The future of renewable developments in Ireland
The Irish government has launched a public consultation on the new Renewable Electricity Support Scheme (RESS) – what does it mean for the future of renewable development in Ireland?
The preferred option outlined in the consultation is an auction system featuring a primary auction which is technology neutral, i.e. various renewable technologies with comparable costs compete and the lowest cost bid wins irrespective of technology. Support will come in the form of a “Floating Feed-in Premium” (FIP) which will be the difference between the auction strike price and the reference market price. All successful winners in the auction would receive the highest clearing price and standard qualification criteria would apply, such as having a grid connection, planning permission, community participation, etc. Auctions would take place over regular intervals (i.e. such as every two years) to allow the scheme to take advantage of reducing technology prices which in turn should require lower levels of support over time.
The scheme also provides separate auctions for both community led and developer led wind farm projects, with separate ring-fencing of renewable capacity (10-20%) for these projects.
One notable aspect of the consultation is the specification of a technology neutral primary auction. The most likely consequence is that onshore wind continues to be the dominant renewable energy source as it has the lowest Levelised Cost of Energy (LCOE). The scheme does allow the government flexibility to provide separate technology auctions to support broader government objectives, such as diversifying the renewable technology mix or supporting community led projects. However, one of the primary drivers mentioned throughout the report is the desire to obtain the most cost effective solution for consumers, in terms of minimizing the impact on the Public Service Obligation (PSO) levy. Elevated cost is also one of the reasons given not to provide support for micro-generation in the RESS. This would indicate that there currently isn’t a significant appetite to support other higher cost technologies, such as offshore wind and solar, though it does allow them to compete in the future, if costs come down.
The lack of specific auctions for solar and offshore wind technologies is disappointing, especially for the solar industry, where many companies have looked to invest, with over 5GW of applications for grid capacity made. Solar does have one potential bargaining chip; it can be deployed quickly. This means, if Ireland looks set to miss out on its 40% renewable energy source of electricity (RES-E) target for 2020 based on projected onshore wind installation rates, a solar auction could be held in 2019 to help provide the needed extra renewable installed capacity required to meet this target. Even if the LCOE of solar is not currently competitive with onshore wind, it could be argued that the cost of any potential EU fine would be better spent supporting the renewable industry in Ireland. The solar industry would also benefit greatly from some forward planning and support from the Irish government, instead of it being considered as a backup plan or a venture to be explored when costs decrease.
The inclusion of offshore wind in the consultation document is somewhat encouraging for the industry. However, offshore wind projects off the coast of Ireland are unlikely to be able to compete against other technologies in a technology neutral auction, in the near term. But as costs continue to fall and the opportunity to develop projects of sufficient scale develops, offshore wind projects might be able to start competing with other technologies between 2020-2030.
One of the issues with the currently described scheme is its lack of clarity around the size and frequency of auctions. Once the scheme is finalized, the government should plan a roadmap to 2025 or 2030 which details the capacities to be auctioned and timings. This will help the renewable industry plan for the long-term, rather than react to each announcement.
The government also needs to consider how any new Group Processing Application (GPA) process for grids would operate in a system where applicants take part in an auction. If only a few applicants are successful in the auction, how will this affect the overall cost of the shared asset and their ability to build out the renewable developments?
Generally, the outlook for onshore wind is good. However, further progress needs to be made separately by government, regulators and the industry, regarding access to the grid, streamlining the planning process and ensuring community buy in. The outlook for solar is still uncertain. Strong lobbying efforts are needed by the industry to emphasize the potential benefits of solar, both in developing an industry and meeting Ireland RES-E targets. The outlook for offshore wind is business as usual with no clear indication of support from the government.