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November 2019

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Capacity Market: guess who’s back, back again!

Emma Burns
Emma Burns
13 November 2019

In our latest podcast, experts Emma Burns and Tom Edwards discuss the recent developments in the Capacity Market since its reinstatement announcement on 24 October. They discuss what led to the suspension Capacity Market, the outcome and implications of the suspension, what changes the Government have now committed to and where do we go from here?

Editor’s Pick Ireland: Do all roads lead to hydrogen?

Cathal Ryan
Cathal Ryan
05 November 2019

This article was originally published on 12 November 2019 in Energy Spectrum Ireland

On 3 October, Hydrogen Mobility Ireland published its report: A Hydrogen Roadmap for Irish Transport, 2020-2030, which outlines how government and policy makers can facilitate the uptake of hydrogen fuelled vehicles.

Hydrogen is viewed as the cleanest fuel used to store and produce energy on demand, dependent on how green the process used to form it (electrolysis vs methane reforming). The report, compiled by Element Energy, aims to give a clear vision of what hydrogen mobility can achieve over the next 10 years and establish hydrogen as a key part of Ireland’s transition to a low carbon economy.

The report focuses on three objectives:

  • Develop a strategy to introduce hydrogen vehicles and related infrastructure into Ireland between 2019 and 2030;
  • Set out the business case for industry actors to invest in a profitable hydrogen mobility market in Ireland, and,
  • Understand the policies required for the hydrogen mobility market to scale.

The strategy suggests an initial Phase 1 deployment of hydrogen refuelling stations: three in the Dublin area with two production sites to support a fleet of 30 buses, 50 cars and 10 vans which would be owned by private businesses. The initial phase would need significant state funding: €14mn on top of private funding totalling €34mn and inclusion of green hydrogen in the Biofuels Obligation Scheme. Hydrogen Mobility hopes the initial Phase running up to 2022 will give confidence to early adopters.

Phase 2 will run to 2030, where this expansion phase will ensure basic hydrogen refuelling infrastructure is available on a national scale. Locations of the refuelling stations have been chosen to give over half the population access to hydrogen filling. To facilitate this, 76 filling stations and a series of production sites to supply the filling stations would be built, and 27 electrolysers would be required to meet demand, and would be co-located with sites of demand, renewable generation. To further enhance renewable credentials, curtailed wind could be used to fuel

electrolysers as Ireland tries to meet its 70% RES-E targets. Additionally, hydrogen could be purchased from an industrial reformer for security of supply reasons.

The delivery of hydrogen, for use in Fuel Cell Electric Vehicles (FCEV), from an industrial reformer and electrolysis from renewable sources, would be comparable to Battery Electric Vehicles (BEV) emissions savings when charged from the electricity grid from 2022 to 2030. To deliver the hydrogen road map, a number of actions need to be delivered by government:

  • A €350mn investment for all aspects of the hydrogen production chain to fulfil the reports strategy by 2030, covering costs of fuelling stations, production equipment, compression and distribution trailers,
  • Extension of BEV purchase grants and preferentual tax rates to FCEV’s to give price parity with internal combustion engines and incentivise uptake of the technology,
  • Inclusion on the biofuels obligations scheme for green hydrogen to enable hydrogen to be sold at a resonable price to customers.
  • Positioning Ireland for hydrogen expansion post-2030.

The report, although ambitious in its aims, is achievable. Although the Climate Action Plan does not include hydrogen for transport in the Governments plans to 2030, the decarbonisation of transport will not be possible just using BEVs. Hydrogen can play a key role, and this report shows the way.

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 (ES) 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.

REQUEST A FREE TRIAL HERE

Renewable growth drives common goals for electricity networks across the globe

Charlotte Nelson
charlotte.nelson
17 October 2019

Across the globe, electricity networks are experiencing significant growth in renewable capacity as countries seek to decarbonise their power sectors without impacting the security of supply. The scale and the rapid nature of this change are creating a whole new set of challenges for the power networks.

