Energy

KEY DEVELOPMENTS

Offshore Renewable Energy: Future Framework

DECC is consulting until 19 February 2024 on the draft Offshore Renewable Energy Future Framework Policy Statement, with the intent of finalising it by March 2024. It aims to set out the strategic long-term approach to meeting ambitious offshore renewable energy targets for 2030, 2040 and 2050. This will require a significant stepping up of investment in enabling infrastructure, including interconnection, grid and storage capacity. Our briefing on the consultation is available here: Offshore Renewable Energy Development in Ireland: Consultation begins on Future Framework.

Connection Policy

We mentioned last month the CRU’s consultation on Generation and System Services Connection Policy for onshore generation, storage and other systems services technology projects, which closes on 16 February 2024. (CRU/2023/163)

In that context, the CRU has highlighted EirGrid’s position paper (published in addition to its previous response to the call for evidence) which it suggests will provide further clarity on the consultation.

The paper proposes to deal with all generation technologies and system services in a unified batch system, with locational signals to be provided at the start of each batch. Information would be presented by using geographical maps and tables so that customers and industry can understand where on the transmission system the best opportunity for connection exists. Maps will be complemented by a corresponding table specifying the maximum quantity of MW capacity for a node to maintain the same status as currently allocated (with a green or amber indication shown). It is proposed that ECP-3 will prioritise applicants based on locations where the maximum volume of available generation can be realised, using three categories (red, amber, green).

EirGrid also states that, up until now, it has been assumed that any customer can access the power system with 100% of their capacity most of the time, but that this concept will no longer be appropriate and that this will have consequences in the constraints seen on the system.

Ongoing Consultations on Demand Strategy

We mentioned last month the CRU’s consultation on a National Energy Demand Strategy, which is open until 16 February 2024 (CRU/2023/148). In that context, the following consultations are also ongoing:

Large Energy Users: The CRU is extending the consultation deadline until 19 March 2024 on electricity and gas connection policy for large energy users (CRU/2024/001). We have commented previously that, while it may be open to a Member State to include environmental conditions as part of a planning or other regulatory consenting process, pending any change in European law it is impermissible to take these factors into account when processing a connection application.
Flexibility Product for Distribution System: The CRU is consulting until 14 February 2024 on ESBN’s Demand Flexibility Product Proposal. The CRU states that the intent is to secure contracts with market participants for a medium duration demand flexibility up to a volume of 500MW, meeting a defined system need in the short term, with additional services and products to be offered in the future to meet a broader range of distribution system needs. The total volume to be procured is around 1GW. It is expected that this will come from a range of sources including storage, industrial heat, flexible transport (smart charging) and demand response from large energy users. It is proposed that the costs will be recovered from Distribution Use of System charges but that “in the medium term, as flexibility markets mature, alternative mechanisms of cost recovery may be considered. For example, any generators benefitting from the services of procured storage capacity could be required to contribute to the cost of the service”. (CRU/2023/165)

Installed Capacity Cap

The CRU decided to remove the installed capacity cap: (i) associated with single technology sites, and (ii) for hybrid co-located sites subject to a review and update of operational processes by the SOs relating to aspects such as forecasting, and availability associated with mixed technology sites. The impact of the decision may not be fully realised for all hybrid projects until there are mechanisms in place to facilitate the sharing of MEC in the market. The SOs will now review codes and standards to identify changes required to implement the decision. (CRU/2024/02)

Renewables Acceleration Areas

The 2023 amendments to the Renewable Energy Directive requires Member States to designate renewable acceleration areas by 21 February 2026. Specific environmental and permitting rules will apply in such areas to speed up delivery of renewable generation capacity. The Commission is calling for evidence until 23 February 2024 in respect of guidance in this area.

Consultation on Renewable Energy Auctions

The Commission is calling for evidence until 1 March 2024 on design elements of renewable energy auctions with a view to providing a Recommendation in Q2 of 2024.

New Requirements for Renewable Energy Auctions

Political agreement has been reached on a Regulation known as the Net Zero Industry Act, intended to ensure access to a secure and sustainable supply of net-zero technologies.

The Council’s negotiating mandate indicates that the Regulation will impose certain requirements in relation to renewable energy auctions for strategic net-zero technologies (which are listed at Article 3b and which include, for example, solar, wind, energy storage, grid and other technologies). The draft states that, when designing auctions for the deployment of energy from renewable sources, Member States shall include (a) pre-qualification criteria related to responsible business conduct, cybersecurity and data security and ability to deliver the project fully and on time; (b) pre-qualification criteria different than those referred to in (a) or award criteria to assess the auction’s sustainability and resilience contribution as referred to in certain other provisions which deal with procurement procedures. These criteria are required to be applied to at least 20% of volume auctioned each year per Member State.

The Regulation also includes provisions relevant to public procurement, as well as to streamlining of permitting for construction of new manufacturing facilities, which we mention in other sections of this horizon scanner. Further information is available from the Commission here and the Council here.

