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May 2020

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Yes, and..? Fast tracking Irish offshore wind

Conall Bolger
Conall Bolger
21 May 2020

The Irish Government’s announcement of seven offshore wind projects being able to apply for planning permission under the (yet to be enacted) Marine Planning and Development Management Bill, 2020 (MPDM) is positive for the Irish offshore wind sector. A consenting regime is one of the key pillars of any successful offshore sector.

I am taking some inspiration from our proud theatrical traditions and rather than focusing on the potential limitations, I am accentuating the positives and looking to the future.

“Yes, and…” is a principle in drama improvisation where one player accepts what the other has provided and augments it. I am saying “yes” to this announcement. Providing a route to planning for these projects, in addition to those seeking to progress under previous foreshore leases such as Arklow, potentially means thousands of MWs clearing a key development hurdle.

There is an “and”, which are the elements that can magnify this announcement’s impact, and enable gigawatts of turbines to be spinning in Irish waters by 2030 creating a substantial sector: The “and” includes:

  • Making passage of the MPDM an early priority for the next Government when it takes office
  • Securing offshore grid connections within a reasonable timeframe. Ireland needs to accelerate not only the choice of model by network connections to offshore renewable projects are allocated and funded, but start allocating that capacity, and putting in place the resources to deliver connected projects
  • Progressing auctions for awarding of renewable support in 2021 and 2022, and aligning the delivery dates in the auctions with those in the planning and grid deployment processes
  • Ensuring that one body has ultimate responsibility for progressing the sector could be helpful (as it has been in other markets); developers still have to navigate (ahem) a diffuse web of responsibilities, though the MPDM improves that situation

There have been a number of false dawns for offshore renewable energy development in Ireland. It is a market with an abundant resource, with the experiences of more mature markets in northern Europe and the UK from which to draw. Failing to take advantage of all these resources would be more akin to tragedy than improv.

 

Wholesale energy prices fell to record lows in April

Joe Camish
Joe Camish
15 May 2020

This week we look back at wholesale power price development throughout April, a month which saw notable bearish price movements.

The most prominent of these were the movements in the day-ahead power price. Across April the price averaged €28.0/MWh, the lowest monthly average since the commencement of project I-SEM back in October 2018 – highlighted in Figure A.

The monthly average also represented a €6.3/MWh reduction on the previous month, and a €21.4/MWh discount year-on-year. Power prices were influenced by the well documented drop in demand stemming from COVID-19 measures, which has seen power demand fall by 20% on average since the start of March.

Prices were also dragged lower by other market movements as day-ahead NBP gas prices dropped 40%, reaching a 14-year low mid-month. While Brent crude oil and coal prices dropped 23.1% and 19% month-on-month respectively.

It should also be noted that downward power price movements would have been pegged back by low wind generation throughout the month – which accounted for 25.1% of the generation mix last month, the lowest levels this year. Therefore, if conditions were equally windy as the previous month, we could have observed even lower power prices in April.

RESS-1 application closing date is further extended

Cat Sturman
Cat Sturman
01 May 2020

This article was originally published on 14 April 2020 in Energy Spectrum Ireland Issue 62. 

With a lot of uncertainty around the impacts of COVID-19 on global supply chains and renewable project delivery we are starting to see the effects in the Irish Energy market, notably the announcement that prequalification for the Renewable Energy Support Scheme in Ireland will be extended.

In December 2019, the Department of Communications, Climate Action and Environment (DCCAE) detailed further information regarding the RESS timelines, and Minister Bruton confirmed that the government had approved the design of RESS-1. The auction was originally planned to commence in June 2020 and would see the first projects eligible for support in 2021 and become fully operational in 2022.

However, when COVID-19 was first identified in China, it caused an economic slowdown leading to a significant fall in demand. This led to fears of over-supply for fuel and oil products and a reduction in prices. As the economic impacts of COVID-19 are spreading globally, oil prices are falling rapidly. This has reverberated into the carbon market, with the price of EUA’s falling more than 30% to a 16-month low of just over €15/tCO2e. The energy industry is likely to continue to feel the effects of this drop in oil and gas prices and the ongoing impact of COVID-19 for a prolonged recovery period.

Several issues are also facing the renewable industry. The renewable sector in Ireland relies on European and global supply chains for raw materials and components and the first logistical delays in the supply chain can be observed already.

