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Investors focus on booming Irish renewable energy market as government sets ambitious new targets

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By Beatrice Bedeschi – Ireland is set to attract a fresh wave of investments in green energy in the coming years, on the back of recent regulatory changes and as the country looks to achieve ambitious 2030 renewable targets.

Ireland is aiming to reach 70 per cent renewable capacity in the generation mix by 2030.

In order to achieve that objective, the country is expected to add 5.8 GW of non-hydro renewable capacity over the next decade, reaching a total 9.6 GW by 2030, data analytics and consulting company GlobalData said in its ‘Ireland power market outlook to 2030’ report.

The rise in green generation capacity is expected to “open up a wide variety of investment opportunities and position Ireland as a leading exporter of power to the UK and mainland Europe” the report said.

“Ireland is behind in terms of renewable output compared to other European countries, and is now looking to catch up,” says Pavan Kumar Vyakaranam, power analyst at GlobalData.

Currently, Ireland generates most of its power from fossil fuels.

Thermal power accounted for 58 per cent of total installed capacity in 2018, of which 35 per cent was natural gas. Onshore wind accounted for 32 per cent of capacity, with the remaining 10 per cent being equally split between hydro and non-hydro renewables, GlobalData says.

Because of that Ireland looks on track to miss the target set for the period 2013 to 2020 for renewables by about one eighth and for cumulative emissions by about 5 per cent. 

In addition, the recent growth in emissions, particularly from industry, agriculture, and transport, is expected to put it on a trajectory to be over 25 per cent off reduction targets for the 2021-2030 period, the government said in its Climate Action Plan issued in June.

The plan contains, among other things, more stringent renewable targets, a commitment to the phasing out of coal and peat generation and plans to decarbonise the transport and agriculture sectors.

It also reiterates Ireland’s commitment to the Europe-wide 2050 net-zero emission target.

From sectors where Ireland has a binding commitment – which includes activities outside the Emissions Trading System (ETS) – a cumulative gap of 101 metric tonnes of CO2 equivalent emissions is to be closed over the period to 2030, the Plan stresses.

Auction scheme 

The plan “is a statement of the ambition of the Irish government to decarbonise the economy further,” says Russell Smyth, deal advisory partner at consultancy and accounting firm KPMG Ireland.

As part of that, the government introduced a new auction-based subsidy regime, the Renewable Electricity Support Scheme (RESS). This is expected to prompt “a new wave of investments in Ireland in renewable assets,” he says. 

“What’s interesting is that the new scheme will open the market to new renewable technologies,” adds Smyth.

While onshore wind currently accounts for most of the country’s renewable capacity, the new auctions are expected to focus on solar PV energy, as well as fostering growth in the nascent offshore wind sector.

“The government has identified [offshore wind] as a key sector and is looking to introduce specific support, such as dedicated auctions, licensing arrangements and new government task forces to ensure the offshore industry develops” Smyth said, adding “offshore wind is essential for Ireland to achieve the renewable targets.

“The auction scheme doesn’t have a specific budget, but rather a total capacity that it’s targeting to fund.”

First auctions are expected to be held later in 2019.

“We expect solar projects to take charge at the first auctions, followed by offshore wind later on”  says Vyakaranam. “As a floor price has not yet been disclosed, and as renewable technology costs keep falling, it’s still unclear whether auctions will be successful in awarding all the capacity, he said, citing cases of auctions held in other markets which saw projects being withdrawn as the price awarded was “too low to make the project viable.”

Smyth says: “Ultimately projects are going to bid at a price that they’re comfortable with, so I’m not concerned that they wouldn’t delivered a price that won’t work”, adding however that one concern is that “the auctions will see both offshore wind and solar competing” raising the issue of whether the price awarded would favour one technology against the other. 

“It’s still not clear how they’re going to be designed, but they should be broadly in line with the UK regime” adds Smyth. “Auctions are already attracting a lot of interest from international investors including large international investors in the onshore and offshore wind, as well as UK investors.” 

International, UK investors focus on Irish market 

Among the oversees investors focusing on the Irish power market, London-listed renewable investment fund Gore Street Energy Storage Fund is capitalising through investments in energy storage assets.

“Ireland has been a very good place to invest for renewables funds. This is driven by fundamentals around Ireland’s high growth economy, excellent wind resource and poor energy security,” says Gore Street’s CEO Alex O’Cinneide.

As government support looks set to increase the share of intermittent renewable generation in the energy mix, “that naturally leads to a greater and greater need for storage” to provide stabilisation to the grid, he says.

Battery storage technology has seen a dramatic decrease in costs recently, amid increased adoption of electric vehicles, which in turn has made batteries economically viable for power grid balancing services, he points out.

Gore Street holds a combined portfolio of 189 MW of storage assets in the UK and Ireland, and has the option to purchase an additional 200 MW of energy storage assets in Ireland.

In the Republic of Ireland and Northern Ireland, it is developing four battery projects which are expected to be under multi-year fixed and variable tariffs contracts from power grid operator EirGrid.

In addition to the auction schemes, economic support to renewable capacity might come in the form of corporate Power Purchase Agreements (PPAs).

“Ireland has limited corporate PPAs, as previous subsidy regimes were already providing the market with the needed funding. But going forward, there are going to be competitive auctions and not all capacity will be able to secure subsidies, so some project will be more interested in finding corporate PPAs,” says Smyth.

James Goldsmith, senior consultant at Cornwall Insight Ireland, says: “Ireland possess the fundamental building blocks for a sustained CPPA market to develop. The presence of environmentally conscious corporate buyers, an active renewable energy development community and relatively few legislative hurdles should make for a significant churn of deals flowing through.”

The government’s Plan states as much as 15 per cent of renewable capacity should be contracted to corporates by 2030.

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