised to directly procure emergency power generators for winter next year, bypassing energy providers including the ESB.
The Irish Independent has learned that EirGrid has now established a new special purpose vehicle that will be used to develop 450MW of emergency power generation.
Its memorandum of association notes that the new company has been established "to the extent considered necessary for the security of supply.... to purchase, or order the manufacture of, or otherwise acquire electricity generation plant for resale and do all other things necessary to comply with a direction given by the Commission [for Regulation of Utilities] in this regard”.
It also notes that the company's money can be invested in electricity generation plant, and can develop "any land acquired by the company".
There may be some further cost, but we will not know that until all the contractual arrangements are in place
Mr Ryan indicated to the Dáil during the summer that the 450MW in emergency power generation being sought will cost in the region of €350m to deliver. It’s expected to be in operation for three to four years. After that, the assets could be decommissioned and potentially sold off on the international market.
“There may be some further cost, but we will not know that until all the contractual arrangements are in place,” said Mr Ryan during the summer. “We cannot be specific because contract negotiations are ongoing as we speak.”
Mr Ryan added at the time that the 450MW of generating capacity to be installed on a temporary basis would not result in a “significant additional cost” on the public.
“We were just unfortunate in the auction process,” he noted.
“We wanted to deliver similar open cycle, fast reaction, derivative-type generators. These were bid for and we succeeded in the auction process, but they were subsequently not delivered for a variety of reasons, including delays in the planning system, and suppliers and power generator manufacturers not being able to meet the commitments they had made.”
The public have been warned that rolling electricity blackouts could be on the cards this winter if the electricity network struggles during what is the peak demand season for power.
A government review of the security of Ireland’s energy supply includes options such as a floating liquefied natural gas platform that would operate during periods of a “material risk of demand disruption” here.
