Energy
"Future connection policy in Ireland will need to comply with RED III requirements as well as the obligations in the IME Regulation and Directive, some of which will likely soon be strengthened."
KEY HIGHLIGHTS
First Offshore Wind Auction
Ireland’s ORESS 1 auction has provisionally awarded support for four projects with a combined capacity of 3.074 GW. The average price bid by winning projects was €86.05/MWh. Inclusion in the Terms and Conditions of compensation for curtailment and oversupply is considered to have supported lower prices than the maximum bid price which had been set at €150MWh. Projects will remain exposed to constraint risk to the extent not compensated through Article 13 of the IME Regulation.
Connection Policy: Call for Evidence
The CRU calls for evidence until 23 June 2023 on electricity generation and system services policy (CRU/2023/41). It is intended that a new policy will replace ECP-2, which provides an annual application window of a month (or, in ECP-2.4, two months) for submission of applications for connection.
The call for evidence focuses on the aims of a new policy, rather the form it might take, but invites input on development of the policy. One of the stated aims is to ensure that Article 16 of RED II is implemented “to align relevant grid-permitting timelines” with its requirements. It is worth noting, however, that the Recast RED III is anticipated to soon become law (the compromise text is here with corrigendum here). Future connection policy in Ireland will need to comply with RED III requirements as well as the obligations in the IME Regulation and Directive imposed on Member States, regulatory authorities, TSOs and DSOs, some of which will likely soon be strengthened (see next paragraph). Connection policy and procedure needs to meet this legal framework.
Reforms to Electricity Market Legislation
We looked at the proposals to amend the IME Regulation and Directive here. Since then, there is a Presidency revision; Parliament’s Industry, Research and Energy (“ITRE”) Committee draft report and amendments here, here and here; and other Parliament committee reports (here and here). The ITRE Committee amendments include amendments to support anticipatory investment in the grid, to require further information to be regularly published on capacity for new connections to the grid, and to provide criteria for flexible connection arrangements. These amendments are due to be discussed by the Council on 19 June 2023 and the ITRE Committee is expected to adopt its report in July 2023.
System Services Future Arrangements
The SEMC is consulting until 3 August 2023 on the Phased Implementation Roadmap for the System Services High Level Design (SEM-23-043), following the 2022 High Level Decision Paper (SEM-22-012). A timetable for deliverables is set out at page 9. The plan would comprise:
- extending the current tariff arrangements by 24 months but reducing tariff rates,
- early implementation of competitive procurement for reserve services (with tariffs for reserves being wound down from Q2 2025 and the Layered Procurement Framework for reserves going live in May 2025), and
- full implementation of the Layered Procurement Framework, that day ahead systems services auctions (going live in December 2026), combined with short term contracts to manage volume risk.
Significant investment is required now to develop the storage and system services required for energy transition. Long-term revenue certainty is vital to underpin investment, for example through a price floor or CfDs. It isalso open for consideration as to whether there are alternatives to a day ahead market to remunerate what are essentially services required to ensure grid stability and delivery of electricity from intermittent energy sources.
Clean Energy Package Implementation
The latest CRU roadmap on implementation of the Clean Energy Package is available (CRU/2023/50). It outlines planned work relating to RED II and the IME Directive, but not the IME Regulation.
Fit for 55/REPowerEU
Several new or amending instruments have now been passed into law, including the Effort Sharing Regulation and Carbon Border Adjustment Mechanism. Several others are due to be follow shortly including the Recast RED III. Our latest update is available here.
EU
Energy Market Interventions
The Council reported here on interventions to address high energy prices in accordance with Regulation (EU) 2022/1854. Ireland reported figures on electricity demand reduction pursuant to the Regulation.
The Commission announced outcomes of the first international tender for the joint purchasing of EU gas supplies through the AggregateEU mechanism. Supplies bid surpassed demand submitted by companies. A second round will launch with suppliers able to submit bids for aggregated demand during 7-10 July 2023.
The Commission’s quarterly reports on markets indicated price stabilisation at the end of 2022.
European Green Deal: Greenwashing
In the context of the Circular Economy Action Plan and New Consumer Agenda, the EU is progressing several legislative instruments aimed at making sustainable products the norm and mitigating the risk of greenwashing.
