Energy

KEY DEVELOPMENTS

EU Electricity Market Reform

Amendments to the Internal Market in Electricity Regulation and Directive come into effect on 16 July 2024. Find out more about the changes to the internal market in electricity rules in our briefing here.

Internal Market for Renewable Gas, Natural Gas and Hydrogen

Regulation (EU) 2024/1789 on the internal markets for renewable gas, natural gas and hydrogen enters into force on 4 August 2024. It applies from 5 February 2025 (though some provisions apply from earlier dates). Directive (EU) 2024/1788 on common rules for the internal markets for renewable gas, natural gas and hydrogen enters into force on 4 August 2024 and is required to be transposed in domestic law by 5 August 2026. Together, these instruments significantly update the rules for the internal market in natural gas. They expand the regulatory framework to provide also for market and system integration of renewable gases, and to provide for dedicated hydrogen markets and systems. Our fuller briefing will follow.

Regulation to Reduce Methane Emissions in the Energy Sector

Regulation (EU) 2024/1787 on the reduction of methane emissions in the energy sector enters into force on and is applicable from 4 August 2024. It lays down rules for the accurate measurement, quantification, monitoring, reporting and verification of methane emissions in the energy sector, as well as the reduction of those emissions, including through leak detection and repair surveys, repair obligations and restrictions on venting and flaring. It applies to several activities including natural gas transmission and distribution, oil and fossil gas exploration and production, and fossil gas gathering and processing.

Net Zero Industry Regulation: Renewable Auctions

Regulation (EU) 2024/1735 on establishing a framework of measures for strengthening Europe’s net-zero technology manufacturing ecosystem is now in force, with provisions applying from various dates beginning on 29 June 2024. As mentioned previously, the Regulation will impose requirements in relation to renewable energy auctions for strategic net-zero technologies (which include solar, wind, energy storage, grid and other technologies).

Constraints and Curtailment: Important High Court Judgment

We previously mentioned the outcome of proceedings in which 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 included 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 is relevant.

The High Court has now handed down a further judgment setting out further declaratory relief, described at paragraphs 25-60.

Private Wires Consultation

Following on from the outcome of its public consultation, the Government published a consultation summary report as well as guiding principles to support the development of the final private wires policy. Principles and their application will be required to align with Article 7 of the IME Directive. It is not yet clear how some of the principles will be applied. For example, principles include that, where grid-based solutions are available, these will be preferred to private wires for connecting generators and consumers. As we commented previously (here), the conditions for grant of direct line permissions in existing legislation tend not be triggered because of the approach taken to applications for connection to the grid.

Electricity Storage Policy Framework

The Government approved an electricity storage policy framework, which sets out 10 Government actions. They include supporting market access, arbitrage and revenue stacking (2024-2027); supporting immediate “additional” procurement of demand flexibility products and long duration storage (2024-2028); and putting in place by 2028 a route to market for long duration storage for 2030-2040.

Accelerating Renewable Energy Taskforce

The Government approved an Implementation Plan of 70 actions for this taskforce with the goal of meeting the target of 80% demand being met by renewables in 2030. The taskforce has nine working groups divided across the pillars of planning, grid and storage, and route to market.

Offshore Phase 1: Merchant Projects

The CRU published a decision on asset treatment for merchant Phase 1 offshore wind projects (CRU/2024/66). It sets out the following:

Treatment of the offshore transmission connection assets, including the Asset Transfer Valuation, Post Construction Review, Asset Transfer Process and Operations & Maintenance Strategy: The Phase 1 policy approach for ORESS 1 projects will apply.
Guarantee of Availability for these assets and compensation for outages: Developers are to be compensated at the weighted average ORESS 1 strike price (€86.05/MWh) if an outage is due to an EirGrid connection asset failing (over and above planned maintenance allowance).
Firm Access treatment: EirGrid is required to write to each Merchant Phase 1 project to confirm the Firm Access Quantities (FAQs) that have been allocated to date, and an indicative timeline for the allocation of remaining units.

