Government publishes Ireland’s Climate Action Plan 2023

This article is an extract from our Energy Spectrum Ireland service, which is a monthly publication and weekly news bulletin covering key developments in the Irish and Northern Irish energy sectors. If you are interested, we are currently offering a free trial which you can sign up to by filling in this form.

On 21 December, the government issued its Climate Action Plan 2023 (CAP23), providing the second annual update to Ireland’s Climate Action Plan 2019. CAP23 incorporates the carbon budgets and sectoral emissions ceilings and sets a roadmap to halve emissions by 2030 and reach net zero no later than 2050, as committed to in the Programme for Government.

When considering the necessary pathways to implement and deliver Ireland’s emissions reduction targets, CAP23 highlights the need to implement all measures outlined in the sectoral emissions ceiling analysis (which result in emissions reductions of approximately ~43%) and additional, not yet specific, measures to deliver the unallocated per annum savings of up to 5.25 MtCO2eq. To this end, the government considers that the areas of renewable generation, the retrofitting of residential and commercial buildings, a modal shift in transport and fleet electrification, changes to land use, and efficiency improvements in agriculture are the most important for the decarbonisation of Ireland. Preliminary analysis in the report suggests associated measures to achieve the necessary emissions reduction will require a total of around €119bn incremental and redirected capital investment in low-carbon technologies and infrastructure in the period 2022 to 2030, roughly divided cross the transport (~€42bn), electricity (~36bn), and buildings (~€31bn) sectors.

The report states that the delivery and governance architecture of CAP23 has been strengthened to better reflect the scale and nature of the challenge ahead. This includes building on the existing foundation of policy development, governance, and reporting, and upgrading processes, structures, and public sector capacity required to deliver the plan. Two key areas of change include:

• Strengthening the role of the Climate Action Delivery Board to ensure better alignment with the Cabinet Committee on the Environment and Climate Change and enable cross-governmental ownership of the plan.

• Aligning the Climate Action Plan’s delivery cycle to an annual rhythm to match other cross-government processes.

CAP23 asserts that the electricity sector faces a significant challenge to meet its requirements under the sectoral emissions ceilings. To meet the 2030 target, the government will rollout measures to accelerate and increase the deployment of renewable energy to replace fossil fuels (Figure 1), deliver a flexible system to support renewables and demand, and manage electricity demand.

When considering industry, the government outlines that it will implement measures and actions including the electrification of new and current manufacturing processes to displace the use of fossil fuels where possible and as soon as possible, to utilise biomass, and low and zero emission gas as key fuels for the decarbonisation, and to develop policies for hydrogen, and carbon capture and storage for the third carbon budget period.

To reduce commercial and public building emissions by 45% and residential building emissions by 40% by 2030, the plan details provisions to support the retrofitting of 120,000 dwellings to BER B2 by 2025, rising to 500,000 by 2030, the rollout of heat pumps with targets for 2025 and 2030, and the generation up to 0.8TWh of district heating by 2025 and up to 2.5TWh by 2030.

The government has also revised its CAP21 goals higher in the transport sector to meet a higher level of ambition. CAP23 outlines several targets, actions, and measures to support the sector’s decarbonisation including a 20% reduction in total vehicle kilometres, a reduction in fuel usage, and significant increases to sustainable transport trips and modal share.

Our Insight

In this section, our Irish energy consultants comment on what this means for different parts of the market, and what sort of impact it may have.

Assets

The increase in renewable energy targets further boosts demand for the provision of solar and wind assets. The offshore target is noted as 5GW, with a further 2GW of offshore generation earmarked for green hydrogen production, reflecting planned grid capabilities for integration of offshore wind and potentially infers co-location of wind and hydrogen offshore. Decarbonisation of space heating has also attracted greater attention with targets set for heating provided by district heating. Potential revenue streams exist for asset owners in district heating, particularly for data centres and hydrogen producers. Risk factors exist for the realisation of targets, domestically with major facilitation by government needed in large-scale deployment of renewables, and internationally with growing demand on critical raw materials predicted to cause supply chain pressure.

Impact: Positive

Eóin O’ Donnell            

Wholesale

The recognition that new gas is required to ensure adequate margin on the system suggests that the power prices will continue to be impacted by global gas prices into the medium-long term. However, the EU are about to launch a consultation on wholesale market design with one of the political objectives seeming to be the uncoupling of power prices from gas. The other thing to note is that the government has reiterated their commitment to the electrification of the transport sector and have introduced a 2025 target for retrofitting of built environment so we may start to see material changes to the nation’s demand profile before 2030.

Impact: Positive

Ruth Young    

Retail  

Some of the key areas identified by the government in CAP23, namely renewable generation, the retrofitting of residential and commercial buildings, and a modal shift in transport and fleet electrification, will directly impact the retail sector. While the push towards renewables will help dampen the current high prices and tricking that effect down to consumer bills, electrification of transport and perhaps heat (down the line) will need retail suppliers to focus on meeting this increase in demand. The government also plans to introduce a Green Electricity Tariff by 2025 to incentivise renewable energy, and support at least 500MW of community owned renewable assets.

Impact: Positive

Ratnottama Sengupta

Large Energy Users

Included in the CAP23, the CRU are actioned to publish a Demand Side Strategy to facilitate the target of 15-20% flexibility by 2025 (20-30% by 2030). Although this includes domestic DSR with time-of-use tariffs, large energy users are expected to make the largest contribution to this target. This incentive, alongside the reform of system services will further mitigate the barriers for large energy users to participate in the flexibility market. Large energy users should follow these incentives closely as there is a potential for new revenue streams.

Impact: Positive

Phoebe Nolan  

Regulation and Policy           

It is good to see a more detailed CAP23 update that highlights specific sectors, targets, and industries that are in need of changing. The CAP23 estimates that Ireland will need ~€119bn to fund the decarbonisation transition. This seems like a robust budget but only time will tell what the actual costs end up being. Additionally, it is exciting to see that the CAP23 has increased its transport targets compared to the CAP21 but unless immediate action is taken to make progress towards those targets, they may be too ambitious.

Impact: Positive

Catherine Edwards    

If you enjoyed our insights…

Our Energy Spectrum Ireland service is a paid-for subscription which consists of a weekly news bulletin and a monthly publication which dives deeper into key market, regulatory, policy and transactional developments in the Irish and Northern Irish energy sectors.

This month,

  • our Policy section covered the government’s Climate Action Plan 2023
  • our Regulation section explored Forward Work Programmes issued by the SEM Committee and the UR. We also look at CRU’s 2022 customer survey report.
  • our Industry section summarises the Sustainable Energy Authority of Ireland’s annual analysis on energy trends, targets, policies, and actions.
  • our Markets page provides data on the volatile movements seen through December

Sign up for a free trial, and a member of the team will be in touch

Alternatively, we are always happy to speak to you directly, if you would like to speak to our team, please contact Magdalena on m.jennings@cornwall-insight.com

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