Energy
“Even with a revised RED, the Commission considers that further immediate action is needed.”
KEY DEVELOPMENTS
New European Wind Power Package along with revised Renewable Energy Directive
As amendments to the Renewable Energy Directive (“RED”) come into effect, the European Commission continues to pursue efforts to accelerate deployment of renewable energy generation.
Renewable Energy Directive
Directive (EU) 2023/2413 amending the 2018 RED comes into effect on 20 November 2023. It significantly develops obligations on Member States in relation to the permit-granting procedure to build, power and operate renewable energy plants and co-located storage, as well as assets necessary for connection to the grid. Amendments also aim to facilitate system integration of renewables and achieve faster mainstreaming of renewables in buildings, transport and industry. While the transposition date is 21 May 2025, most of the provisions on permit granting must be transposed by the earlier date of 1 July 2024.
New Wind Power Package
Even with a revised RED, the Commission considers that further immediate action is needed. It is concerned about the slow deployment of wind energy, citing several causes (see Q&A). It has therefore launched a European Wind Power Package consisting of a European Wind Power Action Plan and Communication on offshore renewable energy.
The European Wind Power Action Plan is structured into six pillars of actions to be undertaken by the Commission, Member States and industry. Timelines are set out in the Annex.
“ENTSO-E welcomed publication of the package and indicated that in January 2024 it will release a first European Offshore Network Development Plan.”
“Pending any change in European law it is impermissible to take these factors into account when processing a connection application.”
The Communication to deliver on the EU’s offshore renewable energy ambitions looks at strengthened regional co-operation, including on auctions for offshore renewable energy and guidance for cost-benefit analysis and cost-sharing for grid projects. The goal is now 11GW of offshore generation by 2030, a near doubling of the intent stated in 2020. The Commission also intends to address the role of ports as a key element in the offshore energy supply chain, including by mapping, categorising and prioritising port infrastructure needs.
ENTSO-E welcomed publication of the package and indicated that in January 2024 it will release a first European Offshore Network Development Plan.
Firm Access Policy: Appropriate Risk Allocation is Key
The CRU published the decision paper on the Firm Access detailed methodology (CRU/2023/114) following consultation (CRU-23-63) and the earlier high level decision paper (SEM-23-004).
Generators will receive a longstop date for the award of Firm Access, using the existing connection agreement longstop dates. However, the decision states: “The CRU notes that longstop dates should not be applicable where connection delays arise as a result of TSO actions/delays. The CRU agrees that certain delays outside of a unit’s control may need to be (sic) reflected in any longstop arrangements, however these would need to be carefully considered.”
It is not clear how this sits with the high level decision to provide projects with timebound firm access dates de-linked from completion of reinforcement works.
A firm threshold with a value of 2% applied to renewable energy only will apply across the entire network, which the CRU may adjust. If, in a firm access run undertaken by EirGrid, a generator’s expected constraints are below 2%, it will be a candidate for receiving firm access. 2022 constraint levels in Ireland are shown at page 21 of EirGrid’s annual constraint and curtailment report of 31 May 2023. In some months they were close to or over 6%, and the average was 4.8%. The CRU says the majority of respondents suggested the firm threshold level should be set at 7% as a minimum. The CRU describes 2% as a cautious approach.
The CRU’s caution is based on preventing cost to the consumer. However, grid development (or the lack of it) inevitably entails a cost to the consumer, whichever bill line item it appears on. The CRU to some extent acknowledges this in its statement: “Some of the increased cost associated with constraint payments may be offset by reduced bid prices for renewable energy support auctions.” However, choosing to allocate grid risk to developers may lead to an economically inefficient allocation of costs to consumers, to the extent that: (i) it entails an additional cost in the form of a risk premium because developers cannot manage, control or quantify grid risk, (ii) it means that, even if the grid is reinforced and downward dispatch reduced, the cost of the risk of downward dispatch is baked into long-term CfDs (save to the extent of the UAEC), and (iii) it does not allow SOs to see the true cost of dispatch down, visibility of which is vital for proper cost benefit analysis to justify future investment in the grid and interconnection.
The CRU decided to include a look-forward approach, intended to provide a locational signal, whereby the TSO will provide information on where firm access will be available.
Storage remains outside this approach and the CRU indicates that this will be reviewed following completion of the Electricity Storage Policy Framework by DECC. The CRU also considers that the treatment of existing firm access for repowered generators requires further consideration due to the complexity of this issue. Addressing these issues is required to ensure compliance with principles of non-discriminatory access to networks under the IME legislation.
As regards offshore, treatment of projects seeking to participate in Offshore Phase 2 will be clarified separately. Assessment of Phase 1 projects that do not hold an ORESS 1 Notice of Award will be based on the Generator Connection Assessment while it is still valid.
