RESS 2 Auction Design and Implementation Project - Stakeholder Briefing 19th July 2021
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RESS 2 Auction Design and Implementation Project Stakeholder Briefing 19th July 2021
Agenda • Opening address from Minister Ryan • Introduction from Eamonn Confrey, Principal Officer, Electricity Policy Division • General Overview of RESS • RESS 1 Update • RESS 2 Project / Programme update • Detailed overview of main consultation items • Q&A Session – via Slido, go to https://app.sli.do/ and enter code RESS2 to join the Q&A 2 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications
General Overview of RESS
• RESS marks a shift from guaranteed fixed price feed-in-tariffs to a market oriented
mechanism where cost is determined through competitive bidding between renewable
generators.
• State aid approval granted for RESS in 2020, with RESS to be characterised by a series
of auctions throughout the lifetime of the scheme.
• Funded via the Public Service Obligation (PSO) mechanism.
• Auction quantity to be decided, expected range 1,000 to 3,500 GWh. Quantity to be
provided support may exceed this target. Bid price and competition ratio dependent.
• Offers to be selected in ascending price order and awarded on a Pay-As-Bid basis.
3 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and CommunicationsGeneral Overview of RESS
Participants in RESS are required:
• To be a new or repowered renewable project.
• Have full planning permission for the renewable project.
• Have a grid connection contract from the System Operators, EirGrid or ESB Networks, or
be listed as an eligible ECP2 project.
• Demonstrate control of the site for the purposes of developing and operating the project.
4 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and CommunicationsGeneral Overview of RESS
The RESS Award is structured as:
• A two way support arrangement through Floating Feed-in-Premium comparing a strike
price (bid price) with a reference market price, on the basis of metered output.
• Support for a successful project will nominally be 15 years with a range from 14 to 16.5
years. Additional support will be provided for reaching early Commercial Operation of up
to 1.5 years. A Longstop mechanism will allow for projects to reach Commercial
Operation up to one year beyond the COD Milestone. No support will be provided during
this period.
• Applicants will require a PPA with a supplier that is eligible for the PSO process.
• An Implementation Agreement will commit the project to being developed as offered in
return for receiving letter of offer.
5 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and CommunicationsRESS 1 Update
• RESS 1 auction results September 2020, auction largely successful. Delivered high
volumes, competitive prices* and good community participation.
• Expecting projects to deliver by end 2022, longstop end of 2023. These are trajectory
points under the National Energy and Climate Plan (NECP).
• 1275 MW capacity successful across 82 projects, including 7 community category
projects.
• 14 projects subsequently withdrawn from RESS 1. 1088 MW of projects remaining.
*competitive, but higher than in other European countries
6 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and CommunicationsRESS 1 Update
(continued)
• The Department will continue to monitor delivery against the RESS 1 milestones. Recently
passed Milestone 4 that had a deadline of 30th June 2021. Request that projects continue
to ensure that they submit accurate and robust information on time for each milestone.
• Significant proportion of projects have notified CRU that they expect to be eligible for
support in the upcoming 2021 / 2022.
• System Operators have noted they expect more than 10 projects to energise before the
end of 2021.
• Following on from RESS 1, DECC has reviewed the RESS competition processes and
design to develop RESS 2.
7 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and CommunicationsRESS 2 Project Update
• Project team established in December, draft Terms and Conditions published in June 2021
and consultation opened.
• Engagement with experts around Europe on international best practice in auction design,
e.g. AURES II.
• Primary design principles maintained;
• Offer prices must be competitive and costs to consumer minimised.
• ‘Shovel ready’ eligibility requirement.
• Bid bonds / performance securities required.
• Procure additional volumes within 5% final bid price.
• Incentivise strong community participation.
8 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and CommunicationsOverview of RESS 2 Consultation Seeking feedback from stakeholders on key design principles that have been retained or changed in RESS 2. The subjects on which we have sought specific feedback through the Consultation are: 1. Market Reference Price 2. Evaluation Correction Factor 3. Eligible Technologies 4. Hybrid Storage Projects 5. New Project criteria 6. Indexation 7. Financial Questionnaire 8. Locational Considerations 9. Bid Bond and Performance Security 10. Community Category 11. Community Benefit Fund 12. Citizen Investment Scheme 9 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications
1. Market Reference Price (MRP)
• MRP structure from RESS 1 maintained. Limits the exposure of variable generators to
energy price outcomes excluding balancing.