Our latest insight paper – Market design amidst global energy transitiondelves deeper into this issue. As a pre-eminent energy research, consulting and market intelligence business that operates in Australia, Great Britain (GB) and Ireland, we have analysed the outlook for transmission networks amid the changing landscape, and how legacy design and policies are shaping each countires system today.

Discussing the insight paper Gareth Miller, CEO of Cornwall Insight, said: “Despite differences in market design and characteristics, all three markets are grappling with similar issues, that comes from committing to deep decarbonisation. This includes the most appropriate methods for charging for networks, managing access to them and dealing with issues such as network congestion and constraint.”

Renewable projects are often in isolated locations away from demand centers. However, as renewable growth is set to continue “the networks will need to transition from being demand-centric to more supply orientated”, Gareth said.

The main priority in Australia is to enhance transmission capacity and network efficiency. Without this, the transmission system will be a barrier to growth for decentralised flexibility and renewables.

In contrast, GB and Ireland benefit from interconnection with other national markets. This provides them with additional levers that can be pulled to manage system security and supply. However, they are still trying to hone and optimise network flexibility in light of steepening decarbonisation objectives.

In all three markets, unit charges are rising, driven by a reduced charging base as decentralised energy grows quickly. This combination of changes is leading to network congestion, as transmission network development struggles to keep up, and flexibility markets are being optimised and changed.

The fast nature and the size of the renewable growth across all the countries examined will see both system operators and stakeholders  needing to “continually evaluate” the market structures and designs to alleviate issues.

All the markets are at very different stages in the process in trying to improve any problems, but reforms are on-going to accommodate the rapid physical transformation of the generation mix.

Although each country has its objectives and tensions, they are reflective of the broader global reforms that are being undertaken in most developed liberalised and decarbonising energy markets. It is clear that they “could all learn from each other and elements of their network arrangements.”

To download the insight paper for free, please click here.

Pathway to 2030

Catherine Edwards
Catherine Edwards
09 October 2019

The Integrated Single Electricity Market (I-SEM) recently saw its first birthday on 1 October 2019. A year in and this transition has already had a dramatic shift in the market. The move to I-SEM represents the most drastic change in the electricity market in a generation. Against this backdrop, on Wednesday 2 October, Cornwall Insight Ireland hosted an anniversary event – Pathway to 2030 – to analyse the key moments over the past year and bring clarity to what participants can expect in the SEM going forward.

This event was attended by representatives from some of the key stakeholders in the Irish energy markets. Together, our independent, expert Irish team took attendees on an insight-led tour through the goals and plans for the future. These talks focused on the upcoming trends in the market including Corporate Power Purchase Agreements (CPPAs), the Renewable Electricity Support Schemes (RESS), the evolution of hybrids in the market, an overview of the market a year into I-SEM and a keynote speech from Dr David Connolly (CEO of the Irish Wind Energy Association) on the promising future of wind energy.

Cornwall Insight Pathway to 2030 team

The event was interactive which allowed attendees to get a sense of the mood within the industry regarding the impacts of I-SEM thus far and the goals that have been laid out for the next 10, 20, and even 30 years. The mood was optimistic yet cautious as participants shared their views on what they believe to be the largest opportunities and challenges going forward (grid connections and Brexit). The sense in the room was that Ireland was turning a positive corner with the majority predicting significant growth of renewable energy in the medium term (3-6 years).

Source: Cornwall Insight

The introduction of I-SEM has created new market complexities and as a result, new structures are needed to meet them. It is within this new market that Cornwall Insight is perfectly set up to help provide clarity, insight, and understanding. Our Dublin office is has been working behind the scenes across the industry and the event gave us an opportunity to showcase some of that good work and predict future trends.

The future of energy purchasing: Corporate PPAs

Cornwall Insight’s senior consultant James Goldsmith presented on CPPAs. He discussed not only how CPPAs will be needed and utilised in order to achieve future energy goals, but also why there are many good reasons for CPPAs in the first place. Specifically, James said that in order to achieve the 15% CPPA target that accompanies the 70% renewables target by 2030, 5.8TWh of renewables will be required by CPPAs.

