Energy

KEY HIGHLIGHTS

Metering, Tariff and Demand Connection Policy

The CRU is consulting until 30 August 2023 on a demand strategy to reduce carbon intensity and increase flexibility of energy demand. The first phase of the strategy comprises the following papers:

Call for Evidence on the Energy Demand Strategy Project to inform a strategy to be consulted on later this year (CRU/2023/56);
Consultation on Incentivising the Uptake of Time of Use Tariffs (CRU/2023/58);
Scenarios for 15-20% Flexible System Demand (ESBN Paper);
Consultation on Review of Large Energy Users (LEU) Connection Policy (CRU/2023/57).

The proposed project scope, as set out in CRU/2023/56, focuses on three priority areas.

Area 1: Smart Services

This is targeted at measures that will encourage greater flexibility among domestic customers and smaller business customers: smart meters and smart services; time of use tariffs; dynamic pricing; microgeneration; and energy sharing.

CRU/2023/58 proposes amending the accreditation framework of price comparison websites; applying the Estimated Annual Bill for all time of use tariffs; increasing the maximum number of time of use tariff retail suppliers are allowed to offer on the market; and bringing forward the review of the Standard Smart Tariff.

Area 2: Demand Flexibility and Response

This is targeted at schemes to incentivise the provision of demand response at certain times, or when certain system conditions arise.

The ESBN paper focuses on a 2025 15-20% flexibility target, developing four scenarios to build a baseline plan: 1) a “no-storage” scenario; 2) an “industry-led” scenario; 3) a “consumer-led scenario; and 4) a central scenario.

The CRU indicates, by way of example, potential measures for domestic and business customer flexibility. Potential business customer flexibility measures include: managing production schedules to align with low-price, off-peak and/or high-wind periods, temporarily reducing cooling or heating loads, transferring data processing to alternative facilities, and/or putting in place smart energy management systems in offices and other facilities.

Several further work items are identified, including that the CRU is engaging with ESBN to develop market-based measures to procure flexibility services from large customers, aggregators and suppliers.

Area 3: New Demand Connections

This is targeted initially at very large (electricity and gas) energy users seeking to connect (new demand). The CRU states this is intended to provide a pathway for new LEU connections to the electricity and gas systems to ensure that large demand connections are low to zero carbon, or that they bring significant flexibility with them when they connect. A subsequent focus will be existing demand, where there is contracted demand already in place.

CRU/2023/57 proposes that prospective LEUs seeking connections to the electricity or natural gas grid would be required to achieve net zero emissions at time of connection. The System Operators are directed, in the meantime, to take emissions profiles into account in the context of current connection applications.

These consultations have been published in the context of the Climate Action and Low Carbon Development Acts. The law in relation to the circumstances in which electricity and gas connections may be refused are clearly set out in both European and domestic law.

Similarly, the fact that connection policy must be non-discriminatory is a fundamental feature of both Irish and European law. The proposals in relation to restrictions on LEU connections are clearly incompatible with these requirements and it is, of course, the case that the Climate Action and Low Carbon Development Acts cannot supersede European legal obligations binding on the CRU and the TSOs.

While it may be open to a Member State to impose environmental conditions such as those proposed in CRU/2023/57 as part of a planning or other regulatory consenting process, pending any change in European law it is clearly impermissible to take these factors into account when processing a connection application.

Offshore Renewable Energy Development

The Maritime Area Regulatory Authority is established, responsible for assessing Maritime Area Consent applications, granting marine licensing for specified activities, and administering the existing foreshore licence portfolio.

Phase 2 of offshore development will be plan led. The process to establish the first Designated Maritime Area Plan (DMAP) is underway with publication of a draft South Coast DMAP. DECC indicates that next steps are:

August – September 2023: engagement with citizens and stakeholders,
August – October 2023: establishment of draft DMAP
October 2023: Minister to seek approval of Minister for Housing Local Government and Heritage for the draft DMAP,
October – November 2023: public consultation on draft DMAP, SEA and AA
December 2023: potential amendments,
December 2023 / January 2024: Minister to seek approval of the Oireachtas.

The Minster is designated as a Competent Authority ‘D’ under the Maritime Area Planning Act 2021.

ORESS 2.1 is intended to run after the DMAP is approved. Consultation on ORESS 2.1 is open until 25 August 2023. ORESS 2.1 is intended to support development of up to 900 MW of new capacity in the South Coast DMAP. DECC intends that there will be a single successful participant in each ORESS 2 auction, but may provide for the possibility of award to more than one participant.

The consultation states that provisions in ORESS 1 on indexation, UAEC and 20-year support are intended to be maintained.

