Tuesday, 15 August 2017

Rising Solar Energy Interest

(prepared for our panel participation on solar energy at Energy in Agriculture 2017)

Solar PV Arrays (BioXL)
There has been a large increase in the development of utility scale solar photovoltaics (PV) in Ireland. As of July 2017 there are about 1.5 GW in the planning system, with 95 projects granted planning permission (Thanks to our friends at PHR). There are also connection applications for 3.7 GW made to ESB Networks so far, and a further 1.8 GW to Eirgrid.

What is driving this?

Challenges with public acceptance of wind energy have increased the costs, risk and timelines associated with projects to unsustainable levels. From a planning and public acceptance perspective, solar arrays are far more benign than wind turbines. Many who work in wind energy have now diversified into solar energy. The reality remains that wind energy is cheaper and more productive than solar on a straight energy basis: a MW of installed wind generates three times as much electricity as a MW of solar.

From a landowner point of view, higher returns are available than for existing farming activity. More money for less risk, no outlay and minimal effort is hard to overlook. It is particularly appealing for relatively small conacre farms.

Swanson's Law (Wikimedia/Creative Commons)

Costs of solar PV have fallen dramatically over the last decade and continue to fall. Swanson's law is an observation that the price of solar modules tends to drop 20 percent for every doubling of cumulative shipped volume. There is the prospect over time that solar PV will become more cost-effective than any other technology.

Experience in the UK

A look across to the UK shows how a substantive industry arose from a standing start. In 2011 there was no solar sector to speak of, but by 2017 over 12 GW had been installed. This is enough to power the Irish grid twice over at peak demand. UK subsidies were cut dramatically in 2015 and deployment of solar since has stalled to a trickle. The abrupt decrease in UK activity has encouraged actors there to cast their eye to Ireland.

Getting on the Grid

Grid to consider (BioXL)
With over 500 projects seeking grid connectivity, and a cumulative capacity that would exceed the size of the present generation, what are the prospects for connecting any of these projects?

ESB Networks are processing 47 of these at present and it is taking about a year for the offer process with each one. So effectively the majority of projects are 'on hold' for a lengthy period of time.

The CER is concurrently reviewing the grid application process, and the 5.5GW of solar will appear modest once the 12 GW of queued wind projects are added into the mix. The intent is to provide a more equitable grid access process, although it is a finite resource that cannot be split ad-infinitum.

What cause for optimism regarding future connections? Growing demand (e.g. via numerous data centres) and electrification of our energy needs (e.g. electric cars and heat pumps) will lead to a larger and more resilient network. A large body of work is underway to accomodate growing levels of renewable generation under Eirgrid's DS3 programme, ultimately allowing 75% instantaneous levels of variable output (or technically speaking non-synchronous) generators on the system.

Is there room for so many projects?

Clearly the answer is no. It is already apparent that many projects will not be viable for a variety of reasons. Quite a number of projects have allowed grid connection offers to lapse as they were not commercially affordable.

Many challenges (BioXL)
The likely emergence of auction-style support mechanisms puts competitive pressure on developments to minimise return on capital and explore funding solutions that don't involve traditional bank project finance. Changes to the way projects engage with and partner with a community are necessary, but by the same token likely to be complex and costly.

There has been an increasing level of planning refusals, particularly for larger scale sites (20MW+). This is a major dent in the commercial prospects of a site with an earmarked grid connection contract. The CER (along with most sector actors) are keen to link grid offers to planning, and it will become more difficult to reassign grid to alternate land in the event of a planning refusal.

The commercial environment generally for renewable energy projects is dis-improving. Local authorities are imposing high development levys on projects (€10k/MW in many areas) and implementing revised commercial rates which will alter the fixed cost base of projects materially. Regulatory changes to the single electricity market are also creating more and more uncertainty for future project development and finance.

Thursday, 13 October 2016

Sustainable Energy Updates from Budget 2017

The Irish government has set out its 2017 budget on 11th October. We thought it might be helpful to those interested in sustainable energy to post an update.

Minister Paschal Donohoe summed up the political backdrop to the budget well "Many believed that the Government would not still be in place by the time Budget Day arrived, and yet, here we are".

The following item, assessed as a macro-economic risk in the budget documents sets a glum tone from a sustainable energy perspective: "..[that] higher oil prices would reduce consumer spending power and lower corporate profitability in Ireland." Many do highlight on a daily basis the logical alternative to reduce this risk - energy efficiency and renewable energy.

