Energy

KEY DEVELOPMENTS

Significant Consultation on Connection Policy

The CRU is consulting until 16 February 2024 on Electricity Generation and System Services Connection Policy for onshore generators, storage and other systems services technology projects (CRU/2023/163).

Questions range from addressing scope of the policy, to a minded to approach to introduce a bi-annual batch application process without caps for renewable generators, and whether there are categories that should be considered outside the batch process.

Questions are also posed around alignment with the planning process, whether procurement processes (capacity, LCIS) should be included in the policy, whether locational prioritisation would be appropriate, whether the charging methodology should be amended, the application process fee structure, and whether a modification process is appropriate for repowering, as well as questions around small scale generation and non-exporting generation.

EirGrid Clinics: EirGrid published an FAQ document on Customer Clinics for customers and developers. Projects eligible for a clinic meeting are projects that are: (1) outside of an Enduring Connection Policy batch; (2) outside of the formal offer process; (3) seeking to qualify for an upcoming capacity auction; and (4) which have not yet received planning permission approval.

Significant Consultation on Demand Strategy and Connection of Large Energy Users

Last October we looked at the CRU’s initial consultation pack on demand strategy. The CRU is now progressing the first of several consultations, beginning with the National Energy Demand Strategy, open until 16 February 2024 (CRU/2023/148). The CRU considers that there are three mechanisms for delivering demand strategy:

implicit flexibility (responses to incentives, such as through tariffs, leading to “implicit” demand reduction or shifting);
explicit flexibility (procurement through contracts or products to deliver a defined flexibility response); and
mandatory requirements (such as connection conditions, planning requirements or, for example, a mandatory smart charging standard for EVs).

In the context of this consultation it will be useful to bear in mind the definition of demand response in the IME Directive: the change of electricity load by final customers from their normal or current consumption patterns in response to market signals, including in response to time-variable electricity prices or incentive payments, or in response to the acceptance of the final customer’s bid to sell demand reduction or increase at a price in an organised market as defined in Article 2(4) of Commission Implementing Regulation (EU) 1348/2014, whether alone or through aggregation. This is not changed by the energy market reform amendments.

The CRU is also consulting until 26 February 2024 on electricity and gas connection policy for large energy users (CRU/2024/001). It proposes to decarbonise energy demand by imposing ongoing requirements on large customers around emissions reduction as a condition of connection and use of the systems.

We have commented previously that, while it may be open to a Member State to include environmental conditions such as those proposed in the call for evidence paper (CRU/2023/57) 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.

Electricity Market Reform

Agreed amendments to the Internal Market in Electricity Regulation and Directive are available here. The next step is formal adoption by the Council and Parliament. Further information is available from the Commission, Council, and Parliament.

Since the initial proposal (which we looked at here) there have been significant developments.

It has been recognised that not all essential services can be delivered through a market based on energy prices. Capacity remuneration mechanisms are to be made a structural element of the market. A ‘capacity mechanism’ is now a measure – not a temporary measure - to ensure the achievement of the necessary level of resource adequacy by remunerating resources for their availability. The Commission will be required to make proposals to streamline and simplify the process for assessing capacity mechanisms. Member States may introduce new support schemes for demand response and storage, and system operators may procure demand reduction at peak hours.

Amendments also aim to remove barriers to the PPA market. For example, Member States will be obliged to ensure the availability of market-based guarantees for PPAs. (It is worth remembering also that Renewable Energy Directive amendments require that Guarantees of Origin must be capable of being transferred to the buyer of renewable energy under the PPA, currently not possible for corporate offtakers in Ireland.)

Further integration of renewables in the energy system is another area of focus. There is some development of transparency obligations for system operators as regards grid congestion, and requirements to bring trading deadlines closer to real time. There will also be new EU level renewable energy auctions linked to the European renewable energy financing mechanism.

There is also political agreement on amendments to the REMIT Regulation. Market participants from third countries will have to designate a representative in the relevant Member State. In addition to substantive penalties which may be imposed by Member States, ACER will have power to impose penalties to ensure compliance with on-site inspection decisions and requests for information. Further information is here.

Reform of the EU Internal Market in Natural and Renewable Gas

The final draft of the recast Regulation on Natural and Renewable Gas is available. There is political agreement on the Directive, but a final text is awaited. Further information is available from the Commission, Council and Parliament.