The EU also intends to establish a Strategic Technologies for Europe Platform to drive investment in, among other things, cleantech. Further information is available here.

FURTHER EU DEVELOPMENTS

New 2040 Targets

The Commission recommends a 90% net greenhouse gas emissions reduction by 2040 compared to 1990 levels, following its impact assessment on possible pathways to climate neutrality by 2050. A legislative proposal will be made after the European elections in June 2024. The approach includes an Industrial Carbon Management Communication. A Q&A document is available here.

Electricity

Networks: ENTSO-E released first Offshore Network Development Plans as a new component of its TYNDP for 2024. ENTSO-E states that it translates the EU Member States’ non-binding agreements on offshore goals from January 2023 into offshore transmission corridors, transmission equipment needs and related costs. The identified transmission corridors are only intended to be indications of where investment in transmission infrastructure would be the most economically efficient.
Flexibility: The CEER reported on DSO data exchange relating to flexibility and the NRAs’ role.

Gas

Biofuels: The Union Database for Biofuels is open for online registration by the relevant economic operators of transactions of liquid renewable and recycled carbon fuels. It is provided for under Article 31a of the Renewable Energy Directive.
Ozone protection: Two new Regulations have been adopted and will soon enter into force to reduce the use of hydrofluorocarbons and F-gases. Further information is available from the Commission and Council.

Carbon

CCUS: As mentioned above, the Commission adopted an Industrial Carbon Management Communication, providing details on how CCUS technologies could contribute to reducing emissions by 90% by 2040 and reaching climate neutrality by 2050.
EU ETS: Most Member States, including Ireland, have not transposed the revised EU ETS Directive by the required deadline. Amendments strengthen the existing rules, extend the ETS to maritime transport, and implement carbon pricing in new sectors (buildings, road transport and fuels used in small emitting industries), as well as establishing a Social Climate Fund funded by ETS revenues.

Connecting Europe Facility

The Commission awarded funding to eight cross-border energy projects that received PCI status in 2022. Further information is available here.

Energy Efficiency

The Commission is calling for evidence until 26 February 2024 on assessing the state of public funding for energy efficiency, and on providing guidance for unlocking private investment.

Brexit

A Council Decision sets out guidance for the elaboration of cooperation frameworks between the EU and in the UK. Those frameworks for cooperation will be between ENTSO-E and the UK TSO for electricity; ENTSOG and the UK TSO for gas; and ACER and the UK regulator.

Vehicles

Political agreement was reached on the proposal for a Regulation to strengthen CO2 emission performance standards for new heavy-duty vehicles and urban buses. Further information is available here.

Small Modular Reactors

The Commission is establishing an industrial alliance to accelerate deployment of small modular reactors. Further information is available here.

Statistics

The Commission amended rules under which Member States report energy statistics, mainly including in relation to hydrogen and hydropower (Commission Regulation (EU) 2024/264) and in relation to the energy and environment section for income and living conditions (Commission Delegated Regulation (EU) 2024/298).

EU CASE LAW

Parties affected by Decisions of Regulatory Authorities

Article 41(17) of the Gas Directive 2009/73/EC requires Member States to ensure that suitable mechanisms exist at national level under which a party affected by a decision of a regulatory authority has a right of appeal to a body independent of the parties involved and of any government.

In Case C-277-22 a Hungarian Court referred a question to the CJEU in a challenge by a gas supply company to the lawfulness of the regulator’s decision on usage charges and connection fees for the transmission system. The regulator argued that the company did not have standing to bring proceedings, since it was not party to the procedure for the adoption of the decision and had no direct link to the subject matter of the procedure; that it was affected by the decision only in an indirect way; and that a mere economic interest on its part was not sufficient to establish a right of appeal.

The CJEU responded that Article 41(17), read in the light of the first paragraph of Article 47 of the Charter of Fundamental Rights of the EU, means that it is not permitted to have domestic legislation under which only the system operator is classified as a ‘party affected’ by a decision fixing connection fees, usage charges and remuneration for the operator, such that only the operator has standing to bring an appeal against that decision. The Court commented that Article 41(17) has direct effect and it is apparent from its wording that Member States must prescribe suitable redress mechanisms under which all affected parties may dispute a decision of a regulatory authority before an independent body.

Termination of Supply Contract

In Case C-371/22 a Polish Court referred a question to the CJEU regarding a penalty imposed on a small business customer following its termination of an electricity supply contract. The CJEU responded that Article 3(5) and (7) of the previous IME Directive (2009/72/EC) does not prevent national legislation under which, in the event of early termination by a small undertaking of a fixed period, fixed price supply contract with a view to changing supplier, that undertaking is required to pay the contractual penalty in the contract (the amount of which may correspond to the entire price of the electricity which it had undertaken to purchase, even if that electricity has not been and will not be consumed), even where that legislation does not lay down a criterion for the calculation of such a penalty or its possible reduction, provided that the legislation, first, ensures that such a contractual provision must be clear, intelligible and freely consented to and, second, provides for the possibility of appeal.

