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Irish Government announces how it intends to subsidise solar PV

After many months of waiting, the Irish Government has finally indicated how it intends to subsidise solar PV development in Ireland.

In short, solar cannot expect any special treatment. Solar PV projects must compete with other technologies in a capacity auction for contracts for difference.

In July the Department of Communications, Climate Action & Environment issued its National Mitigation Plan which broadly outlined plans for further promotion of renewables and the country’s transition to a low carbon economy. The plan recognised that reaching its 2020 target for 16% renewable generation would be a challenge and that further support would be required for renewables. It signalled its intention to flesh out the nature of that support later in the year. There has been an expectation for a couple of years that the Irish Government would provide support for solar PV; no-one expected it to be anywhere as generous as support had been in England, but the general consensus was that an auction process supporting up to around 1.5GB of solar would be announced.

The Department has now issued a consultation on the design of a new renewable electricity support scheme. It would be fair to say that as the proposals stand they potentially fall short of even the modest expectations of the solar PV industry.

Whilst recognising that support is required to reach the 2020 target and the 2030 target of 40% renewable generation, the consultation does not propose to differentiate between technologies. The draft plan proposes a “principal category auction” in which technologies will be selected on the basis of price only. Projects will compete for a “Floating Feed-in Premium” (FFP), which will be calculated as the difference between the strike price and the reference market price. In essence this is similar to the UK’s Contract for Difference model.

In many respects the use of a FFP is no surprise and certainly reflects the direction of travel in renewables support across the EU – particularly given the potential incompatibility of Feed in Tariffs with EU state aid rules. The government also considers that a FIT would not perform well against market integration and I-SEM (the new single electricity market) criteria. However, if these plans follow through to the final support scheme, the lack of technology differentiation and the use of a technology neutral auction, in particular for solar is something of a disappointment.

The big question for the solar PV sector is whether the technology can compete against other technologies (and wind in particular) in the auction process. The consultation does float the possibility of future auctions being technology specific, allowing the Department to assess previous auctions and adjust the design as the process progresses. This at least is a hopeful sign, in comparison to the lack of certainty in future CFDs that currently affects the GB market.

The Department also intends to include a significant requirement for community involvement in renewables projects. All projects over 500kW will be required to offer opportunities for local communities to invest in the project. A minimum of a 20% share has been proposed to qualify for support. However, the consultation suggests that developers need only make “reasonable efforts” to market the offer.

Notable for its absence in the consultation however is domestic rooftop solar; there are no specific proposals for support of micro-generation schemes. The Department’s view is that costs are significantly higher and more market/network reform is required before any tariffs could be introduced.

The fact that the Irish Government intends to support significant amounts of new renewables development is of course encouraging. It is disappointing however that clearer market signals are not being provided for solar PV specifically given the roughly 5.4GW of pipeline projects that currently exists. The consultation closes on 3 November 2017 so there remains a substantial opportunity to influence the final decision. Beyond this, innovation and falling costs for solar, along with storage and co-location may well offer opportunities for viable subsidy-free projects. Certainly this is not the end for solar PV in Ireland, but it is perhaps also not the beginning that many expected.

This publication is intended for general guidance and represents our understanding of the relevant law and practice as at September 2017. Specific advice should be sought for specific cases. For more information see our terms & conditions.


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