RESS-won: renewables on the march
05 August 2020
Yesterday will be remembered as a good day for the Irish renewables industry, with the level of supported renewables capacity set to grow by over a quarter in the next 2-3 years.
After years of waiting, the first Renewable Energy Support Scheme auction (RESS-1) results are here (provisionally, pending appeals). Individual prices are confidential though the average published prices were: community projects – €104.15/MWh, solar – €72.92/MWh and all projects – €74.08/MWh.
The headline will be the 796MW of solar projects securing contracts. The big implication is, assuming successful delivery, Ireland could have 800MW grid-scale solar projects in the next couple of years. The solar industry lobbying has delivered.
However, the wind industry is not a loser here. While the capacity of winning projects was lower, 479MW, higher wind capacity factors mean that nearly twice the volume of onshore wind output is forecast to be supported than solar. Only a relatively small proportion (21MW) of the bidding wind projects did not secure a contract.
A big takeaway is the price level. The average prices obscure any variation in the bid prices. Having modelled Irish solar projects, it’s clear that developers placed reasonably lean bids to secure contracts. A lot of the wind projects are likely to be operating under less generous pricing than under previous Renewable Energy Feed-in-Tariff (REFIT) contracts.
The all projects category average price being higher than the pure solar average price suggests that a number of higher-priced solar projects didn’t or couldn’t win in the solar category and secured contracts in the all projects category. The price level and competition suggest there was also some canny bidding in the community pot.
The outcome of the auction will probably satisfy policy makers considering some of the wilder predictions pre-auction, though the price level is higher than recent auctions in other jurisdictions.
One driver for that may be network costs, which are not insubstantial.
Another talking point, the RESS contracts not being indexed to inflation, will have increased bid prices. It adds 20-30% more to a project’s operational costs, depending on assumed rates. Differences between similar bids could come down to bidders’ respective views on inflation levels. The freshly minted Department for Climate Action, Communication Networks and Transport may reconsider that aspect of design in future auctions.
While there is scope for participants to express dissatisfaction, within the RESS-1 process the only relevant grounds for appeal are procedural ones, and the auction appears to have been run as per the terms and conditions. The Minister has some powers to intervene; Minister Ryan’s return to the energy portfolio may involve him fielding calls from project owners. Our expectation is, however, that the Minister may wish to avoid intervening to maximise auction credibility.
The focus for many now shifts to ESB Networks delivering connections to meet the RESS delivery deadlines. Staff at the distribution company can expect to be hearing quite regularly from RESS project developers seeking updates on progress.