“EirGrid assumes that, in 2030, constraints will be 0.6%.”
Shaping our Electricity Future Version 1.1
The keenly awaited update to Shaping our Electricity Future (“SOEF”), EirGrid’s Roadmap for meeting the 2030 renewable energy targets, is available. It is to be updated every two years.
EirGrid states that the scale of work will be immensely challenging to deliver, even in the context of a plan-led approach. It identifies candidate reinforcements required, additional to committed projects already progressing through grid development frameworks and to work identified in SOEF Version 1.0.
EirGrid states that the estimated total transmission capex costs of candidate reinforcements required by 2030 is €3.396 billion for Ireland and 326 million for Northern Ireland. These totals are broken down as follows:
Under PR5 for 2021 – 2025, the CRU’s decision on the TSO’s network and non-network capex is €70.19 million and €60.72 million respectively, and the TAO’s PR5 network capex is set to €978 million (CRU/20/152).
EirGrid assumes that, in 2030, constraints will be 0.6%. It is not express in this statement what constraints cover. The section refers to “reduction in renewable generation constraint, i.e. the RES spillage savings measured in gigawatt-hours”, and the SOEF glossary provides separate definitions for Constraint, Curtailment and Surplus Renewable Generation.
The cost of 0.6% constraints is €31.2 million, “at an average compensation rate of €88.62/MWh”, which is a “cost of compensation determined based on assumed strike prices of €80/MWh for onshore wind; €80/MWh onshore solar PV; and €120/MWh for offshore wind. Assumed strike prices are based on LCOE estimates”.
EirGrid states that, where appropriate incentives and frameworks to effectively exploit surplus renewable generation are not put in place, 20% of available generation could be surplus to demand requirements in 2030.
Information is also outlined on markets workstreams under:
- Pillar 1: Scheduling and Dispatch changes; Capacity Market incentives and modelling design changes; System Services volume based procurement and new services; and related investment drivers, that is tariff review and TLAF review, and
- Pillar 2: Integration with GB market and with EU markets.
Consultation on the next iteration of Tomorrow’s Energy Scenarios, which will consider pathways for evolution of the power system in 2035, 2040 and 2050, will take place this summer. It is indicated that the SOs are collaborating with ENTSO-E on strategic integrated offshore network development plans.
Firm Access Policy: Appropriate Risk Allocation is Key
The CRU is consulting until 9 August 2023 on the detailed methodology for firm access policy (SEM-23-63), following the high level decision paper earlier this year (SEM-23-004). A key change promised by this policy is that generators will receive time bound firm access dates, de-linked from completion of ATRs, and allocated through an annual process undertaken by EirGrid.
A key question is how the Firm Threshold mechanism will work. The consultation indicates that there will be one Firm Threshold across the entire network. If, in a firm access run undertaken by EirGrid, a generator’s expected constraints are below a certain percentage (the example of 1 or 2% is given), it will be a candidate for receiving firm access. Recent constraint levels are shown at page 9 of EirGrid’s 31 May 2023 annual report on constraints and curtailments (available in the EirGrid Library here).
The CRU states: “The main risk associated with the introduction of a Firm Threshold is the potential for additional cost to the consumer through compensation payments. Firm access removes risks from developers by ensuring they are compensated for non-market based redispatch. However, the increased certainty for developers is expected to reduce their bids into renewable support auctions.” The CRU invites comments on the appropriate percentage at which Firm Threshold should be set, taking account of “the trade-off between increasing renewable capacity and potential for increased cost to the consumer”.
An appropriate response is that grid development is required to meet 2030 targets and that this inevitably entails a cost to the consumer, whichever bill line item it appears on. However, the choice of reflecting the cost through compensation for dispatch down versus support auction prices is important. Choosing to let the cost be borne by developers may not be economically efficient 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.
