Energy

KEY DEVELOPMENTS

RESS 4

Provisional results for the RESS 4 auction results are available here. The average bid price was €96.85/MWh. (Previous average bid prices were €100.47 in RESS 3, €97.87 in RESS 2 and €74.08 in RESS 1.) Volumes to be awarded are up as compared to the last competition, as shown below:

RESS 1: 86 projects were successful, representing a total Deemed Energy Quantity of 2236.652 GWh or Offer Quantity of 1275.536 MW.
RESS 2: 80 projects were successful, representing a total Deemed Energy Quantity of 2747.89 GWh or Offer Quantity of 1948.201 MW.
RESS 3: 23 projects were successful, representing a total Deemed Energy Quantity of 934.48 GWh or Offer Quantity of 646 MW.
RESS 4: 27 projects were provisionally successful, representing a total Deemed Energy Quantity of 2070.97 GWh or Offer Quantity of 1333.64 MW. A greater volume of wind (in terms of Deemed Energy Quantity) was successful as compared to solar (1146.07/GWh compared to 924.90/GWh). In terms of Offer Quantity, however, 959.84 MW solar was successful, and 373.8 MW of wind.

Offshore Revenue Model for EirGrid

The CRU’s Decision on the Offshore Revenue model to be applied to EirGrid as Offshore Asset Owner (“OAO”) is available at CRU/2024/99. It focuses on four areas: (i) financial building blocks (including a separate OAO price control, revenue cap and regulated asset base), (ii) offshore programme monitoring of EirGrid’s preparedness for its role as asset owner, (iii) capital expenditure and investment gateway framework, and (iv) performance incentives.

The CRU states that, in Phase 1 of offshore development, the Price Review 6 (“PR6”) control will allow for developer-built transmission assets to be transferred, in that it will anticipate the capex required for EirGrid to take ownership of these new transmission assets from project developers.

In Phase 2, progression will be monitored by the CRU through investment gateways, each of which will represent a go/no go decision point at which revenues may be approved by the CRU to permit EirGrid to progress to the subsequent gate. The timing of each gateway will be “component project specific and recognise that in some circumstances EirGrid will be competing for services e.g. cable manufacture. The CRU’s current expectation … is that the Phase 2 projects will reach gateway 2 by the start of PR6 and all will be complete by the end of 2030”.

The CRU addresses certain risk-sharing as follows:

development risks will be managed via the gateway process,
construction risks will be shared between EirGrid, its supply chain and the consumer via the financial incentive package and gateway processes,
operational risks are expected to be shared between EirGrid, its O&M contractor and the consumer, and
financing risks are described as including the payment risk EirGrid faces in respect of Phase 1 OG-TUoS charges and the risk of financing costs being higher than anticipated/allowed under EirGrid’s price controls. The CRU indicates that, as a guiding principle, it expects to set OAO price controls to enable EirGrid to recover its financing costs.

The decision outlines workstreams to be progressed pre-PR6 (including commencement of the investment gateway process); as part of the PR6 process (which determines revenues that EirGrid can collect to fund construction, operation and maintenance of the system); and separate from the PR6 process (which includes development of an offshore network tariff model).

Offshore Renewable Energy Technology Roadmap

SEAI published pathways assessing the readiness of offshore technologies and considering latest relevant technology innovations and key future innovations for offshore renewable energy technologies relevant to the Irish context. The Roadmap sets out 50 recommendations, including in relation to permitting and grid connection.

Demand Response Consultations

Demand response is important to facilitate large-scale integration of renewable sources in the energy system. The IME Regulation and Directive set out rules in this area including, for example, that dispatching of demand response must be non-discriminatory, transparent and market based, and that Member States must allow final customers, including those offering demand response through aggregation, to participate alongside producers in a non-discriminatory manner in all electricity markets. Two consultations are ongoing in this area.

ACER Consultation on Network Code on Electricity Demand Response

At EU level, ACER is consulting until 31 October 2024 on the revised draft of the Network Code on Electricity Demand Response. This will be a Commission Regulation whose main purpose is to address regulatory barriers to market participation of demand response including load, energy storage and distributed generation, individually or aggregated, and to facilitate market-based procurement of services by SOs. It sets out requirements for SOs, regulatory authorities, and relevant market participants.

The draft code notes that a properly designed baseline methodology is probably one of the most important determinants of the successful conduct of any demand response service, and indicates that national terms and conditions on baseline calculation will include the details necessary to create the baselines used in the settlement of the demand response services. ACER will run a webinar on 1 October 2024 and intends to submit the network code proposal to the European Commission by March 2025. The link to the consultation page is available here.

SEMC Consultation on Demand Side Units

In Ireland, the SEM Committee is consulting until 4 October 2024 on DSUs: A Revised Phase 1 Solution for Energy Payments and Other Issues (SEM-24-046) following the previous consultation in 2022 (SEM-22-036).

