Ireland releases details on new renewable electricity support scheme

Out-Law News | 02 Dec 2019 | 12:40 pm | 3 min. read

The Irish Department for Communications, Climate Action and Environment (DCCAE) has released more detail on the establishment of its new support scheme for renewable electricity – the proposed Renewable Electricity Support Scheme (RESS).

The Irish Department for Communications, Climate Action and Environment (DCCAE) has released more detail on the establishment of its new support scheme for renewable electricity – the proposed Renewable Electricity Support Scheme (RESS).

RESS will be a series of auctions and is designed to encourage the development of renewable electricity projects in Ireland and support the country’s ambition of supplying up to 70% of electricity through renewable energy sources by 2030.

In November 2019 at an industry briefing the DCCAE provided further details on the structure of the first auction  (32 page / 1MB PDF). It is anticipated that RESS auctions will be held at specific intervals to facilitate new technologies, reduced delivery costs and reflecting progress in other areas such as grid capacity and planning permissions received.

Monaghan Garrett

Garrett Monaghan

Partner

Prospective bidders will now have to start thinking about getting 'match fit' for the auctions, the first of their kind in Ireland.

Prospective bidders will now have to start thinking about getting 'match fit' for the auctions, the first of their kind in Ireland. This means refreshing financial models; devising bidding strategies; locking in costs, and allocating resources required to participate in the initial auction (RESS-1). RESS-1 will be technology neutral.

Timetable

Although the final timeline will be subject to the receipt of state aid approval ,the indicative timeline for RESS-1 begins with a detailed design consultation in December 2019 and a briefing on the auction timetable and process. In January 2020 the consultation will be reviewed and registration and training will be opened.

The DCCAE said it hoped to provide a pack with qualification information with final terms and conditions, and obtain state aid approval from the European Commission in February 2020. Qualification submissions are expected to be made in March 2020, with a decision on eligibility in April 2020. Final qualification decisions and an auction information pack will be published in May 2020, with the first RESS-1 auction due to take place in June 2020. Projects would need to be delivered by December 2022.

RESS-1 will seek to procure a minimum of 1,000 GWh/year, not exceeding 3,000GWh/year. Under RESS-1, projects will be eligible for support for a maximum of 16.5 years (1 July 2021 to 31 December 2037), with the possibility of a 12 month extension for force majeure. Grid delay has been explicitly ruled out as force majeure, subject to consultation.

Bonding and key terms

To participate in RESS-1 prospective bidders will be required to provide a bid bond of €2,000 per MW. Following the auction successful bidders will have to enter into an ‘implementation agreement’ with the minister for DCCAE, and a power purchase agreement with an eligible supplier under the Irish Public Service Obligation (PSO) process. Under RESS the existing payment infrastructure for the current support scheme will largely be retained.

With a successful RESS bid, the bond requirements will increase to €25,000 per MW on entry into the implementation agreement. It is not clear if the €2,000 bid bond then falls away or remains in place.

A draft of the implementation agreement has not yet been published but DCCAE has indicated some key commercial terms including a long stop date for commercial operations of 31 December 2022 with the possibility of a 12 month extension for force majeure. Failing to meet this milestone will lead to erosion of the contract term or possible rescission of support by DCCAE.

It has also indicated that there will be no indexation on the strike price, with the strike price being on a ‘pay as bid’ basis with no clearing price. There will be minimum commitments on community participation and DCCAE anticipates the emergence of community-owned projects.

Eligible projects

The auction is only open to new and repowered projects only. A repowered project must increase its power output by 50% and a minimum investment threshold that must be satisfied. Revenue stacking is permissible with ancillary services or EirGrid’s ‘Delivering a Secure Sustainable Electricity System’ (DS3) programme, but not with the capacity market. DCCAE expects auction bids to have a significant focus on community-owned projects and requirements to contribute to a community benefit fund and investment scheme.

Evolving RESS

RESS-1 is an initial step and its design, implementation and effectiveness will have a critical influence on future auctions - for example targeting specific sectors such as offshore wind. DCCAE said a pipeline of future RESS auctions had not yet been baselined and it anticipates that it will adapt future RESS auctions to reflect the experience and lessons from RESS-1.