Energy Efficiency of Data Centres

Article 12 of the Recast Energy Efficiency Directive imposes certain obligations on owners and operators of data centres. The Commission invited feedback until 15 January 2024 on a draft Delegated Regulation on the energy efficiency of data centres. Further information is here.

Climate Action Plan 2024

The annual update of the Climate Action Plan, with an annex of actions, is available here. Electricity sector targets remain the same as last year. Actions for Q4 2024 include implementation of a hybrid connection roadmap and development of a private wires policy framework.

National Energy and Climate Plans

As required under Regulation (EU) 2018/1999 on Governance of the Energy Union and Climate Action, Ireland has submitted its draft updated National Energy and Climate Plan to the Commission to communicate how it will meet obligations under the Renewable Energy Directive, Energy Efficiency Directive, and Effort Sharing Regulation.

The Commission has assessed draft updated NECPs. The draft Irish NECP, submitted on 8 December 2023, was only partially considered in the assessment. The Commission will publish a further assessment looking at the Irish NECP in more detail in early 2024.

The Commission’s overall assessment so far is positive, but it identifies gaps which it expects to be addressed in final updated NECPs, required by 30 June 2024. It will intensify one-to-one contact with Member States, including in relation to the EU Action Plan for Grids. The Commission has also assessed climate adaptation in Member States.

Offshore

It is understood that the Maritime Area Regulatory Authority will transfer from the Department of Housing, Local Government and Heritage to the Department of Environment, Climate and Communications.

In Northern Ireland, the Department for the Economy is consulting until 16 March 2023 on an offshore renewable energy action plan to deploy 1 GW of offshore wind from 2030.

COP28

The key outcome was a decision which has been called the UAE Consensus. It includes wording to accelerate efforts to phase-down unabated coal power and to transition away from fossil fuels in the energy system.

Parties committed to triple global renewable energy capacity and double the rate of energy efficiency by 2030 (the Global Pledge on Renewables and Energy Efficiency); to tackle non-CO2 emissions this decade; to phase out as soon as possible inefficient fossil fuel subsidies; and to further increase adaptation financing. Further information is available from the UN and the European Commission.

Some parties, including Ireland, signed a Declaration on a Global Climate Finance Framework to support accessible and affordable climate financing. Parties also agreed mechanism for the loss and damage fund, which was made operational. A repository of global company-level emissions data was launched and a Roadmap on Just Transition Finance Pathways for Banking and Insurance was published.

FURTHER EU DEVELOPMENTS

Extension of Emergency Energy Measures

Main provisions of Regulation (EU) 2022/2577 laying down a framework to accelerate the deployment of renewable energy are extended until 30 June 2025 by Regulation 2024/223. The amending regulation applies from 1 July 2024 apart from a new Article 3a which applies from the amending regulation’s entry into force. Article 3a supplements Article 3 which provided for the presumption of renewable projects being in the ‘overriding public interest’. Article 3a provides for what may be deemed as ‘no satisfactory alternative solution’ for the purposes of environmental assessment.

Regulation (EU) 2022/2576 enhancing solidarity through better coordination of gas purchases, reliable price benchmarks and exchanges of gas across borders is extended until 31 December 2024.

Regulation (EU) 2022/2578 establishing a market correction mechanism to protect Union citizens and the economy against excessively high prices is extended until 31 January 2025. Further information is here.

Energy Efficiency

Commission Recommendation of 12 December 2023 on transposing Article 30 of the Energy Efficiency Directive is intended to guide Member States on implementing Article 30, which provides for energy efficiency funding and technical support. Article 30(1) requires Member States to facilitate the establishment of financing facilities, or the use of existing ones, for energy efficiency improvement measures. The Recommendation outlines mandatory obligations and explores how they can be fulfilled.

As regards energy efficiency generally, the Commission and Member States signed a Joint Declaration to enhance efforts to establish a long-term viable funding framework for energy efficiency investments and to support the launch of a European Energy Efficiency Financing Coalition, to be launched in 2024.

Energy Performance of Buildings

The final draft of the Energy Performance of Buildings Directive is available. Further information is available from the Commission, Council, and Parliament.

