Energy Entrepreneurship: The Rise and Fall of Airtricity

Aditya Sarkar
June 2, 2016

Submitted as coursework for PH240, Stanford University, Fall 2015

Fig. 1: Windfarms could potentially become an increasingly common site in the countryside. (Source: Wikimedia Commons)

Renewable energy has forever been a market that is infamously difficult to master. Airtricity however, was a company that dared to venture in the aforementioned industry and come out as one of Ireland's greatest business success stories.

The Beginnings

The beginnings of Airtricity can be traced to the frustrations of Eddie O'Connor. Working at the state-owned Electricity Supply Board for the past two decades, O'Connor's attempts at moving the organization towards renewable energy had been repeatedly falling to deaf ears. In 1994, O'Connor's eye was caught by a report sent to the ESB by an engineering professor who happened to be a college friend of O'Connor's. The report highlighted Ireland's potential to develop a comparative advantage in wind generated renewable energy. This could be done due to Ireland's unique geographical position. Being surrounded by vast and open ocean, Ireland had the most concentrated wind corridors in all of Europe. This made the country ideal for generating wind power through the use of turbines such as those shown in Fig. 1. [1]

O'Connor once again brought up the topic of diversifying into wind energy to the ESB, using the report to provide evidence and substance towards his previous claims of potential success, yet his efforts were once again futile. Having been turned away one too many times, O'Connor decided his time with the ESB had run its course and it was on him to pursue what he believed would be a successful and revolutionary venture.

The Rapid Ascent

In the following six years, Airtricity went on to become the UK's largest provider of wind power. Airtricity's nine wind farms were generating 200 megawatts which equated to $155 million in revenue. Airtricity was buying the right to install wind turbines on Irish farms and by 2005 was holding leases on enough land to generate 3,600 megawatts of energy. Their blitz-like approach to conquering the British wind power industry lead to a cool profit of around $10 million yearly. What's more impressive is that Airtricity was managing this without any government subsidy.

Instead of taking help from the public sector, Airtricity did something unique compared to other renewable power companies and competed with it. Due to Ireland's relaxed, and perhaps forward thinking, regulations regarding electricity providers, Airtricity was able to provide electricity directly to households. Up until then, most renewable energy companies would simply sell their energy to be used by the national grid. Airtricity however were able to profit by skipping out on any costs associated with the "middle man" and so directly pocket the full payments from its many customers. Their strategy while selling their generated electricity was to offer bulk discounts to customers such as companies and factories which would consume large amounts of electricity and then profit through earning larger margins when selling to their smaller customers, mainly households. Being a country who's consensus about their government was not very positive, the public were open to the chance to try out a private company which was doing their part to help out the environment. Airtricity were providing electricity to 20,000 households within a year and 40,000 by 2006.

Airtricity's Diversification

Like all companies facing a stage of mega growth, Airtricity was faced with the question of diversification. The growth potential of a company solely generating wind power was doubted by potential investors. The ability to harness sufficient power solely using wind was questioned and there were calls for Airtricity, like several wind generation companies before them, to diversify into other renewable energies. There were strong rumours that Airtricity would leverage their good relationship with turbine manufacturers and move into utilising the power of ocean currents through harnessing tidal energy. One of the main criticism of wind energy and the deterrent to many investors who contemplated putting their money into Airtricity was the intermittency of wind. Ocean currents are more consistent and predictable than winds, there are always currents in the oceans but wind comes and goes and when it goes, there is no electricity being produced. When asked about this however, O'Connor stood refuted all such rumours and confirmed that Airtricity were to remain focused on wind energy. Addressing the intermittency, O'Connor stated that the way to address this was to simply "build more turbines so that the wind is captured when it blows." More wind captured equates to more electricity generated. O'Connor believed that Airtricity should be generating and storing enough electricity to nullify the effect and any problems caused by the variability of the wind and so Airtricity began their quest of mass expansion. [2]

The problem for European wind power companies was the continent lack of land. Continental Europe does not enjoy an abundance of land to erect wind turbine farms on. This was a problem for Airtricity and forced the company to diversify. However O'Connor stuck to his intuition and did not diversify out of wind energy. Instead he diversified out of mainland Europe, in two ways. Airtricity was firstly going to cross the Atlantic Ocean to a country with an abundance of space and a large need for electricity, the United States of America. In addition to this, Airtricity, in collaboration with ABB, planned create a European super grid which would link European countries to wind turbines located offshore in the North Sea.