It is also appropriate to query how one network-wide Firm Threshold will provide locational signals. This question is given added pertinence by the indication at section 2.3 that the look forward approach, described as providing a locational signal for future new capacity, may not now be part of the new policy. The rationale provided is that firm access will be assessed for generators once they reach contracted phase, earlier than first proposed. It is not clear, however, how this provides locational signals in terms of areas to target when developing new projects.
Indexation of Capacity Payments
An SEMC detailed response paper (SEM-23-045) is now available following the earlier high-level decision (SEM-23-038) to apply indexation to capacity payments for new capacity already awarded (without indexation being a term of the auctions) in 2024/25 T-3 and 2025/26 T-4.
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:
- Hydrogen: The new delegated acts on hydrogen standards were formally adopted.
Internal Energy Market Revisions
Coreper set out its general approach on the proposals to amend the IME Regulation and Directive and REMIT: here, here and here. The Council subsequently reached agreement on REMIT aspects. ENTSO-E has made explainer episodes available.
Carbon Capture, Utilisation and Storage
The Commission is consulting until 31 August 2023 on the role CCUS should play in decarbonising the economy.
Simplification of procedures for RES Installations
A Commission report assesses the permission and administrative procedures for renewable energy projects in Member States.
Harmonised Efficiency Reference Values
Projects of Common Interest
ACER reported on its monitoring of PCIs and on regulatory incentives for energy network projects, as well as issuing a recommendation for cross-border cost allocation.
ENTSO-E is consulting until 7 August 2023 on draft guidance for transmission and storage projects wishing to be included in the TYNDP 2024. ENTSO-E and ENTSOG are consulting until 8 August 2023 on TYNDP 2024 input parameters.
ACER indicates declining prices due to increased LNG imports and decreasing demand.
Temporary Solidarity Contribution
The Energy (Windfall Gains in the Energy Sector) (Temporary Solidarity Contribution) Bill 2023 is at the Third Stage in the Seanad. It provides for the Temporary Solidarity Contribution to be paid by businesses in the fossil fuel sector. The revenue cap on inframarginal generation is to be dealt with separately.
Public Service Obligation
The Proposed Decision Paper on the 2023/24 PSO Levy indicates that the PSO Payment will be minus €66.33 million. Last year when wholesale prices were particularly high it was minus €491.25 million (CRU/2023/365).
Offshore Grid Connection
The Independent Technical Advisor is now going to be procured by the CRU rather than EirGrid (CRU/2023/61).
The CRU states it will retain the existing terms of reference for the Electricity Networks Stakeholder Engagement Evaluation Panel with minor clarifications and amendments on administration of meetings. It will publish the list of Panel members for 2023 and 2024 once they have been appointed (CRU/2023/36). The CRU published the Balanced Scorecard incentives which is a subset of PR5 (CRU/2023/54).
The CRU is appointed as regulator of District Heating and Cooling networks by S.I. 350 of 2022, which transposes Directive (EU) 2018/2001 on the promotion of the use of energy from renewable sources. It will require all District Heating suppliers to register with the CRU and make certain information available to final consumers (CRU/2023/51).
Safe Electric and Registered Gas Installer Scheme
There is an update on the recognition process for international applications (CRU/2023/64).
The SEMC is consulting until 28 July on the TSOs’ Imperfections Charges Forecast for Tariff Year 2023/24 (SEM-23-045). For Tariff Year 2023/24 and, similar to recent Tariff Years, Imperfections Costs are mostly due to Constraints. The TSOs’ proposal is €522.06m for Tariff Year 2023/24, an Imperfections Price of €13.40/MWh, compared with Imperfections costs of €834.53m / Imperfections Price of €21.85/MWh for the previous Tariff Year. The SEMC states that, given delays in receiving the TSOs’ submission, the information in this paper is subject to change based on the RAs’ findings following further scrutiny. It is also noted that the SEMC has issued letters to the TSOs on redispatch reporting and that this will be subject to future consultation.