Internal market in electricity amendments
The Council agreed its General Approach on the proposal to amend the IME Regulation and Directive. Next steps are inter-institutional negotiations, following which the Council and Parliament will adopt a final text. A Council press release is here and press comment is available here and here.
ENTSO-E has produced a paper to inform negotiations on the issues which, from the TSOs’ perspective, would facilitate the decarbonisation of the European power system.
Demand strategy consultation
In Ireland, responses to the CRU’s demand strategy are available (CRU/2023/17). The strategy included a consultation proposing that prospective LEUs seeking connections to the electricity or natural gas grid would be required to achieve net zero emissions at time of connection, with System Operators being directed, in the meantime, to take emissions profiles into account in the context of current connection applications. However, while it may be open to a Member State to impose 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.
The CRU has set out next steps:
- Energy Demand Strategy: Consultation Paper (Q4 2023) and Decision Paper (Q1 2024).
- Area 1 - Smart Services: Decision Paper on Incentivising the Uptake of Time of Use Tariffs (Q4 2023).
- Area 2 - Demand Flexibility and Response: Consultation on ESBN Flexibility Procurement Proposals (Q4 2023).
- Area 3 - New Demand Connections: Consultation Paper (Q4 2023) and Decision Paper on LEU’s Connection Policy (Q1 2024).
World Energy Outlook
The IEA’s annual outlook indicates that the momentum behind clean energy transitions is now sufficient for global demand for fossil fuels to peak before 2030 (in its Stated Policies Scenario, which provides an outlook based on the latest policy settings, including energy, climate and related industrial policies). Read more here.
EU
State of the Energy Union 2023
The annual report is available here, along with press release, factsheet, and country fiches including for Ireland. The 2023 version of EU Energy in Figures is also available.
UNFCCC - Paris Agreement
In light of key elements of Fit for 55 being passed into law, the EU and its Member States have submitted updated nationally determined contributions (“NDCs”) to the UN. Further information is available here. The Council also approved conclusions on climate finance ahead of COP28.
EU Emissions Trading System
Commission Decision (EU) 2023/2440 on the Union-wide total quantity of allowances to be allocated in respect of aircraft operators under the EU Emissions Trading System for 2024 comes into effect on 20 November 2023.
Commission Implementing Regulation (EU) 2023/2441, which lays down rules for the application of the EU ETS Directive as regards the content and format of climate-neutrality plans needed for granting free allocation of emissions allowances, comes into effect on 23 November 2023.
Proposed Council Decision on the position to be taken for integrating Regulation (EU) 2023/957 on maritime transport activities in the EU ETS into the EEA Agreement has been published.
The Commission adopted a delegated regulation to establish a new auctioning regulation in line with the revised EU ETS. If the other institutions do not raise objections in the next two months, the Regulation will be published in the Official Journal and then enter into force.
The annual report on the functioning of the carbon market gives an overview of the EU ETS, revenue streams, and oversight in financial markets. It concludes that the EU ETS remains a crucial vehicle for the green transition which will help fund measures under the REPowerEU plan. Revision of the ETS Directive should create incentives for long-term decarbonisation and discourage carbon lock-in. Extension of the EU ETS scope to the maritime sector from 2024 and a new ETS 2 for buildings, road transport and small-emitting industry launching in 2027, means that carbon pricing will cover three-quarters of the EU economy. An accompanying technical information document is available here.
Further emission reduction instruments
Regulation (EU) 2023/2405 on ensuring a level playing field for sustainable air transport (ReFuelEU Aviation) comes into effect on 20 November 2023. The Council’s press release is here.
Two proposed Regulations to reduce GHG emissions from fluorinated gases (F-gases) and ozone-depleting substances have been agreed by the Parliament and Council. Once formally adopted, they will be published in the OJEU and enter into force.
The Council’s General Approach on the proposal for a Regulation amending Regulation (EU) 2019/1242 as regards strengthening the CO₂ emission performance standards for new heavy-duty vehicles is available. Next steps are inter-institutional negotiations, following which the Council and Parliament will adopt a final text. A Council press release is available here.
Carbon Border Adjustment Mechanism
The Commission is calling for applications until 30 November 2023 for members of a new informal expert group to provide advice and expertise on certain elements of the implementation of the CBAM.
Electricity
PCIs/PMIs: ACER published its Opinion on the draft list of proposed PCIs and PMIs and set out recommendations for improvement in the selection process, in how infrastructure needs are identified, and in the selection methodology. The Commission will decide on the list by 30 November 2023.
Balancing energy and cross-zonal capacity: ENTSO-E is consulting until 12 December 2023 on amendments to a) the implementation framework for the European platform for the exchange of balancing energy from frequency restoration reserves with automatic activation, and b) the methodology for pricing balancing energy and cross-zonal capacity used for the exchange of balancing energy or operating the imbalance netting process.
