ARTICLE
16 August 2024

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

AC
Arthur Cox

Contributor

Arthur Cox is one of Ireland’s leading law firms. For almost 100 years, we have been at the forefront of developments in the legal profession in Ireland. Our practice encompasses all aspects of corporate and business law. The firm has offices in Dublin, Belfast, London, New York and Silicon Valley.
The Recast Regulation and Directive on the internal markets for renewable gas, natural gas, and hydrogen came into effect on 4 August 2024.
European Union Energy and Natural Resources

KEY DEVELOPMENTS

EU Gas Market Reform

The Recast Regulation and Directive on the internal markets for renewable gas, natural gas, and hydrogen came into effect on 4 August 2024. Our full briefing is available here: EU provides Legal Framework for Regulation and Decarbonisation of the Gas Sector. The Commission has now indicated the intent to establish the European Network of Network Operators of Hydrogen in 2025.

Significant Demand Strategy Decision

The CRU published the National Energy Demand Strategy Decision (CRU/2024/67), organised around three areas:

  1. Smart Services: It is intended to provide implicit flexibility to encourage domestic and small business customers to respond to incentives, through smart services (such as time of use tariffs, dynamic tariffs, and smart EV charging services) and smart infrastructure (such as smart meter rollout and microgeneration). The CRU intends to develop licences for aggregation and demand response, and the framework for non-licensed market participants. It intends to progress interoperability including through publication of the smart meter data access code.
  2. Demand Flexibility and Response: This focuses on demand side response from customers, including LEUs, and storage under certain system conditions, through implicit flexibility and explicit flexibility (contracts and products). Actions are grouped under market frameworks (such as active participation of DSUs in the market); procurement and product development (including for long duration energy storage, to be consulted on in Q4 of 2024); technology, platforms and systems (such as system changes for dispatchable consumption); and information, certification and reporting (such as design for more detailed GoO certification implementation).
  3. New Demand Connections: The CRU is expected to consult further during summer 2024.

It is important to note, as strategy develops, that both demand response and connection policy are regulated under EU energy and climate law. While the paper lists at page 75 a number of domestic policy principles that "provide a guide for the kind of metrics that may be used to decide on new demand connections", decisions on new demand connections must be made in accordance with the law governing connection to electricity and gas systems.

A holistic approach to the legal framework is also helpful. EU law has primacy over the Climate Action and Low Carbon Development Acts, as recognised in the Acts. The Acts dovetail with EU and domestic law: they oblige relevant bodies to, insofar as practicable, perform their functions in a manner consistent with elements of Ireland's climate governance framework set out in the Acts. This recognises that relevant bodies must do what is able to be done within the particular statutory vires governing them. Each relevant body will have a role appropriate to its functions. Alluding to a joined up approach, the policy states at page 77 that consideration "should be given to a national strategic approach for the planning of large demand customers and associated infrastructure requirements (e.g. energy, water, broadband, transport etc.)...".

Demand Flexibility Product

ESBN has reported on the consultation responses to its demand flexibility product proposal. It is intended that a procurement model will support multi-market participation of assets across flexibility, capacity, wholesale and ancillary services markets. ESBN states that contracts for up to 15 years will award availability payments structured according to a 'floor and share' approach, with negative incentives for deviations from agreed schedules. An initial list of locations potentially suitable for procurement of medium-term demand flexibility, and provisional dates for the tendering process, are available.

FURTHER EU DEVELOPMENTS

Energy Efficiency: Further Guidance on Implementation

In addition to the Commission Recommendations we mentioned last month, further guidance has been published on implementation of the Recast Energy Efficiency Directive.

