The second phase of the Small-Scale Renewable Electricity Support Scheme (SRESS) had high expectations. We’ve heard a lot of rhetoric from ministers, parties and environmentalists about how farmers can get involved in the renewable electricity revolution and make a good income. However, when it comes down to it, unless you leased your land to a large-scale developer, these opportunities simply didn’t exist.

SRESS was supposed to change this. The long-awaited scheme was expected to make export-focused, farm-scale renewable electricity projects, such as small solar farms, single wind turbines, hydro and even small biogas plants, a commercial option for farmers.

Last week, the tariff rates were announced for the scheme, and many in the industry were taken aback at how low they were. Furthermore, farmers are set to receive a lower tariff compared to community groups.

Since the announcement, numerous farmers have contacted the Irish Farmers Journal with concerns that the low tariff rates will make their farm-scale projects unviable.

SRESS structure

SRESS will provide a fixed feed-in tariff for 15 years to community groups, SMEs and farms who build a commercial renewable electricity project between 50kW to 6MW in size. While originally intended to be technology-neutral, only wind and solar projects will now be eligible for the scheme.

Successful applicants to the scheme will receive a letter of offer, which allows the electricity supplier they entered into a power purchase agreement with, to receive SRESS support through the Public Service Obligation.

Tariff rates

While overall investment amounts are generally smaller, small-scale renewable projects can not avail of the economies of scale that larger wind farms or solar farms can. Therefore, they typically need a higher price over a secure term to be commercially attractive.

SRESS tariffs have been set across six categories – three community rates and three SME rates. The tariffs were determined with the assistance of external economic consultants. The rates are outlined in Table 1. The Government stated that it is providing a higher rate for community groups due to the additional barriers they face when building projects, such as planning, grid connection and financing, compared to commercial developers or even small businesses.

Farmers challenges

Farmers are grouped into the same category as SMEs and will receive the same tariff rates. For context, SMEs are defined as enterprises with fewer than 250 employees. The idea that farmers will face fewer challenges in overcoming barriers, such as planning, grid connection and financing compared to community groups is ill-thought-out.

Farms are often located in rural areas with poorer energy infrastructure. It is likely to cost farmers more to secure a grid connection and undertake necessary grid strengthening works to connect a project. In contrast, SMEs tend to be in more industrialised areas or areas with stronger grids, potentially making securing a grid connection more cost effective.

Securing planning permission for a farm-scale project can be just as challenging as for a community group, if not more so. Farmers are often constrained to developing projects on their own land, whereas community projects have more freedom to select more favourable site.

A case for a farm category

Not having a separate farmer category with tariff rates comparable to, or higher than, community projects is a significant oversight by the Government. As farmers are being urged to transform their businesses to meet the 2030 climate targets, SRESS could have provided them with a genuine opportunity to diversify their income and have skin in the game in the renewable electricity sector.

It is difficult for ministers to convincingly argue that renewable energy generation can offer new revenue streams for farmers while supporting the transition to a net-zero economy when a flagship Government scheme barely makes a farm project stack-up.

When looking at the numbers, if a farmer is comfortable with payback periods of 15 years or more, then this scheme might work for them. However, such cases are rare. For example, a one MW solar farm (approximately five acres) will cost around €1.5m to build. There are many assumptions in that figure admittedly. At SRESS rates of 12c/kWh, €105,000 of income would be generated each year, resulting in a rough payback period of 14.4 years. This calculation does not include the cost of finance and the mandatory community benefit fund payment. A one MW solar farm is required to contribute €1,750/year to a community fund.

Is it too late?

If the Government is serious about bringing farmers along with them on this green transition, then they have to put schemes in place to follow through. Like it or not, commercially viable schemes are needed to drive renewable investment on farms, at least until the initial investment costs are recouped. We have seen it in Northern Ireland, Great Britain and Europe, and Ireland is no different.

A review of the tariffs and other key terms and conditions will take place after a three-year period (by the end of 2027) and may occur earlier, depending on uptake levels. This means there may scope to increase rates and potentially make a new category for farmers.

News of the tariff rates drew a mixed response from organisations. While many welcomed the announcement of the scheme, most were disappointed by the tariffs. Some organisations were not even aware of what SRESS means for farmers, highlighting a lack of awareness and understanding among key stakeholders.

Irish Farmers’ Association

Reacting to the announcement, IFA’s director of organisation James Kelly said: “While welcome, the rates being offered are too low for it to make sense for many projects. The ambitious climate change targets set out by the Government must be matched with schemes with the correct support and processes that make them appealing.”

Micro-Renewable Energy Federation

Commenting on the launch of the second phase of SRESS, the chairman of the Micro-Renewable Energy Federation, Pat Smith, welcomed the scheme, but said that “the target export tariff rates provided for in the SRESS scheme will challenge the economics of many projects, and whether they can proceed or not. This will be particularly the case where projects are funded using bank or other forms of debt financing at high interest rates”.

Wind Energy Ireland

Justin Moran, director of external affairs at Wind Energy Ireland said: “We need farming families and local communities to be at the heart of the energy transition, so the announcement of a new support scheme for smaller solar and wind projects is to be welcomed. However, the tariff rate set for new wind projects is lower than expected and we would be concerned whether it is attractive enough to encourage people to get involved in developing community energy.”

Irish Wind Farmers Association

Paddy Phelan, CEO of Meitheal na Gaoithe (Irish Wind Farmers Association) said he is very pleased to see the new scheme introduced. “However, the challenge of building projects under contract-for-difference for 15 years at less than 6GW for any renewable technology cannot be underestimated. Some members have raised concerns that the current tariffs might not be sufficient to encourage a large uptake of projects ranging from 1MW to 6MW, as published for both community and farm sectors,” he said.

Irish Solar Energy Association

Welcoming the announcement Conall Bolger CEO of ISEA said: “SRESS is a positive step, its success depends on providing communities and businesses with the necessary flexibility to execute their projects effectively. Most importantly, SRESS projects must have prompt and affordable access to our national energy grid. Inadequate support for grid connections would significantly diminish the benefits that SRESS aims to deliver.”