The ESB will sell half the electricity from its new plant at Ringsend to independent suppliers in order to secure EU approval for the Dublin power station which is a joint venture with Statoil.
The agreement with the competition and energy commissions in Brussels - brokered by the Irish energy regulator, Mr Tom Reeves - will also oblige the ESB to auction to independent suppliers additional power generated at its older stations.
The development is a setback for the ESB because it will only get wholesale prices for the power. The State company owns 70 per cent of the €250 million plant at Ringsend and its partner, Statoil, holds 30 per cent. Their joint venture, Synergen, has been the subject of a long deliberation by the EU but the new agreement opens the door for Brussels to sign off on the agreement.
It follows extensive scrutiny of the Irish market by the EU, which led the competition commissioner, Mr Mario Monti, to express unhappiness with the structure and pace of liberalisation in the business. An official in his office described the agreement allowing Synergen's connection to the national grid as a "violation of European law". The connection meant only one rival plant could gain access in Dublin to the grid, which is constrained. The conditions Mr Reeves will now enforce are designed to stimulate competition in an industry which has been abandoned by a number of groups which planned large investments.
Mr Reeves's office has told industry players that the conditions will remain in place until a second large independently owned power station is commissioned. The first independently-owned plant at Huntstown, Dublin, is near completion. It is owned by Viridian, the former state-owned electricity monopoly in Northern Ireland.
But two other plants planned by the private sector have failed to secure sufficient financial backing to move into the construction phase. They are a plant at Mulhuddart, Dublin, planned by US-owned group Ireland Power which has lost several partners including Scottish Power and BP. Another station is proposed by Aughinish Alumina in Co Limerick
While the commissioning this year of the Synergen and Viridian plants relieves an immediate shortage in electricity supply, rising demand for power and the long lead-in period needed to build plant will soon led to pressure for new projects
The ESB has resolved to accept the deal under which the EU will agree the Synergen project. It will remove the threat of divestiture hanging over the project after the Government sanctioned expenditure on the plant's turbine on condition that its interest should be sold "if competition law makes it appropriate".
The Ringsend plant will generate 380 megawatts (MW) in the medium-term. Though designed to produce up to 407 MW, full production will be achieved only after refitting work is carried out during its first overhaul in 2005. This suggests about 190 MW of power will go to independent suppliers.