Electricity

Demand Response: ACER reported on regulatory barriers and market restrictions that hinder participation of distributed energy resources (demand response, storage, distributed generation) which significantly impact the market. Recommendations include accelerating roll-out of smart meters and providing proper price signals in retail contracts, as well speeding up the implementation of regulatory change.
Networks: The Commission is considering ACER’s proposals to update the network codes on grid connection to bring into scope newer technologies including storage and EVs and introduce requirements around criteria for modernisation of power generating modules and units used for demand response.
Distribution of Congestion Income: ACER approved TSOs’ proposal to amend the congestion income distribution methodology to address: (1) financial consequences of a counterintuitive flow (electricity moving towards a less expensive bidding zone), and (2) how to distribute income from mechanisms to be introduced in the future (exchange of balancing capacity or sharing of reserve).
Long-term transmission rights: Under Decision 18/2023, ACER approved the TSOs’ proposal to amend the Harmonised Allocation Rules for Long-term electricity transmission rights under Regulation (EU) 2016/1719 on forward capacity allocation. This is in preparation for the introduction of flow-based allocation of these rights, intended to improve efficiency and accuracy of price signals.
Regional Crisis Scenarios: ACER is reviewing the methodology for identifying regional electricity crisis scenarios.

Gas

European Hydrogen Bank: A first EU “auctions-as-a-service” scheme has been run involving Germany. Under this scheme, the Commission runs a single EU-wide auction identifying projects to be awarded first from the Innovation Fund budget and then from the national budget. Additional Member State resources can support projects in the specific Member State. This enables Member States to contribute their own financial resources to support additional projects while relying on an EU-wide auction mechanism to identify the most competitive projects. Further information is available here. Separately, the Parliament adopted a resolution asking the Commission to take further actions in relation to the European Hydrogen Bank, for example providing technical assistance to Member States with a low level of participation.
Hydrogen Imports: A Learnbook on Hydrogen Imports to the EU market has been published.

Carbon

EU ETS emissions allowances: Commission Delegated Regulation (EU) 2023/2830 lays down rules for the timing, administration and other aspects of auctioning of GHG emission allowances.
Carbon Border Adjustment Mechanism: Default Values can be used to determine embedded emissions in imported goods (except electricity) for the first three reporting periods of the current transitional period. The first report, required to be submitted by importers of certain products to the EU, including electricity, has to be submitted by 31 January 2024. Further information is here.

Renewable Support – cross-border access

Article 5 of the Renewable Energy Directive allows Member State to open participation in support schemes to producers located in another Member State. The Commission reported on the implementation of Article 5. It states: “The evidence clearly shows that, if organised well, cooperation between Member States in renewable energy has significant potential in terms of cost-effectiveness, convergence of regulatory frameworks, and making better use of the available renewable resources. In the case of cross-border support schemes the potential can only be achieved if the set-up of the scheme takes into account the impact of various design features on the outcome and the costs and benefits for the participating countries both locally and from a market integration perspective. Furthermore, the impact of regulatory differences on the outcome of cross-border support schemes seems to suggest further scope for the Member States to improve their national frameworks for renewable energy deployment.”

Digitalisation

A partnership has been established to provide training on digitalisation of the energy system.

Share of energy for renewable sources in 2022

Across the EU, Ireland has the lowest share of energy from renewables, at 13.1%. Sweden has the highest share at 66% and the average across the EU is 23%.

Nordpool Event

Finland advised the EU that, on 23 November 2023, day ahead prices were negative (-500 eur/MWh) for 10 hours because a market participant accidentally offered 5787 MW at -500 EUR/MWh price for the day and the exchanges refused to correct the fault. Due to an information campaign by the TSO, generators did not shut down but stayed ready for the intraday phase, and the market participant corrected its position in the intraday markets. Finland now requests an amendment to the CACM so that NEMOs will be able and obliged to correct obvious erroneous offers made by the parties. It also requests a review of Article 10 (technical bidding limits) of the IME Regulation to provide for reducing limits to mitigate the risk associated with extremely high bids. The full statement is here.

Green Deal Industrial Plan

Net Zero Industry Act: The Council agreed its position on the proposed Regulation establishing a framework of measures for strengthening Europe’s net-zero technology products manufacturing ecosystem. Further information is available here.
Critical Raw Materials: The Critical Raw Materials Regulation has been adopted by the Parliament. Once endorsed by the Council it will be published in the OJEU and become law. It is intended to provide the required materials for the energy transition. Further information and the adopted text are available from the Commission, Council and Parliament.

Ecodesign for Sustainable Products Regulation

Political agreement has been reached on a new Regulation to build on the previous Ecodesign Directive. It will set performance and information requirements for certain products placed on the EU market, based on energy and resource efficiency, durability and reusability, recycled content, and carbon and environmental footprints. Further information is available here.

