Energy
Questions are increasingly being asked about the impact of failure to meet our EU 2030 targets under the Effort Sharing Regulation and Renewable Energy Directive (RED III), with the Fiscal Advisory Council now estimating that Ireland could pay up to €20 billion by 2030 to cover the cost of statistical transfers, carbon credits or fines.
Potential constraint volumes are an existential risk for projects. However, this risk can be managed in an economically efficient way, if appropriate legally compliant policy is implemented.
Half-Time Approaches
As this decade began, the EU and Ireland enshrined strong 2030 targets for a more realistic trajectory towards carbon neutrality in 2050.
As we begin the final year of Ireland’s first carbon budget, progress is insufficient (as outlined by the Sustainable Energy Authority of Ireland and Environment Protection Agency), even with energy emissions at their lowest rate in 30 years. This will increase pressure on future budgets and risk delayed achievement of Climate Action Plan targets.
Questions are increasingly being asked about the impact of failure to meet our EU 2030 targets under the Effort Sharing Regulation and Renewable Energy Directive (RED III), with the Fiscal Advisory Council now estimating that Ireland could pay up to €20 billion by 2030 to cover the cost of statistical transfers, carbon credits or fines.
Implementation in Ireland of the 2018-2019 Clean Energy Package and the subsequent legislative reforms (Fit for 55, REPowerEU, and Electricity Market Reform) is critical to meeting our targets, for several reasons. These include providing the pathways for delivery of essential enabling infrastructure (like grids and interconnection), and generation and flexibility services, as well as seizing the opportunities to develop new markets and infrastructure in areas like hydrogen, and floating offshore wind energy.
Without concerted leadership to drive action in 2025, ambition to transform our energy system and power all sectors from renewable sources will falter, and the State and key stakeholders will be exposed to the risk of litigation, whether through actions to enforce EU law, or climate action litigation to hold the Government to its legally enshrined commitments.
Grid
Our 2024 Climate Action Plan targets a fivefold increase in renewable energy capacity by 2030. This will not happen if investment in enabling infrastructure does not accelerate.
2025 promises some welcome developments. Projects seeking grid connections for generation and system services will have a new process, which will open for applications twice every year. The first “Batch Closing Deadline” will be 30 September 2025. The System Operators (SOs) are to propose further details of the process in January 2025. The new policy, which we look at here, is intended to align with permitting timelines in RED III.
The revised Internal Market in Electricity Regulation (the IME Regulation) includes obligations aimed at ensuring regular information flows around capacity for connections. It is intended that EirGrid will submit a proposal in Q1 of 2025 on how constraints reporting may be updated for projects under the new connection policy. Under the new policy, EirGrid will conduct bi-annual firm access allocation runs, publishing results within five months. Efficacy of the policy on firm access, a status relevant to compensation for redispatch, will become clearer to the industry in 2025.
Potential constraint volumes are an existential risk for projects. However, this risk can be managed in an economically efficient way, if appropriate legally compliant policy is implemented. A mechanism in EU law that supports economically efficient investment requires that, if a Member State is not yet equipped for market-based redispatch, certain operators of generation, storage or demand response are entitled to be kept financially indifferent to being dispatched down. This entitlement has been vindicated in the High Court in Ireland, in judgments here and here. These judgments are the subject of appeal proceedings taken by the regulator. This will be watched closely not only by the industry in Ireland, but potentially across the EU.
While Ireland’s new connection policy addresses treatment of certain hybrid projects, further work needs to be progressed to allow for hybrid connections to happen, not just across renewable technologies (including offshore) but all generation technologies. It will be vital in 2025, to help maximise grid capacity, to progress these further workstreams: (i) sharing of maximum export capacity behind a single connection; and (ii) allowing for multiple legal entities to share a single connection point.
If Ireland is to maximise existing renewable generation capacity, it will be necessary in 2025 to seize the potential for repowering of existing plant, which is also addressed in the new connection policy.
Private Wires
Ireland’s new policy on private wires is anticipated in early 2025, following a proposal by the Department for Environment, Climate and Communications, which we considered here. A clear pathway for permitting private wires would support development of new renewable generation capacity, particularly where grid is a scarce resource, as well as increasing supply options for large energy customers.
