Menu
Allianz and Afloat - Supporting Irish Boating

Ireland's sailing, boating & maritime magazine

Offshore Wind and Solar Covered by New Windfall Tax

22nd November 2022

Offshore wind farms will be affected by a new EU council regulation to ensure "windfall gains" from the energy sector.

The Government says it has decided to place a cap on all market revenues of non-gas electricity generators, whereby excess revenues will be “collected and used to support electricity consumers”.

Proceeds could range from around €300 million to €1.9 billion, through the cap on market revenues and a “temporary solidarity contribution” from fossil fuel companies, it estimates.

The cap on market revenues from December of this year to June of next year will apply to non-gas electricity generators with a capacity of 1 MW or more, and involves:

  • a cap of €120 per MWh for wind and solar;
  • a cap of at least €180 per MWh for oil-fired and coal-fired generation;
  • a cap of €180 per MWh on other non-gas generation

“The Russian invasion of Ukraine has led to unprecedented increases in wholesale natural gas prices, impacting the prices paid by consumers, but also leading to windfall gains in some areas of the energy sector,” Minister for Environment Eamon Ryan said.

“The agreement of the EU Council Regulation and the Government’s approval on its implementation will ensure that windfall gains will be collected and redistributed to support energy consumers,” he said.

The €120 per MWh cap for wind and solar takes into account the revenues generators would have expected to earn prior to the increase in gas prices, which was less than €100 per MWh, and the limited increase in costs incurred by these generators, his department says.

“It should also be noted that where electricity suppliers can demonstrate that revenues in excess of the cap are being passed on through lower prices to final consumers, those revenues will not be subject to the cap,”the department says.

“ The cap on market revenues will operate from December 2022 to June 2023 inclusive, as set out in the Council Regulation,”it says.

The Government says has also decided to implement the “temporary solidarity contribution”, as set out in the Council Regulation, to companies which are active in fossil fuel production and refining for the years 2022 and 2023.

This “ temporary solidarity contribution” is based on the portion of a company’s taxable profits which are more than 20% higher than a baseline, it says

“ The baseline will be the average taxable profits for the company for the period 2018 to 2021. Losses from previous years will not be taken into account in the calculation of the taxable profits in temporary solidarity contribution or the baseline,”Ryan’s department says.

“Taxable profits which are more than 20% above the baseline will be subject to the temporary solidarity contribution at a rate of 75%,” it says.

“ This will lead to an effective rate of 0% for windfall gains of up to 20%, an effective rate of 50% for windfall gains of 60%* and an effective rate of 60% for windfall gains of 100% (i.e. where profits have doubled),”it says.

“Given the volatility of gas prices, the level of proceeds from the cap on market revenues and the temporary solidarity contribution cannot be estimated with any certainty,” it says.

“ Depending on the price level of natural gas, the proceeds could range from circa €300 million to €1.9 billion. However, the level is expected to be in the lower end of this range and could be even lower if gas prices reduce,” it adds.

Minister for Environment Eamon RyanMinister for Environment Eamon Ryan

Proceeds from the cap on-market revenues are expected to be collected in 2023, with proceeds from the temporary solidarity contribution to be collected in 2023 and 2024.

The EU Council Regulation says that the proceeds can be used to the benefit of electricity consumers.

This could include reductions in network charges, or supports provided directly to consumers, similar to those already in place.

The Government says it “will determine, in due course, how best to distribute these proceeds”.

Published in Power From the Sea
Lorna Siggins

About The Author

Lorna Siggins

Email The Author

Lorna Siggins is a print and radio reporter, and a former Irish Times western correspondent. She is the author of Search and Rescue: True stories of Irish Air-Sea Rescues and the Loss of R116 (2022); Everest Callling (1994) on the first Irish Everest expedition; Mayday! Mayday! (2004); and Once Upon a Time in the West: the Corrib gas controversy (2010). She is also co-producer with Sarah Blake of the Doc on One "Miracle in Galway Bay" which recently won a Celtic Media Award

We've got a favour to ask

More people are reading Afloat.ie than ever thanks to the power of the internet but we're in stormy seas because advertising revenues across the media are falling fast. Unlike many news sites, we haven’t put up a paywall because we want to keep our marine journalism open.

Afloat.ie is Ireland's only full–time marine journalism team and it takes time, money and hard work to produce our content.

So you can see why we need to ask for your help.

If everyone chipped in, we can enhance our coverage and our future would be more secure. You can help us through a small donation. Thank you.

Direct Donation to Afloat button

Ireland's Offshore Renewable Energy

Because of Ireland's location at the Atlantic edge of the EU, it has more offshore energy potential than most other countries in Europe. The conditions are suitable for the development of the full range of current offshore renewable energy technologies.

