Minister for Communications, Climate Action and Environment, Denis Naughten, T.D., is today publishing a public consultation on the design of a new Renewable Electricity Support Scheme (RESS).
The new scheme is being developed to incentivise the introduction of sufficient renewable electricity generation to meet national and EU-wide renewable energy and decarbonisation targets out to 2030.
Reflecting a broader movement towards greater public and citizen engagement in relation to energy policy, the emerging principles of the scheme are now being presented for public consultation.
In the course of developing this consultation document, the Department of Communications, Climate Action and Environment commissioned two studies – the first by Cambridge Economic Policy Associates (CEPA) offered an economic assessment of renewable technologies while the second by Ricardo Energy and Environment (Ricardo) assessed support models for community ownership of renewable energy in Ireland. Both of these reports are available to view on the Departments website.
On the basis of these studies, a range of policy measures have been identified and the Department is now seeking public feedback on these. As the consultation paper presents the emerging approach to the design principles of the new RESS, Minister Denis Naughten strongly encourages all stakeholders to submit their views before the deadline of November 3rd 2017.
Communities
The new scheme will be designed to increase community and citizen participation in the energy transition to a low carbon economy. Communities and citizens will actively participate in and benefit from renewable energy projects in their local area. The consultation sets out a number of policy options to support both community-led projects and developer-led projects with material community involvement. These options reflect both extensive community engagement at home and the experience of countries such as Denmark, Canada and Scotland who are world leaders in promoting community participation in renewable electricity projects.
Diversification
The new scheme will be designed to help realise the Government’s objective of broadening the renewable energy mix. As renewable technologies mature and costs fall, Ireland is well placed to take advantage and greatly diversify its renewable portfolio. However, as some technologies will cost more than others to deliver, public opinion is being sought now for its views on how quickly, and how deeply, this diversification ambition should be progressed.
Micro-generation
In the course of preparing the new scheme, opportunities for micro and small-scale generation have been explored. Financial mechanisms have been investigated, and the experience of other EU member states in reforming network structures and charges, dealing with cost burden-sharing and ensuring just compensation for self-generating consumers, have been examined. The economic evidence indicates that meeting Ireland’s renewable electricity targets and renewable diversity ambitions are more cost-effectively achieved at large and medium scale. As a result, micro-generation has not been included directly under the emerging principles of the new RESS. However Minister Naughten remains committed to finding a correct mechanism for developing small and micro-scale generation in Ireland. To progress it, the Minister has asked the Sustainable Energy Authority of Ireland (SEAI) to facilitate a workshop on micro-scale generation on 17th October 2017. Government fully recognises the wider societal benefit that micro and small-scale generation can play in both increasing acceptance of and promoting renewable energy projects. The Department of Communications, Climate Action and Environment, in collaboration with SEAI, will develop a policy position on how best to support small and micro-scale generation.
RESS Structure
The new RESS will largely be shaped by EU State Aid Guidelines which call for competitive auctions and bidding between project developers for state support. However, the Department can further impose downward pressure on renewable electricity costs by designing a scheme that takes best advantage of falling renewable technology costs and increases public acceptance. The proposed design allows the Government to control both the costs and the level of RES-E ambition. It is highly flexible, can respond to market-driven outcomes, and take advantage of maturing technologies.
Launching the public consultation, Minister Denis Naughten stated:
“The scale of transformation needed to meet our low carbon transition targets cannot be overstated. If we are to reach those targets, we must harness the combined efforts of the entire country. Industry, of course, has a key role to play in bringing to market technology options that deliver, at scale, solutions to minimise and manage costs for households and businesses alike. But industry cannot do this alone. My Department has listened to citizens, to communities and to other stakeholder groups. They have developed an emerging approach to how Ireland can best achieve its renewable electricity ambitions, taking value for money, sustainability and security of supply into account, as key policy drivers. It is an approach that I believe will allow us to achieve our renewable electricity ambitions. The consultation for this emerging approach to the new scheme is now open. I strongly encourage all stakeholders to have their say on a developing policy of great importance, one which will impact us all.”
Further information regarding the Public Consultation along with supplementary documentation can be accessed here.
Background and Frequently Asked Questions:
Renewable Electricity Support Scheme (RESS) Consultation
This final public consultation is the next phase in the RESS design process. The consultation is seeking views on specific questions relating to design principles and structure of the new RESS, including pathways for providing greater community and citizen participation in renewable electricity projects. Feedback is sought on the emerging design options and implementation of the new scheme.
This public consultation will remain open until 16.00hrs on November 3rd 2017. All responses should be submitted to RESS@dccae.gov.ie or in writing to RESS Consultation, Electricity Policy Division, Department of Communications, Climate Action and Environment, 29-31 Adelaide Road, Ireland. D02X285.
