Ireland’s Energy Sector - Challenge and Opportunity in 2021
12 February 2021
2020 was something of a mixed year for the Irish energy sector. It presented challenges and changes, but also considerable opportunities for market participants. We examine some of these challenges and opportunities from an eventful year, look back at our previous commentary on these issues and also highlight topical issues for the sector to keep an eye on in 2021.
Three important developments in 2020
1. A Challenge: COVID-19
The greatest and entirely unforeseen challenge faced by all sectors of the Irish and global economies in 2020 was COVID-19. It looks set to continue to make its presence felt for some months to come. The Irish energy sector has been shielded to some extent from the impact of COVID-19 by virtue of the sector’s importance to the economy and its designation as an essential service. However, for energy projects that are under construction or require maintenance, the practical implications of local and global lockdowns have been, and remain, a core concern for asset owners, developers and contractors alike. The issues of supply chain impact, service levels and claims for extensions of time and cost have arisen on a number of projects and operational assets.
In 2020, we looked at the key question of whether construction contractors affected by COVID-19 might be entitled to contractual relief as a result, particularly due to force majeure. We also reviewed the latest set of restrictions on construction activities in Ireland, which commenced on 8 January 2021.
- COVID-19 and Construction Contracts: Can Your Project Become Infected?
- Construction Update: Non-essential Construction to Close – What Does this Mean for You?
2. A Change: Clean Energy Package Implementation
2020 also saw progress on the implementation of the EU Clean Energy Package (CEP) in Ireland. Last year, we signalled the key areas of the Irish electricity market that are subject to change as a result of the CEP.
Since then, the SEM Committee has published important decision and information papers on some aspects of CEP implementation. These include balance responsibility and eligibility for priority dispatch. The SEM Committee will continue to progress through other work streams relating to CEP implementation into 2021. Target dates for implementation of other areas of the CEP are set out in an updated roadmap to CEP implementation published by the SEM Committee on 15 December 2020. A consultation paper and decision on non-market based redispatch and compensation are scheduled for Q1 and Q2 respectively.
3. An Opportunity: RESS 1 Auction
Despite the challenging environment of lockdowns and remote-working during 2020, the RESS 1 auction reached a successful conclusion, with only a minor dent made in the RESS 1 timetable due to COVID-19. The first auction in the Renewable Electricity Support Scheme era was a significant milestone in the next ambitious phase of the rollout of renewable electricity in Ireland.
We commented on the provisional RESS 1 auction results when published, which remained unchanged when the final results were confirmed.
Two familiar themes in 2021
1. Future RESS Auctions
2021 will see further details emerge on the proposed second onshore RESS auction, as well as the much-anticipated first offshore RESS auction.
We commented on the final RESS 1 terms and conditions published in early 2020. We considered areas of improvement since the consultation process and aspects that could have been improved further, but remained unchanged for RESS 1. The sector will no doubt take an active interest in the policy approaches adopted for future RESS auctions.
2. Brexit and Electricity Trading
We saw the finalisation of the EU-UK Trade Agreement and the end of the Brexit transition period at the end of 2020. The continued functioning of the Single Electricity Market was secured by the Protocol on Ireland/Northern Ireland to the Withdrawal Agreement. However, the position in relation to interconnection with Great Britain remains subject to further review and development in 2021. We look at the state of play for the Irish electricity market at the end of the transition period.
One key takeaway for the coming year
Interested stakeholders should continue to monitor relevant developments on CEP implementation, proposed terms and conditions for the upcoming RESS auctions, and the interconnection between the Single Electricity Market and Great Britain post-Brexit.
The COVID-19 crisis did very little to slow the creation of new investment opportunities in the Irish renewables sector in 2020, and we expect this trend to continue into 2021.
For more information on successfully navigating related issues for your business in 2021, 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.