Offshore Renewable Energy FAQs

Offshore renewable energy draws on the natural energy provided by wind, wave and tide to convert it into electricity for industry and domestic consumption.

Offshore wind is the most advanced technology, using fixed wind turbines in coastal areas, while floating wind is a developing technology more suited to deeper water. In 2018, offshore wind provided a tiny fraction of global electricity supply, but it is set to expand strongly in the coming decades into a USD 1 trillion business, according to the International Energy Agency (IEA). It says that turbines are growing in size and in power capacity, which in turn is "delivering major performance and cost improvements for offshore wind farms".

The global offshore wind market grew nearly 30% per year between 2010 and 2018, according to the IEA, due to rapid technology improvements, It calculated that about 150 new offshore wind projects are in active development around the world. Europe in particular has fostered the technology's development, led by Britain, Germany and Denmark, but China added more capacity than any other country in 2018.

A report for the Irish Wind Energy Assocation (IWEA) by the Carbon Trust – a British government-backed limited company established to accelerate Britain's move to a low carbon economy - says there are currently 14 fixed-bottom wind energy projects, four floating wind projects and one project that has yet to choose a technology at some stage of development in Irish waters. Some of these projects are aiming to build before 2030 to contribute to the 5GW target set by the Irish government, and others are expected to build after 2030. These projects have to secure planning permission, obtain a grid connection and also be successful in a competitive auction in the Renewable Electricity Support Scheme (RESS).

The electricity generated by each turbine is collected by an offshore electricity substation located within the wind farm. Seabed cables connect the offshore substation to an onshore substation on the coast. These cables transport the electricity to land from where it will be used to power homes, farms and businesses around Ireland. The offshore developer works with EirGrid, which operates the national grid, to identify how best to do this and where exactly on the grid the project should connect.

The new Marine Planning and Development Management Bill will create a new streamlined system for planning permission for activity or infrastructure in Irish waters or on the seabed, including offshore wind farms. It is due to be published before the end of 2020 and enacted in 2021.

There are a number of companies aiming to develop offshore wind energy off the Irish coast and some of the larger ones would be ESB, SSE Renewables, Energia, Statkraft and RWE.

There are a number of companies aiming to develop offshore wind energy off the Irish coast and some of the larger ones would be ESB, SSE Renewables, Energia, Statkraft and RWE. Is there scope for community involvement in offshore wind? The IWEA says that from the early stages of a project, the wind farm developer "should be engaging with the local community to inform them about the project, answer their questions and listen to their concerns". It says this provides the community with "the opportunity to work with the developer to help shape the final layout and design of the project". Listening to fishing industry concerns, and how fishermen may be affected by survey works, construction and eventual operation of a project is "of particular concern to developers", the IWEA says. It says there will also be a community benefit fund put in place for each project. It says the final details of this will be addressed in the design of the RESS (see below) for offshore wind but it has the potential to be "tens of millions of euro over the 15 years of the RESS contract". The Government is also considering the possibility that communities will be enabled to invest in offshore wind farms though there is "no clarity yet on how this would work", the IWEA says.

Based on current plans, it would amount to around 12 GW of offshore wind energy. However, the IWEA points out that is unlikely that all of the projects planned will be completed. The industry says there is even more significant potential for floating offshore wind off Ireland's west coast and the Programme for Government contains a commitment to develop a long-term plan for at least 30 GW of floating offshore wind in our deeper waters.

There are many different models of turbines. The larger a turbine, the more efficient it is in producing electricity at a good price. In choosing a turbine model the developer will be conscious of this ,but also has to be aware the impact of the turbine on the environment, marine life, biodiversity and visual impact. As a broad rule an offshore wind turbine will have a tip-height of between 165m and 215m tall. However, turbine technology is evolving at a rapid rate with larger more efficient turbines anticipated on the market in the coming years.

 

The Renewable Electricity Support Scheme is designed to support the development of renewable energy projects in Ireland. Under the scheme wind farms and solar farms compete against each other in an auction with the projects which offer power at the lowest price awarded contracts. These contracts provide them with a guaranteed price for their power for 15 years. If they obtain a better price for their electricity on the wholesale market they must return the difference to the consumer.

Yes. The first auction for offshore renewable energy projects is expected to take place in late 2021.

