What is the Climate Action Plan?

On 17 June 2019, the Irish Government published the 'Climate Action Plan' and an 'Annex of Actions' setting out a cross-sector suite of objectives and actions aimed at reducing Ireland's carbon emissions. The Climate Action Plan includes a number of new – and existing – measures that will have broad implications for the electricity sector.

Importantly for market participants, the Climate Action Plan incorporates many of the recommendations of the Joint Oireachtas Committee on Climate Action which were published earlier this year, in a report titled "Climate change: a cross-party consensus for action", suggesting that climate policy and regulation should enjoy relative consistency going forward.

Sizing the opportunity

The Climate Action Plan includes an ambitious target to deliver 70% of Ireland's electricity from renewable energy by 2030. In doing so, the Government has identified clear winners (wind, solar and CHP) and losers (coal and peat). In order to meet the forecasted growth in energy demand (including from Data Centres and Electric Vehicles), the Climate Action Plan envisages an additional 12GW of renewable energy capacity coming online by 2030. This represents a near of Ireland's current capacity.

The path to achievement includes:

  • Increasing carbon tax: Carbon pricing will remain a key tool for incentivising further increases in the build-out of renewable energy. Under the Climate Action Plan, carbon tax is expected to increase to at least EUR 80 per tonne by 2030
  • Phasing out fossil fuels: The Climate Action Plan spotlight's a necessary shift in strategy for the Government semi-state power producers. Bord na Mona will transition away from peat by 2028 and will be required to end coal-burning at Moneypoint power station by 2025
  • Deploying of renewable energy: The Climate Action Plan estimates that new build will be compromised of:
    • At least 3.5 GW of offshore renewable energy
    • Up to 1.5 MW of grid-scale solar energy; and
    • Up to an additional 8.2 GW of onshore wind capacity.
  • Facilitating Micro-generation: The potential long-term impacts of and support for distributed generation will be noted by energy developers and investors. Though it doesn't represent an immediate threat to the utility and supplier-lite model, the Climate Action Plan does include a renewed focus on micro-generation. A permanent ongoing support scheme which would enable individual homes to install their own generation and receive a price for selling excess electricity back to the grid will be put in place by 2021.

How do we get there?

The Climate Action Plan suggests that the next era of project development will kick-off in Ireland as soon as Q1 2020 once successful grid applicants (from ECP-1) know whether they have been successful in the first competitive renewable energy auction.

  • Implementing the Renewable Energy Support Scheme ("RESS"): The Climate Action Plan offers a definitive path forward with respect to RESS. The first highly anticipated auction is set to take place in Q4 2019 suggesting that specifics on the design and eligibility criteria are imminent. The Plan promises more frequency in RESS auctions and a guaranteed route to market for offshore in the second and third auctions. See further here: "The Climate Action Plan and Offshore Wind". The Climate Action Plan reiterates the Government's focus on increasing community participation as well as "community gain arrangements" but it is not explained how this will work; industry awaits the next instalment of RESS in this regard.
  • Scaling up Corporate PPAs: Beyond RESS, the Climate Action Plan specifically notes the funding opportunities for projects where they enter into Corporate PPAs. The Government anticipates that at least 15% of new developments will be contracted under Corporate PPAs by 2030, though it remains to be seen how widely adopted this funding approach will be.
  • Facilitating Grid Connection: The Climate Action Plan includes definitive timeline for the next round of grid applications under the Enduring Grid Connection Policy ("ECP") – offers are expected to be processed in Q3 2020. The Climate Action Plan also explains that the Commission for Regulation of Utilities (the "CRU") will undertake a review of hybrid connection requirements which are required to facilitation an increase in RES-E penetration.
  • Streamlining Regulations: The Climate Action Plan highlights a number of initiatives focused on streamlining regulations particularly with respect to planning. For example, the Department of Housing, Planning and Local Government is expected to publish the Strategic Environmental Consultation on Wind Energy Guidelines later this year with a view to finalising them in Q4 2019. The Plan also acknowledges that a more holistic consenting regime and grid connection framework is needed to facilitate the development of offshore projects. This will include prioritising the passage of the Marine Planning and Development Management Bill and ensuring that the implementation of new offshore grid connection policy lines up with the RESS auction time frames. See further here: "The Climate Action Plan and Offshore Wind".
  • Continuing Focus on DS3: To facilitate a higher penetration of variable renewable electricity by 2030 (both SNSP and average), the Climate Action Plan outs various steps that are being taken by EirGrid and the CRU in this regard. See further here: "Battery Storage Opportunities for Ireland 2019".
  • Increasing Interconnection: Following recent CRU publications on interconnectors, the Climate Action Plan underscores the Government's commitment to building further interconnection with the United Kingdom and France.

Conclusion: what to expect?

This Climate Action Plan, together with the policy initiatives and regulatory development that are running in parallel, will usher in a new wave of development activity in the Irish market from 2020 onwards.