CLIMATE ACTION LITIGATION/GREENWASHING

Describing Renewable Energy Supply

A recent decision of the Advertising Standards Authority for Ireland emphasises the importance of carefully considering the way in which green claims are framed, even in circumstances when they may well be made appropriately in the context of renewable energy law and policy.

The Advertising Standards Authority for Ireland upheld complaints against Budweiser for claims it made around use of renewable electricity. The Authority considered that “the claims made were that 100% renewable electricity was being used at the brewery, and given that some of the electricity used by the advertisers was purchased from a utility provider and was offset by guarantees of origin, the Committee considered that the claim that the products were brewed using 100% renewable electricity was exaggerated”.

On the face of it, this conclusion fails to acknowledge the nature and purpose of guarantees of origin (which are not offsets) as provided for under the Renewable Electricity Directive and domestic legislation.

The CEER mentions the topic at page 7 of its report, What Regulators Stood for in the Second Half of 2023, stating “what lies behind the definition of “green” should be defined at European level. Having green energy products backed by GOs is a first step towards informing consumers about green offers”. As we previously noted, the CEER provided guidance on good practice for trustworthy information on green offers, as have advertising standards authorities in other jurisdictions such as the UK and Australia.

EU Legislation

The Parliament approved the proposed Directive on empowering consumers for the green transition through better protection against unfair practices and better information. Once approved by Council it will be published in the OJEU and become law. It is intended to complement the Green Claims Directive, which is also progressing through the legislative procedure.

DOMESTIC DEVELOPMENTS

NECP

DECC is consulting until 7 March 2024 on the draft National Energy and Climate Plan, required to be submitted under the EU Regulation on Energy Union and Climate Governance, and to outline Ireland’s commitments under the Renewable Energy Directive, Effort Sharing Regulation, and Energy Efficiency Directive.

Grid

EirGrid published the Transmission Forecast Statement 2022.

Biomethane

The Climate Action Plan committed to supporting delivery of up to 5.7TWh of indigenously produced biomethane by 2030. As a first step the Government is consulting until 27 February 2024 on a draft National Biomethane Strategy. The draft strategy briefly considers different forms of funding supports in other jurisdictions but does not specify any to be used in Ireland.

Climate Adaptation

DECC is consulting until 19 February on the National Climate Adaptation Framework.

Ireland’s Climate Change Assessment

The EPA published its first Climate Change Assessment for Ireland. Findings include: “Having peaked in 2001, Ireland’s greenhouse gas emissions have reduced in all sectors except agriculture. However, Ireland currently emits more greenhouse gases per person than the EU average. A legal basis for deep, rapid and sustained national emissions cuts now exists, although current policy and action remain insufficient to meet these aims. The pathway forwards is clearer for energy, transport and the built environment than for agriculture and land use. For all sectors there are many challenges to overcome.”

Legislative Programme

Legislation for priority publication in Spring Session 2024 includes the following:

Future Ireland Fund and Infrastructure, Climate and Nature Fund Bill, to provide for the establishment of the Future Ireland Fund and the Infrastructure, Climate and Nature Fund. Pre-Legislative Scrutiny was completed in December 2023.
Marine Protected Area Bill, to provide for the designation and effective management of Marine Protected Areas (MPAs) in the Irish maritime area. Pre-Legislative Scrutiny was completed in February 2023.

Legislation for priority drafting in Spring Session 2024 includes the following:

Companies (Corporate Governance, Enforcement and Regulatory Provisions) Bill, to enhance and strengthen enforcement and regulatory provisions in the Companies Act 2014 relating to corporate governance, company law enforcement and supervision, administration and insolvency.
Gas Safety (Amendment) Bill, to amend the Electricity Regulation Act 1999 to incorporate third party operators of Liquid Petroleum Gas networks into the CRU’s regulatory regime.

FURTHER CRU BUSINESS

Secondary Fuel Switches

As regards generators subject to the Secondary Fuel Obligation, the CRU decided that compensation for running on secondary fuel will be extended to include the additional costs of running on secondary fuel when instructed which are incurred but not recovered through the ex ante or balancing markets. (CRU/2024/04)

SEMC BUSINESS

System Services

Terms of Reference of the Project Panel for System Service Future Arrangements are available. The objective of the Panel is to provide a regular forum to track progress and allow stakeholder input. It is intended that a first meeting will take place by the end of February. (SEM-24-005)

PLEXOS

The regulatory authorities will start an SEM PLEXOS backcast and validation project before the end of Q1 of 2024. They will seek information from relevant market participants to validate the representation of their generation units in the market. (SEM-24-004)

NORTHERN IRELAND

DfE published the Energy Strategy Action Plan Report 2023.