Interconnection
It is hoped that the EU-UK Statement on Enhancing Strategic Cooperation, and plans to establish a security of supply working group, will give momentum to develop rules for trading across electricity interconnectors with Great Britain. Next steps are elaborated on here, and the Specialised Committee on Energy is expected to publish a Roadmap of activities in 2025.
As go-live of the Celtic Interconnector approaches (Q4 of 2026), the SOs and Market Operator will be preparing for re-integration of the SEM into EU market and system rules, which have been developing at pace (for example to allow 15-minute Market Time Unit products). The Celtic Interconnector will be included in the EU Core Capacity Calculation Region.
Increasing renewable energy generation capacity fivefold will not be possible without increased grid interconnection between Ireland and its neighbours. The Government committed to support a further connection to Great Britain by 2030. Concrete actions are needed to ensure there is a robust consenting and financing pathway to enable interconnector projects to progress.
Renewable Energy in EU Law
As mentioned in our Environment and Planning section, certain provisions to streamline the permit-granting process for renewable energy projects in RED III are already required to be transposed, and the Commission has sent Ireland (and others) a letter of formal notice for failing to fully so do.
The next deadline for transposing many of the new RED III provisions is 17 January 2025. They include provisions on renewable acceleration areas (the preparatory mapping exercise is to be done by 21 May 2025). New provisions also raise targets and bolster mechanisms to increase the share of renewable energy in final energy consumption, and in transport, buildings and industry. There is a target for innovative renewable technology in newly installed capacity. The Commission has published guidance on transposition, available here (under recommendations and guidance notes).
Renewable energy is increasingly mainstreamed in the electricity internal market. We considered the recent changes to the IME Regulation (now in force) and Directive (to be transposed by 17 January 2025) here, including provisions to drive growth of renewable power purchase agreements.
Offshore Renewable Energy
Phase 1 development will continue in 2025 for ORESS 1 projects and potential merchant projects (with the decision on asset treatment for merchant Phase 1 projects now available). Draft transmission connection and asset sale and purchase contracts are now also available, as well as the decision on the offshore revenue model to be applied to the TSO as offshore asset owner.
Phase 2 development should intensify in 2025, with publication of the South-Coast Designated Maritime Area Plan (DMAP), grid connection policy (supplemented by a further draft decision), and grid connection charging policy, which we considered here. ORESS 2.1 terms and conditions are approved. The qualification phase is to open in Q1 of 2025, and the bidding phase in Q2 of 2025.
For the longer term, we looked here at the Policy Statement on the Future Framework for Offshore Renewable Energy. Numerous developments are anticipated in 2025. They include a future DMAP roadmap, an offshore transmission strategy, an offshore renewable energy roadmap, implementation of a competitive Maritime Area Consent framework, assessment of the feasibility of a floating offshore wind demonstrator site, and assessment of potential for floating offshore wind at scale. Meanwhile, the European Commission invites applications until 21 January 2025 to fund projects that demonstrate innovative floating wind farm concepts. It is also intended in early 2025 to develop routes to market for the additional 2GW of new offshore renewable energy targeted in Ireland for 2030.
Onshore Renewable Energy Auctions
In 2025, Ireland will hold a fifth onshore renewable electricity support scheme (RESS 5). We look at the proposed terms and conditions being consulted on until 14 February 2025, here.
New requirements will apply from 30 December 2025 to renewable energy auctions under the EU Net Zero Industry Regulation. Member States will be required to include criteria to assess the auction’s sustainability and resilience contribution, as well as in relation to responsible business conduct, cyber and data security, and ability to deliver the project fully and on time.
A clear pathway for permitting private wires would support development of new renewable generation capacity, particularly where grid is a scarce resource.
Numerous developments are anticipated in 2025. They include a future DMAP roadmap, an offshore transmission strategy, an offshore renewable energy roadmap, implementation of a competitive Maritime Area Consent framework, assessment of the feasibility of a floating offshore wind demonstrator site, and assessment of potential for floating offshore wind at scale.
It is hoped that in 2025 there will be progress on application of climate and energy law in decision making, and a High Court judgment in January 2025 provides strong guidance on this for ‘relevant bodies’ like the Commission for Regulation of Utilities.
It is in Ireland’s interest to transpose the new Directive in 2025 to enable stakeholders to kickstart progress towards hydrogen production and transport.
