Last week we saw the release of the Renewable Electricity Support Scheme (RESS) High Level Design from the DCCAE. The report provides an interesting insight into both the policy ambitions for the state over both the near term and the next 12 years, and equally regarding the desire to see a technological diversity in the renewable sector over that period. Below we highlight the key points that jumped out at us in ElectroRoute;

Policy Background

The RESS scheme is ultimately underpinned by the recent agreement between the EU Commission, EU Parliament and EU Council to set a biding energy target of 32%, a target for which Ireland will need to contribute in the form of a national renewable share of circa 24-26% by 2030. Ireland will seek State Aid approval for a scheme which will aim for a RES-E sectoral target of 55% or 11,000-12,000 GWhrs/year. Of course, to meet these targets, Ireland will need to accelerate its current progress towards 2020 targets which are widely expected to be missed. RESS-1 and RESS-2 are intended to be accelerated to support these targets. In order to hit our 2030 targets, under EirGrid’s four scenarios, it is estimated that a 2030 RES-E generation (total) range of between 5,660MW to 12,140MW is required depending on a number of variables.

RESS High Level Design – in a nutshell

1. Community Involvement As expected, the involvement of communities on a financial level is an important consideration of the High Level Design;

• Financial Support for community-led projects during the early phases of development will be made available.
• A Mandatory Community Benefit Fund and Register will be standardised across the sector. This is proposed at €2/MWh for all RES-E generation produced.
• Mandatory Investment opportunities for communities with a focus on a 5km zone around the project.
  • This requirement is achieved by offering an opportunity to invest, but not based on uptake.
  • A separate ringfenced category will be included in the 2nd auction (circa 10%) and subject to review for future years.

2.  Auctions Auctions are proposed on the following schedule;   The capacity auctions will be open to numerous technologies, and while a single auction will take place, intervention levers will influence the outcome;

1. Targeted Delivery Dates: Projects must indicate a plan to energise and connect by a target deadline or risk losing their subsidy.
2. Technology Cap: Some auctions will place an upper limit on technology procurement at which point a more expensive technology will be procured (provided this falls within an agreed percentage of the uniform price).
3. Technology Neutral with Enhanced LCOE: Whole system costs and external costs will be associated with certain technologies.
4. Supply Demand Ratio: Price dependant, a demand curve flexibility will be introduced to procure more/less volume in a given year. Volumes to be procured will be set to ensure competition.
5. Contract Term: Contract terms will differ per technology and can differ from one auction to another.
6. Budgetary Caps: this is intended to drive further competition.
7. Administrative Strike Price per Technology: This sets a Cost of New Entrant (CONE) for each technology.
8. Community Owned Projects: A capacity allocation for a volume of community owned projects (5-15%, beginning after RESS-1) will be set.

The commercial design features the following key details:

1. Eligibility Rules: Each project must have met pre-agreed milestones in terms of development and community engagement to participate.
2. Bid Bonds: These are placed before the auction to avoid sceptical bids. If a project fails to build per milestones, they will lose such a bond. – Community led projects are proposed to be exempt.
3. Project Milestones: In order to retain the contract, the development of the project must meet an agreed timeline.
4. Financial Structure: RESS will be a 2- way CfD.
5. Floating Feed in Premiums: Payments to generators are a function of output, strike price and the reference price.
6. Uniform Price: The auction will be Pay as Clear.
7. Market Reference Price: This will be the Day Ahead price.

Other Key Details In order to participate in the auction, each technology will be subject to a viability test to ensure a support scheme is reasonably required to commercial operations to be achieved. The delivery years of RESS 1 (by end 2020) is such that solar technology seems to be a strong candidate to succeed. While the paper refers to a desire to accelerate progress towards 2020 targets, the DCCAE state that alternative/complimentary options include negotiating a statistical transfer with a member state which overachieves on its renewables targets. In summary, we find ourselves encouraged by the High Level Design and very much look forward to seeing the High Level Design translated into a detailed design structure through the RESS Auction Design & Implementation Working Group. If you have questions about the participation of your project in future RESS auctions, don’t hesitate to contact our Client Services team.

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