Energy

KEY DEVELOPMENTS

Constraints and Curtailment: Important High Court Judgment

The High Court in Ireland found in favour of the applicants in a judicial review of the SEMC’s decision in SEM-22-009 in relation to implementing Article 13(7) of the IME Regulation.

Article 13(7) provides for compensation to be provided to certain generators if they are subject to non-market based redispatch. The Court found that SEM-22-009 was incompatible with Article 13(7) in certain key respects. Key elements of the decision include a finding that generators were entitled to compensation even if they did not have a day ahead position (including de-minimis generators) and whether or not they benefited from priority dispatch. Significantly also, compensation must include foregone renewable supports and foregone CPPA revenues.

The entitlement under Article 13(7) is subject to whether the producer’s connection agreement has a guarantee of firm delivery, and so implementation of the CRU’s firm access detailed methodology, following the SEMC’s high level decision, are relevant.

Further information on this litigation will follow.

EU Action Plan for Grids

The Commission adopted a Communication on an EU Action Plan for Grids. It identifies measures that can be completed within the next 18 months to secure adequate investment framework for grids. Actions are summarised into categories in Annex I. The categories include accelerating the implementation of PCIs and developing new projects; introducing regulatory incentives for forward-looking grid build-out; incentivising a better usage of the grids; improving access to finance; and accelerating deployment through faster permitting and public engagement. Further information is available here.

The Commission also proposed an EU Delegated Regulation setting out PCIs and PMIs (which enters into force if no objection is expressed by the Parliament or Council within two months). Further information is available here. Also available is the amended list of projects eligible to apply for funding under the Connecting European Facility. It is in Article 1 of Commission Delegated Regulation (EU) 2023/2639.

Offshore Developments in Ireland

Phase One: CRU published the grid connection pathway for Phase 1 projects that are not in ORESS 1. Grid Connection Assessments are to remain valid until the end of July 2024 subject to the project submitting: (i) a planning application to ABP no later than the backstop date in the MAC; and (ii) a director’s declaration to the CRU by the end of June 2024 confirming a route to market (or intention to obtain a route to market to the satisfaction of MARA, as defined in the MAC conditions). Further details on full connection offer validity, conditionality, and execution are set out in CRU/2023/156.

Phase Two: Policy development continues, following the Statement on the Framework for Phase Two.

• An Indicative Roadmap for Phase 2.1 sets out 2024 dates by which a Final South Coast DMAP may be adopted, as well as dates by which projects might expect publication of raw geophysical survey data, connection and charging information, and ORESS 2.1 Final Terms and Conditions.
• It is now understood that the draft Phase 2 DMAP may include one or two projects for ORESS 2.1 (which would be delivered by the same developer).
• A formal decision by the regulatory authority on grid access for Phase 2 projects and Phase 1 projects that do not hold an ORESS 1 Notice of Award is anticipated in late 2023/early 2024, as is a consultation on the revenue recovery model to be applied to EirGrid in its role as offshore asset owner. (It should be noted that the Oireachtas has already vested EirGrid with the function of offshore TSO).

Future Framework: The Offshore Renewable Energy Development Plan II is intended to inform Phase 3 and an Enduring Regine, now to be known as the Future Framework. A consultation report has been published, indicating some concern around ability of Government to deliver to time and expectations. A Future Framework Offshore Wind Policy Statement is anticipated in Q1 2024, as is an offshore transmissions strategy.

The North Seas Energy Cooperation also published long-range plans (and action agenda along with tendering schedule), which include Ireland’s indicative plans to meet a 2040 target of 20GW of offshore wind through competitive processes in the period up to 2030.

Ireland in Core Capacity Calculation Region (CCRs)

ACER invites views until 10 January 2024 on the TSOs proposal to merge the Core and Italy North CCRs and include the Celtic interconnector to facilitate Ireland’s integration into the European electricity market.

Security of Supply

A new Energy Security Strategy has been approved by the Government. It incorporates other national policies on transition to a non-fossil fuels energy system, implementation of energy efficiency measures, and ensuring a fit-for purpose grid and increased interconnection. The Government commits to expediting delivery of energy infrastructure and expanding the energy expertise and capacity available to Government.

As regards gas, a Strategic Gas Emergency Reserve for medium term security will be introduced. The timeline is described as accelerated implementation. It is anticipated that this will be a Floating Reserve Regasification Unit but GNI are to examine this and prepare a substantive proposal by Q2 2024. GNI are also to develop a series of scenarios on the future role of the gas network to support a network transition plan.

2024 is also earmarked for transfer of the Inch gas pipeline to GNI for re-purposing. Gas connection policy is to be reviewed (in a way which we think is problematic, as we noted previously in relation to the recent Demand Strategy consultation), and gas demand flexibility measures (particularly during peak times) introduced by 2025.