• Structure widely used throughout Europe, reduces generator risk.
• DECC concern is that insulating generators from market price risks fails to internalise
these risks.
May not provide the best efficiency incentives.
Could bias inter-technology comparison that is based on strike prices.
10 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications2. Evaluation Correction Factor (ECF)
• RESS 1 allowed for the use of technology specific ECFs, all ECFs set to 1. ECFs used to
multiply the as-offered strike price for evaluation purposes in the auction. This accounts
for the fact that the overall customer cost implications of RESS differ across technologies,
not all reflected in the strike price. Plan to implement non-unitary ECFs in RESS 2.
• The ECFs would account for technology differences in items such as; Energy capture
prices, capacity value, other system costs including difficult to quantify items that may
impact overall customer cost.
• Historical data and models can provide some insight into appropriate ECFs, both have
limitations and there are other hard to quantify factors.
Need to exercise judgement in the development of these factors, limited ranges for
ECFs. Range for Wind; 0.95 and 1.10, for Solar; 0.85 and 1.05. ECF for non-variable
technologies will be set between 0.95 and 1.0.
11 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications3. Eligible Technologies
• As there will be a separate ORESS auction, offshore projects excluded from RESS 2.
• The eligible technologies for RESS 2 have been expanded to allow for hybrids that
incorporate storage and wind / solar hybrids (hybrid arrangements discussed later).
• With an eye toward practicality and administrative costs DECC is not expanding eligibility
to projects that are unlikely to be competitive.
12 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications4. Hybrid Storage Projects • As defined in the Terms and Conditions and the consultation document, an Applicant planning hybrid renewable generation and storage facilities may select from two options in their RESS 2 Application for Qualification. • In Option 1, only the renewable generation portion of the facility (i.e. the wind farm or solar farm) is considered as being the RESS 2 Project – and the storage is separate. No restriction on import of power for charging. • In Option 2 the storage is “behind the meter” and is considered as being an integral part of the RESS 2 Project. Imports of power from the grid for charging not allowed. Consistent with approach found in UK and European practice. 13 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications
5. New Project Criteria
• The RESS 1 approach of requiring an investment threshold of €300 per kW and of
increasing site capacity by at least 50% is maintained when an existing site is utilised.
• Projects with a lower level of investment should not require support in order to justify the
investment.
• Projects that do not meaningfully increase RES at a site do not sufficiently contribute to
meeting goals.
14 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications6. Indexation
• DECC is inclined not to index the RESS strike price when underlying costs of RESS
projects are not expected to be exposed to significant inflation risk.
• Indexing would expose customers to inflation risk.
• Indexing does not appear to be required to attract capital at reasonable rates.
• Indexing has not been used in other long term market arrangements, e.g. DS3 and
Capacity Market.
• Risk that indexing to lower the apparent costs as opposed to real costs as this simply
shifts costs to the future.
15 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications7. Financial Questionnaire
• Mandatory requirement to submit responses as opposed to voluntary in RESS 1. This is
a requirement which is driven by the State Aid Approval for RESS. Responses are
required to enable State Aid ex-post evaluation. Consequences for non-compliance, or if
information submitted is found to be false.
• Questionnaire content and format consistent with RESS 1.
• Key issues being addressed through the questionnaire:
• Importance of RESS to the economic viability of your project.
• Potential for your project to be delivered via a CPPA.
• Financial data required includes; Project Internal Rate of Return (nominal, pre-tax),
Capital Costs (nominal) and Annual Operating Costs (nominal, 2025).
16 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications8. Locational Signals
• RESS 2, as with RESS 1, relies on implicit locational signals.
• RESS 2 projects are incentivised to reflect in their offers the connection costs and risks of
non-completion and expected exposure to system constraints.
• The TSO makes information available to Applicants in respect of their connection and
also in respect of possible constraints that may impact areas in the form of constraint
reports. Applicants can weigh up this information with other detailed aspects of the
project and reflect all these considerations including connection and constraints risks in
their offer.
• Explicit locational signals (e.g. area limits) may be necessary if it is considered that
Applicants are not reflecting locational risks efficiently in their offers. This is a complex
consideration and feedback from the industry in this regard would be welcome.
17 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications9. Bid Bonds / Performance Securities
• The proposed changes in bid bonds and performance securities will be more in line with
the approach in other European jurisdictions.