The consultation states that arrangements for access to and use of grid infrastructure will be consulted on by CRU in summer 2023, and determined in advance of the ORESS 2.1 auction. Auction bids will be submitted before the bidder has a MAC and planning permission and the winning bidder’s applications will get priority consideration.

DECC has issued a circular providing notification of a reconnaissance geophysical survey and indicating that delivery options and timelines are being assessed. Further, it is expected that the awarded developer will likely undertake higher resolution pre-development geophysical, geotechnical, benthic, and environmental surveys, and that EirGrid will undertake further surveys in respect of offshore grid developments.

Interconnection

The update to the 2018 National Policy Statement is intended to set out a state-directed approach to support further interconnection with GB and to consider a second connection with France, a connection with Spain, and a connection with Belgium or the Netherlands. It states that Ireland’s interconnection capacity is 500 MW and should, by 2026, be 1700 MW and, by 2033, potentially more than 5000 MW.

There are general policy statements to demonstrate commitment to a more structured and planned approach to provide certainty for industry.

However, while the Statement is helpful in recognising the need to develop interconnection, there is not much to indicate how private sector development will be facilitated.

A key message is that further work will be done in the development of an Offshore Transmission Strategy, to set out matters such as the number, capacity and indicative locations of interconnection; the appropriate option for cables (traditional point to point or multi-purpose); terrestrial grid connections required to support offshore generation; the intended offshore grid investment for offshore generation; prioritisation and sequencing of interconnection cables; intended regulatory treatment of cables; and any necessary inputs into DMAPs.

It is stated that “an appropriate framework will need to be developed and established to channel project promoter efforts to State needs and requirements, and align CRU, Eirgrid, ESB and other state resources accordingly. Appropriate structures and criteria will be necessary to manage potential competition and/or sequencing between developers. It is also intended to explore and establish appropriate processes to integrate interconnection development with emergent generation capacity.”

As a next step, the Statement identifies establishment of an policy framework for multipurpose interconnectors.

National Hydrogen Strategy

A National Hydrogen Strategy is available, aimed at reducing uncertainty by providing a strategic vision of the role hydrogen will play in the Irish economy. Main points and timelines are set out at pages 5-6. First end use sectors are expected to be heavy duty transport, followed by industry and flexible power generation. Aviation and maritime are expected to be large end-users but will take longer to develop (page 43). Transport is expected initially to be provided by compressed tankers followed later by hydrogen pipelines. A list of 21 actions for this decade (at pages 86-87) include, in addition to implementation of relevant EU law:

assessing the potential for hydrogen end uses in a National Industrial Strategy for Offshore Wind (2024-2026);
reviewing licensing and regulatory regimes relevant to underground hydrogen storage (2024-2028);
continuing to prove technical capabilities of the current network (2023-28) and developing a plan to transition the network to hydrogen (2023-2026); and
progressing work to support development of strategic hydrogen clusters and reviewing current approaches to energy system planning (2024-26).

Actions include establishment of an innovation fund to support demonstration projects across the hydrogen value chain, details of which are to be communicated shortly.

As the UK this year conducts a process to allocate its hydrogen fund to support production at scale, further details to give certainty around required investment and route to market supports would be welcome.

Green Deal: Fit for 55 / REPowerEU

We last looked here at instruments already signed into law and those nearing the final stages of the legislative process. Since then, the following instruments have moved closer to becoming law:

Recast Energy Efficiency Directive: The consolidated text has been formally adopted. It will be published in the OJEU and enter into force 20 days later.
Alternative Fuels Infrastructure Regulation: The consolidated text has been formally adopted. It will be published in the OJEU and enter into force 20 days later.
FuelEU Maritime Regulation: The consolidated text has been formally adopted. It will be published in the OJEU and enter into force 20 days later.
RED III: The ITRE Committee of the Parliament signed off on the final text, which will now be put to a vote in the plenary session of the Parliament in September 2023.

Hydrogen

The two delegated acts are now in force. They govern standards for renewable hydrogen for the purposes of meeting Member States’ renewable targets under RED II; clarify the additionality requirement (driving new post-2030 electricity generation); and set criteria to ensure hydrogen is only produced when and where needed. Further information is available here.

Critical Entities

Under the Critical Entities Resilience Directive (EU) 2022/2557, Member States must by 17 July 2026 identify critical entities in the 11 sectors covered, which include energy. Critical entities will have to take measures to enhance their resilience. To identify the critical entities, Member States will use a list of essential services to carry out risk assessments. The Commission has adopted a list of essential services, which comes into force following a two-month period in the absence of objections from the Parliament and Council. Further information is available here.

