RESS 4 Consultation Open

The consultation for the fourth onshore Renewable Electricity Support Scheme auction is now open. Our Energy team reviews the proposed changes against previous iterations of the scheme and their likely impact for Ireland’s renewable energy industry.

The Irish government is consulting on the rules for the fourth onshore Renewable Electricity Support Scheme auction (RESS 4). RESS 4 will be the latest iteration of the support scheme, deployed in support of achieving Ireland’s target of generating 80% of electricity from renewable sources by 2030. This includes generation of 9GW of onshore wind and 8GW of solar photovoltaic generation.

The Department of the Environment, Climate and Communications (DECC) has indicated that RESS 4 will be based fairly closely on the high-level design of the most recent completed auction, RESS 3. However, by way of its consultation, DECC is seeking stakeholder views on the merits of diverging from the RESS 3 design in six areas:

1. Risk allocation
2. Community benefit funds
3. Delivery timelines
4. Technology specific price cap and evaluation correction factor (ECF)
5. Auction qualification process
6. Withdrawing from RESS 4

Risk allocation

DECC has proposed to mitigate certain development risks by extending events for which relief, against RESS deadlines, is available to the developer. This is set against a backdrop of increasing delivery challenges for renewable energy projects. In addition to the rules relating to “force majeure” events, which reflect the RESS 3 position, it is now proposed that relief will also be available for delays that are due to a system operator. This category of delay would include the inability to deliver required reinforcements or to grant outages to complete connection works within the contracted RESS delivery period. Judicial review proceedings initiated by a third party associated with the project or grid connection would also fall within scope.

These new relief events will allow projects to withdraw from RESS 4 without penalty. By contrast, the separate “force majeure” regime provides only an extension of time of up to one year, and a project still faces the loss of its performance bond if the issue persists beyond this period.

Community benefit funds

Under the proposals for RESS 4, a project would be required to both establish and register its community benefit fund, and establish a fund committee, during its construction/commissioning phase.

Notably, for any project that becomes operational, the fund must be maintained for the lifetime of the relative support period under RESS. This is regardless of whether the project remains in the scheme.

In addition, DECC has emphasised that distributions from community benefit funds cannot be made before a project reaches commercial operation. While generators will retain the discretion to make separate payments to local individuals during the planning or construction phase, these payments will not be credited towards the community benefit fund obligations.

Delivery timelines

In light of increased supply chain stresses and lead times on all construction materials, DECC proposes to set the RESS 4 longstop date at “the end of 2029”. This change would allow generators five years from the offer of RESS 4 support to achieve commercial operation. This is an increase of more than 18 months compared to RESS 1 and 3 but it is consistent with the recent extension to the equivalent period for RESS 2. This increase should widen the range of projects that can compete in RESS 4, although in many cases this will be at the expense of a notional RESS 5 applicant base. Changes of this type do potentially erode certainty around the auction timetable.

Technology-specific price cap and evaluation correction factor (ECF)

DECC is considering adjusting the existing price cap, as well as introducing technology-specific price caps as a cost mitigation measure.

As part of the bid evaluation process in past iterations of RESS, ECFs have been used to factor in additional benefits to overall customer cost that a certain technology type may have over another, but which cannot be reflected in a simple bid price comparison. ECFs are utilised in RESS auctions to multiply the as-offered bid price for evaluation purposes. This gives certain bidders a competitive advantage over others.

Technology-specific ECFs were introduced in RESS 2 and will likely be retained in RESS 4. However, DECC is using the consultation to gauge market opinion on whether each of the wind and solar ECFs should be increased or lowered within a range:

Auction qualification process

In the interests of shortening the overall RESS 4 timetable, DECC intends to significantly reduce the application review period. To facilitate this, application requirements will be minimised and simplified. The quantity of required documentation will be reduced, and updated guidance on how to correctly complete an application will be published.

Applicants should be aware that DECC intends to adopt a “right-first-time” approach in the RESS 4 auction. This approach will presumably involve DECC taking a stricter approach to the exclusion of applications that it regards as defective, although no guidance is offered yet on how this might work.

Ability to withdraw from RESS

Under RESS 3, once the commercial operation milestone has been achieved and certain obligations have been satisfied, projects can withdraw from the Public Service Obligation on the expiration of 12 months’ written notice to the Minister. In a departure from the RESS 3 rules, DECC is considering requiring that RESS 4 projects remain subject to the Public Service Obligation for the duration of the support term, unless expressly authorised by the Minister. The intention is to provide greater certainty for projects, as well as long-term protection to electricity consumers from the volatility of fossil fuel prices.

Key dates

Comment

Stakeholder responses to the RESS 4 consultation will help shape the design of the auction, and ultimately the terms and conditions of participation in the scheme. In light of the complex renewables landscape and the challenges facing the sector, the consultation presents an opportunity for the industry to offer their views and influence the approach of DECC to RESS 4.

DECC’s consultation paper is available here.

For more information and expert guidance, contact a member of our Energy team.

The content of this article is provided for information purposes only and does not constitute legal or other advice.

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