KEY DEVELOPMENTS

Onshore Renewable Electricity Support Scheme: Fourth Auction

The provisional timetable for the RESS 4 auction is available. The qualification information pack will be published on 1 May 2024 and final auction results are expected in late September 2024.

Day-Ahead System Services Auction ("DASSA")

As part of Future Arrangements for System Services (a condensed overview of which is here), EirGrid is consulting until 10 May 2024 on the design of the DASSA. Key proposals are summarised at page 5 and include the elements set out below.

  • The DASSA will initially procure reserve services on an all-island basis.
  • The DASSA will take place after the Day Ahead Market and before the first day-ahead Balancing Market Long-Term Schedule. It will be cleared on a pay-as-cleared basis per Trading Period (30-minute intervals).
  • A DASSA Order, and associated commitment obligation, will be allocated to auction winners for each service for each Trading Period. It is proposed to have performance incentives and scalars.
  • Secondary trading will take place after the DASSA results are published and up to 90 minutes before the relevant Trading Period.
  • Where service volume requirements are not fully met by DASSA Order Holders, an ex-post reconciliation mechanism, the Final Assignment Mechanism, will be used to remunerate service providers who were available to meet volume requirements, on a merit order basis.
  • Service providers will be required to register with the TSOs and accede to the System Services Code. Settlement for the DASSA arrangements will take place monthly in arrears.

System Services: DS3 Tariffs

EirGrid is consulting until 26 April 2024 on DS3 tariffs. The consultation paper states that the TSOs are proposing one or more of the following options:

  • reduction in the Temporal Scarcity Scaler,
  • reduction in tariffs for Reserve Services, and/or
  • ceasing procurement of certain system services from the next procurement gate.

The TSOs also seek information to assist in determining whether they should increase the reactive power tariff to encourage more volumes from low carbon providers.

EU DEVELOPMENTS

Legislation

  • Energy Performance of Buildings Directive: The consolidated text of the Directive amending the EPBD is available. Once formally adopted by the Council it will be published in the OJEU and enter into force 20 days later.
  • REMIT Regulation: The Council adopted the Regulation updating the REMIT Regulation to improve protection against manipulation of wholesale energy markets. Once signed by the Presidents of the Parliament and Council, it will be published in the OJEU and enter into force 20 days later. Further information is available here.
  • Green Claims Directive: Parliament adopted its position on the proposed Directive, which would impose obligations on companies in relation to marketing claims and penalties for breach of obligations. Development of the Directive will continue after the European elections in June 2024. Further information is available here.
  • Nature Restoration Regulation: The consolidated text of the draft Regulation is available, and the last step is formal Council adoption. However, it has been reported that the Council Presidency was unable to secure a majority vote. If passed, the Regulation would establish targets to restore certain habitat types to good condition. It would include provisions relevant to deployment of renewable energy infrastructure, as well as the built environment.
  • Industrial Emissions Directive: The consolidated text of the proposal to amend the Directive is available. Once formally adopted by the Council, it is expected to be published in the OJEU and enter into force 20 days later.
  • Critical Raw Materials Regulation: The Council adopted the Regulation to establish a framework to ensure a secure and sustainable supply of critical raw materials. Once signed by the Presidents of the Parliament and Council, it will be published in the OJEU and enter into force 20 days later. Further information is available here.

Delegated / Implementing Legislation

  • Energy Efficiency - Data Centres: We previously referenced Article 12 of the Recast Energy Efficiency Directive, which imposes obligations on owners and operators of data centres, and that the Commission had invited feedback until 15 January 2024 on a draft Delegated Regulation on the energy efficiency of data centres. The Commission has now adopted the Delegated Regulation on the first phase for establishing an EU-wide scheme to rate the sustainability of EU data centres. It requires data centre operators to submit information as against performance indicators to the European database by 15 September 2024, 15 May in 2025 and on subsequent dates each year. Further information is available here.
  • Renewable fuels of non-biological origin: The Commission adopted a Delegated Regulation to amend Regulation (EU) 2023/1184, which sets out production rules, in order to align terminology with the revised Renewable Energy Directive.
  • Compliance of fuels with the Renewable Energy Directive: The date for accreditation or recognition of certification bodies under Implementing Regulation (EU) 2022/966 has been extended to 1 January 2025 by a Commission Implementing Regulation.
  • Cybersecurity: The Commission adopted a Delegated Regulation under the IME Regulation which sets out a network code on cybersecurity for the electricity sector. Further information is available here.