 

Source: Cornwall Insight

Although an increase from the current 0.4TWh to 5.8TWh may seem like a daunting challenge, James pointed out that there are quite a few incentives for CPPAs such as price stability, cost saving, corporate social responsibility and small capital outlay for corporates. CPPAs not only help businesses save money in both the immediate term and the long run, they also help with corporate social responsibility through green certification supporting their corporate sustainability targets.

RESS Auctions

Evie Doherty, another senior consultant at Cornwall Insight, presented on the impact of RESS auctions on offshore wind. Evie went over examples of various offshore wind projects but highlighted that it can be difficult to compare offshore wind projects in different jurisdictions. This is because they can have different parameters – for example if grid connections cost are included, supply chain, locations, etc. When considering RESS for offshore wind, Evie outlined supply chain, wholesale price cannibalisation, network access and constraints, and structure of the auction (pay as bid or pay as clear) as factors to consider.

The delivery of offshore wind projects is time sensitive if Ireland is to achieve the 2030 target of 70% renewable generation. From concept to energisation, an offshore wind farm can take upwards of 12 years to implement due to planning hurdles and consenting. If an offshore wind farm were to receive a positive outcome from an auction, it is predicted that it will take at least another six years before that offshore wind farm is installed. The timing of the delivery steps for offshore wind through development (planning, consenting, auctions, etc.) will have an impact on delivery and any delays risk non-delivery of offshore wind in time for our 2030 RES-E targets.

Hybrids, the road forward

Training Consultant, Ruth Young, presented on the role of hybrid sites in delivery system flexibility to achieve the 70% renewables target. Specifically, she talked about some of the ongoing connection, charging and compliance challenges faced by those looking to establish a hybrid connection site.

 

Source: Cornwall Insight

Ruth discussed some key activities that will enable the transition to more hybrid sites and how a joined up approach to overcoming policy, regulatory and technical barriers is required.

It is evident from Action 18 of the Climate Action Plan that the Irish Government views hybrid connection as crucial for further renewable integration and are seeking to facilitate the operation of hybrid connections (e.g. solar/wind/batteries) in the electricity market. As an extension of Action 18, Ruth also identified the EirGrid FlexTech forum as a welcome initiative to remove the technical barriers to renewable integration.

Although the audience identified regulatory uncertainty and grid connection as concerns, overall it appeared as though most believed that hybrids are vital to achieving 70% renewables by 2030 and that we are likely to see a large-scale roll-out of hybrid connections prior to 2027.

Source: Cornwall Insight

A Windy Future

Finally, we were lucky enough to have Dr. David Connolly, CEO of IWEA, as a keynote speaker at the event. David presented a very hopeful outlook for the future of wind and its prominent role in the future. In support of his optimistic views, David noted that Ireland was number 1 in Europe for onshore wind production in 2018.

David Connolly presenting on the role of wind energy in 70% RES-E goals

Wind energy will play a large role in meeting the 70% target by 2030. Analysis shows that achieving the 70% target will require approximately 5 GW of ‘new’ wind energy by 2030. There is no denying that 5 GW of ‘new’ onshore wind energy is a massive challenge to deliver but, David is confident that the goal is achievable and points to countries like Denmark as examples of countries that should be emulated. Denmark has already achieved a successful Smart Energy System that surpassed 50% wind energy on their grid system as early as 2013. David stated that there is no reason why a similar system wouldn’t work in Ireland citing some of the key work EirGrid has completed with the DS3 implementation.

Can we do it?

Although there are major obstacles still to overcome, it appears as though the industry is cautiously optimistic in its ability to deliver upon targeted goals of 70% renewables by 2030.

Being realistic about the challenges ahead is a good way to come up with solutions to those challenges and to demand the support necessary to properly meet and address them head on. Altogether the room seemed excited about the potential for future opportunities and innovation. Cornwall Insight is proud to count itself a member of that group as we are on the same page and look forward to joining them on the adventures that will come on the pathway to 2030.

