RESS-1 application closing date is further extended
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.
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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.