The Minister for the Environment, Climate and Communications has altered certain aspects of the Terms and Conditions of the second Renewable Energy Support Scheme (RESS 2). Our Energy team looks at the implications for RESS 2 projects.

Certain milestones must be achieved by RESS 2 projects under the Terms and Conditions (RESS 2 Ts&Cs). Failure to meet these milestones could result in a project’s RESS 2 Letter of Offer being revoked and draws made against its performance security.[1]

Deadlines extended

The Minister has extended the deadlines for the remaining milestones on foot of “exceptional circumstances” facing RESS 2 projects. These issues include grid reinforcement delays by EirGrid and ESB Networks, difficulty in procuring critical materials to develop grid connections for renewable energy projects and grid outage availability.

The Minister’s use of his powers to amend the deadlines on an industry-wide basis is particularly significant as this is the first time this power has been used under a RESS scheme. The Minister has chosen to make the amendments under his powers under Section 1.11 of the RESS 2 Ts&Cs. This amendment provides that subject to Article 6 of the Renewable Energy Directive, the Minister reserves the right to alter or amend any provision, Section or part of the RESS 2 Ts&Cs. This includes instances arising as a consequence of any directions, conditions or requirements of any consents, clearances or licenses.

It is interesting that the Minister has made these changes using his general power under Section 1.11, rather than the more specific deadline extension mechanism under Section 11.9.

The extended deadlines will apply to each RESS 2 project to the extent it has not already achieved the relevant milestone.

The amended milestones are as follows:

Any force majeure extension may be for a maximum period of one year to 31 December 2041. The force majeure provisions are otherwise unchanged.

Replacement performance security

If a RESS 2 project does not achieve commercial operation before 31 December 2025, the developer must replace the existing performance security with a new performance security instrument. The Minister will return the previously held performance security, provided the replacement performance security meets the requirements. Any such replacement performance security must:

• Have an Expiry Date of 31 July 2027 - the required Expiry Date under the RESS 2 Ts&CS prior to this amendment was “the earlier of the date falling seven months after the Commercial Operation Date or 31 July 2026”. If a RESS 2 project achieves commercial operation earlier than the extended Longstop Date, the replacement performance security will be returned to the issuer prior to this expiry date
• Be for an amount calculated in accordance with Section 8.3 of the RESS 2 Ts&CS. Where one or more demands were made under the previous performance security, the replacement performance security is required to be equal to the balance of the uncalled security
• Be issued by a financial company with an approved credit rating
• Subject to (a) and (b) above, be in the form set out in the RESS 2 Implementation Agreement, and
• Be effective so there is no gap in security cover.

Failure to provide the replacement performance security to the Minister before 31 December 2025 will be a breach of the Implementation Agreement and the RESS 2 Ts&Cs and will be treated by the Minister as an event of default.

Duration of support

Under the amended RESS 2 Ts&Cs, where a project has achieved each milestone by the relevant Final Milestone Date and is otherwise entitled under the RESS 2 Ts&Cs to receive RESS 2 Support, it is obliged to do so:

• No earlier than 1 July 2023, and
• No later than 31 December 2026.

The end date for RESS 2 support is also updated from 31 December 2039 to 31 December 2040, subject to any extension due to a successful claim of force majeure.

These milestone extensions have preserved the position that the period of RESS 2 Support is subject to a maximum duration of 16.5 years and a minimum duration of 14 years.

Comment

The extensions to the deadlines under the RESS 2 Ts&Cs will come as welcome news for affected RESS 2 projects. It will be interesting to see whether this relief results in a lower attrition rate for the RESS 2 fleet, and whether similar amendments are made to the RESS 3 deadlines.

For more information on the impact of these extended deadlines on RESS 2 projects, contact a member of our Energy team.

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[1] Terms not defined in this note are those defined in the RESS 2 Terms and Conditions, October 2021.