WindEurope CEO Giles Dickson stated recently “With COVID-19 we are likely to see delays in the development of new wind farm projects which could cause developers to miss the deployment deadlines in countries’ auction systems and face financial penalties. Governments should be flexible on how they apply their rules. If ongoing auctions are undersubscribed because developers can’t bid in time, governments should award what they can and auction the non-awarded volumes at a later stage”.

How and when things will return to normal depends on rapidly evolving variables, from geopolitics to the global containment of COVID-19. Early indications suggest that COVID-19 will have moderate effects on international supply chains for the renewable industry. However, with the outbreak of COVID-19 still at a relatively early stage in Europe, is it too soon to judge its impact on production and revenues in the sector?

Noting WindEurope’s comments on potential impacts on renewables auctions, Ireland has joined Germany and Great Britain in their decision to extend their auction schedule. Although we have only seen an extension to the prequalification deadline so far, EirGrid have indicated that auction timelines will shift as a result, with dates to be updated in due course. Given the four-week extension for the prequalification window, we’d estimate an auction is now likely to be held in July or August rather than June.

Given the time it has taken to get to this stage in RESS, developers may be frustrated with the delay, which has been coupled with a lack of state aid approval which remains in progress. With this delay we are now facing the prospect of knock on effects which will inhibit implementation of the climate action plan between now and 2030.

To mitigate the risk of Ireland missing its 70% RES-E target, the RESS high level design may need to be revisited with auction volumes adjusted. With the unprecedented nature of the COVID-19 crisis, a delay of this nature seems sensible and certainly some participants will be very glad to see this announcement.

If you have enjoyed reading this article and are interested in the latest developments from the Irish energy market, please request a free month’s trial.

The Energy Spectrum Ireland (ESI) service captures key developments across the energy sector and offers a timely, insight-driven overview of the need-to-know news and changes in the industry. The service comprises of two publications: Energy Spectrum Ireland, published monthly, and Ireland Energy Weekly Bulletin. 

Impacts of COVID-19 on the renewable energy support scheme

Ruth Young
Ruth Young
25 March 2020

With a lot of uncertainty around the impacts of Covid-19 on global supply chains and renewable project delivery we are starting to see the effects in the Irish Energy market, notably the announcement that prequalification for the Renewable Energy Support Scheme in Ireland will be extended.

The global energy sector has already felt the impacts of the coronavirus with consumption levels declining and global markets plummeting, especially in the wake of the oil price disputes between the Organisation of the Petroleum Exporting Countries (OPEC) and Russia.

When Covid-19 was first identified in China, it caused an economic slowdown leading to a significant decrease in demand. This led to fears of over-supply for fuel and oil products, and a fall in prices. OPEC wanted to cut production to impede the price drop, however Russia would not agree, and OPEC decided to increase production until Russia relented. Talks continued while markets closed on Friday 6 March and when they reopened on Monday 9 March, many companies lost millions. As the economic impacts of Covid-19 are spreading globally, oil prices are continuing to fall, with Brent Crude oil prices reaching a 17-year low last week. This has reverberated into the carbon market, with the price of EUA’s falling more than 30% to a 16-month low of just over €15/t. As things progress, the energy sector will need to simultaneously contend with low oil-prices and supressed demand, whilst managing debt obligations, business continuity and the safety of their workforce.

The energy industry is likely to continue to feel the effects of this drop in oil and gas prices and the ongoing impact of COVID-19 for a prolonged recovery period.

It is not just uncertain times for the gas and coal industry, with a number of issues facing the renewable industry also. The renewable sector in Ireland relies on European and global supply chains for raw materials and components and the first logistical delays in the supply chain can be observed already. The slowdown of China’s manufacturing output and restrictions on travel is apparent, and over the last week a number of European plants involved in wind and solar manufacturing have reduced production or entirely closed after a number of employees tested positive for Covid-19. This will inevitably lead to weak links in the renewable supply chain as vendors and suppliers face operational or financial strain. Any further delays may start driving up costs in the short term.