Retail Prices

The Commission looked at the effects of higher energy prices on households. It indicates that emergency measures implemented by Member States responded to an urgent need to mitigate high prices but that, by being untargeted, many measures had a regressive effect and a high cost on public finances.

Connecting Europe Facility

Eight PCI/PMI projects are selected for CEF funding. There are four CO2 transport and storage projects, one gas storage project, and a smart grids project. Funding is being given for studies for a CCS interconnector and an electricity interconnector reinforcement project.

Recovery and Resilience Fund

The Commission published guidance for Member States to update REPowerEU chapters, required to be submitted to access the Recovery and Resilience Fund. To ensure rapid roll-out of REPowerEU measures, Member States should submit their modified Recovery and Resilience Plans with REPowerEU chapters by 30 April 2023.

Innovation Fund

A project in Ireland was among the 37 large-scale clean tech projects to recently sign grant agreements funded by the EU ETS. Further information is available here.

European Wind Charter

Ireland signed the European Wind Charter and pledged to deliver on wind energy targets. Key commitments outlined include improving, simplifying and providing consistency in the design of auctions for wind energy.

GREENWASHING

In the UK, the Advertising Standards Authority banned adverts by Lufthansa, Air France-KLM and Etihad on the basis that they gave a misleading impression of the advertiser’s environmental impact. The adverts were paid-for Google adverts, identified by the ASA's AI Active Ad Monitoring system. Environmental advertising guidance, updated in November 2023, is available from the ASA.

"Since the initial proposal for market reform (which we looked at here) there have been significant developments. It has been recognised that not all essential services can be delivered through a market based on energy prices."

FURTHER CRU BUSINESS

Transmission Development Plan

Non-confidential responses to the draft TDP are available here, along with a CRU letter to EirGrid on its review of the TDP 2023-32 and the requirements for TDP 2024-33. The letter indicates that the TDP does not provide sufficient evidence of 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. Further, reasons for lack of development in the North-West are not sufficiently explained, nor are plans clearly indicated. The delivery of TDP 2024-33 is to be expedited as much as possible, with the expectation that it be delivered by Q2 2024.

Smart Meter Data Access Code

The CRU has concluded that a revised approach will be needed in the development of a Smart Meter Data Access Code. It has published an Information Paper (CRU/2023/158) and consultation responses on the previously proposed Code (CRU/2023/87). The CRU now intends to develop a Code that is more succinct, clear, and that adopts suggestions in the consultation responses. It intends to hold workshops and publish a revised draft by the end of March 2024.

Gas

The CRU published its decision on the fifth price control (PC5) for GNI and, as competent authority under EU Regulation 2017/1938, on actions taken over the last year to ensure gas security of supply. (CRU/2023/157)

Financial Penalties

The CRU invites comments until 31 February 2024 on a proposed decision paper on its approach to setting financial penalties, suggesting two methodologies. (CRU/2023/160)

Customers

The CRU has published the Customer Care Team Quarterly Insights Report for Q3 2023 (CRU/2023/136); an update on the Estimated Annual Bills of domestic electricity and gas tariffs available in the market (CRU/2023/161); and an update on arrears and non-payment of account disconnections (CRU/2023/162).

SEMC BUSINESS

Forward Work Programme

The SEMC work programme for 23/24 is available. It sets out 31 projects including a consultation and decision on priority dispatch hierarchy in Q2, 2024; decision on a system services roadmap in Q4 2024; and implementation of DSU energy payments solution.

Capacity Market

SEM-24-003: The SEM Committee will hold a T-3 2027/28 auction in 2024.
CMC_08_23: The SEMC approved a typo correction on Capacity Aggregation Threshold introduced by CMC_01_22 on New Interdependent Combined Units.
CMC_12_23: The SEMC decided not to make a modification to allow Unit Specific Price Caps for Existing Capacity in excess of the Auction Price Cap.
CMC_19_23: The SEMC decided to make a modification to retrospectively apply indexation to multi-year New Capacity projects that won in the 2024/25 T-3 and 2025/26 T-4 auctions.
CMC_06_23: The SEMC decided to make a modification to complete the initial introduction of Annual Run-Hour Limited (ARHL) De-Rating Factors.
CMC_25_23: The SEMC decided to amend the requirements for achieving Minimum Completion or Substantial Completion by associating these milestones with an additional compliance and testing certification.