Energy - Horizon Scanner: Infrastructure, Construction, Energy, May 2024

KEY DEVELOPMENTS

Offshore Wind Energy in Ireland

Future Framework

The Government of Ireland published its Policy Statement on the Future Framework for Offshore Renewable Energy, which we look at in a briefing here.

ORESS 2.1

The Government is also consulting until 7 June 2024 on draft terms and conditions for the ORESS 2.1 auction. Unrealised Available Energy Compensation remains a feature, and notably the constraints carve-out is gone from Eligible Available Quantity.

It is proposed that there will be relief for Grid Delay Events (defined as action or inaction by the TSO which is outside the reasonable control of the Generator that prevents or delays the Generator from achieving Commercial Operation on or before the Longstop Date), by way of potential extension of the Target Commercial Operation Date and Longstop Date, as well as Grid Delay Compensation for each day that Grid Delay Event occurs after the Grid Delivery Date. Grid Delay Compensation will be calculated by reference to 90% of Strike Price.

There will also be relief for Third Party Judicial Review Challenge of the Planning Consent, by way of extension of the Target Commercial Operation Date and certain Milestone Completion Dates. If a Third Party Judicial Review Challenge remains outstanding during a period proposed as December 2028-December 2029, the Minister may extend the Planning Consent Longstop and the Longstop Date up to a maximum period of two years.

South Coast DMAP

Publication of the draft terms and conditions comes as the Government consults until 14 June 2014 on the South Coast draft Designated Maritime Area Plan (DMAP), which identifies four maritime areas off the coast of Counties Waterford and Wexford for offshore wind projects. It proposes that the first Phase 2 offshore wind project, with a capacity of approximately 900MW, will take place in one of the areas, “Tonn Nua”, off the coast of Waterford. Our briefing is available here.

PR6

The CRU is also inviting comments on its PR6 Strategy Paper, which includes a new objective for the TSO: successfully establishing an offshore electricity system and achieving integration of the offshore revenue recovery model.

Onshore Renewable Energy in Ireland

Terms and Conditions and the Timetable for RESS 4 are now available, with the qualification process opening on 20 May 2024. See more in our briefing, here.

EU Energy Market Reform

The agreed texts that will amend the Internal Market in Electricity and Gas Regulations and Directives are now available. Next steps are adoption by the Council following which they will be published in the OJEU and come into force the twentieth day following of publication.

EU DEVELOPMENTS

NECP

The Commission's Recommendation on Ireland's draft updated national energy and climate plan is now published in the OJEU here. As noted previously, the Commission has made several recommendations of actions Ireland should take to meet its commitments under several EU instruments aimed at decarbonisation.

EU-GB Trading

• TCA: The Commission adopted Decision No 1/2024 of the Specialised Committee on Energy on the guidance on frameworks for cooperation between EU and UK TSOs and regulators. ENTSO-E / ENTSOG and the UK TSOs are asked to develop and implement, as soon as possible, efficient and inclusive working arrangements to ensure their effective cooperation, including as regards offshore energy, efficient use of interconnectors, and gas decarbonisation.
• Gas: ACER requires further information about the proposed gas transmission tariff methodology for Interconnector Limited, the gas pipeline connecting the UK and Belgium, allowing bidirectional flows to supply gas to continental Europe. This is a merchant pipeline which was granted derogations from a number of provisions of the EU Network Code on Harmonised Transmission Tariff Structures, but certain requirements in the EU Network Code are applicable to the pipeline.

TEN-E Regulation

The Commission published the first list of Projects of Common Interest and Projects of Mutual Interest. The 166 projects are entitled to streamlined permit-granting and regulatory support, and are eligible for EU financing from the Connecting Europe Facility. A call worth €850 million has been launched for projects. Further information is available here.

Energy Performance of Buildings Directive

Now that the Recast Energy Performance of Buildings Directive is formally adopted, we consider the consolidated text in a briefing here. The Recast Directive has now been published in the OJEU and will enter into force on 28 May 2024.

REMIT

The Regulation amending the REMIT Regulation has been published in the OJEU and is in force. The amendments are aimed at ensuring further transparency and increasing monitoring capacities to contribute to the stabilisation of energy prices and consumer protection, as well as to ensure more effective investigation and enforcement of cases of potential cross-border market abuse. Further information is available here.

ACER has provided an overview of main changes and will host a workshop on 11 June 2024 to discuss implementation and main implications.

