‘Renewable Electricity Price Guarantee’ policy set in Northern Ireland

The scheme, initially at least, will not be open to offshore wind developers, the Department for the Economy (DfE) has said late last week in a new policy paper (23-page / 3.9MB PDF) in which it confirmed the finalised plans for the design of the new scheme.

The REPG scheme is being designed to incentivise investment in renewable energy projects in Northern Ireland. It is to be based on the two sided ‘contracts for difference’ scheme that operates in Britain. Under the REPG, renewable energy generators will be able to bid, through a series of auctions run by the system operator in Northern Ireland, as the designated delivery body, to deliver renewable electricity capacity to the all-Ireland electricity grid.

“Similar to the CfD scheme used in Britain, the REPG scheme will be funded through a structured payment mechanism applied via electricity suppliers,” the DfE said. “This mechanism will be designed to be bidirectional: consumers will contribute during periods of low market prices to support generator payments, and will receive payments or bill reductions during periods of high prices when generators repay the difference. This two-way payment system promotes price stability and levels the cost of electricity across the lifetime of the contract, thereby minimising potential price spikes for consumers.”

“Over time, as renewable generation increases and fossil fuel dependence declines, consumers will benefit from lower and more stable electricity prices than they are experiencing today,” it added.

While much of the detail for how the scheme will operate will be set out in new legislation and in standalone terms and conditions for each REPG auction, the DfE’s paper did set out the eligibility criteria relevant to the initial auction and confirm other important points of design.

In relation to the initial auction, for example, the DfE said it will be “limited to mature, well-established technologies capable of delivering clean electricity at the lowest possible cost to consumers” only, confirming that this would not include offshore wind – currently, there are no offshore wind projects operational in Northern Ireland. Instead, the first auction will be open to those behind onshore wind, solar PV, onshore wind and solar PV, onshore wind and battery, solar PV and battery, and solar PV and onshore wind and battery projects.

Only developers able to guarantee the provision of at least 5MW in renewable energy capacity will be able to participate in the auction, and only then if they have valid planning permission for their projects, have an accepted grid connection offer, and are able to provide evidence of financial commitment.

Developers that are successful in the auction will stand to gain a 15-year state payment guarantee for the supply of electricity to the grid, which will be indexed linked to CPI as a hedge for investors against general inflation during the life of the contract.

Commenting on the publication, Richard Murphy, energy expert at Pinsent Masons, said: “It is good to see the lessons learnt from other renewable energy support schemes being designed into the initial REPG auction round at day one, so that there is clarity from the outset on matters such as the inclusion of indexation, dispatch down compensation and negative price provisions.”

The REPG ties in with the statutory duty the DfE faces under the Climate Change Act (Northern Ireland) 2022 of ensuring that at least 80% of electricity consumption in the country comes from renewable sources by 2030.

In the initial auction, the DfE said it will seek to procure between 750 and 1,250GWh/year in renewable electricity capacity but that, to meet the 2030 target, future auctions will need to procure between 3,250 and 3,750GWh/ year.

The DfE said the legislation to underpin the REPG is expected to be introduced to the Northern Ireland Assembly later this year. It will separately consult on the terms and conditions for the first REPG auction so that it can start once the legislation is finalised.

“This is a welcome boost for the local renewables sector,” said Catherine Burns, renewable energy specialist at Pinsent Masons. “We have seen a two-speed renewables market emerge across Ireland and having visibility on policy and a pipeline of auctions will promote investor certainty and confidence to deploy capital in Northern Ireland.”

With a body of work currently ongoing to build the policy and regulatory frameworks for offshore wind deployment in Northern Ireland, the omission of offshore wind from the list of technologies eligible for the initial REPG auction comes as no surprise, according to Murphy and Burns. They said, however, that such a technology of scale can contribute to government targets in a material way and is likely to be included in future auction rounds.

There is also a greater emphasis emerging on government schemes for local economic capture. Indeed, recently published research (39-page / 2.2MB PDF) highlighted how increasing offshore wind capacity to 1GW by 2030, and to 2GW by 2040, could add billions of pounds of growth to the Northern Ireland economy.

Researchers at the Fraser of Allander Institute at the University of Strathclyde modelled a series of scenarios that explored the benefits and costs of investment in fixed and floating offshore wind generation.

“Taking the most realistic situation for offshore wind in Northern Ireland … we find that the economic growth could be between £6.12 billion and £5.58 billion (depending on farm type) and increase employment up to 29,010 person-years over a 60 year period,” their report said.

Burns said: “To realise the full potential of offshore wind as well as onshore renewables in Northern Ireland, local economic capture, not just through electricity generated but through investment in local delivery capabilities, such as the upgrade of Belfast Harbour and inward investment into the manufacturing supply chain and a skilled labour force, is needed to help to retain more economic value and reduce leakage to external suppliers.”