KEY DEVELOPMENTS

Fourth Onshore Renewable Energy Support Scheme

DECC is consulting until 26 March 2024 on design of the RESS 4 auction. One of the proposals is to provide for a suspension of Milestones for Relief Events, that is events outside a generator's control that could not have been avoided and which result in or cause the failure of the project to reach individual Milestones. This will be welcomed by developers given that allocation of risk to the entity best placed to manage it is a fundamental principle of project development and is necessary to deliver projects in an economically efficient manner. Similarly, the proposal to extend the timeline for delivery, in light of supply chain stresses, such that the Longstop date will move to the end of 2029, is prudent and is similar to the extension given to RESS 2 projects.

Offshore Renewable Energy Development

Merchant Phase 1 Projects

The CRU is consulting until 12 April 2024 on its minded to position on how assets built by Merchant Phase 1 projects, and transferred to EirGrid, will be treated (CRU/2024/09). It looks at:

  • asset transfer value: this is to be determined through an ex-post costs assessment (in the post construction review) and paid back by EirGrid via OG-TuoS to the developer over a period of 30 years at a fixed rate of return,
  • post construction review: this will assess outturn costs for design and development, capital expenditure, interest during construction and transaction costs,
  • asset transfer: there will be a series of gateways culminating in a three-month period of continuous operation before asset transfer to EirGrid, which will assume operation and maintenance strategy,
  • guarantee of availability and compensation: planned maintenance days will be allowed for EirGrid with three options presented for the level of compensation to be paid to developers, and
  • firm access: a firm access date is to be provided in the full connection offer (which must be executed by 31 December 2025).

Phase 2 Offshore Grid Charging Policy

The CRU is consulting until 19 April 2024 on the Phase 2 Offshore Grid Charging Policy to determine how, in the plan-led model of development, costs of offshore transmission assets constructed by EirGrid will be recovered (CRU/2024/12). Two options are presented.

  • Under the first option (Offshore Generator Transmission Use of System (OG-TUoS) Tariff), the costs of offshore transmission assets would be recharged to offshore generators through a project specific "Offshore Grid Charge" (OG-TUoS). The developers of the offshore projects would pay for the 'shallow connection' works up to the meshed onshore grid through the OG-TUoS charge.
  • Under the second option (Socialise through Irish Transmission Demand tariffs (D-TUoS)), the costs of offshore transmission assets would be socialised across all electricity consumers in Ireland through network charges, specifically Demand Transmission Use of System (D-TUoS) tariffs.

Industrial Strategy

The Department of Enterprise, Trade and Employment has made the keenly awaited Offshore Wind Industrial Strategy available. It includes 40 actions for 2024 and 2025, many of which focus on growing the offshore wind development supply chain.

Nature Restoration Law and Renewable Energy

The European Parliament adopted its position on the proposal for a Regulation on nature restoration. The proposal is to require Member States to restore 30% of in scope habitats from a poor to good position by 2030, with higher targets for subsequent years. Requirements include restoring drained peatlands and Member States can choose from a wide range of measures to do this.

The text provides for the deployment of renewable energy infrastructure to be taken into account when complying with certain obligations. It states that it should be possible to combine acceleration of renewables with restoration activities, wherever possible, including in renewables acceleration areas and dedicated grid areas. Member States should coordinate the development of national restoration plans with the mapping of areas required to meet their 2030 renewable energy targets. For the purposes of various provisions in the text, renewable energy projects are presumed to be in the overriding public interest. We will consider this further in the coming weeks. Further information from the Parliament is available here. In Ireland, DECC announced funding for community biodiversity grants.

FURTHER EU DEVELOPMENTS

Assessment of Ireland's National Energy and Climate Plan

The Commission published its assessment of Ireland's draft updated NECP for 2021-2030. It is now up to Ireland to take full account of the recommendations and submit a final updated NECPs by 30 June 2024. Further background is here.