Net Zero Industry Act and Renewable Energy Auctions

Parliament adopted the proposed Regulation to establish a framework of measures for strengthening Europe's net-zero technology products manufacturing ecosystem. Council is expected to adopt it without further amendments on 27 May 2024, following which it will be published in the OJEU and come into force.

The Regulation will impose certain requirements in relation to renewable energy auctions for strategic net-zero technologies (which include, for example, solar, wind, energy storage, grid and other technologies). The draft stated that, when designing auctions for the deployment of energy from renewable sources, Member States shall include: (a) pre-qualification criteria related to responsible business conduct, cybersecurity and data security and ability to deliver the project fully and on time; (b) pre-qualification criteria different than those referred to in (a) or award criteria to assess the auction's sustainability and resilience contribution as referred to in certain other provisions which deal with procurement procedures. These criteria are required to be applied to at least 20% of volume auctioned each year per Member State. Further information is available here.

Energy Ministers and industry representatives signed a European Solar Charter to support the competitiveness of the European PV manufacturing industry. It suggests early implementation of relevant provisions in the Net-Zero Industry Act on the use of non-price criteria in renewable energy auctions, public procurement or other relevant support schemes.

Critical Raw Materials

Regulation (EU) 2024/1252 establishing a framework for ensuring a secure and sustainable supply of critical raw materials has been published in the OJEU and enters into force on 23 May 2024.

It lays down measures aiming to: (a) lower the risk of supply disruptions related to critical raw materials likely to distort competition and fragment the internal market, in particular by identifying and supporting strategic projects that contribute to lowering dependencies and diversifying imports and by undertaking efforts to incentivise technological progress and resource efficiency in order to moderate the expected increase in the Union consumption of critical raw materials; (b) improve the Union's ability to monitor and mitigate the supply risk related to critical raw materials; and (c) ensure the free movement of critical raw materials and products containing critical raw materials placed on the Union market while ensuring a high level of environmental protection and sustainability.

The Commission is consulting until 7 May 2024 on the launch of a joint purchasing mechanism to aggregate demand for and supply of critical raw materials.

System Integration

ENTSO-E and ENTSOG are consulting until 18 June 2024 on an interlinked model progress report for electricity and hydrogen, which includes recommendations for the use of integrated models in the cost benefit analyses of both the electricity and gas Ten-Year Network Development Plans.

Electricity

• Resource Adequacy: ACER approved for the first time ENTSO-E's Resource Adequacy Assessment for 2023, acknowledging increasing consistency for example around assumptions for modelling adequacy risks and investment behaviours.
• Day-ahead and Intraday Markets: ACER is considering amendments to the single day-ahead coupling products methodology, intended to enable the implementation of the 15-minute Market Time Unit products into the single day-ahead coupling, expected in January 2025. The amendment is deemed necessary to comply with the provisions of the IME Regulation. Interested parties can contact ACER up to 4 June 2024. ACER is also considering amendments to the methodology for the price coupling algorithm and the continuous trading matching algorithm.

Gas

• Hydrogen Bank: Nearly €720 million has been awarded to seven renewable hydrogen projects through a competitive auction funded by revenues from the EU ETS. Successful bidders will receive a subsidy to bridge the difference between the cost of producing hydrogen and the market price for hydrogen.
• Transmission Capacity: ACER will consult until 14 June 2024 on updating the European rules on allocating gas transmission capacity.
• LNG Market Monitoring: ACER considers that EU LNG demand is likely to reach its peak in 2024. Read more here.

Carbon

• Batteries: The Commission is consulting until 28 May 2024 on the methodology for calculating and verifying the life-cycle carbon footprint of EV batteries, as a first step in implementing the carbon footprint requirements for EVs, as well as on the format companies need to use when declaring the carbon footprint of batteries.
• EU ETS: Corrections have been made to the Delegated Regulation allocating free allowances.

Disused Offshore Installations

The OSPAR Convention deals with protection of the marine environment of the North-East Atlantic. A proposed Council Decision suggests the EU votes in favour of an amendment to the definition of “concrete installation” in OSPAR Decision 98/3 on the Disposal of Disused Offshore Installations, in order to clarify that any cell content within the substructure is not part of the installation. Cells are used for storage of hydrocarbons and can contain residual materials which carry environmental risk.

Eco-design Regulation

The Parliament adopted its position on the proposal to revise the Regulation establishing a framework for setting eco-design requirements for sustainable products. It is anticipated that the Council will adopt the proposal without further amendments. Further information is available here.