Also of note is a high level risk of Ireland not meeting an obligation to reduce greenhouse gas emissions by 20% on 2005 levels by 2020. "EPA projections indicate that [the target] will not be met without the purchase of additional emissions allowances, the cost of which cannot be quantified at present."

"The fuel inputs used to create high efficiency electricity in combined heat and power are being fully exempted from carbon tax." Engineers will scratch their heads at the description of high-efficiency electricity... nonetheless this measure will reduce the carbon tax payable on gas for CHP engines (certified as high-efficiency CHP) to zero.

Minister Michael Noonan offered the House "a relief from carbon tax for solid fuels that include a biomass element to incentivise the development of these greener fuels". Details on this will be helpful, it should benefit those selling e.g. briquettes which combine peat and wood shavings.

He also revealed "a measure.. to provide that natural gas used as a vehicle fuel will be taxed at the EU minimum rate of excise for a period of 8 years". The minimum rates at present are €2.6/GJ for private motor vehicles and €0.3/GJ for commercial vehicles. Biogas was not mentioned.

The scheme of accelerated capital allowances for energy efficient equipment is being made available to sole traders and non-corporates. This is a significant development as these entities may incur tax liability at the marginal 50% rate, as opposed to the corporate tax rate of 12.5%. About 100,000 farmers are sole traders. This should be particularly interesting for biomass heating, heat pumps or Solar PV on farm buildings for self consumption. The devil will be in the detail as always.

The recently rebranded  Department of Communications, Climate Action and Environment (DCCAE) got an extra €50m in the budget - is there a possibility of beefing up the energy policy team in Adelaide road? It has long been suggested to the Department that additional expertise would help accelerate programme delivery.

A capital spend of €90m on climate change actions was announced also.
Minister Denis Naughten provided some additional clarity on this in a release from DCCAE later that day.
  • €500,000 will be directed to the establishment of a National Dialogue on Climate Change, something Denis Naughten has initiated
  • €7 million has been allocated to a new Renewable Heat Incentive Scheme for 2017
  • €4 million will be allocated to the Better Energy Communities Scheme, a programme which has been one of the only sources of support for sustainable energy projects in recent years
  • €2 million will be allocated to the Better Energy Homes Scheme
  • the Warmth and Wellbeing scheme is to be expanded with €8m set aside for 2017

Renewable Heat Incentive (RHI) 


In light of this budget development, we have made further enquiries regarding the RHI. The €7m budget estimate is based on ongoing work by DCCAE and consultants Element Energy, and the ambition to go live in the latter half of 2017.

DCCAE are currently indicating that the design consultation paper for RHI will issue prior to the end of 2016 and that a scheme may be operational by Q3 2017, which is an optimistic timeframe. Industry frustration is palpable with delays to the implementation of this scheme since it was first announced in 2013. See previous post about our work on RHI.

The cost of an RHI can't be known until the design consultations have been progressed. Most aspects of the scheme are still up in the air, and we have to wonder what happened the budget allocated for RHI in 2016?

Keep in mind also that price supports are subject to approval from the EU competition authorities to assess them for unfair market distortion. Grandfathering (i.e. retrospective application of the RHI) remains in place for new qualifying installations after 8/7/14, though payment would not be back-dated.

Tuesday, 15 September 2015

Renewable Heat Incentive for Republic of Ireland

BioXL carried out an extensive analysis of options for incentivising renewable heat in Ireland on behalf of the Irish Bioenergy Association, which was published in September 2015 and submitted to the Department of Energy in response to ongoing consultations on the topic.

There are national and EU policies supporting decarbonisation through delivery of 12% renewable share of heat by 2020. Most public buildings and industries continue to rely on fossil gas for their heating needs. The market for renewable heat has seen almost zero activity since 2008.
The only prospect of getting this market going again is to promptly deliver a renewable heat incentive which pays end-users to switch from fossil gas to renewable heat. 

Some of the key recommendations are:
  • To urgently replace gas boilers with renewable heat systems to meet 2020 targets - Ireland is currently at 6% renewable share of heat
  • Gas prices are extremely competitive, and priced at a level which does not account for the wider socio-economic impact of it's use
  • In this context, an exchequer-funded renewable heat incentive is required to give an appropriate signal to switch from gas to more sustainable renewable heat technologies
Download the report here