The Commission recommended 23 actions which focus on requiring a greater degree of specificity around how Ireland intends to comply with EU climate instruments. Recommendations include:

  • 7. ... Describe how Ireland plans to accelerate permitting and detail the renewable energy technologies for which it plans to designate 'renewables acceleration areas' with faster and simpler procedures. Include further detailed measures on an enabling framework for increasing integration between electricity and heating and cooling networks, and on waste heat recovery. Describe how the design of the obligation on fuel suppliers in the transport sector will be covered and include further measures for promoting hydrogen in industry and preparing the EU for renewable hydrogen trade.
  • 9. Provide to the extent possible an expected timeline of the steps leading to the adoption of legislative and non-legislative policies and measures aimed at transposing and implementing the Renewable Energy Directive as amended...
  • 11. ... Set out complete policies and measures to achieve the national contributions on energy efficiency, and how the Energy Efficiency First principle will be implemented....
  • 12. Include updated ambition level to ensure a highly energy efficient and decarbonised national building stock and to transform existing buildings into zero-emission buildings by 2050, including intermediate milestones for 2030 and 2040 .....
  • 14. Put forward clear objectives and targets for demand response in the demand flexibility plan and set out a clear timeline for the planned changes to system services to improve the flexibility of the energy system, in light of an assessment of the flexibility needs. Describe how Ireland intends to facilitate energy system integration in the context of Article 20a of the Renewable Energy Directive as amended....
  • 17. Specify the reforms and measures to mobilise the private investments needed to achieve the energy and climate targets. ...
  • 19. Explain in detail how and by when Ireland intends to phase out fossil fuel subsidies. Explain in more detail how Ireland plans to phase out solid fossil fuels for power generation by clarifying the related commitments and measures.

Offshore

  • Marine Protected Areas: Ireland will receive EU funding to support designation of at least 30% of the maritime area as Marine Protected Areas. Further information is available here.
  • Offshore bidding zones: The Commission published a report on the use of congestion revenues for offshore renewable energy projects when projects are connected to more than one market or offshore bidding zones are established.

Electricity

  • REMIT Revision: The proposal to amend the REMIT Regulation has been updated by Parliamentary endorsement of a further amendment. It is expected that this will be approved by the Council and the final text will be adopted. Further information about the reforms is available here.
  • REMIT Fine: In France, Engie SA was fined for breach of the REMIT Regulation. Further information is available here.
  • Networks: The ENTSO-E Strategic Roadmap 2023-2025 is available here. There are now two pillars: a power system for a carbon-neutral Europe and a secure and efficient power system for Europe.
  • Cross-Border Trading: ACER has announced next steps in advance of its decision by 7 August 2024 on TSO proposals to amend the methodology for pricing balancing energy and cross-border capacity and the implementation framework for a European platform for the exchange of balancing energy from frequency restoration reserves.
  • Solar: The Commission is calling for evidence until 2 April 2024 on innovative forms of solar energy deployment, with the aim of adopting a Recommendation in Q2 of 2024.

Gas

  • REMIT Fine: In Italy, ENET was fined for breach of the REMIT Regulation. Further information is available here.
  • Hydrogen – State Aid: The Commission approved State aid by certain Member States for the third Important Project of Common European Interest in the hydrogen value chain. Further information is available here.
  • Hydrogen - Lending: The EIB is lending up to €100 million to Sunfire in Germany to support development of solid oxide electrolysers for renew hydrogen production in industrial settings.
  • Security of Supply - Aggregate Gas Purchasing: Buyers could submit demand for gas on 15 February 2024 for the period April 2024 to October 2029, for aggregate purchasing at EU level. Further information is available here.
  • Security of Supply – Demand Reduction: EU Ministers agreed a Council recommendation to continue coordinated demand-reduction measures for gas. Further information is available here.

Carbon

  • CBAM – Research on Alternatives: The Commission published a paper proposing an alternative policy to the Carbon Border Adjustment Mechanism. The authors indicate that the Leakage Border Adjustment Mechanism would not require knowledge of embedded emissions and would be capable of being applied to all tradable sectors. This paper was presented by several researchers at the Research Conference on the Single Market organised by the Commission's Directorate General for Internal Market, Industry, Entrepreneurship and SMEs. The opinions expressed are not attributed to the Commission and we have not seen anything to indicate a new direction of travel by the Commission as regards the CBAM Regulation.
  • Certification: Political agreement has been reached on a proposal for a Regulation establishing a Union framework for carbon removals. It is intended to establish a voluntary framework for certification to boost innovation in carbon removal and farming. Further information is available here.

Recovery and Resilience Funding

The Commission published an evaluation report and country snapshots here on this facility the aims of which include funding the green transition. Further information is available here.

Critical Raw Materials

A regulation known as the Critical Raw Materials Act is close to being finalised, in parallel with the Net Zero Industry Act we discussed last month. The Parliament has published a corrigendum to its position on the Critical Raw Materials Act, which aims to secure a sustainable and competitive value chain in Europe, here.