- Green Claims Directive: Under a proposal for a Directive on substantiation and communication of explicit environmental claims, traders would be required to carry out assessments to substantiate explicit environmental claims. There would also be rules around substantiating comparative environmental claims, and around how both types of claims are communicated. There would be standards for environmental labelling of products, processes or traders. There would be a framework for complaint handling and penalties. The proposal is under consideration by the Parliament’s Internal Market and Consumer Protection Committee, and public feedback is invited until 21 July 2023.
- Consumer Protection: A proposal for a Directive on empowering consumers for the green transition through better protection against unfair practices and better information would amend the Consumer Rights Directive and Unfair Commercial Practices Directive to specify certain practices as prohibited unfair commercial practices. These would include displaying a sustainability label which is not based on a certification scheme or not established by public authorities; making a generic environmental claim for which the trader is not able to demonstrate recognised excellent environmental performance relevant to the claim; making an environmental claim about the entire product when it actually concerns only a certain aspect of the product; and presenting legal requirements as a distinctive feature of a trader’s offer. It would add the environmental and social impact of products to the list of characteristics about which traders should not deceive consumers. It would also add to the list of potentially misleading actions, to include making claims about future environmental performance without clear, objective and verifiable commitments and an independent monitoring system. The Council has agreed its position and negotiations will follow once the Parliament’s position is adopted.
- Ecodesign Regulation: A proposal for a Regulation to establish a framework for setting ecodesign requirements for sustainable products (which would repeal a 2009 Directive on eco-design requirements for energy-related products). The Council has agreed its position and Parliament is expected to approve its position in July following which informal trialogue negotiations can begin.
- Construction Products Regulation: A proposal for a Regulation laying down harmonised conditions for the marketing of construction products, repealing the 2011 Construction Products Regulation. The Parliament’s Internal Market and Consumer Protection Committee’s report has been tabled for plenary hearing in July.
EU ETS
The Communication on total number of allowance in circulation in 2022 for the purposes of the Market Stability Reserve is available.
Industrial Strategy
A proposed Critical Raw Materials Regulation aims to establish a framework to ensure the EU’s access to a secure and sustainable supply chain for a range of materials critical to certain sectors including renewable energy and e-mobility. Feedback is invited until 30 June 2023.
Carbon Capture, Utilisation and Storage
The Commission is inviting input until 31 August 2023 as it assesses the role of CCUS in decarbonising the economy and measures needed to optimise its potential.
Technical Assistance
The Commission launched a Covenant of Companies’ pledging scheme which involves companies pledging to reduce carbon emissions and receiving technical support to achieve this. A second call for applications for support runs until 31 August 2023 or until maximum applications have been received.
INTERNAL MARKETS
Electricity
ACER intends to consult from mid-July for 10 weeks on amendments to the grid connection network codes, with the intention of ensuring systems adapt for new trends like increasing numbers of storage modules and electrical charging points. ACER will also consult until 15 September 2023 on its report on cross-border capacity. ACER has also invited views until 15 June 2023 on the definition of structural congestion.
ACER has approved changes to the methodology for calculating scheduled exchanges resulting from single day-ahead coupling under the CACM Regulation. ENTSO-E has published two updated guidance documents on the connection network codes. It has also made available a new ENTSO-E resource on the TYNDP, aiming to ensure data published since 2010 is easily available.
Gas
ACER’s 10th Report on Congestion finds that in 2022 congestion tripled to unprecedented levels. It recommends actions the TSOs should now take. Having set out preliminary findings more specifically on cross-border congestion in North-West Europe, it intend to report more fully and set out its expectations around actions the TSOs and RAs should now take. ACER and ENTSOG have also made proposals to provide shippers with greater flexibility to book firm capacity at interconnection points. In the context of ten-year network development planning and selection of PCIs, ACER also published a study on a cost-benefit analysis for hydrogen networks.
CLIMATE LITIGATION
Trends
We consider some of the key trends in climate action litigation in a recent briefing: Climate Action Litigation: Where is it headed?
Shareholder action against Shell
In ClientEarth v Shell [2023] EWHC 1137 (Ch), the High Court in England and Wales denied permission for ClientEarth to proceed with a derivative action against Shell. Our review of the judgment is available here.