WindEurope CEO Giles Dickson stated recently “With COVID-19 we are likely to see delays in the development of new wind farm projects which could cause developers to miss the deployment deadlines in countries’ auction systems and face financial penalties. Governments should be flexible on how they apply their rules. And if ongoing auctions are undersubscribed because developers can’t bid in time, governments should award what they can and auction the non-awarded volumes at a later stage”.

How and when things will return to normal depends on rapidly evolving variables, from geopolitics to the global containment of COVID-19. We are already seeing material and component production ramping back up in China. Early indications suggests that COVID-19 will have moderate effects on international supply chains for the renewable industry. However, with the outbreak of COVID-19 still at a relatively early stage in Europe, is it too soon to judge its impact on production and revenues in the sector?

Noting WindEurope’s comments on potential impacts on renewables auctions, Ireland has joined Germany and Great Britain in their decision to extend their auction schedule. Although we have only seen an extension to the prequalification deadline so far, EirGrid have indicated that auction timelines will shift as a result, with dates to be updated and notified to participants in due course. Given the four-week extension for the prequalification window, we’d estimate an auction is now likely to be held in July or August rather than June.

Given the time it has taken to get to this stage in RESS, some may be frustrated with the delay. With the unprecedented nature of the COVID-19 crisis in mind a delay of this nature seems sensible and certainly some participants will be very glad to see this announcement, with results of our recent twitter poll showing almost two thirds of participants in favour of a delay.

Editor’s Pick | Clean Energy Package: what does it really mean?

Cathal Ryan
Cathal Ryan
24 March 2020

This article was originally published on 10 March 2020 in Energy Spectrum Issue 61.

The Capacity Market Code removes or restricts payments to fossil fuel generators and allows cross border participation in Capacity markets, arising from the Clean Energy Package (CEP). We look at some of the other potential changes in the way EirGrid and SONI operate our energy system arising from the implementation of the Clean Energy Package.

The EU’s Clean Energy Package is a series of eight legislative acts adopted by the European Parliament and European Council in 2018 and 2019 to fulfil the EU’s Paris Agreement commitments. The purpose of the CEP is to enable the EU to transition to cleaner energy and facilitate a 40% reduction in greenhouse gas emissions by 2030 compared to a 1990 baseline. The main areas of focus of the Clean Energy package are:

  • Energy efficiency.
  • Renewable energy.
  • Consumer protection and affordability.

A high-level exercise has recently been conducted by the Regulatory Authorities (RAs) in Ireland and Northern Ireland to identify the areas of the Regulation which may require action by the SEM Committee. The RAs identified six key areas which will require action by the SEM Committee in 2020.

  1. Balancing responsibility.
  2. Priority dispatch.
  3. Redispatch.
  4. Market parameters.
  5. Capacity Remuneration Mechanism.
  6. Regional Coordination Centers.

As stated above, the Capacity market code modification has been proposed and is currently out for public consultation. With this in mind, we look at two of the other developments that may be on the short-term horizon, balancing responsibility and priority dispatch.

Balancing responsibility is in line to change this year with the SEM committee stating they will look to put their approach to public consultation by the end of Q120. The current SEM framework sets out the de minimis threshold for participation in the BM to be a Maximum Export Capacity of 10MW, defining the current minimum capacity for Balance Responsibility. The CEP updates this requirement, so that all market participants are to be responsible for any imbalances they cause in the market, including the previously exempt de minimis generation. A modification to the Trading and Settlement Code (TSC) will likely be required, to accommodate a reduction in the de minimis threshold for balance responsibility.

Priority dispatch is also under review by the SEM committee with their proposal due for public consultation in Q120. Under the current SEM framework, all renewable generation and peat is subject to priority dispatch, including provisions for Hybrid plants and High Efficiency CHP/Biomass/Hydro plants. The change in regulation will update the rules surrounding priority dispatch, effectively removing it for new renewable generators, to facilitate a non-discriminatory, transparent and market-based system. Revisions to the TSO licenses may be needed in order to adopt this requirement as well as a modification to the TSC.

The Clean Energy Package legislation is designed to facilitate an EU wide transition towards cleaner energy. The implementation of these changes will alter the future of energy markets across Europe. Making de minimis generators balance responsible will result in a change in the scale and management of future intermittent generator development.

Furthermore, removing priority dispatch for generators will result in a markets-based solution to which generators will get on the system. Any renewable generators receiving subsidies that were energised before July 2019 are not subject to the new rules, keeping the status quo.