Flexibility: ACER has reported on the need for electricity system flexibility to almost double by 2030 to accommodate more renewable energy.
Security of Supply: ACER has reported on the EU framework to assess and tackle electricity security of supply. It reaches several findings including that there is scope for improving the design of incentives and penalties in capacity mechanisms to ensure delivery of the service. ENTSO-E is consulting until 5 December 2023 on the Methodology for Identifying Regional Electricity Crisis Scenarios.
Energy Efficiency: Commission Delegated Regulation (EU) 2023/2104 amends the legislation on review of harmonised efficiency reference values for separate production of electricity and heat in application of the current Energy Efficiency Directive (which is repealed from 12 October 2025 by the new Energy Efficiency Directive).
EVs: ENTSO-E produced a position paper on deployment of heavy duty EVs and their impact on the power system. The main aim is to analyse impact on a) the electricity system demand and connection characteristics, b) flexibility potential, and c) TSO hands-on experience.
Cybersecurity: The Commission invites feedback until 17 November 2023 on a draft delegated regulation supplementing the IME Regulation by establishing a network code on sector-specific rules for cybersecurity aspects of cross-border electricity flows.
Regional Coordination Centres: ENTSO-E’s annual report on performance of RCCs is available.
Market monitoring in 2023: Commission quarterly reports indicate a fall in wholesale prices in Q1 of 2023. The ACER 2023 report on the progress of EU electricity wholesale market integration is available. The main challenge of electricity market integration is long-term markets. On balancing markets, the limited engagement of TSOs and data availability are hindering the success of balancing platforms. In 2022, congestion income increased by more than three times compared to 2021, accompanied by a surge in remedial costs.
REMIT: The latest quarterly report is available.
Gas
TYNDP: ENTSOG published its final Guidelines for Project Inclusion for the Ten-Year Network Development Plan 2024. It provides guidance on the procedural steps, and administrative and technical requirements, that promoters and projects have to meet to be included in the TYNDP. In addition, a User Handbook, providing a step-by-step explanation of the project portal and the project collection process, will be published at the end of October.
Hydrogen: ACER published its Opinion on the draft list of proposed hydrogen PCIs and PMIs, calling for improvements in the next selection process to ensure more transparency, precise methodologies and coherence in application, and synchronisation between TYNDPs and PCI/PMI selection.
Capacity allocation: ACER intends to review the Capacity Allocation Mechanisms Network Code. A consultation will run until 5 January 2024 and an online workshop will be held on 14 November 2023.
Security of Supply: The Commission reported on the application of Regulation (EU) 2017/1938 on measures to safeguard security of gas supply as well as publishing a staff working document. It identifies potential improvements to the gas security of supply architecture such as common solidarity rules in the absence of bilateral agreements. ACER has also made available a study on the impact of EU and national gas storage regulations. As a next step, the CEER will undertake a study on storage burden-sharing mechanisms and identification of best practices to enhance the efficiency of storage filling obligations. ENTSOG also published the Winter Supply Outlook 2023/24.
Market monitoring in 2023: Commission quarterly reports indicate a fall in wholesale prices in Q1 of 2023. The ACER 2023 report on the internal gas market in 2022 and 2023 is available and includes lessons for the future around resilience factors.
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 includes 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. Commission Delegated Regulation (EU) 2023/2450 listing the essential services comes into force on 19 November 2023.
Energy poverty
In Recommendation (EU) 2023/2407, the Commission has set out recommended actions for Member States to tackle energy poverty, along with a staff working document. Further information is available here. The CEER has also renewed common principles for enhanced consumer protection this winter.
Clean technologies
The EU has reported on policy initiatives to promote investments in clean technologies. A summary is available here. The Commission has also published a Communication on the revision of the Strategic Energy Technology Plan, identifying that further actions and targets need to be progressed. Further information is available here.
Infrastructure
The Commission published a correction to the technical guidance on climate proofing of infrastructure.
GREEN CLAIMS AND CLIMATE ACTION LITIGATION
Green Claims Directive
As the development of the proposal for an EU Directive on substantiation and communication of explicit environmental claims continues, the Parliament has published a briefing. It states that the Directive would “require companies to substantiate the voluntary green claims they make in business-to-consumer commercial practices, by complying with a number of requirements regarding their assessment”.
Challenge to Food Vision 2030 unsuccessful
Friends of the Irish Environment’s challenge to the Government’s plan for the agri-food sector, Food Vision 2030, has been dismissed by the High Court. The NGO had alleged that there were failures to comply with environmental assessment obligations. The judgment is available here.
Adaptation plans
In the UK, litigants are alleging that the Government’s failure to set out lawful adaptation objectives in its five-yearly national adaptation programme is a breach of human rights. The litigants are a citizen whose home is threatened by coastal erosion, a citizen whose medical conditions are exacerbated by heat waves, and Friends of the Earth. A press report is available here.