Small Modular Reactors

The Commission is establishing a new European Industrial Alliance to accelerate the development, demonstration and deployment of SMRs in Europe by the early 2030s. Further information is available here. The Parliament has also published a summary on the future of nuclear energy in the EU.

Data

A snapshot of renewable energy in the EU is available here. A new interactive atlas showing energy demand down to 1X1 km has also been made available.

CBAM IN THE UK AND NI

The UK Government confirmed that it will consult in 2024 on a UK Carbon Border Adjustment Mechanism to be introduced from 1 January 2027. It is intended to apply to relevant goods imported in the aluminium, cement, ceramics, fertiliser, glass, hydrogen and iron & steel sectors.

Clarity as regards application of the EU CBAM across the SEM is needed. The UK Government states in the Safeguarding the Union Command Paper that there will be a vote on a cross-community basis in the NI Assembly, in accordance with Schedule 6B of the Northern Ireland Act 1998, on any EU notification seeking to add the EU CBAM Regulation to the Windsor Framework.

GREENWASHING

Green Claims Directive

The Parliament's Internal Market and Environment Committees adopted their position on the draft Green Claims Directive. The Directive will set out rules around how businesses substantiate and verify green claims. The next step is voting in plenary session, and follow-up by the new Parliament after the elections. Further information is available here.

Directive Empowering Consumers

The Green Claims Directive is being progressed in addition to the Directive on empowering consumers for the green transition through better protection against unfair practices and better information, which is also nearing the end of the legislative process. Further information is available here.

INTERNATIONAL ENERGY ASSOCIATION

Ireland co-chaired the IEA's 50th anniversary event, at which several mandates were agreed in a joint communiqué. They include commitment to achieve a fully or predominantly decarbonised electricity sector by 2035, and to work with key international financial institutions to remove barriers to investment, noting the IEA analysis that clean energy investment from all sources needs to reach USD 4.5 trillion per year by 2030 to limit warming to 1.5°C. Further information is available here.

FURTHER DOMESTIC DEVELOPMENTS

Constraints

EirGrid published ECP-2.3 Constraints Analysis slides and a Q&A document. The slides conclude that 'grandfathering' of constraints leads to significantly higher volumes of total dispatch down for non-priority generators, and that total dispatch down reduced from 2026 to 2028, mainly because of reduction in surplus and curtailment due to additional demand and interconnection along with relaxation of operational constraints. Constraints increase from 2026 to 2028 and reduce by 2030. Some very high constraints levels are shown in the slides.

CCAC

The Government appointed new members to the Climate Change Advisory Council.

FURTHER CRU BUSINESS

Public Service Obligation

The CRU has notified suppliers of information requirements for submissions to the CRU for the 2024/2025 PSO levy. (CRU/2024/06)

Dynamic Electricity Price Tariffs

The CRU is consulting until 5 April 2024 on dynamic tariffs for customers that would vary hour-by-hour to reflect wholesale prices. (CRU/2024/08)

Price Comparison Websites

The CRU is satisfied that accredited websites are complying with the Accreditation Framework. (CRU/2024/03)

SEMC BUSINESS

Capacity Market

  • Auctions in 2024: There will no longer be a T-3 2027/28 auction. The SEMC will instead hold the T-4 2028/29 auction targeted for 12 December 2024, with incentives for early delivery of new capacity in the capacity year 2027/28. Details of early delivery incentives are expected to be developed and communicated in the coming weeks and will be intended to reward investors who deliver capacity from 1 October 2027, and those who can deliver capacity for part, but not all, of the 2027/2028 capacity year. It is anticipated that a Capacity Auction Timetable for the T-4 2028/29 auction will be published shortly. The SEMC also reiterates its commitment to increase the Auction Price Cap. (SEM-24-017).
  • New Capacity: the definition of New Capacity is being amended to avoid Demand Sites moving between Participants being categorised as New Capacity (SEM-24-006).
  • Consultation responses: Responses to consultation SEM-23-034 are available (SEM-24-014). Modification proposals included a proposal to introduce a Remedial Action for Unforeseeable Delays Due to Extraordinary Supply Chain Impacts. Responses to consultation SEM-23-044 are also available (SEM-24-008). Modification proposals included a proposal relating to facilitation of Unit Specific Price Caps for Existing Capacity.

Market Audit

Terms of Reference for the Trading and Settlement Code Market Audit 2023 are available (SEM-24-007).

Directed Contracts

The Information Paper on quantities and prices for Round 26 offerings is available (SEM-24-018).

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.