Challenge to cut in Funding
In the UK, it is reported that a campaign group intends to apply for judicial review of a Government decision to cut investment in active travel. The group is reported to allege that the cuts will contravene the walking and cycling strategy and result in missed net zero and air quality targets.
Greenwashing
In the UK, it is reported that the Advertising Standards Authority decided that ads by Shell, Respol and Petronas misled the public on the basis that the ads omitted material information by promoting green offers and plans without mentioning larger polluting operations. The rulings are available here.
ESG REGULATORY FRAMEWORK
A draft delegated act made under the Corporate Sustainability Reporting Directive is open for feedback under 7 July as we note further here. Further information on development of the EU Taxonomy is available in our Finance horizon scanner here.
DOMESTIC DEVELOPMENTS
Legislation
The Electricity Regulation (Amendment) (Standing Charges) Bill 2023 would give the CRU power to monitor standing charges on electricity and gas bills. It would require suppliers to submit annual reports on standing charges which would include a breakdown of suppliers’ fixed costs, and an explanation of how the standing charge was calculated and how it relates to covering the fixed costs. It would require pre-approval for increasing standing charges.
Constraints and Curtailment
EirGrid’s annual report on constraints and curtailment in 2022 is available here. The level of dispatch-down of wind was 8.5% of total available energy from wind on the island of Ireland. A breakdown is shown as follows:
Hydrogen
Ireland and Germany agreed a joint declaration of intent to cooperate in green hydrogen, in recognition that Germany will wish to import hydrogen.
Offshore
MARA’s establishment date is 17 July 2023 (a press release is available). Maritime Area Planning Act 2021 (Commencement of Certain Provisions) Order 2023 commences Part 2 (Maritime Spatial Plans and Designated Maritime Area Plans), other than Chapter 9 (Maritime Authorisation Database).
A Government White Paper on Enterprise Implementation identifies integrating decarbonisation and net zero and commitments as a priority. Actions include development of the National Industrial Strategy for Offshore Wind: consultation is scheduled for Q4 2023 and publication for Q2 2024.
Ireland ratified the Convention on the International Organization for Marine Aids to Navigation (a press release is available), which recognises the IALA as an international organisation to give weight to its standards and recommendations.
Climate Act Governance
The Government is calling for evidence until 14 July 2023 to assist in formulation of the 2024 Climate Action Plan. Proposals for additional policies and measures are invited. However, completion of actions in the 2023 Climate Action Plan are eagerly awaited (for example on hybrid connection and private wires).
The Government is also consulting until 30 June 2023 on the Long-term Strategy on GHG Reductions, intended to set out the pathway to get to carbon neutrality by 2050.
Energy Efficiency Grant
A grant is available to small businesses which, through participation in the Green for Micro, GreenStart or SEAI Energy Audit programmes, have identified the technology and equipment need and benefits.
Reporting
The EPA has published the Interim Energy Balance for 2022.
SEMC BUSINESS
Proposed TSC Amendment: Indexation of Capacity Payments
The SEMC states it “has decided to implement a form of indexation for multi-year New Capacity awarded in the 2024/25 T-3 and 2025/26 T-4 auctions based on wholesale construction price indices for Ireland and Northern Ireland”. It states it will “issue a more detailed response document in the coming weeks”. It states it will then “bring forward such TSC and any other modifications as may be required to implement this indexation policy in the near future and will work with the TSOs to ensure any necessary systems changes are implemented in time to reflect in settlement, starting from October 2024 (SEM-23-038).
Capacity Market Code
The RAs are consulting further until 16 June 2023 on CMC_03_23 – Amendment to Long Stop Date for T-1 Capacity Auction. The proposal aims to extend the Long Stop Date associated with the single year T-1 capacity contracts from one month after the beginning of the relevant Capacity Year to three months (SEM-23-040). The RAs are also consulting until 21 July 2023 on several further Code Modifications concerning mitigation of impact of Third Party Gas Connection delays; amendment to drafting introduced by CMC_15_22 (Remedial Action to enable Extensions due to Planning and Permitting Delay); facilitation of Unit Specific Price Caps in excess of Auction Price Cap; Minimum Completion prior to Long Stop Date; and Locational Capacity Constraint Violation Criteria (SEM-23-041).
Directed Contracts
Information on quantities and prices for Round 23 is available (SEM-23-042).