Target 2030 - The Renewable Electricity Support Scheme for Northern Ireland
Following a consultation in February 2023, the Department for the Economy (‘the Department’) published a new high-level design support scheme this week for renewable electricity in Northern Ireland (‘the Scheme’). The publication outlines a high-level design of the new Scheme, designed to facilitate investment in renewable projects in Northern Ireland and offer greater price protection to consumers.
The Scheme hopes to grow the green economy in Northern Ireland in line with the 2030 target of reaching 80% renewable electricity, set by the Climate Change Act (Northern Ireland) 2022. Figures show that only 45.8% of total electricity consumption in 2023 in Northern Ireland was generated from renewable sources, showing a clear need for rapid development in advance of 2030. By offering a route to market for developers, the Scheme aims to boost investment in the renewable sector and achieve the climate targets.
Key points
The Scheme follows the ‘Contract for Difference (CFD)’ approach, as previously adopted by the UK in 2014, which has been historically successful at advancing renewable generation and is a widely understood by developers within the market. Other key features of the scheme include:
1. Contract length
The Scheme sets the contract length at 15 years, as adopted by the UK and Republic of Ireland.
2. Auctions
Auctions are intended to take place bi-annually with plans for two auctions in advance of 2030, namely in 2025/6 and 2027. Further analysis will be carried out to assess the feasibility of this auction roadmap in line with climate targets.
3. Minimum project size
The minimum size of eligible projects is yet to be confirmed. The analysis carried out so far suggests a minimum size of 5MW, however, there is an industry preference to reduce this and support smaller generation projects in Northern Ireland.
4. Price mechanism
A ‘Pay as Clear’ price mechanism will be adopted as a more attractive mechanism for investors who will receive the price of the highest accepted bid in the auction.
5. Strike price
The strike price will be 100% linked to inflation which will provide more certainty to the market and better value for consumers. Further analysis will be carried out to establish the appropriate index.
6. Dispatch down compensation
Dispatch down compensation is a key consideration of the Scheme which could provide greater market certainty regarding oversupply and curtailment. The implications of such compensation will be subject to further analysis in the coming months.
7. Offshore wind
Offshore wind is currently included as an eligible technology within Pot 3 of the proposed Scheme, however, this will be subject to change as the timeline for the delivery offshore wind continues to be a working progress. Regardless, offshore wind will continue to be considered as the Scheme evolves to assist with the development of a route to market for offshore delivery.
Next steps
The high-level design published by the Department represents a starting point for this Scheme, with further analysis to be carried out on its sustainability and capability of meeting the 2030 target. Technical modelling will be used to shape the final auction design and a financial impact assessment will be carried out to assess the full implications on consumers.
The Department will continue to develop the design of the Scheme throughout 2024, in cooperation with the organisations that will be responsible for administering and regulating the Scheme. It should be noted that once the design is finalised, the Scheme will be subject to State Aid approval.
Overall, the proposed Scheme is a welcomed development in the renewables sector in advance of the 2030 target, and we look forward to its development over the coming months.
For further information in relation to this topic, please contact any member of the ALG Belfast Energy & Natural Resources team.
Date published: 12 April 2024