The SEMC proposes that in the temporary Phase 1, DSUs pay a supplier compensation payment to the Imperfections Charge fund. The SEMC states: “[W]hile the DSU and customer may benefit in the first instance from both the savings in the supplier’s charges to the customer, as well as energy payments from the SEM, these savings will be passed on to the Imperfections Charge fund through the supplier compensation payment.” Energy payments for ‘long-run DSUs’ are not envisaged: “Energy payments … address the missing money problem for high-cost DSUs that provide demand reduction at times of high wholesale prices. However, long-run DSUs should not expect to receive additional revenue, which is appropriate given that these DSUs do not have a missing money problem, and their costs are fully compensated in the savings in supplier’s charges”.

The consultation also looks at baselining and metering, availability declarations, bid compliance, Aggregated Generator Units, and Dynamic Tariffs. The link to the consultation page is available here.

Redispatch Reporting under Article 13(4) of the IME Regulation

The regulatory authorities are consulting until 8 October 2024 on the form of TSO report to be provided under Article 13(4) of the IME Regulation (SEM-24-059). Since 1 January 2020, TSOs and DSOs have been obliged to report at least annually to the competent regulatory authority on: (a) the level of development and effectiveness of market-based redispatching mechanisms for power generating, energy storage and demand response facilities; (b) the reasons, volumes in MWh and type of generation source subject to redispatching; (c) the measures taken to reduce the need for the downward redispatching of generating installations using renewable energy sources or high-efficiency cogeneration in the future including investments in digitalisation of the grid infrastructure and in services that increase flexibility.

Data Centre Obligations

In-scope data centre operators have until Sunday 15 September 2024 to complete their first round of sustainability reporting in line with the requirements of the Delegated Regulation on the first phase of the establishment of a common Union rating scheme for data centres ((EU) 2024/1364) (made under the Recast Energy Efficiency Directive). The Delegated Regulation is available here.

FURTHER EU DEVELOPMENTS

Further Guidance for Member States transposing new Green Deal Legislation

The Commission adopted guidance for Member States on transposing the following provisions in the Renewable Energy Directive:

System integration of renewable energy (Article 20a): Communication C(2024) 5041 seeks to clarify requirements for electricity system operators around provision of information close to real time on the renewable energy share and emissions content of electricity supply. It includes guidance on obligations for battery and EV manufacturers, requirements for smart and bi-directional recharging, and the participation of small and decentralised energy sources in electricity markets.
Renewable fuels of non-biological origin (Articles 22a, 22b & 25): Communication C(2024) 5042 seeks to clarify the targets on the consumption of RFNBOs in the industry and transport sectors.
Heating and cooling (Articles 15a, 22a, 23 & 24): Communication C(2024) 5043 seeks to clarify these new provisions and the approach to accounting the higher share of renewable energy in this sector. It provides guidance on how to apply the definition of waste heat.

The Commission also adopted guidance for Member States on transposing Article 26 (Heating and cooling supply) of the Recast Energy Efficiency Directive. Recommendation (EU) 2024/2395 is intended to clarify how EU countries can identify efficient district heating and cooling systems, ways to establish planning obligations for systems that do not fulfil the criteria for efficient district heating and cooling systems, and ways to ensure the efficient use of excess heat available from large energy users which are under planning. Further information is available here.

Energy Security

The Commission is calling for evidence and consulting until 3 September 2024 in order to carry out a “fitness check” of the rules on the security, resilience and autonomy of the EU’s energy system. The key instruments being examined are the Gas Security of Supply Regulation, the Electricity Risk Preparedness Regulation and emergency measures taken under REPowerEU. The consultation page is available here and there is further information here.

Electricity

ACER will consult until 14 October 2024 on TSOs’ proposals to amend the harmonised methodology for cross-zonal capacity allocation for the exchange of balancing capacity or sharing of reserves.

Gas

ACER will consult until 21 October 2024 on the governing arrangements for the new European Network of Network Operators for Hydrogen (ENNOH).
ACER will consult until 25 October 2024 on the update of the Capacity Allocation Mechanisms Network Code to align with the EU’s decarbonisation goals.
The EU announced it reached the 90% gas storage target ahead of the deadline under Regulation (EU/2022/1032) on Gas Storage.

Critical Raw Materials Act

The Commission announced it received 170 applications for Strategic Projects under the Critical Raw Materials Regulation (EU) 2024/1252 establishing a framework for ensuring a secure and sustainable supply of critical raw materials. Strategic projects benefit from streamlines permitting and enabling conditions for access to finance.

CLIMATE ACTION LITIGATION

Challenges to the EU’s Green Deal

NGOs are taking legal action which, broadly, allege that the EU Green Deal, now elaborated in legislation, did not go far enough to reduce emissions. In one action, expected to be heard in the CJEU in 2025, NGOs submit that the targets in the Effort Sharing Regulation are not based on latest science and are therefore grossly inadequate. In another action, NGOs are challenging the EU Taxonomy, particularly the inclusion of planes and ships based on efficiency criteria, arguing that it is a form of greenwashing. Press reports are available here and here.