Please note that all submissions and comments submitted to DCCAE for the purpose of this consultation may be subject to release under the Freedom of Information Act 1997-2003 and will be published on the Department’s website. Any information which is commercially sensitive should be clearly indicated in the submission.
Frequently Asked Questions (FAQs):
DCCAE September 2017 - Renewable Electricity Support Scheme
1. General Overview of RESS
2. RESS Analysis - Consultants
3. Key Characteristics of RESS
4. RESS Community Participation
5. Technologies supported under RESS
6. Cost of RESS
7. Microgen Proposal
8. RESS Opportunities
9. RESS Challenges
1. What is the new Renewable Electricity Support Scheme (RESS) and why is it being developed?
The proposed new RESS is a scheme that will provide financial support to renewable electricity projects in Ireland. Ireland has a national binding target of meeting 16% of its energy requirements from renewable energy sources by 2020. This results in a 40% renewable electricity target, 10% in renewable energy in the transport sector and 12% renewable energy in the heating sector.
For 2030, the EU is proposing an EU wide renewable energy target of 27%. There is a move away from binding national targets, but Ireland is expected to contribute to the EU wide target (current expectation is to remain at 40% of electricity from renewable sources (RES-E).
The new scheme is being designed to deliver this additional new renewable electricity, to allow Ireland to achieve and maintain its 40% RES-E as energy demand grows out to 2030. Other RES-E ambitions were also included in the economic analysis and modelling (45%, 50%, and 55%).
Policy objectives that have shaped the emerging design of the new RESS include; increasing community participation in renewable electricity projects; ensuring value for money for electricity consumers; enhancing security of supply, broadening the renewable technology mix.
Cambridge Economic Policy Associates (CEPA) were contracted by DCCAE to carry out an economic assessment to underpin the new RESS. CEPA are an international economic and financial policy consulting business with specialist expertise in energy policy. CEPA work across multiple energy sectors including network regulation and competition, market design, infrastructure pricing and economic and general energy policy. Within Ireland, CEPA have previously worked for EirGrid, ESB, Gas Networks Ireland and the Commission for Energy Regulation.
Ricardo Energy and Environment (Ricardo) were contracted by SEAI to undertake a study to assess models to increase community ownership in renewable energy projects in Ireland. Ricardo energy looked at international best practice and held workshops and stakeholder interviews with over 50 renewable energy experts in Ireland across a range of disciplines including community groups, financial institutions, energy associations etc.
Both studies ran for circa 6 months and were led and directed by a steering group headed by DCCAE.
2. What are the key characteristics of the new RESS?
A key characteristic of the new scheme will be the inclusion of policy measures to increase community participation in and benefit from renewable electricity projects.
This RESS design consultation can be broken down into the main headings of:
1. Community Ownership. Policies and measures to both increase community and citizen ownership in renewable projects and to deliver increased community benefits have been assessed as part of this analysis. International best practice has been examined and key stakeholder workshops and interviews have been undertaken to inform the emerging policy options for Ireland. Crucially, a key policy option emerging is that all projects wishing to apply for support under the new RESS, would first have meet mandatory criteria around offering investment opportunities in such projects, to the local community. Financial support mechanisms to facilitate this and institutional structures will be put in place to enable these policies.
Other key policy measures emerging are the ring-fencing of specific capacity (MWh) for community-led projects and the facilitation of Grid access to community-led projects.
Best practice from international leaders such as Scotland, Denmark and Canada in community participation in renewable energy will be adopted.
2. RESS structure – largely shaped by EU State Aid.
· RES-E support levels must be set through competitive auctions.
· All new RES-E schemes should provide support in the form of a premium in additional to the market price.
Both of the above characteristics are very different to existing REFIT design principles, whereby generators get a fixed price (tariff, €/MWh) for each unit of electricity exported to the grid. The PSO currently makes up the difference between the market reference price and the fixed price.
Fixed tariffs are no longer available under EU State Aid rules, and when designing new schemes, generators must compete in auctions for support, by bidding in a price at which they are able to deliver renewable generated electricity. This price might vary from project to project and also from auction to auction. It is expected that generators bids (costs) will reduce as the scheme matures with each additional auction, due to technology cost reductions and learnings from previous auctions. This in turn will put downward pressure on the prices that end consumers pay to support renewables through the PSO.
Prequalification rules and mechanisms such as bid bonds will be introduced to ensure that generators cannot participate until they have met certain criteria in terms of planning, community participation etc. And those generators who are successful and don’t deliver in the required timeframe will face penalties. These measures safeguard the scheme from risk of underbidding.
