The final Terms and Conditions for participation in the first auction under the Renewable Electricity Support Scheme (RESS) – Ireland’s new flagship support scheme for renewable electricity generators – were published on 27 February 2020.
We are pleased to see some movement – between the consultation version of the RESS 1 Terms and Conditions, and the final version – on the following points:
Criteria for RESS participation – Community: It has been confirmed that the proposed Renewable Energy Participation Scheme for citizen investors will not now be a feature of the first RESS auction. This eliminates a significant and uncertain legal, regulatory and administrative burden that would otherwise have been faced by participants. In addition, it is no longer necessary for Community-Led Projects to have a minimum of 150 shareholders.
Criteria for RESS participation – Independence: The evidence required to be submitted, in relation to project independence, has been simplified considerably. There is no longer a risk that it will be necessary to obtain declarations from the directors of banks and/or PPA counterparties. However, each applicant is required to provide a list of all entities to which it “or its Principal Owners” (a Principal Owner directly or indirectly owns or controls more than 30% of the applicant) have revealed “Pricing Information”. These provisions remain open to interpretation, and advice should be sought in order to determine the extent of an applicant’s obligations.
Under new ownership
Helpfully, the final Terms and Conditions accommodate the possibility of changes in applicant ownership between RESS qualification and RESS bidding. However, the identities of any potential new “future Principal Owners” need to have been included by applicants in their original qualification application, despite the fact that the acquisition or investment may not have been completed at that time. These constraints should be at the forefront of the awareness of buyers and sellers looking to contract for sales or investments involving potential RESS projects over this period.
There had been inconsistency – as between the consultation version of the Terms and Conditions, and EirGrid’s auction timetable – as to precisely when each project’s €2,000/MW Bid Bond was required to be posted. This confusion has been resolved and it is now clear that the bond is required at the time of applying for qualification.
Final Withdrawal Date
Another helpful new element is the addition of a “Final Withdrawal Date” mechanism, which allows an applicant to withdraw its application and recover its Bid Bond at any time prior to a withdrawal deadline – which falls shortly after the announcement of the provisional qualification results, but before the date on which the results of any reviews are announced.
A new definition of “Installed Capacity” has been added, which references the MWAC nameplate capacity of all of the “Installed Plant” for the RESS 1 Project and which applies to projects of all technology types. The definition of Installed Capacity is used for the purposes of the Metering obligations and for setting the minimum and maximum installed capacity of the RESS 1 Projects, and industry sources have flagged that, as defined, it creates some uncertainty in respect of the measurement of that capacity.
On the following points – where we had previously noted that improvements might be possible – the position adopted in the final RESS 1 Terms and Conditions remains the same as that in the consultation version:
“Cliff Edge” and Delay: it remains the position that extensions of time for events of Force Majeure are subject to an absolute long stop date of 31 December 2023, following which date the Implementation Agreement will terminate (and RESS support will be withdrawn) if Commercial Operation has not been achieved. Projects that are successful in the RESS auction therefore remain exposed to grid delays and any institutions lending to successful applicants will require material buffers in the programme to mitigate the risk. This will likely reduce the number of applicants for RESS 1
Strike Price – no indexation: it remains the position that the Strike Price that is applicable to a successful RESS project will not be adjusted, over the life of the RESS support, by any form of indexation
Negative Pricing: it remains the position that no RESS support will be payable, and the PPA off-taker will receive no relief, in respect of any period in which the price in the Day Ahead Market is negative
Criteria for RESS participation – Site control: it remains the position that the submission of a consent form, signed by the landowner, will be required – potentially creating additional leverage for landowners where its provision has not been expressly provided for in the existing option or lease agreements, and
“New Project” criteria: notwithstanding a potential concern that the definition of a “New Project” might not fully align with the “partial” repowering that is contemplated by the Renewable Energy Directive, this category has not been widened
The publication of the final form of the Terms and Conditions for the first RESS auction is a major and very welcome step in the facilitation of the next phase in Ireland’s electricity decarbonisation process.
The industry will now await with interest the next event – being the publication by EirGrid of the “qualification information pack”, including the final form of the statutory declarations that will be required from the directors of applicant entities, along with the opening of applications for RESS qualification. This had originally been due to occur on Monday 2 March 2020. EirGrid’s latest RESS 1 timetable now indicates that, along with most milestones in the RESS 1 programme, it has been delayed by one week. It will now occur on Monday 9 March 2020.