Green Deal: Industrial Plan for the Net Zero Age

Net Zero Industry Act: The proposed Regulation on establishing a framework of measures for strengthening Europe’s net-zero technology products manufacturing system will, in particular, support the following technologies: solar PV and solar thermal; onshore wind and offshore renewable energy; batteries and storage; heat pumps and geothermal energy; electrolysers and fuel cells; biogas/biomethane; CCS; and grid technologies. It has been before several Parliament Committees and the next step is adoption by the lead Committee (ITRE) of its report. (An EP briefing is here.) Ireland adopted an Opinion calling for impact analysis, stating that new rules cannot put smaller states at a competitive disadvantage, and calling for greater detail on several aspects of the proposal.

Critical Raw Materials Act: Aims of the proposed Regulation establishing a framework for ensuring a secure and sustainable supply of critical raw materials include strengthening the value chain to ensure that, by 2030, EU capacities have significantly increased to reach specified benchmarks; diversifying imports; and improving the ability to monitor and mitigate supply risk. The Parliament’s lead Committee (ITRE) is expected to adopt its Report on 7 September 2023. ENTSO-E made recommendations on both proposals, summarised here.

Green Deal: Circular Economy - Batteries

Regulation (EU) 2023/1542 concerning batteries and waste batteries will come into effect on 17 August 2023. It lays down requirements on sustainability, safety, labelling, marking and information required for placing on the market or putting into service of batteries in the EU. It imposes due diligence obligations on economic operators placing batteries on the market or putting them into service. It lays down requirements for green public procurement when procuring batteries or products into which batteries are incorporated.

Green Deal: Circular Economy – Ecodesign

Positions have been adopted by the Council and Parliament on the proposal for a Regulation on ecodesign of sustainable products. The next step will be trialogue negotiations.

Climate Governance

The Commission adopted guidelines to assist Member States in updating and implementing national adaptation strategies, plans and policies required under the European Climate Law.

Support Schemes for Renewable Energy

Feedback is invited until 28 August 2023 on the opening up of support schemes for renewable energy. It is intended to assess the extent to which Member States have supported renewable energy generation from other countries in line with Article 5 of RED II.

Second Joint Gas Purchase

International gas suppliers were invited to submit offers in July in a second tender. Three further tenders are to occur this year.

Investment

The EU awarded €3.6 billion to clean tech projects through the EU Innovation Fund and the EIB lend €18 million for EV charging infrastructure research and development.

The EU and UN SDGs

The EU has begun monitoring its law and policy against the UN Sustainability Development Goals, with energy as one of the areas chosen this year for review. The Parliament reported on findings here and approach here.

INTERNAL MARKET

Internal Market in Electricity Legislation

Proposed amendments to the IME Regulation and Directive (which we looked at here) are progressing through the legislative process. The ITRE Committee of the Parliament has proposed amendments which include provision for a market revenues cap on generation when an electricity price crisis is prepared (amendment 84); establishment of a platform to trade PPAs (amendment 92) and a PPA database (amendment 96); and development of standardised PPAs (amendment 97).

Further information is here and the report is here. The next step is for Parliament to vote in plenary on the ITRE Committee report.

Grid

ACER is consulting until 25 September 2023 on amendments to the Network Code on requirements for Grid Connection of Generators and on Demand Connection. The intent is to adapt to trends such as increasing numbers of electricity storage modules, EV charging points, and proliferation of distributed energy resources. ACER has also provided an Opinion on ENTSO-E’s draft fourth CBA guideline for projects to be included in the TYNDP.

Interconnection

ACER has found slow progress, and identified barriers to, reaching the 2025 target of having 70% interconnector capacity available for cross-zonal trade. Feedback on findings is invited until 15 September 2023.

Procurement of Balancing Capacity

ACER published three decisions setting out the methodology for: (i) cross-zonal capacity allocation for the exchange of balancing capacity or sharing of reserves (to be ready for application in two years); (ii) the RCC task of regional sizing of reserve capacity (to be operational in three years); and (iii) the RCC task of facilitating procurement of electricity balancing capacity (to be operational in two and a half years).

Gas System

ACER has made recommendations to address congestion in North-West Europe. ACER has also called for improvements to be made to ENTSOG’s draft gas and hydrogen TYNDP.

Unit Investment Costs

ACER has reported on unit investment cost indicators and published an energy infrastructure unit investment cost calculator to facilitate future estimations of unit investment costs. The report includes predicted unit costs for emerging infrastructure categories like electrolysers, batteries, hydrogen and CO2 pipelines.

Response to Energy Crisis

ACER has published an assessment of over 400 measures introduced in response to the energy crisis.

