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Renewables sector in 2016 - will it blow hot or cold?

Last year didn't end well for Northern Ireland's renewable energy sector. The proposed early end for onshore wind subsidies remains mired in uncertainty; NIE announced a substantial delay in delivering grid connections; and the Paris Climate Agreement amounts to little more than vague promises.

So with all these challenges lying ahead for 2016, are there any opportunities or has the renewables industry in Northern Ireland had its day?

It is difficult to express the disappointment in the outcome of the Paris talks in a few sentences. After all the self-congratulation of the Paris Agreement adoption on December 11, you could be forgiven for thinking that it was a turning point for UK climate change policy and perhaps an end to the accelerating subsidy cuts by the Tory government.

Not so. A close inspection of the carefully crafted wording reveals nothing more than a vague objective to hold increases in global average temperature to "well below" 2°C and reach global peaking of greenhouse gases "as soon as possible". These broad aspirations are framed by "common but differentiated responsibilities… in the light of different national circumstances".

In other words, each signatory state has a get out clause where "national circumstances" dictate. To the extent the agreement means anything of substance, no doubt the UK government will claim that it will meet its obligations through existing renewables along with new nuclear and gas generation. In short, nothing in the Paris Agreement requires the government to u-turn on its intention to limit new subsidies for onshore renewables.

Closer to home, Deti has signalled its intention to withdraw subsidies for onshore wind from this April under the NI Renewables Obligation (Niro) in line with the cuts proposed by Decc in Great Britain. Deti's announcement came several months after Decc's proposals and with an even shorter consultation period.

Although Deti has in effect been forced to follow Decc (which holds the purse strings for the overall subsidy pot), Decc has yet to finalise its own proposals as it struggles to force the required legislation through the House of Lords. Deti's consultation has now become mired in a judicial review brought by the Ulster Farmers' Union on the grounds of insufficient consultation. All of the above leads to ongoing uncertainty for developers and funders over the likely subsidy status of schemes that are approved but undeveloped.

To make matters worse, NIE has been swamped with grid applications since the Utility Regulator forced it to lift restrictions on accepting applications only after planning permission was granted. This has led it to announce that it will not issue any grid connection offers before May 2016. Given the lead-in times for procurement, construction and grid connection, it is unclear whether many projects would even make the April 2017 cut-off for subsidies irrespective of the proposed early closure for onshore wind.

Whether any subsidies will be available after April 2017 is also unclear. Deti has indicated that some form of Feed-in Tariff may be available, and the UK government may issue further rounds of 'Contracts for Difference' subsidies for large scale projects. Such vagueness at this point in time restricts long-term investment decisions. Developers and funders will inevitably look further afield for more pro-development jurisdictions where perhaps the aims of the Paris agreement are taken more seriously.

So what is left for Northern Ireland? Certainly there will be a vibrant market for refinancing and acquisition of existing renewables projects and those fortunate enough to qualify for subsidies under the Niro before it ends. The real interest perhaps lies in the longer term for technologies such as large scale wind and solar that could achieve grid parity (ie that can compete with 'traditional' generation without subsidy).

The rapid advancement of storage technology may also facilitate this process and be a significant bolt-on to existing schemes. If wind and solar generation can be utilised when the wind does not blow and the sun does not shine, this will massively increase their income-generating potential and mitigate the need for costly grid upgrades.

Projects may also become viable without the need for grid connection. In this context rooftop solar still has major potential and has been relatively unexploited in Northern Ireland. Grid parity and storage are not quite here, but a longer term view beyond the current gloom suggests an exciting future for renewables.

First published by The Irish News on 19 January 2016.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at January 2016. Specific advice should be sought for specific cases. For more information see our terms & conditions on www.TLTsolicitors.com

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