28/09/16 1. Challenges for wind energy projects in. World Wind Energy Association. Legal Working Group. Eoin Cassidy. Ireland. Mason Hayes & Curran

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1 Challenges for wind energy projects in Ireland World Wind Energy Association Legal Working Group Eoin Cassidy Partner Mason Hayes & Curran 28/09/16 1

2 Wind Energy Positives Ireland In July 2016 there are 228 wind farms on-line and operational, spread across 27 of the 32 counties on the island of Ireland Installed wind generation capacity for the island is 3,169 MW. Estimated that 3,800 to 4,100 MW of wind needs to be installed by 2020 to meet Ireland s 40% renewables target (All Island Generation Capacity Statement ). Forecast increased due to economic recovery and increased demand. There are estimated to be over 3,400 wind energy related jobs in Ireland. 2

3 Wind Energy Positives Ireland At times 55% of Irish electricity has been produced from wind. 55% is a limit imposed by the transmission system operator (EirGrid plc). The TSO is seeking to increase the limit to 75%, as and when facilitated by the DS3 system support services programme. 200 million Euro saved in avoided fuel imports in 2014 with wind. 3

4 Wind Energy Positives Ireland 21% of Ireland s electricity demand met by wind energy in 2015 (Sustainable Energy Authority of Ireland) although this does not include importation of Guarantees of Origin, which are habitually used by electricity suppliers to improve the renewability of their fuel mix. Ireland is, for now, working to build out the final tranche of wind farms supported by an investor-friendly feed-in tariff scheme (REFIT): comprising (i) 69.72/MWh reference price (CPIindexed) plus (ii) 9.90/MWh balancing payment (not indexed) 4

5 Wind Energy Positives Ireland Maturing industry, with depth of experience across the spectrum of advisors, and projects consolidating to sizes that are attractive to a range of capital sources. 5

6 Challenges: Regulatory instability Single Electricity Market (gross mandatory pool) went live, across entire island, in 2007 and has attracted new capacity investment of at least 3.5GW SEM now undergoing a radical programme of amendment known as I-SEM (Integrated-SEM) to better integrate with neighbouring markets on the timelines required by the EU Third Energy Package. I-SEM due to go live in Q

7 Challenges: Regulatory instability Challenging aspects of I-SEM for wind: the market will now expose wind generators to balancing risk, and although this exposure may be cushioned by amendments to REFIT, these amendments have not yet been announced passive capacity payments regime is to be replaced by auction of Reliability Options financial instruments that are unlikely to be attractive to wind generators due to their intermittency 7

8 Challenges: Regulatory instability Announced and anticipated regulatory changes will have the effect of introducing three complex and overlapping auction processes: to be awarded Reliability Options under I-SEM capacity remuneration mechanism for contracts to supply system support services under the DS3 programme to win support under the post-refit support scheme These may run smoothly, but delivery risks cannot be ignored 8

9 Challenges: Planning Uncertainty Grid Splitting and the case of O Grianna New legislation? Site maximisation 9

10 Challenges: Maturing objectors While a maturing industry is a positive in terms of its implications for the depth of experience across the spectrum of advisors, this also applies to the depth of experience among objectors. There is little to suggest that Ireland s 40% renewables target was informed by wider environmental analysis (including community acceptance). Resistance to further development is mobilising, and in the event that the two proved irreconcilable, it is far from clear that the target would prevail over electoral concerns. 10

11 Challenges: Industry disruption Growing appreciation, across the energy sector, of the disruptive effect that wind is having (eg. underused CCGTs and gas transportation infrastructure) While the regulatory intention is for these assets to find new roles as DS3 service providers, this has not prevented calls for wind to pay its share of the stranded infrastructure costs Lag between (i) award of REFIT support and (ii) PSO costs hitting consumer bills; means that public appetite for the financial support of wind energy is difficult to accurately measure 11

12 Questions / Discussion? Eoin Cassidyecassidy@MHC.ie 12