On 4 February 2019, EirGrid published its final recommendation paper on DS3 Volume Capped Contracts which has subsequently been approved by the Single Energy Market Committee (SEMC) on 8 February 2019. This represents an opportunity for up to 140MW of new high availability technology (envisaged to primarily comprise battery storage) being contracted by September 2019.
Whilst the specific text of the Volume Capped Contracts was not released with the final recommendations and decision paper (contracts are subject to further legal review and will be finalised ahead of the tender process), some high level features of the Volume Capped Contracts are apparent from the final recommendations and SEMC decision.
The maximum size of project connected at a single grid connection point is 50MW.
Each volume capped contract will be for a maximum fixed term of six years, subject to a longstop of 31 August 2027. Projects which achieve go-live earlier than 1 September 2021 will not benefit from a longer term and projects which achieve go-live later than 1 September 2021 will have a contract term of shorter than 6 years.
Service provision is required by 1 September 2021 (effectively allowing a two year procurement and construction programme for successful applicants).
There will be no requirement for bid bonds as part of the auction process but performance bonds will be a requirement at contract execution stage in order to incentivise service delivery by 1 September 2021. The recommendation paper states that the SOs have no objection in principle to posting of collateral by other acceptable means (e.g. cash deposit). Notably the SOs are also reviewing the credit rating requirements for bond providers and also considering flexibility in relation to changes in bond issuers.
No inflationary adjustment will apply to payment rates under the contract – applicants are invited to reflect their estimate of inflation in their bid price.
Consistent with previous SEMC decisions, the final recommendations and decision paper clarify that service providers with non-firm connections will assume risk of network unavailability. Accordingly, in the event of a network outage which prevents an otherwise available unit from fully providing service(s), the service provider will be paid for service(s) up to the higher of the level of its firm connection and the level allowed by the network constraint.
The proposed five day scheduled outage allowance can be carried over from calendar years, to the extent there are unused days. Outage days cannot be split into sub-periods (e.g. a 12 hour outage will be treated as one day). Five day scheduled outage period does not count against a provider's availability performance scalars.
An indicative procurement timeline is set out in the recommendations paper (as set out below). The procurement process will be structured as a two stage process comprising pre-qualification following which applicants, who have satisfied certain contractual and technical pre-requisites, may enter the auction. Winning bids will be ranked based on price (the recommendations paper addresses the question of potential tie breaks in pricing and a number of measures have been considered to mitigate against tie-breaks occurring, including requiring bid prices to be expressed to the nearest cent). The auction bidding process is scheduled for May / June 2019 with contract execution on or before 1 September 2019.