Private Wires Consultation
The Private Wires consultation raises many issues, beginning with the practical challenges associated with the current legal framework for direct lines. We look at this further in our briefing: Private Wires: First Principles - Arthur Cox LLP. The consultation closes at 5.30 p.m. on 13 October 2023.
Market Revenue Cap
DECC published the draft legislation to require non-gas generators or intermediaries to pay the collection agent (EirGrid) their revenues above a Market Revenue Cap, as envisaged in Council Regulation (EU) 2022/1854, which we looked at here.
As the authority designated to implement the market cap, the CRU is consulting until 6 October 2023 on the approach to gathering information and assessing the market cap surplus (CRU/2024/03).
Feedback to DECC and the CRU will be important to ensure that both the bill and assessment methodology align with the Council Regulation (EU) 2022/1854 and that they are consistent with each other and capable of implementation in a practicable and fair way.
The draft legislation appears to give rise to some unintended consequences and so we anticipate it will need to be revised before being enacted.
Offshore Grid Connection Pathway (CRU2023/102)
The CRU is consulting until 22 September on proposed decisions on grid access for: (1) Phase 2 projects, and (2) Phase 1 projects that do not hold an ORESS 1 Notice of Award.
Obtaining a MAC, route to market and final planning consent are proposed as pre-requisites to requesting a full grid connection offer. The pathway for Phase 1 projects to proceed on a merchant basis involves submitting a planning application by the end of June 2024 and confirming a route to market by the end of July 2024.
Offshore Revenue Recovery Model for EirGrid (CRU/2023/105)
The CRU is calling for evidence until 29 September 2023 on a revenue recovery model for EirGrid as asset owner of the offshore grid, within the context of the PR6 regime. Two broad options are suggested: (1) separation, involving EirGrid being regulated as two separate entities, TSO and offshore asset owner, and (2) a new single entity regulatory regime.
In our view this decision was made by the Oireachtas when the Electricity Regulation Act 1999 was amended to vest EirGrid with the functions of offshore TSO and it is not clear to us how option 1 is compatible with the domestic legislative framework.
Carbon Border Adjustment Mechanism
The Carbon Border Adjustment Mechanism Regulation (EU) 2023/956 will ultimately require importers of in scope goods to the EU to buy CBAM certificates to reflect any difference in the price of carbon between the EU and the third country from which the goods are being imported.
An initial phase to transition to the full scheme involves reporting obligations and begins in respect of the period starting from 1 October 2023. An Implementing Regulation laying down reporting guidelines is now in force and the Commission has also published guidance, which is available from this page.
In scope goods include electricity. The EU ETS applies in the electricity sector in Northern Ireland pursuant to the Withdrawal Agreement, but it does not appear that any process to bring Northern Ireland within the CBAM under the Withdrawal Agreement has been carried out. In Ireland, Revenue indicates here that Revenue, as the National Customs Authority, and the Environmental Protection Agency, as the National Competent Authority, will work together to engage with all stakeholders to implement CBAM.
Fit for 55
Latest updates are:
- Renewable Energy Directive: The Parliament adopted the proposal for a Recast RED III. It will now have to be formally adopted by the Council before it becomes law. The Parliament’s press release is here and the text adopted will be available here.
- Regulation on Methane Reductions in the Energy Sector: The four-column document setting out positions of the institutions has been published. The next stage is informal trialogue discussions.
Green Deal Industrial Plan
Latest updates are:
- IME Regulation and Directive: Parliament adopted its position (following the report of the lead Committee) on the proposal to amend the IME Regulation and Directive. The next stage is trialogue negotiations with the Council. Further information is available here.
- REMIT Regulation: The lead Parliament Committee adopted its report of the proposal to amend the REMIT Regulation. Once adopted by the Parliament in plenary, trialogue negotiations can begin with the Council. Further information is available here.