If you have enjoyed reading this article and are interested in the latest developments from the Irish energy market, please contact Richard Wetherall on 01603 604400 for a free month’s trial.

The Energy Spectrum Ireland (ESI) service captures key developments across the energy sector and offers a timely, insight-driven overview of the need-to-know news and changes in the industry. The service comprises of two publications: Energy Spectrum Ireland, published monthly, and Ireland Energy Weekly Bulletin.

A message from our CEO

Gareth Miller
Gareth Miller
20 March 2020

Dear customers and partners

Covid-19 is understandably occupying widespread attention. We felt it was important to reassure you that we have a robust plan to maintain continuity of service, whilst looking after the welfare of our employees, their families and of course our customers, and to let you know how that will be achieved.

Our people have been equipped with remote working capability over many years and regularly work from different locations both nationally and internationally.

We also already benefit from and utilise a range of platforms to allow for virtual customer interaction. We will be making use of these existing tools to ensure the delivery of our subscriptions reports and consulting activity will continue as normal, but interactions with our customers in these areas will be supported by video conferencing and telephone communication instead of face-to-face meetings.  Again, this form of communication is not new to us and has been established practice for many years in an insight-led business with large national and international clients.

Our public forums and training that we would otherwise convene at a physical location will now move to virtual webinars. We think this gives certainty now to our customers about delivery and also protects the welfare of our employees and our customers as much as we can by avoiding travel and gathering in close proximity, without any detriment to the quality of insight and knowledge sharing that we are able to deliver. We are highly experienced at delivering webinars as they have formed part of our existing services for many years. We will be contacting our customers in this area imminently to discuss our plans.

Our experts are also reviewing and assessing the impact and risk areas for the Energy Sector as we move closer to the next phase of the Government’s four-stage crisis plan and we will be adding specific coverage to our Irish Weekly Bulletin and Energy Spectrum Ireland publications, market intelligence and regulatory insight services to ensure we cover key impacts of Covid-19 as they unfold.

Finally, as is evident by our approach, whilst we may not be able to physically meet you for a period of time, it doesn’t mean that we won’t be engaging or communicating with you. Far from it, we see our dialogue and exchanges growing. During this time, when travel, convening and attending meetings becomes more challenging, the delivery of digital insight, intelligence and solutions to you will become more and not less vital. We recognise that we have an important role in the success of the businesses we serve and the people who work in them. We will make sure that we keep that sense of purpose at the heart of our approach in the coming months.

If you have any queries please do not hesitate in contacting your normal CI points.

Will the neighbourhood get a windmill?

Cathal Ryan
Cathal Ryan
05 March 2020

With the Renewable Energy Support Scheme (RESS) auction scheduled to kick off this June, community projects have been given a special preference category as part of the auction design. The question remains, will this be enough to spark a change in how we develop, operate and own assets in the future? Community ownership of renewable assets is touted as a key part of our future energy system as we attempt to evolve our grid to a more decentralised model.

The auction design allows for three separate preference categories; community projects, solar and all projects. Each of these categories has been given a representative maximum quantity that can be awarded as set out in the draft Terms and Conditions. The allowable quantities for each category are:

  • Community projects – 30GWh
  • Solar projects – 300GWh
  • All projects – 3,000GWh

 

 

A minimum size of 1MW has been set for all preference categories with the maximum size of a community-led project being capped at 5MW. This is significantly smaller than the allowable project size for solar, 125MW and for the all projects category of 600GWh/year.

Community-led projects that enter into the RESS auctions must meet specific requirements. If a project is eligible to enter as a community-led project there is scope for the project to enter into the community projects pot as a zero-bond project.

For community projects the ability to enter as a zero-bond project allows them to remove the burden of securing finance for these bonds or gathering equity from all the members of the community involved. The flip side of this is the government are also not willing to risk large sites failing to energise, so the project cap of 5MW is probably merited considering the lack of bonds to keep them honest.

Upon implementation, the EU Clean Energy Package will make all projects above 400kW MEC balancing responsible. For community projects which are likely to be small wind installations or solar farms, this will further complicate the operation of community-owned projects as in RESS they have to be in the 1 – 5 MW range.

