Energy Update: Let it Go? Releasing Unwanted Irish Grid Capacity
08 May 2017
Last year the Commission for Energy Regulation (“CER”) authorised a limited opportunity for stalled projects to release their capacity in exchange for 80% of their first stage payment. This opportunity, however, was only available to those agreeing to release their full maximum export capacity (“MEC”) held under a given gate.
Ultimately, the initiative was not successful in encouraging the release of unused capacity with only two applications received. Projects seeking to release a portion of their capacity remained subject to the rules outlined in the COPP Paper.
The CER has now published a decision entitled ‘Connection Policy Transitional Arrangements – Partial Capacity Release’ (“CER/17/090”) in which it approves the principle of partial capacity release. Projects with unused or unusable capacity have until 30 June 2017 to apply for a reduction in MEC free from the standard MEC reduction charges, i.e. €10,000/MW or €25,000/MW depending on the construction stage of the connection works. The decision clarifies that, unlike full capacity release, no first stage payments or charges will be refunded for partial release. Projects will be required to pay the appropriate modification charge on submitting a partial capacity release application.
The CER has also extended the deadline for applications for full MEC release, previously 28 April 2017 to 30 June 2017.
The clock is ticking. Holders of unused capacity need to consider whether it is time to ‘Let it Go’ and avail of this once-off opportunity to reduce their MEC free of a reduction charge.
Does your project qualify?
A partial release application is only open to projects that hold a valid connection agreement with MEC greater than 5MW and looking for a reduction of at least 3MW. The standard COPP rules in relation to MEC changes continue to apply save for the MEC reduction charges. Any security that is in place will be amended accordingly in line with the revised MEC level on processing of a reduction application.
The system operators will not permit relocation or transfer to another technology type of released capacity. This is because the process is intended to ensure existing projects can apportion their MEC correctly and move forward with construction rather than promoting secondary trade in capacity.
Similarly, projects that submit a partial release application will not be permitted to subsequently relocate their remaining capacity or transfer it to another technology type. Partial capacity release is open to projects regardless of their construction phase. To discourage any speculative applications, applications cannot be withdrawn once submitted and the reduced connection agreement must be accepted.
Factors to consider before submitting an application
If you have a project which complies with the CER/17/090 criteria, and you are considering submitting an application to reduce capacity, you need to consider the implications. A reduction in MEC may affect the project’s compliance with REFIT and electricity licences. In addition, in-construction bank-funded projects will need to assess whether their existing lending and security arrangements facilitate the proposed release/reduction in capacity. This analysis needs to be concluded and resulting action taken prior to the 30 June 2017 deadline for partial reduction applications and to avoid incurring costs.
The partial capacity release decision provides a once-off opportunity for projects wishing to release part of their MEC without incurring the MEC reduction charges. It remains to be seen if the most recent CER decision will encourage the release of unused and unusable capacity back to the grid to benefit new entrants. Similarly, industry participants will need to gauge whether this initiative will be more successful than the previous full release mechanism.
For more information on how the implications of a partial capacity release will affect your project, please contact a member of our Energy, Utilities & Projects team.
The content of this article is provided for information purposes only and does not constitute legal or other advice.