DOMESTIC DEVELOPMENTS
Ports
The Department of Transport is consulting on a review of the National Ports Policy with the objective of presenting a new draft policy to Government in 2025. Responses are invited by 15 January 2024.
Legislation Programme – Autumn 2023
Legislation for priority publication includes a Marine Protected Area Bill. Legislation for priority drafting includes a Gas Safety (Amendment) Bill. All other legislation includes a Companies (Corporate Governance, Enforcement and Regulatory Provisions) Bill. The programme is available here.
ESG Insights
Dr Caroline Sweeney, a Senior Parliamentary Researcher, has produced a resource on ESG, and Sustainable Development: The Legal and Regulatory Framework in Ireland.
UK
Energy Act 2023
A significant new legislative framework is now in place in the UK, some provisions of which extend to Northern Ireland. It is wide-ranging, concerning licensing; CCUS and hydrogen production, transport and storage; licensing of hydrogen pipeline projects; new technology; independent system operator and planner; governance of gas and industry codes; market reform and consumer protection; heat networks; energy smart appliances and load control; energy performance of premises; energy savings opportunity schemes; core fuel sector resilience; offshore wind electricity generation, oil and gas; and civil nuclear sector. An overview is available here
FURTHER CRU BUSINESS
Renewable Hubs Pilot
The CRU decision paper indicates that the pilot will begin while the ECP-2.4 batch window is open. Current ECP-2.3 and future ECP-2.4 projects at five Renewable Hub locations identified by the DSO will initially take part in the pilot (CRU/2023/131).
Security of Supply
Along with the October update to the security of supply programme of work, the CRU has published an Information Paper on a Services Agreement entered into by EirGrid and ESB for the continued availability of the three units at Moneypoint after their planned closure date for the provision of capacity on an out of market and temporary basis (CRU/2023/124).
District Heating
In line with Regulation 33(1) of S.I. No. 350/2022, the CRU is requiring District Heating Suppliers to register their site details by 17 November 2023 (CRU/2023/121).
Market Revenue Cap
The CRU published its slides from the stakeholder workshop outlining how it proposed to implement the market cap. The draft legislation appears to give rise to some unintended consequences which we note have not yet been addressed in amendments to the Bill.
Clean Export Guarantee
The CRU has extended the deadline until 24 November 2023 for responses to the consultation on Enduring Arrangements for Remuneration of Microgeneration Exports under the Clean Export Guarantee. The consultation also reviews the interim arrangements for deemed payments for exporting customers (CRU/2023/112).
Consents
The CRU has published the current list of holders of Authorisations to Construct and Licences to Generate.
Safety
The CRU published the Report on Energy Safety 2022 to the Minister.
Customers
The latest monthly update on Estimated Annual Bills is available. The CRU indicates it is publishing these notices in the context of sustained high energy prices (CRU/2023/120). The CRU has also issued an enforcement action in relation to billing information.
SEMC BUSINESS
Balancing Market
Curtailment: Mod_10_23 to the Trading and Settlement Code has been recommended for approval to provide for implementation of certain elements of SEM-22-009 on dispatch, redispatch and compensation. It states that “this Modification would result in firm curtailment volumes receiving the same settlement treatment as constraint does today by including those volumes in the discount charge (which is a payment to the Generator Unit) with a deemed decremental price of zero such that any imbalance charge is offset and those volumes would retain their ex ante market revenue”.
Batteries: Mod_11_23 to the Trading and Settlement Code has been deferred. It stated that the amendments would “allow market participant and the control centres to realise more value from batteries, and better align with their operating characteristics. In particular they will allow Battery Storage Units to submit negative Physical Notifications and be dispatched to specific MW levels in their charging range”.
Capacity Market
Refurbishment category: The RAs will develop a policy for an intermediate length contract refurbishment category within the Capacity Auction Exception Application process. They intend to make this available to exception applicants within the T-4 2028/2029 Capacity Auction (SEM-23-083).
Third party delay risk for new Capacity Market Units: The RAs consulted until 20 October 2023 on a new proposal to, instead of approving several related proposals, now make two modifications: (i) linking approval of Substantial Financial Completion Delays to Long Stop Dates and Capacity End Date and Time for specific auctions, and (ii) providing a mechanism for the SEM Committee to approve extensions to the Long Stop Date and Capacity Quantity End Date and Time for specific auctions (SEM-23-080).
Indexation and other amendments: The RAs published the timetable and consultation (closing 1 December 2023) for four further Modifications (SEM-23-081 and SEM-23-084) and intend to hold a separate consultation for CMC_19_23 on Indexation of Capacity Payments (SEM-23-082).