3. Technology Neutral or Technology Specific. A key design principle of any new RESS is whether technologies compete against each other for support in auctions (e.g. wind and solar PV projects competing for support) or whether they are technology specific auctions (an auction for solar PV projects) where the same principles of competitive bidding and premium payment still apply. The economic evidence suggests that a number of technologies have overlapping costs and could compete against each other. It would be expected that the broadening of the renewable technology mix will increase as the scheme matures and technology costs further reduce.
4. Financial Support Mechanism. As we have seen, current EU State Aid Guidelines prohibit Feed in Tariffs as a mechanism to support renewable electricity generation, with the exception for small scale generators and demonstration projects. A number of financial mechanisms have been assessed as part of the economic appraisal and the emerging approach is to adopt a design which results in the lowest total cost of support.
4. Community Participation & RESS
The new Renewable Electricity Support Scheme has community participation and ownership designed into its very fabric.
· All projects looking for support under the new RESS will need to meet pre-qualification criteria including offering the community an opportunity to invest in and take ownership of a portion of renewable projects in their local area.
o Financial incentives could be introduced to facilitate those who wish to invest.
· Grants would be made available through the development and construction phases of community-led projects to incentivise community participation and remove financial barriers.
· Grid access should be facilitated for community-led projects.
· Establishment of Trusted Intermediary and Trusted Advisor bodies; these will act as independent facilitators and brokers of dialogue between communities and developers. They will support community participation in renewable energy projects, provide information and ensure that local strategies align with broader Government policy.
· A register of community benefit payments should be established.
These recommendations could have a profound effect – boosting community ownership of and involvement in the renewable energy transition in Ireland.
5. What technologies are going to be supported under the new RESS?
1. There are currently no schemes open for new renewable electricity generators/ applications in Ireland. Current schemes are known as REFIT schemes and they offer a flat price or floor price to all renewable generators that successfully apply, for a period of 15 years.
2. Technologies supported under the existing 3 REFIT schemes include onshore wind (large and small), hydro, biomass landfill gas, other biomass, biomass combustion, biomass CHP (large and small), AD Non CHP (large and small), AD CHP (large and small).
3. Neither Solar PV rooftop nor ground mounted is supported under existing support schemes in Ireland. It has been deemed too expensive to support via the PSO up to this point (Solar PV technology costs have fallen by 80% over the past 5 years).
4. In the development of the new scheme, a public consultation was undertaken in 2015. This consultation examined the requirement for a new support scheme and identified a range of technologies were identified to be considered for support under the new RESS.
5. It is proposed that each technology appraised will remain open for consideration under a range of design scenarios that are being developed. The findings from this consultation will help to inform the final scheme design.
6. While it is recognised that each renewable electricity technology can, in principle, contribute towards Ireland’s renewable electricity ambitions, it is also important to take account of the fact that some renewable electricity technologies are more market ready and more cost effective than others, meaning they are likely to be in a position to deploy faster and at a lower cost to the consumer.
7. Technologies that were included in the RESS economic appraisal: Solar PV (rooftop and ground mounted) at various scales; wind (onshore and offshore) at various scales; bioenergy (biomass combustion, biomass CHP, AD CHP, sewage gas, biogas, bio LPG CHP) at various scales, Micro CHP; Hydro, at various scales; Ocean (wave and tidal) at various scales; Waste to Energy; Geothermal at various scales.
8. In short, the scheme will support the most cost effective technologies and projects. If however Government policy requires support for emerging, more expensive technologies, then this too can be catered for under the principles of the proposed new RESS.
6. How much will it cost?
It is proposed that the new RESS will be funded by the Public Service Obligation levy (PSO). The PSO is a levy paid for by all electricity consumers. The total cost will ultimately be a function of the structure of the scheme (which technologies can participate; tech neutral or specific auctions; the frequency of the auctions and the financial mechanism chosen).
The analysis has generated a baseline scenario, which identifies the least cost renewable technology mix required to deliver Ireland’s 2030 contribution to EU wide RES-E targets, and incorporates a ring-fenced community category.
The analysis has also appraised technology specific scenarios and a number of RES-E ambitions (45%, 50%, and 55%).
What is clear is that the further the scheme moves away from the baseline scenario, the greater the increase in cost to the PSO. Broadening the renewable technology portfolio to include emerging or more expensive technologies increases the cost, as does increasing the RES-E penetration level, at an even greater rate.
A key function of this consultation is to understand the public desire for such a move away from the baseline scenario to a more expensive scheme.
7. Micro Generation
The analysis undertaken suggests that support for micro and small-scale renewable generation is best achieved outside of the main RESS. There are multiple reasons for this;
1. The relative higher costs associated with micro and small-scale generation compared to larger-scale community-led and developer-led projects.
