09 Sept 2024
By Marcos Byrne
The Renewable Energy Support Scheme (RESS) 4 results have recently been announced in Ireland, marking a significant milestone in the country’s efforts to enhance its renewable energy capacity, Marcos Byrne, Policy Manager at Wind Energy Ireland looks at the results of and how future auctions might improve. This round of the scheme has attracted substantial interest from developers and will deliver 374 MW of the 4,200 MW of new onshore wind energy required by the Climate Action Plan to be in place by 2030. The auction results show that 1,146 GWh of wind energy were successful alongside 925 GWh of solar energy indicating a strong pipeline for new wind farms, reflecting the commitment of industry to meeting the 2030 targets.
What is the Renewable Electricity Support Scheme?
The Renewable Electricity Support Scheme (RESS) is a key Government policy to deliver the Climate Action Plan. RESS 4 was the fourth onshore auction under the scheme and was open to onshore wind and solar energy projects. Under the RESS wind and solar energy projects compete against each other to win contracts to provide electricity at a guaranteed price for up to 16.5 years.
What went right in the auction?
There were several changes introduced for RESS 4 to increase the volume of projects entering the auction. These changes were all positively received by industry. 1. Relief Events: The introduction of Relief Events for Operator and Judicial Review delays in RESS 4 is a positive development. This provision mitigates risks from the System Operator’s failure to deliver necessary grid reinforcements or grant outages for connection work within the contracted delivery period. It also addresses delays from third-party Judicial Review proceedings. These measures help lower auction prices by enabling more projects to participate, increasing competition and driving down costs.
- Indexation: RESS 1 and RESS 2 auctions had no index-linking, while RESS 3 introduced partial indexation, which, despite being less favourable than for offshore auctions, helped keep prices from rising further. It is encouraging that this provision was maintained for RESS 4.
- Extended Longstop Date: The RESS 4 Longstop date for project completion is set for the end of 2029, about 18 months longer than previous auctions. This extension allows around 5 years from the Letter of Offer to the Longstop date, providing valuable certainty for projects, especially given current supply chain challenges in the energy sector.
- Curtailment: The Government’s introduction of Unrealised Available Energy Compensation in RESS 3 mitigates the revenue loss risk for wind and solar farms due to grid curtailments. This significant move allows projects to bid lower. Expanding this provision to cover network constraints would further help reduce bids amid increasing dispatch down levels.
What should improve for future auctions?
While RESS 4 saw some positive changes made, WEI still believes more can be done to further improve conditions for future auctions, and thus attract more volume into the auctions.
- Duration of the contract: The RESS 4 contract is for a maximum of 16.5 years, compared to the 20-year contract offered to offshore projects in ORESS 1. A longer contract duration significantly lowers the risk for investors and allows developers to secure financing at better rates. By not offering 20-year contracts in RESS 4, projects are compelled to submit higher bids.
- Apply full indexation: The current provision should be expanded in future onshore RESS auctions to include 100% protection during the operational phase.
3.Constraints and Lack of Grid Capacity: The Unrealised Available Energy Compensation provision does not currently address the high grid constraint risks due to limited network capacity. Many eligible wind farm projects opted out of the auction because they were uncertain about connecting by the end of 2029. Others refrained from bidding below the price cap due to constraint risks. To optimise renewable generation development at the lowest cost to consumers, this risk should be managed by the System Operator. Properly mitigating network constraint risks in future RESS terms could lead to additional savings.
- Price cap: The Government set the price cap at €93.50 for wind energy (€110 for solar), preventing many wind projects from competing unless they bid below the cap. Some projects withdrew from the RESS process upon the cap’s announcement, reducing the available renewable energy in the auction.