Circular Economy

The EU and China agreed to cooperate on circular economy including in relation to battery value chains.

Climate

The latest report on the impact of climate change is available from the EU's Climate Change Service, Copernicus.

Innovation Funding

The Commission highlighted the volume of applications for funding to support the deployment of innovative clean technologies and has announced further funding for research and innovation for green and digital transition.

CLIMATE ACTION LITIGATION

UK Climate Action Plan

The High Court in England & Wales upheld a challenge by NGOs including ClientEarth, which alleged that the UK's Net Zero Strategy was not fit for purpose under the Climate Change Act in that it “relied on high-risk and unproven technologies to tackle climate change, as well as vague and uncertain proposals”. The Court ordered the UK Government to produce a new plan for cutting emissions. Further information is available here.

Complaints against Airlines

The Commission has, with national consumer authorities, sent letters to 20 airlines identifying several types of potentially misleading green claims and inviting them to bring practices in line with EU consumer law within 30 days. Further information is available here.

FURTHER DOMESTIC DEVELOPMENTS

Legislation

The Gas (Amendment) Bill 2023 has been signed into law. It provides for the dissolution of Ervia and the transfer of functions, assets, liabilities, records and staff to GNI.

The Government Legislation Programme (Summer 2024) includes in the legislation for priority publication the Gas Safety (Amendment) Bill and the Marine Protected Area Bill. Legislation for priority drafting includes the Heat Bill and the Gas (Amendment) Bill.

Local CAPs

Climate Action Plans have been published by 31 local authorities, as required under the Climate Action and Low Carbon Development Acts 2015 to 2021.

FURTHER CRU BUSINESS

Transmission Development Plan

The CRU is consulting until 24 May 2024 on EirGrid's draft TDP 2024-2033 (CRU/2024/29).

PR5

The annual electricity distribution 2022 report and report letter are available (CRU/2024/18/18a).

Market Revenue Cap

The CRU is consulting until 31 May 2024 on the final settlement re-run reconciliation returns and returns required due to changes to hedging agreements and PPAs, required to be made by 14 August 2024 (CRU/2024/31).

Domestic Tariffs

Updated Estimated Annual Bills across the market are available (CRU/2024/28).

SEMC BUSINESS

Capacity Market: New Capacity

The SEMC is consulting until 20 May 2024 on several Code modifications (SEM-24-027), including in relation to recovery of Net Present Value Lost as a result of No-Fault Delays to New Capacity Projects, and recognition of extensions granted under SEM-23-101 and SEM-23-108, which relate to modifications to facilitate delivery of new capacity. Modifications also relate to the Performance Security Requirement and an Enduring Mechanism for Indexation based on GB Model.

Capacity Market: T-4 CY2028/29 Auction

• Early Delivery Incentives: There will be incentives for the early delivery of projects (but no more than one year before the start of the capacity delivery year). Multi-year New Capacity and incremental multi-year Intermediate Length Contract (ILC) capacity will receive payment for early delivery at the same price as its awarded capacity in the 2028/29 T-4 auction. The early delivery incentive will apply to all auctions until further notice (SEM-24-037).
• Intermediate Length Contracts: The SEMC decided (SEM-24-035) to allow Existing Capacity and New Capacity investing more than €100,000/MWd (the Intermediate Contract Investment Rate Threshold (ICIRT)) to bid for an ILC of up to five years. Market participants can bid for ILCs in the 2028/29 T-4 auction, but to Qualify to bid for an ILC in the 2028/29 T-4 auction, they must submit an ILC Exception Application by 4 June 2024. The SEMC has published guidance and a new Excel template to use when submitting ILC Exception Applications (SEM-24-033).
• Parameters: The decision on auction parameters is available (SEM-24-028).

Capacity Market: Market Audit

The SEMC is consulting until 22 May 2024 on the Capacity Market Code Year 5 Market Audit terms of reference (SEM-24-036).

Balancing Market: Battery Storage Units

The SOs and MO state that, due to system vendor constraints, it is not currently possible to optimise the use of Battery Storage Units across a time period based on their technical and commercial data in   submitted Physical Notifications. A Code modification is now recommended for approval, whereby these units would submit both Simple and Complex COD prices, but all actions on the units would be System Operator flagged. These actions would initially be flagged out of pricing (but could be tagged back in) and would be settled using Complex COD.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.