System Services, Flexibility And Customers
How system services are valued in the context of an energy system transitioning to net zero will be critical to securing adequate investment. Their benefit to the system is not necessarily reflected by an energy wholesale market price and this is recognised in the recent amendments to the IME Regulation, which we looked at here.
Future Arrangements for System Services
In 2025, the TSOs and Market Operator plan to progress several workstreams, including Future Arrangements for System Services. This includes development of a Day Ahead System Services Auction, key features of which the SEM Committee describe here. Technical products suitable for the auction are now approved, and the TSOs are to consult on firm access policy for system services. This workstream also provides for a Layered Procurement Framework, and the TSOs are to assess, at least annually, services to be procured. It also includes regulated arrangements (DS3) which are extended to April 2026 (with the tariff review decision for the coming year here).
Long Duration Energy Storage
The Government’s electricity storage policy framework earmarks 2024-2027 to support market access, arbitrage and revenue stacking, and identifies several actions over the course of the next years culminating, for example, in having a route to market in place for long duration energy storage by 2028. The SOs and Market Operator are understood to be engaged in discussion with the regulatory authorities on consultation and procurement timelines.
Demand Side Units
The IME Regulation and Directive have rules for demand response including, for example, that dispatch 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. In Ireland, the outcome of the SEM Committee’s consultation on DSUs is eagerly awaited. At EU level, finalisation of the Network Code on Electricity Demand Response is awaited.
Connection of Large Energy Customers and Demand Flexibility
The regulator’s decision on criteria for connecting large energy users to the electricity and gas grids will be critical to the large energy users across economy (see strand three of the National Energy Demand Strategy Decision.) Both connection policy and demand response are subject to rules under EU law. It is hoped that in 2025 there will be progress on application of climate and energy law in decision making, and a High Court judgment in January 2025 provides strong guidance on this for ‘relevant bodies’ like the Commission for Regulation of Utilities. EU law has primacy over the Climate Action and Low Carbon Development Acts. The Acts explicitly dovetail with EU and domestic law in that they oblige relevant bodies to, insofar as practicable, perform their functions in a manner consistent with elements of Ireland’s climate governance framework set out in the Acts. Each relevant body has a role in energy transition appropriate to its functions, and instructions to act outside their functions are legally, and practically, problematic.
The other two strands of the National Energy Demand Strategy Decision are:
- Smart Services: It is intended to provide implicit flexibility to encourage domestic and small business customers to respond to incentives, through smart services and infrastructure. The regulator is to develop licences for aggregation and demand response, and the framework for non-licensed market participants.
- Demand Flexibility and Response: It is intended to offer contracts and products for demand side response from customers, including large energy users, and storage under certain system conditions. Arrangements for procuring 500 MW of medium-term flexibility are awaited.
Hydrogen, Renewable Gas And Natural Gas
A significant new regulatory framework begins to apply in 2025. The Recast Regulation on the internal markets for renewable gas, natural gas, and hydrogen applies in Ireland from 5 February 2025, and the Directive has to be transposed by 5 August 2026. Our briefing is available here. Gas Networks Ireland’s plan for a repurposed, decarbonised gas network is available here.
The European Commission intends to establish the European Network of Network Operators of Hydrogen in 2025, and support auctions are being held under the European Hydrogen Bank. It is in Ireland’s interest to transpose the new Directive in 2025 to enable stakeholders to kickstart progress towards hydrogen production and transport. It is anticipated that that the Government will commission a study to assess hydrogen export markets and routes in 2025.
It will be of interest in 2025 to see outcomes from actions in the National Biomethane Strategy for delivering up to 5.7TWh of biomethane by 2030. Actions for delivery in late 2024 included assessment of schemes to mobilise feedstocks, and engagement on biomethane grid connection policy.
Energy Efficiency
The recast Energy Efficiency Directive must be transposed in Irish law by 11 October 2025. Commission recommendations and guidance notes on transposing the provisions are available here. The Directive will embed the energy efficiency first principle in large planning, policy and investment decisions and increase the targets for energy efficiency and energy savings.
The Directive includes changes to obligations on companies to carry out energy audits or implement energy management systems. Depending on how requirements are transposed, more companies may be within the scope of these rules. We look further at energy audits and energy management systems here.