Expansion into the USA

In June 2005, O'Connor announced at a keynote address that Airtricity had invested an initial $270 million into planning and building wind farms in Texas, New York and the Pacific Northwest. By 2010, O'Connor expected the amount invested into the North American market to reach $1.5 billion. Airtricity's first wind farm in North America was located in Abilene, Texas. The farm had a capacity of producing 125MW of energy (enough to power 75,000 homes). By 2007, Airtricity had constructed or was in the process of constructing enough wind farms to produce over 2000MW of energy in North America. Ironically, due to this success their foray into America was shortlived. In October of 2007, German energy company E.ON acquired the North American arm of Airtricity for $1.4 Billion. A price that was reportedly several hundreds of million dollars higher than the money that Airtricity had invested into its North American assets. The board of Airtricity claimed that the sale was motivated by the shareholders' desire to focus on the development of their European Business.

The European Super Grid Proposal

In early 2006, Airtricity in collaboration with ABB proposed the plan for a European super grid. The lack of land space had prompted Airtricity to start considering offshore sites for their new wind farms and they believed that their solution could help alleviate Europe's growing energy problem. The proposition was to start building wind farms in the northern seas of Europe and linking these wind farms to European countries using a network of sub-sea cables, a super grid. The cables would have dual purpose. When the wind was blowing and the off-shore turbines were generating electricity, the farm would provide electricity to the respective countries through the sub-sea cables. When the turbines were idle however, the interconnectivity of the sub sea cables would provide European countries with an efficient channel to transfer energy to one another and giving rise to a possible power market amongst the now interconnected countries.

For Airtricity, there was a further strategic motivation to the north sea grids. When the wind doesn't blow in Ireland, it is often because it is blowing in the North Sea instead. By expanding the geographic reach of the wind farms they owned, Airtricity would be able to hedge against the variability of wind and be able to produce electricity more consistently.

There have been several calls to the European Union to implement a so-called super grid. The benefits have been repeatedly highlighted and a scientist named Gregor Czisch proclaimed that the project would cost roughly as much as Germany pay for their power right now. Detractors of the plan however once again cite the variability of wind and suggest that the intermittency might cause power shortages if Europe increases their dependence on wind power. While they acknowledge that having multiple sites for the generators will smooth the consequences of the intermittence, a larger meteorological event could affect all of Europe similarly. [3]

Airtricity made their own proposal to the EU Energy Commission in 2008. Their plan suggested that with the appropriate amount and quality of support, it was feasible to have an operational super grid working in the space of five years. Since then there have been many other proposals made to the commission yet as of November 2015, no decision has been made on who's proposal would be followed, or whether the super grid is the right decision to address Europe's energy issues.

Sale to Scottish and Southern Energy

In 2008, it was agreed that Scottish and Southern Energy would buy Airtricity for a total figure reported to be around $3.1 billion. While most of the staff at the company stayed on to work under SSE's new wind energy arm, CEO Eddie O'Connor decided to leave the company. In the time since, rebranded as SSE Airtricity, has continued to operate within Europe, still actively pursuing the contract for the European Super Grid. Eddie O'Connor on the other hand, started another company named Mainstream Renewable Power, a renewable energy company with a development pipeline that promises to provide an excess of 16GW of power.

© Aditya Sarkar. The author grants permission to copy, distribute and display this work in unaltered form, with attribution to the author, for noncommercial purposes only. All other rights, including commercial rights, are reserved to the author.


[1] P. Kaihla, "The Great Windfall," CNN Money, 1 Aug 05.

[2] E. O'Conner, "The Future is Offshore: An Interview with Dr Eddie O'Connor, CEO, Airtricity," Refocus 7, No. 3, 62 (2006).

[3] "The Challenges of Intermittency in North West European Power Markets," Pöyry, March 2011.