Connection delays may scupper 16 wind energy projects
Projects need to be up and running by March 2020 to qualify for renewable energy schemes
Banks co-funding these projects are worried that if they go ahead and build these wind farms and the March deadline is missed, then they do not qualify for REFIT scheme. Photograph: Simon Dawson/Bloomberg via Getty Images
A total of 16 wind energy projects – with full planning permission and grid connection offers – “are at medium or high risk of not being built”, the Irish Wind Energy Association has warned. It represents some €800 million in investment due for completion by 2020 – €200 million of which is already spent.
The problem is arising because connection dates project developers have been offered are all for late 2019, according to IWEA chief executive Dr David Connolly. To qualify for renewable energy feed-in tariff (REFIT) schemes, they need to be built, connected and exporting electricity by March 31st, 2020.
“Unfortunately, due to the amount of asks on them and their own capacity, ESB Networks are running five and six months behind in connecting projects,” he said.
Banks co-funding these projects are worried that if they go ahead and build these wind farms and the March deadline is missed, then they do not qualify for REFIT and the financing of the projects no longer makes sense.
“As a result, they’re actively considering whether to go ahead or not,” Dr Connolly said.
In recent weeks one project lost its funding and had to find another backer, while a second project has reduced the size of the wind farm, he confirmed. Some 300MW of capacity is at serious risk, and 100MW at medium risk – representing 10 per cent of the overall Irish wind fleet.
For project managers it’s an anxious time as that final element is out of their hands, Dr Connolly said. “It requires everything to go right, when a lot of things can go wrong.”
With the ESB Networks factor of most concern, the deadline was in a winter period, when other delays can come into play such as bad weather, he noted. For some investors, this meant “the risk of penalty is just becoming too severe”.
IWEA is looking for a grace period to allow wind farms with a connection date in the second half of 2019 to qualify for REFIT “so long as they connect and export before the end of 2020”. They have raised the issue with Department of Communications, Climate Action and Environment (DCCAE) which oversees REFIT.
It sent a letter to then-minister Denis Naughten in August with a briefing note including supporting letters from two banks funding projects and a legal opinion confirming the minister had the authority to make this change.
This may have considerable financial implications for the State as it has legally-binding renewable electricity targets to achieve by 2020, or incur substantial recurring compliance costs. If these projects don’t get across the line, the worry is that the chances of hitting a 40 per cent target are “pretty remote, as well as losing out on millions of euro in investment”, Dr Connolly added.
Recent Sustainable Energy Authority of Ireland (SEAI) analysis had shown wind energy had made the most significant contribution to that target, he said, while also confirming it is likely to be missed. While the Minister for Environment had said the 40 per cent target was assured, “in our view that is not the case, in light of the SEAI forecast”.
A DCCAE spokesman said REFIT schemes, funded by a public service obligation levy on electricity consumers, were designed to provide financial certainty to renewable electricity generators to help meet Ireland’s binding EU 2020 renewable energy targets.
“The schemes have in-built deadlines designed to incentivise projects to become operational and maximise their contribution to meeting Ireland’s 2020 renewable energy targets, in accordance with the methodology set out in the Renewable Energy Directive,” he said.
A number of extensions to both the REFIT 2 and REFIT 3 deadlines were granted in recent years within state aid rules, particularly to facilitate significant volumes of projects facing technology-specific delays in planning and connection processes and meeting financing timeframes originally set out in the REFIT terms and conditions.
All efforts are being made to maximise renewable projects connecting to the grid as soon as possible
“The Department is working closely with ESB Networks, EirGrid and the Commission for Regulation of Utilities to ensure that renewable electricity projects are connected as soon as possible to the electricity grid and that the current deadlines are met in order to maximise their contribution to the 2020 target,” said the spokesman.
Under EU rules for measuring renewable energy contributions, it is significantly more valuable to connect renewable electricity projects in 2019 than 2020 in the calculation of the overall 2020 targets. “All efforts are being made to maximise renewable projects connecting to the grid as soon as possible in 2018 and 2019,” he added.
The policy focus was moving to a competitive framework for the support of renewable electricity projects, “which are anchored in robust community engagement” as set out in the high-level design of the new Renewable Electricity Support Scheme (RESS).
The RESS was approved by Government in July and is expected that the first renewable electricity auctions will take place in 2019. It has been designed to deliver Ireland’s contribution towards an EU-wide renewable energy target of 32 per cent out to 2030, within a competitive auction-based, cost-effective framework and underpinned by strong community participation requirements.
Private sector investment
It was important that Government “does not crowd out private sector investment through extending subsidy schemes, particularly at a time when corporate contracting of renewable energy is becoming an increasing feature of the global energy transformation”, the spokesman said.
A request for a grace period under the REFIT 2 scheme was, however, being being examined by the department and would take into account the available evidence and impacts on the 2020 targets. “This will shortly go to the Minister for decision,” he confirmed.
ESB Networks said it was committed to working with customers to deliver connections in line with connection agreements. “The nature of the wind industry, and the sometimes complex planning for connections, means that delivery dates for a minority of projects do indeed extend into the second half of 2019,” a spokesman acknowledged.
“However, ESB Networks’ project delivery plans do not predict late delivery that would go beyond these dates. Across 2018 and 2019, ESB Networks expects to connect 58 projects, accounting for over 900MW of renewable generation,” he added. “Our focus is on delivering these new customer connections, and playing our role in transforming Ireland’s energy future.”