  1. Energy Efficiency First Principle Commission Recommendation (EU) 2024/2143 sets out guidelines for the interpretation of Article 3. Article 3 requires Member States to ensure the assessment of energy efficiency solutions in planning, policy and major investment decisions in both energy and non-energy sectors. The guidance notes that: "The practical application of the EE1st principle depends on the decision-making context and the actors involved. Even though the implementation of the principle embodied in Directive (EU) 2023/1791 is vested in the Member States, the relevant decisions on planning, policy and investment are taken by a large number of actors".
  2. Energy Management Systems and Audits Commission Recommendation (EU) 2024/2002 sets out guidelines for the interpretation of Article 11 as regards energy management systems and energy audits. The most important difference in the updated version of Article 11 as compared to the old Energy Efficiency Directive concerns the scope of the obligation for enterprises to implement an energy management system or audit. Whereas the previous law defined the scope through the nature of enterprise (i.e. SME or not), under Article 11(1): "Member States shall ensure that enterprises with an average annual consumption higher than 85 TJ of energy over the previous three years, taking all energy carriers together, implement an energy management system". Moreover, under Article 11(2): "Member States shall ensure that enterprises with an average annual consumption higher than 10 TJ of energy over the previous three years, taking all energy carriers together, which do not implement an energy management system are subject to an energy audit". Articles 11(1) and 11(2) do not exclude any sectors based on their activity (for example, ETS installations or IPPC licence holders).

Carbon Capture and Storage

The Commission published revised guidance on implementation of Directive 2009/31/EC on the geological storage of carbon dioxide, to reflect the global state of the art in CCS and remove ambiguities identified during the implementation of the first technological deployments in the EEA.

Electricity

  • Offshore Network Development: ENTSO-E and the Commission have elaborated guidance to support Member States in delivering the input information needed for the Offshore Network Development Plan 2026. This contributes to the TYNDP under the TEN-E Regulation.
  • Bidding Zone Review: ENTSO-E is consulting until 4 September 2024 on aspects of the TSOs' study on alternative Bidding Zone configurations.
  • Forward capacity allocation: The Commission is consulting until 30 September 2024 on revision of the electricity guideline on forward capacity allocation (Commission Regulation (EU) 2016/1719). The aim is to ensure market participants can benefit from hedging opportunities and to overcome issues with liquidity, accessibility, competition and transparency.
  • Inter-TSO Compensation Mechanism: ACER reported on the mechanism for compensation among TSOs for the costs of hosting cross-border electricity flows (for example, power losses and investments in network infrastructure). There were notable changes in net positions, with many parties shifting from a net contributor to a net recipient position or vice versa. This confirmed previous trends of unstable and unpredictable net positions, mainly arising from fluctuating flow patterns across Europe and year-to-year volatility of losses and costs.
  • Imbalance Settlement: A dashboard monitoring the implementation of the Imbalance Settlement Harmonisation methodology is available. The methodology aims to harmonise the main features of imbalance settlement across the EU.
  • Reserves: Several NRAs including the French NRA are taking further time to decide on TSOs' proposal to introduce a probabilistic dimensioning approach to Frequency Containment Reserves. The aim is to improve how reserves are calculated to stabilise the grid's frequency during supply and demand imbalances.
  • Cybersecurity: The EU has reported on cybersecurity resilience of the electricity sector and set out recommendations across four areas. Key findings are here.
  • Market Monitoring: The Commission report on the market in Q1 of 2024 is available.

Gas

Market Monitoring: ACER's quarterly review is available and indicates a fall in gas-powered electricity generation. ACER reached positive findings on the functioning of system balancing. ACER's summer outlook indicates that the EU will meet demand and storage requirements by 1 November and examines scenarios for the period after that. The Commission report on the market in Q1 of 2024 is also available.

REMIT

ACER has provided further clarification on the revised REFIT Regulation around notification of usage of algorithmic trading and direct electronic access. ACER has also published its quarterly REMIT report.

Financing Mechanisms

The EU Renewable Energy Financing Mechanism is running a second call for proposals to support cross-border projects. In the context of the EU Wind Power Package, the EIB is providing counter-guarantees under a €5 billion initiative to support wind-energy manufacturers. Under the ambit of the Connecting Europe Facility, energy projects are being funded €67.4 million in five several EU countries included in offshore and onshore wind development.

Trade: Offshore Auctions

The EU invoked WTO dispute settlement procedures in relation to criteria included by Taiwan in offshore wind energy auctions. The EU alleges that certain local content and award criteria are inconsistent with WTO rules.