Renewable Energy In Buildings, Transport, Industry
Buildings and Industry
Transposition of the recast Energy Performance of Buildings Directive (see our briefing here) in Irish law should be underway, in advance of the main deadline of 29 May 2026. Intended to complement the Energy Performance of Buildings Directive, obligations to drive production and use of renewable energy in buildings under amendments to RED III must be transposed in Irish law by 21 May 2025. Further information is in our Construction section. Amendments to the RED III also strengthen targets and obligations to mainstream renewable energy in industry.
Renewable Heat Obligation and District Heating
It is anticipated that the Department of the Environment, Climate and Communications will introduce this measure in 2025. The Government may also legislate to provide for district heating. Further information is in our Construction section.
Transport
Obligations on the State to roll out minimum levels of publicly available electric vehicle charging and hydrogen refuelling under the new Alternative Fuels Infrastructure Regulation begin in 2025. The Regulation also imposes new obligations on EV charging operators, owners and mobility service providers (which we looked at here, noting also guidance from the Commission here). There will be amendments to Measuring Instrument Directive to introduce harmonised requirements for charging and refuelling stations and new Commission regulations on technical and data requirements. In Ireland, requirements to accelerate permitting for transport infrastructure are now in Regulations, and a new strategy for data concerning EV recharging infrastructure is anticipated. The Government is expected to submit an updated National Policy Framework for Alternative Fuels Infrastructure to the European Commission by the end of 2025.
Transposition of the recast Energy Performance of Buildings Directive in Irish law should be underway, in advance of the main deadline of 29 May 2026. It includes new obligations on recharging infrastructure for buildings (see our briefing here).
Amendments to the IME Directive, to be transposed by 17 January 2025, include obligations around connection to the distribution network of publicly accessible and private recharging points as regards smart charging and bidirectional charging functionalities.
A new Renewable Transport Fuel Policy 2025-2027 is also anticipated. Rates that apply for the 2025 Renewable Transport Fuel Obligation period have been set in the European Union (Renewable Energy) Regulations 2024.
Carbon
Pricing Carbon in Fuel for Buildings and Transport
From 1 January 2025, reporting and monitoring obligations begin under the new EU Emissions Trading Scheme (ETS2), which will impose a carbon price on fossil fuels supplied for buildings and road transport. Further information about the ETS2 is available here. It will become fully operational in 2027.
Pricing Carbon in Imported Electricity
Reporting obligations for importers of electricity imported from outside the SEM continue into 2025 under the Carbon Border Adjustment Mechanism (CBAM). While the full CBAM will not be operational until 2026, certain reporting obligations change at the start of 2025, as we discuss here. The Government has also made domestic regulations for the CBAM, which provide for substantial offences and penalties for non-compliance additional to the mechanisms in the EU Regulation.
A UK CBAM will be developed, but without electricity in its scope. It will be important to monitor the impact of this on the SEM.
Carbon Capture and Storage
There is a new certification framework in EU law for permanent carbon removals, carbon farming and carbon storage in products which came into effect at the end of 2024. Ireland has not yet undertaken largescale carbon capture and storage, but revised Commission guidance now applies to the Carbon Storage Directive.
Security of Supply
Actions under the Energy Security Strategy should continue into 2025. Actions include creation of a Strategic Gas Emergency Reserve to protect Ireland in the event of a gas supply disruption as Ireland, and it has been anticipated that this will be a Floating Reserve Regasification Unit. Legislation that may feature on the next Government’s programme includes a Strategic Gas Emergency Reserve (Amendment) Bill.
In electricity, additional temporary emergency capacity had to be procured, and the availability of older generation capacity extended. The revised IME Regulation (which we looked at here) recognises that capacity mechanisms are no longer temporary measures of last resort, but rather an enduring feature of market design. It will be vital to see progress on the capacity market in Ireland in 2025. Certain modifications to the Code (for example around introduction of intermediate length contracts) may assist, but supporting delivery of new generation capacity will be of fundamental importance to security of supply.
In terms of bidding in to the capacity market, it is reasonable to anticipate a review, following the quashing of recent auction qualification decisions by courts in Belfast and Dublin.
For developments as 2025 progresses, look out for our horizon scanner on infrastructure, construction, and energy, published each month on our website.
