RESS and Ireland’s Renewable Future

With the Renewable Energy Support Scheme (RESS) consultation closed since November 2017, and the Department of Communications, Climate Action and Environment analysing and working through the approx. 1,250 submissions received, are we any the wiser on what the future support scheme will look like in the Republic of Ireland, and when it is likely to be in place?

A big point of debate seems to be whether auctions should initially be technology neutral as the Department envisaged in the consultation paper, and the Commission for Regulation of Utilities (CRU) appears to support, or whether there should be technology specific ‘pots’ within the auction. Representatives of both offshore wind energy and solar PV energy are calling for specific pots for their respective technologies, feeling that at this point in time they will not be price competitive with onshore wind energy. There are potential merits and disadvantages to both approaches, and to further complicate the picture these are likely to change as time marches on and the relative pricing of the various renewable energy technologies continue to fall – but perhaps on different trajectories.

For Ireland as a country, and for all branches of renewable energy, the earliest rollout possible of RESS (whatever it may eventually look like), is critical to supporting existing jobs, creating new jobs, and lowering the EU fines Ireland will face should we fall short of our RES targets for 2020 and beyond. It is difficult to see any form of renewable energy generation supported by RESS actually delivering electricity into the grid before the second half of 2020 if any significant grid connection works are on the critical path, and if the present grid connection timelines are anything to go by, it’s more likely to be 2021 before there is significant generation under the RESS scheme.

So with the likely generation dates so far away what should projects do now? Assuming the first auctions will be run in early to mid-2019, projects need to ensure they are ‘bid ready’ by the end of 2018 at the latest. To be bid ready, projects need to be value-engineered and optimised across their lifecycle, regardless of which renewable technology a particular developer is focused on. This will help project deliver the lowest Levelised Cost of Energy (LCoE) and hence both the greatest chance of success at auction, and more importantly the ability to deliver the project against the bid price attained.

Although we will know more when the RESS scheme is sent first to Government and subsequently to the European Union for state aid approval, it is likely that bid bonds, planning permission and grid connections will remain as qualification criteria. There is a short window for project developers who aim to bid at the first round of auctions to adequately prepare their projects and it is important to ensure that the planning permissions and grid connection methodologies incorporate the necessary optimisation. The optimisation that would previously have come after being accepted into a REFIT scheme can no longer be delayed as to give a project the best chance of being successful at a RESS auction this must now take place prior to submitting a bid.

In addition, more detailed site and project analysis will be required prior to bid submission to ensure that both Capex and Opex figures can be estimated to a high degree of certainty thereby reducing project contingencies and increasing the confidence in the strength of the financial model for both debt and equity providers.

For Ionic this means that while we are already busy with onshore wind REFIT 2 projects aiming to reach financial close in early 2018, we are also working on a number of projects which are aiming to be RESS-bid ready by late 2018. It’s an exciting new challenge for many of us, though for some who have been in the industry longer it is rekindling the memories we have of bidding into the AER schemes of the late nineties and early noughties. Let’s hope that the lessons learned under AER (and indeed from other jurisdictions) are carried forward into RESS to ensure that it has the best chance of successfully delivering what the industry and indeed the country badly needs.