Offshore Phase 1: Form of Agreement with EirGrid

EirGrid is consulting until 23 August 2024 on the draft Transmission Connection Agreement and Asset Sale and Purchase Agreement contracts for the offshore Phase 1 Projects. Parts of the onshore transmission assets will be consented by EirGrid and built by ESB. In terms of integrating the offshore projects to the grid, EirGrid indicates there will be a 12-18 month proving period with five one-way sequential gateways over the delivery lifecycle, prior to EirGrid assuming ownership and operational and maintenance responsibilities.

Demand Flexibility Product

The CRU approved ESB Networks’ proposal to procure up to 500 MW of medium-term flexibility products to manage congestion on the distribution network. The products must be able to deliver demand reduction, demand shifting and inject power at or near the asset(s)’ full contracted capacity for a minimum of four hours each day over specified hours on the majority of business days, over a minimum of three to six months of the year. They must support revenue stacking. Tenders must be awarded on a most economically advantageous, multi-criteria basis. Contracts will award availability payments structured on a ‘floor and share’ basis and will be awarded for a period of up to 15 years (CRU/2024/69).

FURTHER EU DEVELOPMENTS

Nature Restoration Law: Deployment of Renewable Energy Infrastructure

The European Council adopted the consolidated text of the Regulation on Nature Restoration. It will be published in the OJEU and enter into force 20 days later. The Regulation establishes targets to restore certain habitat types to good condition and includes provisions relevant to deployment of renewable energy infrastructure. Our full briefing is available here.

Offshore: Collaborative Investment

The Commission published guidance on collaborative investment frameworks for offshore energy projects. It is intended to assist Member States and regulatory authorities to engage in dialogues on collaboration principles to identify network needs, accelerate the emergence of new cross-border projects, and foster the implementation of political agreements. The guidance sets a framework for a new sea basin cost-benefit analysis and cross-border cost sharing exercises that assess the implications of developing an offshore network development plan. Further information is available here.

Energy Efficiency

Commission Recommendation (EU) 2024/1722 sets out guidelines for the interpretation of Article 4 of the Energy Efficiency Directive as regards energy efficiency targets and national contributions. Commission Recommendation (EU) 2024/1716 sets out guidelines for the interpretation of Articles 5, 6 and 7 of the Energy Efficiency Directive as regards energy consumption in the public sector, renovation of public buildings and public procurement.

ACER

ACER’s most recent annual activity report is available, covering actions in electricity, gas and REMIT.

Electricity

Balancing Rules: ACER issued two decisions amending the rules for balancing energy across borders. They address some inefficiencies in the PICASSO platform by amending rules on how TSOs reflect their demand in PICASSO and how prices are set in the platform.
Metering Data: Commission guidance is available to help EU countries to follow a consistent approach to reporting electricity metering data interoperability practices to a new repository, intended to facilitate suppliers and service providers to operate across the internal market.
Grids: Regulators invite feedback until 28 July 2024 on principles to evaluate performance of smart grids. ACER also published a study on incentivising efficient investments in grids. It provides an overview of a range of regulatory practices, and a new approach focusing on value, rather than cost, of projects. ENTSO-E is progressing the Action Plan for Grids point to develop common technology specifications and improve visibility of grid project pipelines, and to facilitate investments in manufacturing capacity and secure supply chains.
System Challenges: ACER and CEER call on the EU to prioritise five key electricity and infrastructure challenges throughout the new legislative mandate to facilitate deployment of renewables and unlock a resilient, flexible cost-effective electricity sector. Further information is available here.
Plans: ENTSO-E and the EU DSO Entity have adopted Joint Work Plans for 2024-25. ENTSO-E published an RDI Roadmap for the next decade to elaborate plans to overcome current challenges for the sector.
Net Zero Academy: The Commission launched the European Solar Academy, one of a series of academies aimed at ensuring adequate skills and workforce development.
Market Monitoring: ACER 2024 Market Monitoring Report on capacities for cross-zonal trade of electricity (including the progress in reaching the so-called 70% requirement) and congestion management is available. The report finds the grid is increasingly congested, and this cost €4 billion in 2023. ENTSO-E has also published the market, balancing, and balancing cost report for 2024.
Battery electric vehicles: The EU is in a process of imposing tariffs imposing duties on imports of batter electric vehicles from China. Further information is available here.