As regards electricity, the Security Strategy flags the work ongoing in the CRU’s Security of Electricity Supply Programme (which includes procurement of additional temporary emergency capacity and extended availability of older generation capacity) and SEMC’s follow up actions from the review of the performance of the CRM.

Capacity Market: Consultation on a ‘Refurbishment’ Option and Intermediate Length Contracts

Provisional results in the recent 2027/2028 T-4 Capacity Auction indicate it did not secure significant volumes of new capacity. As the SEMC publishes the consultation response on the EY Review of the Performance of the CRM, it will be vital to see progress in this area. The SEMC’s consultation on implementation of a ‘refurbishment’ option and of intermediate length contracts, which closes on 21 December 2023, will be of interest (SEM-23-093). However, supporting new generation capacity though a market-based auction process will be of fundamental importance to security of supply.

Reform of the EU Internal Market in Natural and Renewable Gas

Political Agreement has been reached on the general approach for a recast Regulation and Directive on Natural and Renewable Gas. Next steps are formal adoption and publication in the OJEU, following which the new instruments will enter into force. Further information is available from the Council and Parliament.

Transmission Development Plan

The CRU published EirGrid’s consultation report on the NDP. The CRU has also written to EirGrid to indicate that the current NDP does not provide sufficient evidence of its consistency with the NECP, with no obvious link between the grid development processes and projects outlined in the document and the climate-related drivers and associated targets. The CRU also stated that the underpinning reasons for the lack of development progress in the North-West are not sufficiently explained in the TDP, nor are future plans clearly indicated. Further information is available here.

Extension of Emergency Measures

The Commission is proposing an extension for 12 months of three emergency measures: the gas solidarity measures, the Market Correction Mechanism and the rules related to permit-granting for renewable energy projects.

The proposal to extend the emergency Council Regulation to accelerate deployment of renewable energy includes amendments, the main of which is an additional Article 3a at Article 3 on Overriding public interest. It provides that, when assessing whether there are no satisfactory alternative solutions to a project for the purposes of the relevant environmental law, this condition may be considered fulfilled if there are no satisfactory alternative solutions capable of achieving the same objective of the project in question, notably in terms of development of the same renewable energy capacity through the same energy technology within the same or similar timeframe and without resulting in significantly higher costs.

The Commission has also reported on use of the emergency Council Regulation. As regards the overriding public interest, it states that: “Member States applying this presumption generally reported positive results, considering it a useful tool for accelerating the deployment of renewable energy sources or infrastructure or a risk reduction factor.”

As regards the provision requiring consenting of repowering within six weeks, some Member States had national provisions in line with or more ambitious than that requirement. However, the Commission shared the concern “that the Member States with the biggest repowering potential should accelerate efforts to further shorten and simplify the related permitting procedures”.

The Commission also reported on the emergency intervention to address high prices.

CRU’s Market Revenue Cap Decision Paper

Following signing into law of the Energy (Windfall Gains in the Energy Sector) (Cap on Market Revenues) Act 2023, the CRU issued the assessment decision paper (CRU/2023/130). Relevant persons are required to submit an assessment of their adjusted surplus revenue to the CRU by 31 December 2023, and to pay assessed adjusted surplus revenue by 31 January 2024. In terms of ensuring that the Act as drafted reflected the policy intent, while a key concern was addressed, there remain some areas of uncertainty.

System Services

A Phased Implementation Roadmap for System Services High Level Design is available. (SEM-23-103) The SEMC has decided:

• to proceed with the Day Ahead System Services Auction (DASSA); not to accelerate or prescribe parameters for the usage of the Layered Procurement Framework (LPF) at this time; and to require the TSOs to carry out an assessment of services to be procured through the LPF, as required, and at least annually;
• to extend the Regulated Arrangements to April 2026, with a tariff review in Q1 2024;
• to implement the Phased Implementation Roadmap; and
• to establish the consultative System Services future Arrangements Panel.

The TSOs will consult on and submit recommendation papers to the SEMC in 2024 on the DASSA Detailed Design, first annual review of the LPF, volumes methodology, products review, locational methodology, System Services Supplier Charge and review of Regulated Tariff Rates.

Demand Side Units

SEM-22-090 on the Enduring Solution to Enable Energy Payments in the Balancing Market included a Phase 1 solution whereby the metered quantity of each DSU would continue to be set equal to its dispatch quantity, with each DSU being paid energy payments on this basis, to be funded through the Imperfections Charge. The SEMC indicated in SEM-23-067 it would apply the TSC Code Modification to achieve this to only a category of DSUs. The SEMC has now stated that that it will consult in Q1 2024 on “solutions that will take account of the different modes of DSU participation, and also take account of ACER’s Framework Guideline on Demand Response”.

It should be noted that, under the IME Regulation, there is an obligation to ensure non-discriminatory, transparent and market-based dispatch of demand response, and this has been applicable under Irish law since 1 January 2020.