UK Sludge Strategy

R (Fighting Dirty Ltd) v Environment Agency [2024] EWHC 2029 (Admin) concerned the environmental regulation of sludge when it is spread on farmland. The claimant, a not-for-profit company set up by environmental activists, challenged the EA’s decision to remove an unachievable target date for implementing its Sludge Strategy without replacing it with a new date. The High Court in England and Wales decided that the EA’s decision had not involved a breach of its public duty to act reasonably, for the reasons set out at paragraphs 37 to 47 of the judgment.

Court rules that Climate Law does not protect Constitutional Rights of future generations

The constitutional court in South Korea ruled that the absence of legally binding targets for GHG reductions for 2031-49 in the national climate law violates the constitutional rights of future generations. It ordered the national assembly and Government to amend the law by 28 February 2026. There is some similarity with the 2021 judgment in Neubauer, where Germany’s federal constitutional court ruled that provisions of the national climate act were incompatible with fundamental rights insofar as they lacked sufficient specifications for further emission reductions from 2031 onward. A Guardian press report is available here.

Litigation over Blacklisting of Companies

In the US, the American Sustainable Business Council is suing the Texas Government over the ‘blacklisting’ of companies that uphold environmental, social and governance strategies, through introduction of a law restricting state entities from investing in companies deemed hostile to the fossil fuel industry. A Climate Case Chart summary is available here and Reuters and FT press reports are here and here.

FURTHER DOMESTIC DEVELOPMENTS

Climate Governance Framework

DECC published Sectoral Planning Guidelines for Climate Change Adaptation to ensure that a coherent and consistent approach to departmental adaptation planning is adopted at national and sectoral level.

Consolidated Legislation

The Electricity (Supply) Act 1927 has been consolidated and is available on the Law Reform Commission’s website here.

EirGrid Statistics

Wind Dispatch Down percentages from 2011 to date, and a System and Renewable Data Summary Report are available on the EirGrid website.

CRU BUSINESS

Network Revenues 2025

Electricity transmission allowed revenues are to increase by circa 38%, and the associated Demand TUoS tariff allowed recovery for 2024/25 by 26.9% as against the previous tariff year (CRU/2024/82). The CRU indicates that the largest tranche of revenue is for maintaining security of supply, including through the procurement of emergency generation. This is followed by delivery of transmission infrastructure, ensuring the electricity network can accommodate more renewable energy, funding the early stages of EirGrid’s new offshore role, helping to deliver against national policy on electricity interconnection, and helping to deliver against EU and national obligations. Included in the CRU’s decision is the approval of €131m to be ring-fenced by EirGrid to provide for payments under Article 13(7) of the IME Regulation, pending the outcome of the CRU’s appeal against the High Court decisions (here and here).

Electricity distribution allowed revenues are to decrease by circa 4.9%, and the associated Demand TUoS tariff allowed recovery for 2024/25 by 0.33% as against the previous tariff year (CRU/2024/86).

Transmission Development Plan

The approved version of EirGrid’s TDP for 2024-2033 is available. The consultation report highlights responses in four main areas: on grid development for 2030 targets and constraints; project information and publication timeline; co-optimisation of electricity and gas networks; and renewable hubs.

Greenlink Interconnector

Greenlink Interconnector Ltd has been certified by the regulatory authority as compliant with EU unbundling requirements for the purposes of its certification as a TSO in Ireland (CRU/2024/57).

Change of Supplier

The monthly change of supplier update is available (CRU/2024/93).

SEMC BUSINESS

2024/2025 Tariff Year

The following is available for the next tariff year:

SEM Tariffs and Charges (SEM-24-056): the Supplier Capacity Charge is due to increase. There are smaller negative and positive tariffs for the other tariffs and charges.
Other System Charges (SEM-24-057): a Battery Short Notice Declaration charge is introduced from 2024/25. DSU Generator Performance Incentive remains on hold until directed by the regulatory authorities. The threshold for the DSU Short Notice Declaration is lowered from 4 to 2MW.
SEMO revenue allowance (SEM-24-058): total revenue required is €26.162m (March 2024 prices) compared to €24.547m (March 2023 prices) in the previous year.
SEMOpx revenue allowance (SEM-24-055): total revenue required is €5.962m (March 2024 prices) compared to €5.027m (March 2023 prices) in the previous year.

The SEMC is consulting until 20 September 2024 on operational parameters for 2025 (SEM-24-053) and scheduling and dispatch parameters (LNAF and SIFF) (SEM-24-054).

All Island Programmes of Work

The SEMC has published a document to outline an approach to governance and revenue recovery arrangements for All Island Programmes of work. The definition of ‘All Island Programme’ for the purposes of the document differs to the legislative definition of SEM matter (SEM-24-034).

Trading and Settlement Code

Mod_5_24 on clarification of Start Up Payment Conditions resulting from Bid Offer Acceptances being settled on complex COD is effective as at 23 August 2024.