Gas

TYNDP: The list of projects to be included in the ENTSOG’s TYNDP is available. They include GNI’s hydrogen integration project. ENTSOG also consulted on guidance documents being used for the deliverables under the TYNDP. ACER has called for further improvements to ENTSOG’s implementation guidelines for the TYNDP 2024.
Security of Supply: The Court of Auditors has reported on effectiveness of recent crisis-response measures.
Work Programme: ENTSOG invites comments until 6 September 2024 on its 2025 work programme.

REMIT

ACER has received numerous requests for clarification on specific aspects of the REMIT Implementing Regulation. To address this, ACER is consulting until 6 September 2024 on its proposal on data collection.

Carbon

EU-Swiss cooperation: Work is progressing to link the EU ETS with the Swiss ETS, as indicated in this Council Decision.
Gases bound in a product: The Commission sought feedback until 16 July 2024 on a Delegated Regulation for requirements for considering that greenhouse gases have become permanently chemically bound in a product.

Critical Infrastructure

Council Recommendation on a blueprint to coordinate a response at EU level to disruptions of critical infrastructure with significant cross-border relevance, makes several practical and procedural recommendations for Member States to complement the Critical Entities Directive. An exercise has also taken place to test resilience of the energy sector to cyber-attacks.

Green Claims Directive

The Council adopted its approach on the proposed Green Claims Directive, which would impose obligations on companies in relation to marketing claims and penalties for breach of obligations. Further information is available here.

Statistics

Eurostat published statistics for the market share of the largest electricity and gas companies in each Member State in the EU. Overall, there is a downward trend in percentage share of each market. The most recent quarterly report on gas and electricity markets is also available, and shows the share of electricity generated by renewables overtaking the share from fossil fuels for the first time.

CASE LAW

Tax Reductions for Energy-Intensive Businesses

Article 17(1)(a) of the 2003 Energy Taxation Directive provides that Member States may apply tax reductions on consumption of energy products used for certain purposes and of electricity in favour of energy-intensive businesses. In responding to a preliminary question in C-266/23, the CJEU found that this provision must be interpreted as meaning that the actual cost of the energy purchased, within the meaning of that provision, must include additional charges, such as the compulsory distribution tariffs for that energy borne, under national legislation, when purchasing that energy.

Support Schemes

The CJEU in C-205/23 found it permissible (in the context of the replacement of a national support scheme for renewable electricity based on quotas to be injected into the network and the granting of green certificates, by a support scheme for the same electricity based on the grant of incentive feed-in tariffs to those undertakings) to make the benefit of that new scheme subject to the conclusion of an agreement on the conditions for granting the support between the producer and entity controlled by the State responsible for the management and review of the new scheme.

Regulatory Fines

In C-205/23, Advocate General Rantos’s Opinion is that an entity may be fined by two separate regulators (in this case the energy regulatory authority and consumer protection authority) so long as the proceedings and penalties are based on different legal provisions which have separate and complementary general interest objectives; there are clear and precise rules making it possible to predict which acts or omissions may be subject to a duplication of proceedings and penalties and to ensure coordination between the two authorities; the two sets of proceedings have been conducted in a sufficiently coordinated manner and within a proximate timeframe; and all the penalties imposed correspond to the seriousness of the offences.

“The CRU consulted on the proposed levy for 2024/25, and the final figure will be published by August 2024.”

FURTHER DOMESTIC DEVELOPMENTS

GNI – Pathway to Net Zero Carbon Network

Gas Networks Ireland published its plan to move to a repurposed, decarbonised gas network. It includes consideration of further systems integration, particularly the role the gas system will play in energy storage, and development of biomethane and hydrogen markets. Further information is available here.

Long-term Strategy on Emissions Reduction

The Government approved the updated Long-term Strategy on GHG Emissions Reductions, in line with the Climate Action and Low Carbon Development Acts 2015 to 2021 and EU Regulation on Governance of the Energy Union. It looks at sectoral emissions reductions over the next 30 years. Further information is available here.

Overcoming Barriers to Climate Action

EirGrid published System Services Volume Requirements, in line with the Future Arrangements for System Services Phased Implementation Roadmap. This information paper also outlines next steps as regards DS3 tariff arrangements and future arrangements.