- Critical Raw Materials: Parliament adopted its position (following the report of the lead committee) on the proposed Regulation on European Critical Raw Materials. Once adopted by the Parliament in plenary, trialogue negotiations can begin with the Council. Further information is available here.
Hydrogen Pilot Auction
An auction aimed at supporting renewable hydrogen production opens on 23 November 2023. The Commission published Terms and Conditions here. The auction will award up to €800 million to renewable hydrogen producers. The support will take the form of a fixed premium in €/kg of renewable hydrogen produced over ten years of operation, targeting the gap between the production costs and demand’s willingness to pay.
Alternative Fuels Infrastructure
26 projects will receive €352 million in funding to install alternative fuels infrastructure along the trans-European transport network . Further information is available here.
State of the Union
The annual EU State of the Union address is available here. There is a focus on strengthening European manufacturing and industrial capacity, as well as the supply of critical materials. President von der Leyen also stated that: “we will put forward a European Wind Power package – working closely with industry and Member States. We will fast-track permitting even more. We will improve the auction systems across the EU. We will focus on skills, access to finance and stable supply chains”.
The CEER updated guidance on Good Practice for Trustworthy Information on Green Offers and Consumer Protection against Misleading Marketing. Recommendations focus to a large extent on use of Guarantees of Origin, how these should be further harmonised at EU level, and how information about them should be communicated to customers.
ACER will decide by 5 January 2024 on a proposal to amend the congestion income distribution methodology to: (i) address unintuitive flows, and (ii) specify how income generated from the exchange of balancing capacity and sharing of reserves should be distributed among TSOs.
ENTSO-E invites promoters of transmission and storage infrastructure projects to submit projects until 16 October 2023 for assessment in ENTSO-E’s TYNDP. ENTSOG is consulting until 29 September on draft guidelines for project inclusion in its TYNDP 2024, and has also published a call for submissions for a hydrogen infrastructure map.
UK CLIMATE ACTION LITIGATION
Costs in Derivative action against Shell
We looked here at the case of ClientEarth v Shell in the UK, in which ClientEarth was unsuccessful in its application to continue a derivative action against Shell’s directors in relation to Shell’s emissions reduction targets and plan.
The High Court has now ordered ClientEarth to pay all of Shell’s costs ( EWHC 2182 (Ch)). This is a departure from the usual position under E&W court rules that a party will not normally be entitled to its costs of making submissions and appearing at any hearing at the prima facie stage unless invited by the court to do so. The High Court considered that it had been appropriate and proportionate for Shell to take these steps. The Judge “reached the conclusion that this is a case which is far from the norm for many reasons”, which are elaborated at paragraphs 27-31.
UK Carbon Budget
The High Court has ordered a rolled-up hearing of applications for judicial review by the Good Law Project, Friends of the Earth UK and ClientEarth challenging the UK’s Carbon Budget Delivery Plan. The NGOs’ press releases are here and here.
FURTHER DOMESTIC DEVELOPMENTS
ESBN consulted on a range of areas, including its 15-20% Flexible System Demand Strategy, published with the CRU Consultation on Demand Strategy. This states in relation to storage: “ESB Networks proposes to offer multi-year (indicatively 7-10+ years) contracts for the provision of large volumes of commercial-scale, location-specific, multi-hour-duration flexibility to address high demand, renewables oversupply and carbon abatement.”
Other areas in respect of which ESB sought views are market design strategy, domestic customer strategy, commercial customer strategy, behind-the-meter infrastructure strategy and power systems requirements strategy. Further information is available here.
DECC is consulting on a Renewable Heat Obligation until 29 September 2023. It is intended to incentivise suppliers of fuels in the heat sector to ensure a proportion of fuels they supply is renewable. It is intended to introduce the Obligation by 2024.
Memoranda of Understanding have been entered into between Ireland and the UK. They relate to ‘Cooperation in the Energy Transition, Offshore Renewables and Electricity Interconnection’ and ‘Cooperation for Natural Gas Security of Supply’. Further information is available here.