CLIMATE ACTION LITIGATION

Scope 3 Emissions

The UK Supreme Court is to decide on whether potential scope 3 emissions should be taken into account in the grant of planning permission to retain and expand an existing onshore oil well site. Further information is available here.

Biomass Generation Project

As detailed further in the Environment section, the CJEU upheld the General Court’s decision in favour of ClientEarth, which had challenged the EIB’s rejection of ClientEarth’s request to carry out an internal review of its decision to provide a loan for the construction of a biomass plant in Spain. The judgment is here and ClientEarth’s press release is here.

Advertising

In the UK, the Advertising Standards Authority published guidance on misleading environmental claims and social responsibility. Further information on the ASA’s work in this area is available here.

FURTHER DOMESTIC DEVELOPMENTS

RESS 3

Revised RESS 3 Terms and Conditions are available, with Stakeholder Information and Summary of Amendments to Terms & Conditions. Amendments include a clarification to the duration of support.

Temporary Solidarity Contribution

The Energy (Windfall Gains in the Energy Sector) (Temporary Solidarity Contribution) Act 2023 is commenced. In scope companies are companies that generate at least 75% of turnover in a chargeable period from relevant activities, which are economic activities in the field of the extraction, mining or refining of natural gas, coal, petroleum or manufacture of coke oven products. Further information is available here.

Small-Scale Generation

A Small-Scale Generation Support Scheme is being developed to support larger non-domestic renewables self-consumers, such as farms, public buildings, commercial and industrial entities, as well as to provide a route to market for Renewable Energy Communities and other small-scale solar PV developments of up to 6 MW installed capacity. The high level design is here. The scheme will have the following support mechanisms:

First Phase, SRESS Category 1: Renewable Self-Consumers above 50kW and up to 1MW from 2023,
Second Phase, SRESS Category 2: Community/Local/SME projects between 1MW-6MW and export only projects below 1 MW from 2024,
Third Phase: All Categories Tariff Support from 2025.

Further information on supports for small-scale is available here.

CRU BUSINESS

Public Service Obligation

The PSO payment is set to zero for the 2023/2024 PSO Levy. The CRU determined that the funding requirement is -€67.47 million, compared to -€66.33 million in the proposed decision. (CRU/2024/05)

Smart Meters

The CRU is consulting until 15 September 2023 on the Smart Meter Data Access Code. (CRU/2023/87)

Onshore Generation - Installed Capacity Cap

The CRU is consulting until 22 August 2023 on relaxing the 120% ICC for single technology and hybrid technology sites behind a connection point, without increasing the contracted MEC. The CRU states that relaxing the limit may refer to increasing or removing it. The CRU states that, on single technology sites, this will allow for developers/projects to determine the appropriate level of over install depending on site specifics. For non-market hybrid units, removal of the ICC can be supported, but several steps need to be taken as regards market registered hybrid units. (CRU/2023/88)

Gas Price Control

The CRU is consulting until 20 September 2023 under PC5 on revenues GNI can collect for its transmission and distribution businesses. (CRU/2023/67)

Retail Markets

The electricity and gas market monitoring reports for 2022 are available (CRU/2023/89). An Estimated Annual Bill July 2023 Update is also available. (CRU/2024/11)

SEMC BUSINESS

Capacity Market

Locational Capacity Constraint Areas: Consultation took place on Modification CMC_17_23 on LCC areas, which was deemed urgent. It is intended to provide more flexibility in the determination of LCC areas and to provide for instances where the defined methodology does not fully capture effects on the transmission system. (SEM-23-050 – consultation paper, timetable)

Indexation: The SEMC intends to consult from 16 August 2023 until 6 October 2023 on Modification CMC_16_23, titled extension to New Capacity Impacted by Indexation. (SEM-23-055)

Performance Securities: The SEMC intends to consult from 16 August 2023 until 31 August 2023 on Modification CMC_15_23, titled amendment to Performance Securities for Extended Projects. (SEM-23-056)

DSUs: An Information Note on DSU De-rating Factors in the CRM is available. (SEM-23-053)

Administered Scarcity Pricing: The SEMC is consulting on three options which are proposed to improve the operation of the ASP, indicating that, despite periods of tight margin, it has not been triggered, suggesting it may not be contributing to system security as intended. (SEM-23-047)

2024 Parameters

The SEMC is consulting until 16 August 2023 on SEM Operational Parameters (SEM-23-051) and scheduling and dispatch parameters for 2024. (SEM-23-052)

The Department for Energy Security and Net Zero and the devolved Governments published the response to the consultation on developing the UK Emissions Trading Scheme. In commentary here, the Financial Times indicates that the decision led carbon prices to “trade at a discount compared with those in Europe”.