Cost is one difference, and technology is another. Floating wind farm technology is relatively new, but allows use of deeper water. Ireland's 50-metre contour line is the limit for traditional bottom-fixed wind farms, and it is also very close to population centres, which makes visibility of large turbines an issue - hence the attraction of floating structures Do offshore wind farms pose a navigational hazard to shipping? Inshore fishermen do have valid concerns. One of the first steps in identifying a site as a potential location for an offshore wind farm is to identify and assess the level of existing marine activity in the area and this particularly includes shipping. The National Marine Planning Framework aims to create, for the first time, a plan to balance the various kinds of offshore activity with the protection of the Irish marine environment. This is expected to be published before the end of 2020, and will set out clearly where is suitable for offshore renewable energy development and where it is not - due, for example, to shipping movements and safe navigation.

YEnvironmental organisations are concerned about the impact of turbines on bird populations, particularly migrating birds. A Danish scientific study published in 2019 found evidence that larger birds were tending to avoid turbine blades, but said it didn't have sufficient evidence for smaller birds – and cautioned that the cumulative effect of farms could still have an impact on bird movements. A full environmental impact assessment has to be carried out before a developer can apply for planning permission to develop an offshore wind farm. This would include desk-based studies as well as extensive surveys of the population and movements of birds and marine mammals, as well as fish and seabed habitats. If a potential environmental impact is identified the developer must, as part of the planning application, show how the project will be designed in such a way as to avoid the impact or to mitigate against it.

A typical 500 MW offshore wind farm would require an operations and maintenance base which would be on the nearby coast. Such a project would generally create between 80-100 fulltime jobs, according to the IWEA. There would also be a substantial increase to in-direct employment and associated socio-economic benefit to the surrounding area where the operation and maintenance hub is located.

The recent Carbon Trust report for the IWEA, entitled Harnessing our potential, identified significant skills shortages for offshore wind in Ireland across the areas of engineering financial services and logistics. The IWEA says that as Ireland is a relatively new entrant to the offshore wind market, there are "opportunities to develop and implement strategies to address the skills shortages for delivering offshore wind and for Ireland to be a net exporter of human capital and skills to the highly competitive global offshore wind supply chain". Offshore wind requires a diverse workforce with jobs in both transferable (for example from the oil and gas sector) and specialist disciplines across apprenticeships and higher education. IWEA have a training network called the Green Tech Skillnet that facilitates training and networking opportunities in the renewable energy sector.

It is expected that developing the 3.5 GW of offshore wind energy identified in the Government's Climate Action Plan would create around 2,500 jobs in construction and development and around 700 permanent operations and maintenance jobs. The Programme for Government published in 2020 has an enhanced target of 5 GW of offshore wind which would create even more employment. The industry says that in the initial stages, the development of offshore wind energy would create employment in conducting environmental surveys, community engagement and development applications for planning. As a site moves to construction, people with backgrounds in various types of engineering, marine construction and marine transport would be recruited. Once the site is up and running , a project requires a team of turbine technicians, engineers and administrators to ensure the wind farm is fully and properly maintained, as well as crew for the crew transfer vessels transporting workers from shore to the turbines.

The IEA says that today's offshore wind market "doesn't even come close to tapping the full potential – with high-quality resources available in most major markets". It estimates that offshore wind has the potential to generate more than 420 000 Terawatt hours per year (TWh/yr) worldwide – as in more than 18 times the current global electricity demand. One Terawatt is 114 megawatts, and to put it in context, Scotland it has a population a little over 5 million and requires 25 TWh/yr of electrical energy.

Not as advanced as wind, with anchoring a big challenge – given that the most effective wave energy has to be in the most energetic locations, such as the Irish west coast. Britain, Ireland and Portugal are regarded as most advanced in developing wave energy technology. The prize is significant, the industry says, as there are forecasts that varying between 4000TWh/yr to 29500TWh/yr. Europe consumes around 3000TWh/year.

The industry has two main umbrella organisations – the Irish Wind Energy Association, which represents both onshore and offshore wind, and the Marine Renewables Industry Association, which focuses on all types of renewable in the marine environment.

©Afloat 2020

Featured Sailing School

INSS sidebutton

Featured Clubs

dbsc mainbutton
Howth Yacht Club
Kinsale Yacht Club
National Yacht Club
Royal Cork Yacht Club
Royal Irish Yacht club
Royal Saint George Yacht Club

Featured Brokers

leinster sidebutton

Featured Associations

ICRA
isora sidebutton

Featured Webcams

Featured Events 2022

Featured Marinas

dlmarina sidebutton

Featured Chandleries

CHMarine Afloat logo
osm sidebutton
https://afloat.ie/resources/marine-industry-news/viking-marine

Featured Sailmakers

northsails sidebutton
uksails sidebutton
quantum sidebutton
watson sidebutton

Featured Blogs

W M Nixon - Sailing on Saturday
podcast sidebutton
BSB sidebutton
wavelengths sidebutton
 

Please show your support for Afloat by donating