CRU BUSINESS

Installed Capacity Cap

The CRU confirmed 17 June 2024 as the go-live date for the removal of the Installed Capacity Cap for single technology and hybrid technology sites behind a single connection point, without increasing the contracted MEC (CRU/2024/33).

PSO

The CRU consulted on the proposed levy for 2024/25, and the final figure will be published by August 2024. The CRU indicates the PSO levy will be positive, based on the R-factor for 2022/23 (actual market revenues were significantly lower than estimates); the interim R-factor for 2023/24 (set at zero to allow for partial R-factor correction for the 2022/23 year); and the benchmark prices (a reduced forecast for 2024/25 based on a decrease in forward prices of key commodities) (CRU/2024/55).

Market Revenue Cap

The CRU indicates that in scope entities are required to submit updated returns arising from settlement re-runs or hedging-related changes by 14 August 2024. They are required to make any payments that arise as a result of settlement re-run by 31 August 2024, and as a result of hedging changes by 30 September 2024. A materiality threshold of €1000 applies to these requirements (CRU/2024/56).

Gas Tariffs

The CRU published allowed revenue and tariffs for GNI for 2024/25. Existing multipliers, seasonal factors and tariffs for virtual reverse flow have been maintained, but the CRU intends to discuss at the Code Modification Forum what market developments may in the future warrant changes to these parameters (CRU/2024/53).

Clean Export Guarantee

The decision on enduring arrangements to remunerate customers for microgeneration exports is available (CRU/2024/54).

Customers

Latest Estimated Annual Bills of available domestic tariffs (CRU/2024/64) and change of supplier update (CRU/2024/68) are available.

Strategy

The CRU is consulting until 22 July 2024 on its Statement of Strategy (2022-2024).

SEMC BUSINESS

Dispatch Down

In 2013 the SEMC issued a decision setting out Treatment of Curtailment in Tie-Break Situations with an annex defining curtailment and constraint (SEM-13-010). The SEMC is now consulting until 26 July 2024 on the SOs’ proposed new amendments for Constraint, Curtailment, and Energy Balancing (SEM-24-044). The SEMC states that, for TSOs to operate renewable generation units without priority dispatch, updates are required to add Energy Balancing actions to the ruleset. It indicates changes will be required to the definitions and the priority dispatch hierarchy once TSO systems allow the differentiation of priority dispatch and non-priority dispatch units for constraints. The paper sets out principles for non-market based Application, Relaxation, Rebalancing and Removal of Constraint and Curtailment, as well as parallel Constraints.

Imperfections Charges

The SEMC is consulting until 26 July 2024 on the Imperfections Charges forecast tariff for 2024/25 in advance of issuing the final decision on the Imperfections Charge (SEM-24-048).

Capacity Market

CMC_06_24 to CMC_09_24: The SEMC is consulting until 2 August 2024 on several modifications, including in relation to performance securities for extended projects and widening of the longstop extension process to awarded capacity for 2023/24 (SEM-24-047).
CMC_10_24 and CMC_11_24: The SEMC set out a timetable to deal with proposals on introduction of Intermediate Length Contracts and implementation of Early Delivery Incentives (SEM-24-050).
CMC_24_23: The SEMC decided not to make a modification following the proposal to amend the auction timeline, such that the Exception Application date occurs prior to the issuance of the Initial Auction Information Pack (which sets out the price caps for the auction) (SEM-24-030).
CMC_20_23 and CMC_21_23: The SEMC decided not to make modifications following proposals to amending timing of Opt Out Notifications and as regards minimum completion on receipt of Interim Operational Notification (SEM-24-029).
Terms of Reference for the Year 5 Capacity Market Code Audit are available (SEM-24-045).
The SEMC consulting until 21 August 2024 on terms of reference for the panel of technical experts in the SEM (SEM-24-049).

NORTHERN IRELAND

Utility Regulator (Support for Decarbonisation Preparation) Bill

DfE is consulting until 16 August 2024 on a bill to be introduced to the Assembly to allow the Utility Regulator to support DfE through the provision of advice, information and assistance, in fulfilling obligations under the Climate Change Act (NI) 2022, and in its role as regulatory advisor in supporting the development of low carbon energy policy.