Energy Update: Review 2016
23 February 2017
The Irish energy sector has made good progress to deliver the Government’s target of 40% of electricity generated from renewable sources by 2020.
Key topics in 2016 included:
During 2016, there was a continuation of the strong development, financing and construction activity in onshore wind farms. By 2020, 16% of Ireland’s overall energy demand is required to be derived from renewable sources, including a 40% sub-target in relation to electricity.
Approximately 350MW of renewable generation was connected to the Irish electricity grid during the year, bringing the total to approximately 4,400MW. This annual connection figure comfortably exceeded the approximately 150MW that was connected during 2015.
A note of caution was provided by the Sustainable Energy Authority of Ireland, who published an analysis of Ireland’s progress towards its 2020 renewable energy targets. While the installation of onshore wind farms was described as remaining broadly on track, it is evident that the targets in relation to transport and heat are proving more problematic – possibly because it is these targets that require behavioural change by the largest number of actors.
A relatively high-profile setback for Irish biomass generation – regarded as a key enabler, among non-wind technologies, of Ireland’s renewable electricity targets – was the appointment of a liquidator to Mayo Renewable Power Limited. The company had been developing a 42.5MW wood-chip fuelled generating station in the west of Ireland. However, a number of unrelated smaller Irish biomass projects are understood to be proceeding, and it is not clear that Mayo Renewable Power’s difficulties are indicative of more general problems in the sector.
A more positive development for the electricity grid was the obtaining, by EirGrid plc of planning permission for the Irish segment of its major North-South Interconnector project.
One year ago, our summary of 2015 Irish energy policy developments included the publication, by the Irish Government, of an Energy White Paper entitled “Ireland’s Transition to a Low Carbon Energy Future”. 2015 closed on a high note on the global stage also, with the adoption of the Paris Agreement, in December, by the 21st annual conference of parties to the UN Framework Convention on Climate Change (COP21). Perhaps not surprisingly, 2016 has been a quieter year for energy policy.
Following the Irish general election in February 2016 and the formation of a minority government, Denis Naughten was appointed as the minister with responsibility for energy matters, in the renamed Department of Communications, Climate Change and Natural Resources.
The energy measures that were listed in the programme adopted in May 2016 by the new government and Minister were largely pre-existing measures. These included a reiteration of a commitment to publish a National Low Carbon Transition and Mitigation Plan, and a commitment to review price supports for renewable energy.
Notably, despite a commitment in the programme that existing wind farm planning guidelines would be updated “as a matter of urgency … within three to six months”, 2016 drew to a close without tangible progress having been made on this or a number of other items.
On a more positive note, Minister Naughten did extend the deadlines that apply under the terms and conditions of both the REFIT 2 (wind, hydro, biomass) and REFIT 3 (high-efficiency CHP and biomass) support schemes. In particular, the construction/energisation deadline under REFIT 2 was extended from 31 December 2017 to 31 December 2019, and the funding deadline under REFIT 3 was extended from 30 September 2016 to 30 September 2017. These extensions will inevitably improve Ireland’s prospects of achieving its 2020 renewable electricity target.
In November 2016, a deferral of more than seven months was proposed for the go-live of the Integrated Single Electricity Market ("I-SEM"), the new wholesale electricity market that is currently being developed for the island of Ireland. The I-SEM represents a major programme of amendment to the existing Single Electricity Market ("SEM"), in order that it be more consistent, and integrated, with the target model for electricity markets that is emerging at EU level.
Commencement of trading in the I-SEM had been scheduled to occur on 1 October 2017. However, in response to the recommendations of a project “stock-take” report that they had commissioned, the Commission for Energy Regulation (Ireland) and the Utility Regulator (Northern Ireland) deferred the commencement of trading until Wednesday 23 May 2018.
A positive view of this change is that it enhances the credibility of the revised I-SEM project plan and can be regarded as a source of comfort to market participants for whom I-SEM will carry significant investment implications. The respective regulators also point out that as well as recommending a delay, the stock-take exercise “acknowledged the significant progress being made by the many parties, across the multiple workstreams, in a highly complex programme” and “confirmed [that] the I-SEM design is fit for purpose.”
What's on the horizon in 2017
There remain a number of policy areas on which decisions are required during the course of 2017. In particular, the future interation between the existing REFIT schemes and I-SEM needs to be resolved, and the prospects of a support scheme for solar energy need to be clarified. Otherwise, we expect continued buoyancy in the Irish onshore wind energy sector during the coming year.
For more information, please contact a member of our Energy team.
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