Electricity

  • SEM integration: The Core Capacity Calculation Region (CCR) will include the Celtic Interconnector once it becomes operational. The formal decision is available here. ACER has also amended the methodology for intraday flow-based capacity calculation in the Core Region.
  • TYNDP – CBA Implementation Guidelines: ENTSO-E published an updated version of the guidelines. Further information is available here.
  • Grid: ACER and CEER made recommendations around anticipatory investment in grid (in the context of the Commission's Grid Action Plan). They include improving coordination and information exchange among users, operators and regulators, and making improvements around identifying transmission system needs. The paper sets out comparative information across Member States. A recent high-level roundtable, summarised here, considered common challenges requiring political leadership and forward looking engagement with regulators.
  • Markets: ACER's report on 2023 wholesale market trends is available. A report from the Commission to the Parliament on energy prices is also available.
  • REMIT: Updated guidance on transaction reporting is available, with the aim of improving reporting of LNG supply contracts and power purchase agreements.
  • Regional Coordination Centres: The first monitoring report on RCC reporting obligations is available. RCCs will in the future report on further tasks as methodologies for those tasks are finalised.
  • Risk-preparedness: ACER amended the methodology for identifying regional electricity crisis scenarios to be followed by competent authorities in risk-preparedness planning.
  • Pumped storage: One of Europe's largest energy storage facilities is expanding with assistance of EIB lending. Read more about the Kruonis hydroelectric power plant in Lithuania here.
  • Smart power grid: Spain is to invest €1.44 billion in smart power grid development and expansion, with the assistance of EIB lending. Read more here.
  • PPAs: ACER seeks experts by 19 April 2024 to join a group on PPAs, to advise on the need for standardised PPA contracts.

Gas

  • Demand reduction: The Council made a Recommendation to Member States on continuing demand reduction measures for gas. Further information is available here. ACER and the CEER have also published the second part of a study on the impact of gas storage regulations.
  • Markets: ACER's report on 2023 wholesale market trends is available. A report from the Commission to the Parliament on energy prices is also available. The outlook for 2024 has improved but some emergency measures have been prolonged to address remaining risks.

Carbon

  • Progress: The Commission reported that last year's emissions under the EU ETS show the most significant annual reductions since launch of the ETS in 2005 (15% down in 2023 compared to 2022, or 47% below 2005 levels, viewed as good progress to the 62% target in 2030). Read more here.
  • EU ETS: A Corrigendum has been published to the Directive which recently amended the EU ETS Directive (consolidated here to 1 March 2024).

Offshore Development

  • Defence: Efforts to foster coexistence between defence activities and offshore renewable development are underway, reported here by the European Defence Agency.

Climate

The Commission's Communication to the other EU institutions on managing climate risk sets out steps needed to ensure that, in the face of worsening climate risks, the public and businesses can rely on the EU and Member States to maintain societal functions and continued access to basic services. It seeks to clarify who is responsible for making difficult choices and taking action, and how the EU can get ahead of climate impacts. It states that preparedness and resilience must be factored in to EU and Member State action by default across policy areas.

On the international front, the European Council agreed conclusions to bolster climate and energy diplomacy and a Joint Communication on a new outlook on the climate and security nexus. Further information is available here.

Supply Chains

The Commission's Communication on Advanced Materials for Industrial Leadership sets out a strategy to enhance EU competitiveness in materials renewable energy, batteries, zero-emission buildings and semiconductors. Recent developments in supply chain collaboration include launch of an Enhanced Dialogue with Japan to facilitate information sharing and collaborative research and an EU-Norway strategic partnership to develop land-based raw materials and battery value chains.

CLIMATE ACTION LITIGATION

Appeal in Milieudefensie v Shell

In June 2021, we looked at the judgment in Milieudefensie v Royal Dutch Shell, a first example of a private company being ordered to take action to comply with climate targets to vindicate citizens' rights. The Hague District Court in the Netherlands agreed with NGOs that Shell's emissions contribute to climate change and create risks that impinge on human rights under international law and engage the "the unwritten standard of care" in the Dutch Civil Code. The Court ordered Shell "to limit or cause to be limited the aggregate annual volume of all CO2 emissions into the atmosphere due to the business operations and sold energy-carrying products of the Shell group to such an extent that this volume will have reduced by at least net 45% at end 2030, relative to 2019 levels".

It has been reported (for example in the FT) that the hearing of Shell's appeal has begun, and that lawyers for Shell will argue that there was no legal basis for the order and that the Court overstepped its remit.

Green Claims

A Dutch Court ruled that KLM's claim to be committed to the goals of the Paris Agreement was among statements that were misleading and therefore unlawful. Overall, 15 of the airline's statements were found to be misleading. Press reports are available in the FT and Guardian and ClientEarth's press release is here.

Judgment in Portuguese Children and Swiss Elders' Cases

The European Court of Human Rights ruled that Article 8 of the Convention on Human Rights encompasses a right to effective protection by State authorities from the serious adverse effects of climate change on lives, health, well-being and quality of life. The Court held that there had been a violation of the right to respect for private and family life and of the right to access to the court. The Swiss Confederation had failed to comply with its duties under the Convention concerning climate change. Find out more here.