Fuel Poverty Monitor reveals systemic challenges in Northern Ireland

Cat Sturman
Cat Sturman
08 October 2019

This article was originally published on 8 October 2019 in Energy Spectrum Ireland

On 17 September, EAS and National Energy Action (NEA) published The Fuel Poverty Monitor 2018/19, which highlighted that stakeholders in the Northern Ireland market have shown interest in energy efficiency and affordability, but several barriers to entry remain.

Affecting 24.9% of households in Scotland, 22% in Northern Ireland, 12% in Wales and 10.9% of households in England, three different approaches to how fuel poverty is defined and measured in the UK has created ongoing complexities in addressing its scale. Such barriers include fluctuating energy prices and income stagnation; demand outweighing supply; wholesale energy prices and an overreliance on oil which is limiting the affordability of energy for fuel-poor households, the report stated.

Additionally, challenges included insufficient resource to deliver energy efficiency improvements (even with area-based schemes); a lack of resource to cover revenue costs associated with the delivery of energy efficiency and advice to vulnerable households; difficulties associated with improving energy efficiency standards in the private rented sector and falling incomes. Existing available data also is also unable to capture all households in need.

In Northern Ireland and Wales, households are defined to be in fuel poverty if they spend over 10% of their income on fuel, whereas the government is looking to move away from the Low Income High Cost definition in England, to one which looks towards the efficiency rating of a property, in combination with the current relative measure on income. Whilst this will categorise a further million households as fuel poor in EPC bands D – G, it will reclassify up to 200,000 households living in Band C or above. On the other hand, the new fuel poverty definition in Scotland states that a household is in fuel poverty if the fuel costs are over 10% of its net income.

Across all four UK fuel poverty strategies examined in the report, common themes are explored: improving energy efficiency; improving partnerships; targeting households in most need; reducing energy bills and the use of data. Whilst most respondents to the report agreed that the principles of their strategies “were the right ones to be focusing on,” the majority stated not enough has been done to ensure the delivery of key targets.

Although the UK’s Clean Growth Strategy in 2017 reaffirmed the fuel poverty targets and targets to decarbonise all sectors of the UK, slow progress has seen the NEA estimate that it would take more than 90 years to meet the 2030 target. Whilst The Fuel Poverty Act for Scotland implemented a new set of targets, Wales has yet to reintroduce a set of key climate targets. Additionally, Northern Ireland has yet to introduce a new fuel poverty strategy which will encompass specific energy efficiency or fuel poverty targets.

The report issued a high number of recommendations, both regional and for the entirety of the UK. For Northern Ireland, recommendations include a review of the current fuel poverty strategy, and energy efficiency and fuel poverty schemes by the Department for Communities in order to remain focused and ensure any successor to the Northern Ireland Sustainable Energy Programme (NISEP) would be socially just.

Furthermore, it is recommended that an energy efficiency target should be established, driving forward the need to make energy efficiency and infrastructure a priority. The Department for Communities must also review the current fuel poverty strategy and establish a new fuel strategy, which should have a renewed focus on oil, cavity wall insulation, technical performance, the private rented sector and building effective partnerships, including the Department of Health and the Department for the Economy.

Northern Ireland continues to undergo significant challenges in lowering emissions across the housing sector. It will be vital for government to implement new policies and incentives to support homeowners, businesses and industry in order to achieve its net zero goals.

EAS

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 (ES) 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.

REQUEST A FREE TRIAL HERE

Sustainable Energy procurement and the “micro-utility”

James Goldsmith
James Goldsmith Senior Consultant (Ireland)
04 September 2019

In our latest podcast James Goldsmith and James Brabben discuss businesses procuring their energy sustainably, in both GB and Ireland. They discuss how the landscape for procurement is changing, the imperatives for businesses to better manage their consumption through efficiency or behind the meter generation and the increasingly popularity of direct procurement through Corporate PPAs.

Is Ireland ready for a CPPA revolution?

James Goldsmith
James Goldsmith Senior Consultant (Ireland)
03 September 2019

Our latest insight paper – The dawn of corporate PPAs in Ireland? –  assesses whether market conditions are right for continued Corporate Power Purchase Agreement (CPPA) growth to be able to meet the ambitious target laid out by the Irish government.