30GWh will be offered up for community projects in the first RESS auction. Prospective developers have a range of issues to contend with, size constraints and new found imbalance risk being two. Some of the advantages in RESS will be around the lack of bonds securing their position in the auction. What is unclear is how these projects will be further incentivised as the level of support for community projects at present seems like a teaser so the hope would be that future auctions will have a larger pot for community-led projects!

Forum | AddRESSing Qualification | 23 March 2020

With the final RESS Qualification details due to be released on the 9 March and the inevitable slew of questions that will arise from the bundle of regulatory documents, we are providing this forum as part of our “Route to RESS” service. Our team of experts will examine documentation in advance of the forum, highlight the key criteria and areas of potential ambiguity to facilitate a focussed discussion, and ensure attendees leave with an in-depth understanding of the requirements for successful qualification.

Please click here to find out more, or contact Ruth Young at r.young@cornwall-insight.ie to book.

 

 

Considerations for RESS qualification

James Goldsmith
James Goldsmith Senior Consultant (Ireland)
28 February 2020

With the RESS qualifications fast approaching, we take a look at the some of the keys parts of the qualification process, what to look out for when creating your bid and some of the price drivers for bids in the auction.

The scheme is vital in achieving 70% renewables by 2030, delivering up to 3TWh in the first auction, and given the high level of competition anticipated in the first RESS auction, an understanding of the auction process is essential.

 

If you are interested in the RESS qualification, we are holding a forum called ‘AddRESSing Qualification‘. Find out more here.

This is a part of our  ‘Routes to RESS’ service.

Editor’s Pick Ireland | SEAI: Transport takes the largest share of energy in Ireland

Ruth Young
Ruth Young
25 February 2020

Energy-related CO2 emissions fell by 1.2% in 2018, according to the latest publication of Energy in Ireland, an annual report by the SEAI which presents the key trends in energy production and consumption.

Published on 12 December 2019, the report shows how Ireland’s energy system is evolving in response to decarbonisation policy, economic growth and increased demand for energy services. Unusually for Europe, Ireland’s overall demand for energy continues to rise, but despite this increased demand, energy-related CO2 emissions fell slightly. The largest contributing factor to this fall was the reduction in coal used for electricity generation due to a technical fault at coal-fired generator, Moneypoint.

The report marks Ireland’s performance against the Renewable Energy Targets which state at least 16% of gross final energy consumption (GFC) must come from renewables by 2020. This is a mandatory target under the EU Renewable Energy Directive and is typically split into three modes: Electricity, Transport and Heat. Transport remains the largest energy-consuming mode since 2013, closely followed by heat. Electricity is consistently the smallest share of final demand.

Energy in Ireland  CO2 emissions final energy by mode 2005 versus 2018

Across all modes, energy sourced from renewables was up 0.5% in 2018. This was due to a 3.1% increased share in renewable electricity. Transport and heat showed a decrease in renewables share due to demand growth, which resulted in a fall in emissions of 12.6% in electricity but a rise of 6.9% in heat and 2.9% in transport. The sectors contributing the largest share of energy-related CO2 emissions were:

  • Transport (40%): Private vehicles accounted for more than two thirds of transport’s final energy demand but did not contribute to the rise in transport emissions which was caused in the most part by aviation. Energy use for air travel reached an all-time high in 2018 and is now second only to private cars as a share of transport energy. Electricity in transport is currently consumed mostly by the DART system and Luas, but 2018 saw a growth of 0.3% due to increasing numbers of electric vehicles (EVs) on the road.
  • Residential (24%): When accounting for weather effects, residential energy use rose by 5.5% in 2018 compared to 2017. Direct fossil fuel use in households increased by 8.3%, with oil still dominating. Direct renewables use in households also grew by 8%.
  • Industry (21%): Fossil fuels accounted for more than half of energy use with a growth of 4.8% in 2018, met by increased use of natural gas. The direct use of coal and oil has reduced significantly in industry since 2005.

These figures represent energy-related activity only and make up 59% of Ireland’s greenhouse gas (GHG) emissions. The share for direct agriculture activity is 34%, demonstrating the significant role of agriculture in the Irish economy.

