RESS 3 consultation: DECC is listening, but the true test will be in the detail of the solutions incorporated 

The Department of the Environment, Climate and Communications (DECC) published the consultation for the third round of the Renewable Electricity Support Scheme (RESS 3) on 28 October 2022. Some of the issues drawn out in the consultation is a testimony that DECC has its ears on the ground and is listening to the developers, cognisant of the fact that moving un-predictable and un-manageable risks away from the developers in the auction will ultimately result in a lower cost to consumers

Our report earlier this year, published with Wind Energy Ireland, emphasised the importance of insulating the bidder from risks they could not manage, but which could be managed by other entities; but only to the extent that it translated to savings for customers. Amongst the issues highlighted in the consultation are our top four recommendations, around:

  • No cap on compensation for dispatch down due to curtailment and over-supply
  • Indexation to be included
  • Extending the period of support, and reducing the risk of merchant tail
  • Locational solution to constraints, a nodal cap on compensation was originally recommended.

Removing the cap on compensation for curtailment and including over-supply in the compensation payments is key, especially when renewable targets are high, leading to high projections for dispatch down due to these two factors in the future.  Along with onshore wind, other technologies such as battery hybrids and solar need to remain competitive to ensure a balance in the energy mix. Taking away the burden of projecting curtailment and over-supply adequately through the suggested Unrealised Available Energy Compensation (UAEC) method will result in more representative bids.

Partial indexation and not full indexation is being considered; a case can be made for both methods, but partial indexation may be a more exact solution, though it may add on to administrative costs and efforts. However, these costs will be negligible when compared to the possible savings for consumers from a lower bid price.

There is a case to be made for extending the period of support, especially in a volatile merchant market where the dynamics are hard to pin down, especially in the long term. This is one of those considerations that needs to be evaluated with a firm view on ultimate consumer benefits, based on multiple market outcome scenarios.

The most difficult solution to incorporate is the locational signals and compensation for constraints, which is ultimately supposed to be addressed in the solution in line with Article 13 of the Electricity Regulation (Clean Energy Package). DECC is proposing locational solutions, for example, caps, in its consultation, but the actual method incorporated will be a large decider of auction dynamics.

So, while DECC seems to be on the right path and asking the right questions, the final RESS 3 T&Cs and the detailed incorporation will be a decider in investor confidence, the way forward for RESS and the ultimate burden that consumers will have to bear for de-carbonising Ireland’s electricity mix.

Related thinking

Regulation and policy

Calm after the storm although transition begins to lag | 2023 year in review

This year saw a return to relative calmness after the energy shocks of last year, while governments are playing an increasing role as the rate of new renewable generation lags. Spot pricing was subdued compared to last year, with no significant unexpected outages that caused sustained price spikes. Higher levels...

Announcement

Offshore wind now appears in latest ISP

The ISP also forecasts that greater flexible gas generation is needed From Cornwall Insight Australia's Energy Market Alerts service Offshore wind officially appears in the draft 2024 ISP due to state-based offshore wind targets. Figure 1 below from our latest Energy Market Alert, shows the variance in forecast generation between...

Net zero corporates and ESG

Race to net zero: Rebuilding investor confidence in the UK

In our recent insight paper “Race to net zero: Rebuilding investor confidence in the UK”, published on 30 November, we discuss how increased macroeconomic pressures and rising international competition for capital have impacted the UK’s ability to secure investment in renewables and maintain momentum towards net zero. We also investigate...

Announcement

Capacity Investment Scheme boosted from 6GW to 32GW

From Cornwall Insight Australia's Energy Market Alerts service Last Friday, the Commonwealth announced a major boost to the Capacity Investment Scheme, with the scheme now expected to deliver 32GW (combination of 9GW firming capacity and 23GW renewable generation) – up from 6GW. Cornwall Insight Australia has released an Energy Market...

Low carbon generation

De-risking renewable development: CI RESS Model inspires policy changes in RESS 3 T&Cs  

Last year, we partnered together with Wind Energy Ireland (WEI) to produce a report titled “Improving Revenue Certainty and Risk Allocation for New Renewable Generators”, which explored potential auction policy changes for the RESS auction that would help de-risk renewable investment for developers and generators. At the heart of this...

Net zero corporates and ESG

Long-term regulatory and policy changes needed to avoid stalls to business decarbonisation

In light of the financial pressures faced by businesses from rising inflation and interest rates, tight supply chains and labour markets, alongside high energy bills, there is a high chance corporate investment in decarbonisation could be in trouble. In Cornwall Insight's latest Insight paper “Business net zero: Making progress in...

Commercial and market outlook

Winter 2023-24 price cap forecasts fall further below 2022-23 EPG, but long-term prospects remain uncertain

The predictions for the Default Tariff Cap in this piece are out of date, please click here to find our latest forecasts and commentary on the cap. Our latest forecasts for the Default Tariff Cap (price cap) have shown energy bill predictions for a typical household1 have fallen to £3,208...

Commercial and market outlook

Tales of the unexpected: what’s happening with gas prices

The gas sell-off for contracts relating to this winter/spring & coming summer has continued in the last few days. On January 16th alone, contracts closed down c15%-17% on gas contracts for this spring and through into summer. This is despite some analysts predicting that gapping-up would occur on the promise...