Key findings of the report are:

  • The building blocks to create a thriving CPPA market in Ireland exist
  • Barriers surrounding complexity and price have caused a slow start for CPPA activity
  • Many developers are awaiting the finalisation of the Renewable Electricity Support Scheme (RESS)

The CPPA market in Ireland is being targeted by the government as a viable route to help achieve its 2030 renewable energy targets. With the government setting out a goal of 15% renewable electricity to be directly contracted to corporates by the end of 2030. However, the market has been slow off the starting line, according to one of the insight paper’s authors, Senior Consultant James Goldsmith.

Analysing the reason behind the slow activity of CPPAs in the Irish market, James explains that the complex nature of these arrangements means a lot of time and effort by all parties is needed. However, as more deals are established in the market, a standard format could potentially develop, smoothing out the process and time involved.

The insight paper found that although the present CPPA activity is slow, Ireland possesses the fundamental building blocks for sustained growth in the CPPA market. The presence of environmentally conscious corporate buyers, an active renewable energy development community and relatively few legislative hurdles should allow for deals to flow through

Pricing is a key issue to be able to bring a CPPA to a close, and until the Renewable Electricity Support Scheme (RESS) auction parameters are known “developers will be slow to enter into a CPPA”. Entering into an agreement could leave them potentially frozen out of a more lucrative government-backed contract that carries less risk, James pointed out.

In the meantime, it is much more likely that existing assets coming out of Renewable Energy Feed-in Tariff (REFIT) subsidy arrangements, could agree a CPPA deal with a view to re-powering further down the line. Discussing this point, James said, “It may prove that the extra additionality the industry seeks will be through re-powering or existing units brought about by increased financing security.”

CPPAs have been delivering new renewable capacity globally, but it seemed that Ireland was being left behind. However, a few transactions this summer indicate that this route to market is set to become an exciting area of development over the next decade.

If you would like to download a copy of the insight paper for free, please click below.

Risky business: forecasting revenues for green power

Charlotte Farmer
Charlotte Farmer Analyst
25 July 2019

Our recently published Green Power Forecast provides a five-year outlook of revenue streams available to green generators. We forecast prices for wind, solar and baseload projects, providing a theoretical maximised revenue stack for comparison against PPA offers.

Our Chart of the Week shows an annual forecast of revenues for onshore wind projects with high voltage connections to the distribution network, using a national average figure for embedded benefits. Values are given for export-only revenue; however, most sites will also be in receipt of subsidy payments from either the Feed-in Tariff or Renewables Obligation schemes.

Power prices – backwardation & cannibalisation

The revenue from wholesale power declines over time due to backwardation in the market, meaning future power contracts are priced lower than those closer to delivery. This trend causes a decrease in revenue of ~£5/MWh over the forecast period.

Wind assets are also impacted by price cannibalisation. This is the depressive influence on the wholesale electricity price at times of high output from intermittent, weather-driven generation such as solar, onshore and offshore wind, and this trend is set to rise.

Embedded benefits – uncertainty remains

In this edition of the Green Power Forecast, we analysed the potential impact of proposed changes to the Balancing Use of System Charge (BSUoS) embedded benefit. Ofgem’s most recent minded-to position would see BSUoS swing from an embedded benefit to become a charge from April 2021. In total, embedded benefit values fall by £6.46/MWh (59%) between 2020-21 and 2021-22 in our forecast, with changes to BSUoS as the primary driver.

However, there is no confirmed position on BSUoS reform at present, with several options being explored.

Rego values – some respite for generators

Amidst a developing market for Regos, we have increased our assumptions of prices to 40p/Rego for onshore wind projects. While Regos remain a minor component in a generator’s revenue stack, the trend of rising values provides some respite for renewables generators that are seeing values eroded elsewhere.

The overall picture shows declining revenues for green generators in the next five years; however, the PPA market remains highly competitive keeping realised values close to our Market Benchmark Price. Whilst most operational generators are subsidised, it will be the subsidy-free projects looking to find a route to market that will be most impacted.