FURTHER CRU BUSINESS
Renewable Energy Communities
RED II defines ‘renewable energy community’ as a legal entity: (a) which, in accordance with the applicable national law, is based on open and voluntary participation, is autonomous, and is effectively controlled by shareholders or members that are located in the proximity of the renewable energy projects that are owned and developed by that legal entity; (b) the shareholders or members of which are natural persons, SMEs or local authorities, including municipalities; (c) the primary purpose of which is to provide environmental, economic or social community benefits for its shareholders or members or for the local areas where it operates, rather than financial profits. Article 22 sets out a number of obligations on Member States in respect of renewable energy communities, including that they shall provide an enabling framework to promote and facilitate the development of renewable energy communities.
The CRU is consulting until 13 October 2023 on how to define “in the proximity of the renewable energy project”. The CRU proposes that the proximity requirements are set by those in the community developing (or proposing to develop) a renewable energy project, and that the requirements should be established when formalising the REC as a legal entity through a set of rules or written constitution. (CRU/2023/101)
The CRU published the transmission network allowed revenue (2024) and Demand Transmission Use of System tariffs (2023-2024) (CRU/2023/104) and distribution network allowed revenue (2024) and Distribution Use of System tariffs (2023-2024) (CRU/2023/103).
In CRU/2023/104, the CRU welcomes the improvement in performance in some incentive areas, but states that there remains significant scope for improvement for the TSO, for example in System Non-Synchronous Penetration (SNSP), Renewable Dispatch Down & Renewable energy share in electricity. The CRU also notes the progress of transmission capex projects: there has been a 31% underspend in 2022 out of a total €254m allowance. The top 10 projects under the PR5 programme account for 46% of this underspend.
The CRU expects that the combined transmission and distribution adjustments will result in the average residential customer’s annual electricity bill decreasing by circa €6 in October 2023, largely as a result of the LEU rebalancing, outlined in CRU/2023/106.
Information on gas transmission tariffs for 2023/2024 is set out, including in relation to renewable natural gas transmission entry point tariff (CRU/2023/108).
The CRU published an update on the Estimated Annual Bills of domestic customers (CRU/2023/109).
Protection Measures for Households
The CRU published a suite of measures, Additional Customer Protection Measures for Household Electricity & Gas Customers. There are 15 new requirements set out from page 26 (CRU/2023/100)
Customer Switching and Price Comparison
The CRU observed a decrease in change of supplier in April-June 2023, with April showing the lowest switching since reporting began (CRU/2023/113). The CRU also instructed that price comparison websites should, where possible, allow customers to compare their legacy tariffs with current tariffs (CRU/2023/90).
The SEMC published a decision on contractual arrangements for Low Carbon Inertia Services, approving the TSOs recommendation. The TSOs are to now start the Request for Proposal stage and aim to award contracts in December 2023 (SEM-23-064).
The SEMC published:
- a consultation until 6 October 2023 on Code Modification CMC_16_23 on extension of New Capacity Impacted by Indexation. The SEMC is minded to reject the proposed modification to grant an inflationary extension period to New Capacity projects in the relevant Capacity Auctions in the time between raising of the Indexation Modification and the SEMC decision (deemed to be 343 days) (SEM-23-062),
- a decision on Code Modification CMC_15_23 amending timelines for posting Performance Securities for projects receiving extensions (SEM-23-069), and
- an amended timetable for the T-4 CY2027/28 Capacity Auction.
Information on quantities and prices for Round 24 is available (SEM-23-068).
2023/24 Tariff Year
The SEMC has published:
- Other System Charges tariffs (SEM-23-057)
- SEM tariffs and charges (SEM-23-058),
- SEMOpx Revenue Requirement and K-factor (SEM-23-059),
- the revenue allowance for SEMO (SEM-23-063).