2. The required network charge and tariff reforms needed to ensure self-generators/self-consumers contribute fairly to the costs associated with maintaining the electricity grid.
3. Further work is required to identify a fair and just means for compensating self-generating consumers, ensuring micro and small-scale supports are aligned with the principles of the emerging recast Renewable Energy Directive.
4. Further analysis is required to ensure an equitable distributional impact on the PSO and make sure that those who cannot afford to participate in such schemes and those who are in rented accommodation are not unfairly penalised by subsiding those who can afford to participate.
This approach aligns with that of other EU Member States who have undertaken, or are looking to undertake, reforms to ensure self-consumers are treated in a fair and equitable manner. There is a risk that a scheme developed to support microgen and self-consumers and that does not address these issues first will most likely need reforming. There are examples from EU in particular Germany and Italy where microgen schemes have had to be reformed.
The Government fully recognises the important role that micro and small-scale renewable generation can play, both directly in helping to achieve RES-E targets, and indirectly, through the wider societal benefit that micro and small-scale can play in both increasing social acceptance of and promoting renewable electricity projects. The Government remains committed to developing a scheme to support micro and small-scale generation and will work with the Sustainable Energy Authority of Ireland (SEAI) to develop an appropriate scheme to support micro generation in conjunction with the new RESS. A microgen stakeholder workshop will be held on 17th October 2017 led by both the SEAI and DCCAE and this will run in parallel with the RESS design.
Notwithstanding the above, it is important to note that a number of opportunities for small scale renewable generation, and opportunities for community and citizen participation in the energy transition, will be delivered and supported through the community driven policies being developed as part of the RESS design.
8. RESS - Deliverables
· The new RESS will facilitate the development of sufficient renewable electricity to fulfil Ireland’s 2030 contributions to EU wide targets at a range of RES-E ambitions. The RESS has been designed to cater for a range of renewable electricity ambitions (40%, 45%, 50% and 55%).
· The new RESS delivers on Energy White Paper and 2016 Programme for Government commitments to increase community and citizen participation in renewable energy projects and the energy transition to a low carbon economy. The scheme will have community participation designed into its core.
· The RESS emerging scheme design is very flexible and will allow government to add categories for specific technologies if the outcome from the principal auction is suboptimal. In other words, nascent, more expensive technologies can be catered for in subsequent technology specific auctions, if government objectives are not being met via the principal category technology neutral auction. Frequent auctions can be run (xMW capacity e.g. every 2 years) to provide the flexible needed.
· The emerging RESS scheme design provides Government with much more control over costs and budgets than in previous schemes. Budget caps can be imposed on each auction.
· The RESS appraisal has extensively explored opportunities for micro and small-scale generation and a policy framework to deliver micro generation will be developed in conjunction with (but outside of) the RESS. Minister and Department recognise the key role that micro and small-scale generation can play, both directly in meeting RES-E targets and indirectly, in increasing acceptance of and promoting renewable energy projects. SEAI and DCCAE will progress the development of this policy framework.
9. RESS - Challenges
· The new support scheme will be funded by the PSO and paid for by all customers. Renewable Electricity technologies are still more expensive that the market reference price for electricity (per €/MWh). The PSO covers the ‘viability gap’ between the € each renewable generator needs to earn over its lifetime and what it will recover directly from the market.
o This can be managed however by designing a scheme that takes advantage of falling technology costs, incentivises sufficient competition to ensure developers bid in their most competitive prices and doesn’t unduly support more expensive technologies, without a clear government policy objective.
· Certain renewable technology sectors will perceive the scheme as not delivering for them. This is because as part of the emerging structure, being consulted on, we are not initially recommending specific categories for specific technologies. Due to converging and often overlapping viability gaps among a number of renewable technologies, the emerging approach is for a technology neutral category.
o The emerging approach being consulted on is to have an initial technology neutral auction, and to assess the result. If the initial auction results in a suboptimal result, in terms of renewable technology diversity, then specific category auctions for these more expensive technologies can be set up. This is the most prudent approach for a country entering into energy auctions for the first time and mitigates the financial risk to all customers.
· Micro Generation is not included directly under the emerging principles of the new RESS.
o International experience indicates that there are financial and technical network reforms required before introducing a tariff for microgen.
o DCCAE and Government are strongly supportive of developing a microgen sector in Ireland. We will develop a policy framework to address micro generation in parallel with the new RESS. A stakeholder workshop will be held on October 17th to commence this process.
o Small scale community-led renewable electricity projects will be supported under the RESS.
o Community and citizen participation and benefit are being included in the RESS design and these will deliver small scale projects for local community groups.