• The bonds and securities will be applied on a €/MWh basis in RESS 2 to align with the
auction procuring MWh of RES and to align with the technology neutral approach.
• Bond and security levels were set deliberately low in RESS 1 to attract participation.
While project attrition in RESS 1 to date has remained relatively low, higher bond levels
have been applied to discourage speculative bidding.
18 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications9. Bid Bonds / Performance Securities
(continued)
• Bid Bond will be at a rate of €7/MWh of Deemed Energy Quantity (i.e. one year) and
must be submitted between bid submission and IA execution.
• Performance Security will be at a rate of €24/MWh of Deemed Energy Quantity (i.e. one
year).
• Performance Security will be drawn down for failure to meet milestones and other default
events under the IA.
19 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications10. Community Category
The main eligibility criteria for community category projects have been retained.
• Maximum project size is 5MW.
• Primary purpose is community benefit; environmental, economic or social, rather
than financial profit.
• Participation based on local domicile.
• The entity applying must include a “Sustainable Energy Community”.
The biggest change in the Community Category is the requirement that projects now be
100% owned by a Renewable Energy Community.
In February 2021, the Minister announced that that all projects applying to the community
category in future RESS auctions must be 100% community owned. This is to ensure that
communities will be able to retain all the benefits that are associated with generating their
own electricity.
20 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and CommunicationsCommunity Category Supports
Package of supports announced in July for Community Category projects.
The SEAI’s RESS Community Enabling Framework is comprised of:
• Contact helpline 01 8082162 and webpages established for the RESS.
• Trusted intermediary (TI) service setup.
• Interim trusted advisor service setup.
• First 3 guides for the information warehouse will be live on SEAI website in July including,
Onshore Wind, Solar and Planning / Grid.
• Grants framework to be in place Q4 2021 with declarations of interest open now.
Full details available on: https://www.gov.ie/en/press-release/8968e-minister-ryan-announces-package-of-supports-to-
expand-community-energy-revolution/
21 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications11. Community Benefit Fund
• €2/MWh to be allocated into Community Benefit Fund (CBF). This money will fund UN
Sustainable Development Goals, near neighbour payments and other community
initiatives.
• All RESS projects must submit an annual report on the CBF to SEAI who will publish the
detail on the CBF National Register.
• Projects should engage with Communities early, seeking participants to join the Fund
Committee. CBF Committees decide which proposed initiatives will be supported
through the CBF, in line with the provisions of the T&Cs.
• The Good Practice Principles handbook provides more detailed information in relation to
the provisions and operation of the CBFs.
22 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications12. Citizen Investment Scheme • The Department is continuing to work on the development of citizen investment options. • We believe that it is critical that communities are given the opportunity to invest in renewable energy projects. Increased participation by citizens in renewable electricity projects will bring about significant support for climate action as citizens become personally invested in their delivery. • Once sufficiently developed, the details will be published, and a standalone consultation opened to enable stakeholders to have their say on the scheme. • The auction timetable caters for the delivery of a Citizen Investment offering and may be subject to change pending development, consultation and decision on citizen investment measures in RESS 2. 23 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications
RESS 2 Proposed Auction Timetable Full details available on EirGrid webpage: https://www.eirgridgroup.com/customer-and-industry/renewable-electricity-support-scheme/ 24 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications
RESS 2 Proposed Programme
July/August
September - 2022
December 2021 Auction Info
June 2021 July 2021 Review January 2022 Pack Published
March 2022
Publish RESS 2 Stakeholder consultation Seek Minister / Auction September September
August 2021 February 2022 Qualification Info June 2022 September
T&Cs and open event responses, Government Complete 2022 2024
Consultation Final T&Cs Pack Published Qualification 2025
consultation Develop Citizen develop final set Approval on Provisional Final Auction Commercial
closed of T&Cs T&Cs published Qualification Result Longstop Date
Publish RESS 2 Investment Auction Results Results Operation Date
Opens
Timetable options Finalise Citizen Seek Ministerial
Investment / Government
Options Approval of
Results
Complete Outstanding
25 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and CommunicationsQ&A Please submit questions via Slido and vote for questions raised by other participants to bring the most important topics to the top of the list. Questions and voting are anonymous. Go to https://app.sli.do/ and enter code RESS2 to join the Q&A 26 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications
Thank you 27 An Roinn Comhshaoil, Aeráide agus Cumarsáide | Department of the Environment, Climate and Communications
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