Energy in Ireland  CO2 emissions renewable energy contribution to gross final consumption by mode

The data shows that Ireland is making progress on the transition to sustainable energy almost entirely in electricity, but demand continues to rise in all areas. With the 2020 energy targets missed there is an urgent need to drive the transition from fossil fuels across all sectors to meet Ireland’s ambitious targets for 2030 in the Climate Action Plan. This seeks to put 950,000 EVs on the road by 2030 and double the rate of home retrofits, ensuring homes are improved to a B2 Building Energy Rating (BER).

If you have enjoyed reading this article and are interested in the latest developments from the Irish energy market, please contact Richard Wetherall for a free month’s trial.

The Energy Spectrum Ireland (ESI) service captures key developments across the energy sector and offers a timely, insight-driven overview of the need-to-know news and changes in the industry. The service comprises of two publications: Energy Spectrum Ireland, published monthly, and Ireland Energy Weekly Bulletin. 

Editor’s Pick : Taking advantage of the opportunities in RESS

Catherine Edwards
Catherine Edwards
28 January 2020

This article was originally published on 14 January 2020 in Energy Spectrum Ireland

The Renewable Energy Support Scheme (RESS) has been designed to replace the previous Renewable Energy Feed-in Tariff (REFIT) schemes that closed in December 2015.

The RESS scheme is designed to help promote the generation of electricity from renewable sources and will ultimately help Ireland achieve some of its Climate Action goals as outlined in the Climate Action Plan. Some of these goals include:

·         Achieving 70% electricity generated from renewable sources by 2030.

·         Reduce emissions from the public sector by 30% by 2030.

·         Increase the number of electric vehicles (EVs) by 2030 to circa 1mn.

These goals have been developed to help Ireland fall in line with EU emissions targets. Ireland has missed the decarbonisation target set for the period 2013 to 2020, as seen in Figure 1. More worrying is that non ETS emissions grew by 4.7% in 2018 and without intervention this may put Ireland on a trajectory to be over 25% off target for the next 2021-2030 accounting period.

Figure 1:  Ireland’s Non-ETS Sector CO2 eq. Emissions per head Compared to the EU, 201

Source: DCCAE

In order to achieve any of the above goals, it is critically important for Ireland to immediately start expanding and investing in the development of more renewable infrastructure.

So far, the Government has approved the details of RESS as it currently stands. The Minister for Communications, Climate Action and Environment, Richard Bruton has lent his support to the scheme by acknowledging the significant impact RESS will have on the government’s Climate Action Plan.

Specifically, when announcing the details of the first RESS auction at the beginning of December 2019 he said: “Ireland is currently 86% reliant on fossil fuel. We must radically reduce this dependence and make the transition to cleaner, more renewable energy. We are exiting from peat and coal to generate electricity and moving to clean, renewable sources of power, like wind and solar. The Renewable Energy Support Scheme is a flagship Government policy designed to deliver on our commitments to decarbonise our electricity grid, harness our natural resources and bring renewable energy into the heart of our communities. Today, I am announcing the details of the first auction under the Scheme. Installed wind capacity has grown by 50% since 2015. This auction could see capacity grow further by 30% in the next three years, with solar and community participation. This is the equivalent of powering up to 640,000 homes every day and will have a significant impact on delivering what we set out in the Climate Action Plan.”

When?

On 13 December 2019 the Terms and Conditions of the RESS scheme were published and on 17 December 2019 EirGrid and the DCCAE published the RESS-1 Indicative Auction Timetable outlining all key dates leading up to the final auction results date. The notice of award date as can be seen in Figure 2. The timetable highlights 02 March 2020 as the next RESS step during which time the Qualification Information Pack will be published and applications for qualification will open.

The Terms and Conditions are currently open for public consultation which will close on Friday 17 January. Consultation is an important step for all parties interested in participating in the RESS scheme as it outlines all the qualification requirements. The timetable does not list when the final Terms and Conditions will be published but does give the timeline to the auctions itself as per Figure 2.

Figure 2: RESS-1 Timeline

Source: CRU and EirGrid

The expected deadline for the RESS-1 project energisation is to be at or before December 2022 and support for those successful projects will last up to 15 years. As can be seen in Figure 3, additional support can be earned if projects are able to deploy earlier. If a project is able to be up and generating by July 2021, they can receive up to 1.5 years in additional payments bringing the maximum number of years of support up to a potential of 16.5 years. If the project is unable to make the 2022 energisation deadline they have until December 2023 at the latest to be energised. If by December 2023 the project is unable to deploy the project will lose out on RESS payments due to late delivery.

