EirGrid (Ireland’s transmission system operator) has recently published its outlook for the upcoming winter. The winter period is the time of peak electricity consumption in Ireland and so also when the risk is highest for insufficient electricity supply to meet demand. KPMG Ireland’s Sustainable Futures team explore below how Ireland can keep the lights on this winter.
Several of the key challenges pertaining to the energy transition will be accentuated over the coming months, such as managing the intermittency of renewables, increased demand from large energy users, and need for firm dispatchable capacity on the system. Due mainly to the Security of Supply Programme, the winter outlook for 2023/2024 is an improvement on last year’s version but remains below standard as electricity demand continues to increase while infrastructure and generation expansion fails to keep up.
Supply and Liquidity
An improvement from last year, this year’s winter outlook still falls short of the adequacy standard: EirGrid expects 21 hours of insufficient supply to cover electricity demand this winter, better than last year’s projection of 51 hours but more than double EirGrid’s targeted standard of 8 hours per year.
However, EirGrid states that there will be no risk of a system-wide “blackout” (total loss of control of the electricity system) due to insufficient generation this winter although customers could, on average, face up to a total of 2 hours of supply loss over the upcoming winter.
The improved forecast for this year’s winter outlook is mainly owed to the state-led Security of Supply Programme. This programme will increase generation capacity and is set to deliver an expected 270 MW of temporary emergency generation this year with further temporary emergency generation (380 MW) and other capacity, including batteries, to be delivered in 2024.
However, the cost of this programme continues to rise to the point where EirGrid now fear liquidity challenges as a result. The cost, initially estimated at just below €480 million, could in fact end up exceeding €1 billion due to high cost inflation and global supply chain issues fuelling the price surge.
Inflated prices could prove a challenge in years to come as Irish electricity demand continues to increase, as showcased by the now five-year long trend of a new record transmission peak demand set every winter. The current record peak, occurring 14 December 2022 at 17:26, measured 5,544 MW but is expected to be exceeded this winter as well as in subsequent years as new loads are added to the grid.
Data centres and new tech comprise the largest share of new electricity demand. Managing these loads correctly are therefore essential to ensuring an adequately functioning electricity system.
In its most recent report, EirGrid predicts that the load from data centre will rise from 600 MW to c. 1,500 MW in 2031 and consume more electricity than any other sector by the end of the decade.
Already a large strain on the grid, EirGrid, ESB Networks, and a group c. 30 large energy users (commercial customers including data centres) recently reached an agreement on emergency protocols to reduce adverse effects on smaller customers due to elevated peak demand: Large energy users will be required to stop using power from the grid given one hour notice in the event of high supply strain. Those who do not curb their demand or switch to back-up generators will be cut off after the notice period has passed.
Supply and Liquidity
The expected peak demand for the upcoming winter is just under 6 GW while Ireland has a total generation capacity of c.13 GW. However, a large share of the 13 GW is renewable intermittent generation that cannot not be relied on to always cover demand.
Ireland’s wind assets, for instance, are capable of producing in excess of 4.5 GW in ideal conditions, but actual output falls to well below 0.1 GW in times of low wind speeds.
To ensure reliability of the grid, dispatchable on-demand generation capacity is procured through yearly Capacity Market Auctions, where generation capacity is awarded on a per MW basis rather than per MWh (for the upcoming T-4 27/28 Capacity Auction, the price is capped at €163,757.00/MW.)
Successful auction participants must then be ready to be called upon when needed to cover increased grid demand and ensure sufficient supply. Participating technologies in the Capacity Market Auctions include combine cycle gas turbines, thermal units, peaker gas plants, pumped hydro and battery storage, demand side units, interconnectors, and a small number of other technologies.
The failure of the Capacity Market to deliver sufficient dispatchable generation over the past number of years is one of the fundamental reasons Ireland finds itself falling short of grid adequacy standards this winter.
Capacity Production Issues
The issues facing Ireland’s electricity system did not materialise overnight. The requirement for dispatchable generation and increased demand from electrification and added data centre loads have been forecast for several years and formed part of Government publications such as Climate Action Plan 2023 and the Government statement on The Role of Data Centres in Ireland’s Enterprise Strategy.
The failure to produce additional capacity has been caused by a combination of market failure, supply chain issues, and a dysfunctional Irish planning system, even in recent times of high energy prices which would usually attract increased investment. As such, there is no doubt that we urgently need to sort out our markets and planning system as well as building more green infrastructure to ensure that Ireland has an adequate electricity system in the years to come.
Ireland’s TSO will be hoping for a mild, windy winter with limited prolonged cold spells. Due to our power sector’s current dependency on natural gas, uninterrupted supply from Corrib and imports will also be key to keeping the lights on this winter.
Source: KPMG Ireland