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.

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