FURTHER DOMESTIC DEVELOPMENTS

Future Investment

The Future Ireland Fund and Infrastructure, Climate and Nature Fund Bill is available on the Oireachtas website. The Bill would establish:

  • a Future Ireland Fund to support, in a consistent and sustainable manner, State expenditure in 2041 or any year thereafter, and
  • an Infrastructure, Climate and Nature Fund to support State expenditure (a) in 2026 or any year thereafter, where there has been, or is likely to be in the subsequent year, a significant deterioration in the economic or fiscal position of the State, and (b) in each of the years 2026 to 2030, on designated environmental projects. These projects would be designated by a Minister of the Government if he or she is satisfied that the project contributes directly or indirectly, or is likely to contribute to any of the objectives set out at sections 20(a)(a). These objectives include, for example, reduction of greenhouse gas emissions and the achievement of certain environmental objectives enshrined in other legislative instruments.

The funds would be controlled and managed by the National Treasure Management Agency and ownership in them would vest in the Minister for Finance.

Electricity Market Revenue Cap

The CRU made S.I. No. 86/2024 - Energy (Windfall Gains in the Energy Sector) (Cap on Market Revenues) Act 2023 (Returns) Regulations 2024 which we looked at here.

CRU BUSINESS

Gas Network Development

The CRU is consulting until 3 May 2024 on GNI's proposed Ten-year Network Development Plan 2023 (CRU/2024/24). The CRU states that the GNI best estimate scenario for total Republic of Ireland overall demand is that it is expected to peak at circa 62.5TWh/yr in 2025/26, and that there are enough sources of gas to meet this level of demand. However, the 1-in-50 and average peak day gas demand are both expected to increase during the forecast period. Beyond 2030, the gas network could be fully decarbonised through injection of biomethane and hydrogen, but this will require the gas and electricity networks to be further integrated.

System Operators

The CRU is consulting until 24 May 2024 on specification of standards of performance ("SoPs") in the TSO and DSO electricity licences. It proposes to specify all or part of 22 conditions as SoPs in the each of the licences (CRU/2024/13 and CRU/2024/15). The CRU also published, in the context of Price Review 5, the 2022 electricity transmission performance report (CRU/2024/19) and investment, planning and delivery letter (CRU/2024/19b) and report (CRU/2024/20), as well as the 2024 Balanced Scorecard Information Paper (CRU/2024/05). The CRU's letter draws attention to the need to include curtailment costs, and to improve tracking of project progress against expected performance relative to planned timelines.

Regulation of Non-domestic Gas Works

The CRU published an updated Information Note (CRU/2024/23) to supplement its Decision Paper on the Regulation of Non-Domestic Gas Works (CRU/2022/23) and previous Information Notes (CRU/2023/60) and (CRU/2023/119). This concerns the regulation of installers through the Registered Gas Installer scheme. The CRU has decided that this will be implemented on 1 January 2025.

Customer Tariffs

The CRU is extending the consultation deadline on dynamic electricity tariffs to 19 April 2024. It is proposed the tariff will vary by hour to reflect wholesale prices. (CRU/2024/08) An update on electricity and gas tariffs available to customers is available. (CRU/2024/17)

SEMC BUSINESS

Capacity Market

The SEMC is consulting until 15 April 2024 on introducing early delivery incentives into the CRM. It intends to issue a decision ahead of the T-4 auction in November 2024 (SEM-24-024). The SEMC is also consulting until 21 March 2024 on auction parameters and de-rating factors for T-4 CY2028/29 (SEM-24-019).

Interconnectors

The SEMC's decision on compensation arrangements for Net Transfer Capacity ("NTC") reduction on SEM-GB interconnectors is as follows:

  • in terms of capacity allocated in the forward timeframe, compensation should be provided to the interconnector owner when allocated capacity is reduced due to a TSO decision,
  • in terms of capacity allocated through an auction, where NTC is reduced post-auction, current arrangements are clear that the interconnector owners should be compensated for any imbalance costs incurred due to a TSO decision,
  • in terms of capacity that remains unallocated following the auction(s), the SEMC states that compensation is not appropriate, and
  • TSOs should not compensate interconnector owners for unallocated capacity when NTC is reduced prior to the coupled auctions. However, the SEMC may review this position if the transparency and reporting measures do not demonstrate NTC reductions taking place only as a measure of last resort. (SEM-23-024)

SEMOpx Revenue Recovery

The SEMC is consulting until 17 April 2024 on a new regulatory revenue recovery framework for SEMOpx from 2024/2025 onwards. The SEMC propose to broadly follow SEMOpx's proposed approach, whereby an enhanced annual submission process will be implemented rather than conducting a full detailed price control for SEMOpx every three years. The decision is anticipated in Q2 of 2024. (SEM-24-022)

Tariff Timetable

The SEMC has made available the indicative tariff timetable for generators, suppliers and all market participants for 2024/2025 and 2025. (SEM-24-021)

Annual Report

The SEMC's Annual Report is available. (SEM-24-020)

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.