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.

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