Energy Charter Treaty

The EU and its Member States published a declaration stating their common understanding that Article 26 of the Energy Charter Treaty does not apply as a basis for intra-EU arbitration proceedings. Article 26 provides for disputes between a country and an investor of another country. The Commission is consulting until 13 September 2024 on a similar Declaration. The EU and Ireland are exiting the Treaty which they view as incompatible with energy transition goals.

CASELAW

Sustainability criteria for biofuels and bioliquids

Case C-624/22 was a preliminary reference from a French Court asked to adjudicate on a French tax incentive relating to incorporation of biofuels. The CJEU was required to consider Articles 17 (Sustainability criteria for biofuels and bioliquids) and 18 (Verification of compliance with the sustainability criteria for biofuels and bioliquids) of the 2009 Renewable Energy Directive, which the CJEU comment have an essentially similar objective and content for the purposes of the case to the current version of the Renewable Energy Directive. (The relevant provisions are now Articles 29 and 30). The CJEU found that these provisions mean that the mass balance monitoring system and the voluntary national or international schemes provided for in the relevant provisions are intended to assess and justify the sustainability of raw materials and biofuels, not to regulate the evaluation of the share of energy from renewable sources contained in fuels produced according to the co-processing procedure.

FURTHER DOMESTIC DEVELOPMENTS

NECP

Ireland submitted its draft updated National Energy and Climate Plan 2021-2030 to the European Commission. NECPs are required to elaborate how Ireland's energy and climate policies and measures will meet its commitments under EU law.

PSO

The latest updates to the Electricity Regulation Act 1999 (Public Service Obligations) Order 2002 have been made: S.I. No. 377/2024.

System Services Supplier Charge

EirGrid and SONI are consulting until 18 September 2024 on the methodology for determining charges to be imposed on Suppliers to fund payments to the providers of System Services.

Connection Batch Processing

EirGrid published slides on draft assumptions for ECP 2.4. Treatment of surplus and curtailment is proposed to be treated as per ECP 2.3. Treatment of constraint is marked 'TBD'. Final assumptions are anticipated in September 2024.

Balancing Market Principles Statement

EirGrid published Version 8.0 of the Balancing Market Principles Statement. It includes an amendment stating that the "interim solution for Battery ESPS Units is evolving to allow these units to be dispatched for energy purposes more regularly in certain situations, provided at least 100MWh of energy reserve is retained on the aggregate Battery ESPS Units' portfolio". It sets out situations in which these units are dispatched for energy purposes.

ESBN Price Review 6

ESBN is consulting until 30 August 2024 on its investment plan approach for PR6. The proposed focus is on secure and resilient networks and supplies, decarbonised electricity, and empowered customers.

CRU BUSINESS

GNI NDP

GNI's Network Development Plan 2022/23-2031/32 is available. Peak day and annual gas demand forecasts diverge. Annual demand is forecast to decrease by 21% by 2031/32 in the Best Estimate Scenario, and the 1-in-50 winter peak day demand is predicted to grow by 18%. Biomethane and hydrogen supply sources are forecast to meet approximately 14% and 3% of ROI gas demand respectively by the end of 2031/32.

PSO Levy 2024/25

For the PSO Year 2024/25 the CRU has calculated that €251.79 million will be required to support these renewable energy projects. The R-Factor 2022/23 was €326.9 million. (CRU/2024/77).

Compulsory Acquisition

Section 47 of the Electricity Regulation Act 1999 gives the CRU certain powers to grant orders for the compulsory purchase of land. The CRU published an application form and guidance for special orders under section 47.

SEMC BUSINESS

Capacity Market

T-4 2028/2029: The SEMC consulted briefly on modifications submitted by the regulatory authorities relating to introduction of intermediate length contracts and implementation of early delivery incentives according to SEM-24-037. The paper indicates they were raised as urgent modifications to ensure implementation ahead of T-4 2028/2029 auctions (SEM-24-052).

T-4 2027/28: Information on decisions made by the SEMC in determining the volumes procured in this auction is available. Under a 'future changes' section, the SEMC indicates an intent to have greater transparency around the target volume setting and to change the approach to assessing resource adequacy (SEM-24-051).

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.

Mondaq uses cookies on this website. By using our website you agree to our use of cookies as set out in our Privacy Policy.

Learn More