If you are interested in our Green Power Forecast report, please contact Charlotte at C.Farmer@cornwall-insight.com.

 

You might also be interested in…

Corporate PPAs – Current and Future Commercial Considerations Webinar

REGOs – Values, Market Sentiment and Outlook Webinar

Road to zero emissions: A slow start, the pace must now quicken

Tom Palmer
Tom Palmer
03 July 2019

In our ninth podcast, the modelling and consulting teams at Cornwall Insight discuss Electricity Storage in the UK, what is it, what role does it play, what are the available revenue streams and where next for Electricity Storage in the GB power market? Our experts, Paul Anderson, Tom Edwards and Tom Palmer discuss where electricity storage can meet the requirements of a changing system, what challenges face these nascent technologies and how future markets can evolve to encourage deployment of electricity storage technologies.

Getting better: The Climate Action Plan

Conall Bolger
Conall Bolger
26 June 2019

Travelling en masse in a hybrid bus, the Irish government launched the Climate Action Plan on 17 June. The plan identifies the challenge that is facing not just Ireland, but the rest of the world in addressing climate change. The plan itself shows a marked development in the Irish government’s thinking, publicly acknowledging the scale of the challenge; it sets out stretching targets, proposing actions across a range of sectors.

Since its publication, there have been two broad critiques of the plan within the industry: concern around the proposed numbers of onshore wind, offshore wind and solar set out in the plan; and insufficient detail around the next steps (a critique that I was quick to deploy). Further reflection leads me to think both evaluations may be overplayed.

The numbers

There are some impressive numbers within the plan, setting out the shape of a changed energy sector by 2030:

  • €80 carbon tax
  • 70% renewable electricity
  • 950,000 Electric Vehicles (EVs) on our roads
  • 15% electricity demand from renewable sources under Corporate PPAs
  • A renewable portfolio of 8.2GW of onshore wind, 3.5GW of offshore wind and 1.5GW of grid-scale solar
  • 500,000 existing homes upgraded to B2 Building Energy Rating
  • Heat pumps installed in 400,000 households

There was some critique of the relative proportions of different renewable technologies (i.e. the ratio of onshore wind to offshore wind to solar). Observers should perhaps not fixate too much on the specific numbers; it was one scenario identified as consistent with meeting 2030 climate targets. The Renewable Electricity Support Scheme (RESS) auctions rules will, as noted in the document, have a significant determining effect on the final mix of renewable electricity on the Irish system.

It may be more fruitful to consider what these numbers signify: an Irish government advocating a quantum shift in the sector by 2030. The Climate Action Plan isn’t trying to answer what should be the optimal generation mix, but signposting the scale of what is necessary to attain the necessary scale of decarbonisation – in this case, at least tripling the current installed renewables capacity in the next eleven years.

The plan

However, to achieve the 2030 targets, it is necessary to move into detailed planning and specific implementation of those measures. In a sector that plans in decades, 2030 is not such a long time away. It was a common refrain from the sector that the government should now show the detailed future pathway.

Rereading the plan and the associated annex, it becomes evident there is a range of items to be delivered by the first half of 2020. While they are not the entire roadmap, they are certainly useful key performance indicators (KPI) of early progress. The table below summarises a range of these KPIs. Monitoring these provides a framework for assessing progress in the first year.

There is a notable emphasis in the plan upon tracking progress, including governance arrangements, carbon budgets, a strengthened Climate Change Advisory Council and greater accountability to the Oireachtas. It suggests a commitment to implementation, though the outputs from that process will bear scrutinising.

Next steps

This is a policy document that improves upon rereading. No, it’s not perfect, and some sectors are certainly bearing more weight than others in decarbonising the economy.

Yes, the numbers are open to question as they tend to be in scenario-based analysis. Yes, the scale of the hill to be climbed does need more mapping, but we have reasonable contours by which to judge our initial progress. The next 12 months will tell us a lot about the true level of urgency behind this agenda in government and amongst other delivery bodies.

The main challenge is to deliver, to do so at pace and scale.

Can we help?