How?

The RESS scheme is a competitive auction-based market where generators bid in to win government subsidies for their renewable projects. The prequalification results for the T-1 auction have now been released and the applications for auction qualification will be accepted in March with the auction bidding process commencing in June.

Figure 3: RESS funding timeline

Source: CRU and EirGrid

Although there was originally talk of auctions being pay as clear the RESS-1 auction will be pay as bid with selected offers being based on the strike price specified in their offer. Similar to pay as clear, offers will be selected in ascending price order. An example of the winner selection in an overall auction can be seen in Figure 4.

Figure 4: Winner selection in overall auction

Source: EirGrid

As per the above two examples presented by EirGrid, example 1 describes an auction with a minimum of 1,000 GWh and a maximum of 3,000 GWh needed. In the auction 5,000 GWh of offers qualify. The CRU sets a competition ratio of 2.0 with no viability gap. The example shows the Auction Starting Quantity (ASQ) = 5,000/2.0 = 2,500 GWh. An additional 150 GWh are accepted because the offer price is within the 5% of that at ASQ. So, in example 1, a total of 2,650 GWh are accepted in the auction.

Example 2 describes another auction with a minimum of 1,000 GWh and a maximum of 3,000 GWh needed in the auction. In this auction, 4,800 GWh of offers qualify and the CRU sets a competition ratio of 1.5 with a viability gap at 3,300. The ASQ = 3,300/1.5 = 2,200GWh. An additional 200 GWh are accepted because the offer price is within 5% of that ASQ. For example 2, a total of 2,400 GWh are accepted in the auction.

A stakeholder briefing on 22 November 2019 announced that there will be no indexation on prices which came as a surprise to many of the stakeholders present. It will be interesting to see going forward how the lack of indexation impacts bid prices.

With the exception of community projects, all other projects will need to issue bid bonds in advance of participating in auctions in order to be eligible for participation in RESS. The inclusion of bid bonds is to try and incentivise the timely delivery of project milestones and will reduce speculative bids.

In total, the auction quantity for RESS-1 is expected to be between 1,000-3,000 GWh.

It is intended for RESS-1 to have strong community participation in the first auction. As a way of facilitating this participation community projects will be exempt from having to pay the €2k/MW bid bond that all other projects will have to pay in advance of participating in auctions in order to be eligible for participation in RESS.

Potential Impacts?

The added incentive of offering an extra 1.5 years of additional support from the RESS process poses an interesting question for potential bidding strategy.

Generally, the timeline for a wind development project is approximately 30 months – 12 months for financial close and 18 months for the construction. The December 2022 deadline makes sense as an achievable deadline for wind projects if the auction is to take place in June 2020.

If a project developer is confident that they can deliver in time for July 2021 it is possible that they could be incentivised to bid in lower prices than they otherwise would. Although a lower bid means less money, the additional 1.5 years of support would make up for the smaller bid as can be seen in Figure 5.

The danger with this strategy is that the delivery of a renewable energy project takes time and there can often be unpredictable delays and obstacles, such as the on-time delivery of a grid connection.

It could be detrimental for a project if they bid in a low price with the assumption that they can be up and running by July 2021 only to be delayed, not make that deadline, and by default not receive the additional 1.5 years of support.

Figure 5: Subsidy support drop off rate in RESS-1

Source: Cornwall Insight Ireland

Why?

The implementation and finalisation of RESS couldn’t be timelier as Ireland is in a time crunch this coming decade to try and deliver upon the 2030 targets set out in both the Climate Action Plan and the 2030 Climate Energy Package.

Ultimately, 10 years will be a very tight turn around for Ireland’s 2030 energy goals but pressing ahead is the only option.

 

If you have enjoyed reading this article and are interested in the latest developments from the Irish energy market, please contact Richard Wetherall for a free month’s trial.

The Energy Spectrum Ireland (ESI) service captures key developments across the energy sector and offers a timely, insight-driven overview of the need-to-know news and changes in the industry. The service comprises of two publications: Energy Spectrum Ireland, published monthly, and Ireland Energy Weekly Bulletin.

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