In the week that the agriculture sector was set an emissions reduction target of between 22% and 30% by 2030, farmers are set to miss out, for a second time, on the opportunity to take part in the Government’s key renewable electricity policy.
Before we begin, I will say that the publication of the Climate Action Plan has been relatively positive for farm renewables.
We also saw the Government’s first acknowledgement of the need to develop an agricultural biomethane sector to displace natural gas
Opportunities will soon materialise for farmers to generate renewable electricity on-farm, displacing imported electricity and exporting surplus to the grid.
We also saw the Government’s first acknowledgement of the need to develop an agricultural biomethane sector to displace natural gas for use in the heat sector and as transport fuel.
However, this article will focus on Ireland’s flagship renewable energy policy, the Renewable Electricity Support Scheme (RESS). The terms and conditions for the second round of the scheme, RESS 2, were recently published and, again,they have fallen short of expectations for farmers.
RESS is the Government’s key renewable electricity policy, which will be instrumental in supporting the development of 80% renewable electricity generation by 2030.
It is a competitive auction-based scheme, which invites renewable electricity projects to bid for capacity and receive a guaranteed price for the electricity they generate for 15 years.
The RESS is designed to rely on competitive forces to achieve the lowest feasible cost to electricity customers
The scheme is supported through the PSO levy, which is charged to all final electricity customers.
The RESS is being implemented through a series of auctions. The first auction, RESS 1 in 2020, saw 82 onshore wind and solar farm projects secure funding.
The RESS is designed to rely on competitive forces to achieve the lowest feasible cost to electricity customers.
Applications for second RESS 2 have been brought forward to December, three months earlier than originally planned.
RESS 2 follows a broadly similar design to RESS 1, but aims to increase eligible technology diversity and includes support for storage on sites. This means more types of renewable electricity projects can apply.
The auction will be open to new projects between 500kW to 600GWh per annum in output. Projects must have full planning permission and a grid-connection or be eligible for a connection to apply.
Unlike RESS 1, there isn’t a specific preference category for solar technology, which means all technologies will be competing against each other in the auction.
This will prove very disappointing for farmers
This means that higher cost technologies, such as biogas and biomass combined heat and power (CHP), likely won’t be able to be competitive enough to secure support compared with wind and solar PV, which typically avail of economies of scale.
This will prove very disappointing for farmers. As RESS 1 shows, a specific preference category for farm-scale biogas or biomass CHP could have been included in this auction.
However, once again, community-based projects have their own category. The full list of eligible technologies are:
If eligible to qualify for the auction, the applicant will be required to specify an ‘offer price’ for the electricity produced from the project in the auction.
If successful, this offer price will become the ‘strike price’ for that project and will be used to determine the level of support required from the feed-in premium.
Successful projects that generate renewable electricity are known as the generators. They will supply electricity to the supplier who, in turn, supplies electricity to consumers.
The strike price will not be indexed or adjusted for inflation
Once a letter of offer is received, the supplier can enter into a power purchase agreement (PPA) with the generator.
The strike price becomes the price paid to the generator from the supplier and remains constant over the term of RESS 2. The strike price will not be indexed or adjusted for inflation.
The supplier is then entitled to receive RESS 2 support for the duration of the scheme. RESS 2 support is structured as a two-way floating feed-in premium (FIP).
The FIP is described as being two-way, because when costs (ie price paid to the generator from the supplier) exceed market revenues, a ‘support payment’ will be due to the supplier and, when market revenues exceed costs, a ‘difference payment’ will be due from the supplier.
Community benefit funding
Projects that secure funding will have to contribute €2 per MWh to a community benefit fund in local communities close to the site. Onshore wind farms will have to pay a further €1,000 to each household located within one kilometre of the site.
According to the revised RESS 2 timetable published by Eirgrid, applications for auction qualification will close on 13 January. The auction itself will open on 2 May, with the provisional results announced on 17 May.
RESS 2 will be a key instrument in helping to achieve our renewable electricity generation requirement of 80% by 2030. Its clever auction-based system ensures the cost to the end consumer is low. However, the scheme favours large-scale projects, which, in many cases, are funded by semi-state bodies and multinationals. The only opportunity this presents farmers is to lease their land for solar, wind and energy storage projects.
But it didn’t necessarily have to be that way. The incoming micro-generation support scheme and small-scale generation scheme will facilitate farmers to install renewable systems up to 200kW in size. This will mostly be solar panels. But there remains a gap for farm projects of between 200kW and 500kW. Remember, the average farm-sized biogas plant in Northern Ireland is 500kW in size.
As a farmer, I ask myself – is the RESS the best design to give me confidence to install a farm renewable system? Certainly not
There were high hopes that RESS 2 would either contain a specific category for smaller-scale projects, from 50kW to 500kW in output, or a specific preference category for biogas CHP (similar to solar in RESS 1).
While the latter was a long shot, the former is doable and would allow farmers to develop farm-scale wind and solar farms to generate real alterative income streams.
As a farmer, I ask myself – is the RESS the best design to give me confidence to install a farm renewable system? Certainly not.
It’s clunky, bureaucratic and risky. But if this is truly the only route to develop a farm-scale project of up to 500kW in size and generate a guaranteed income for 15 years, then farmers will find a way.
While RESS 2 disappointed, the yet-to-be-confirmed RESS 3 could still present an opportunity to rectify this and give Ireland’s farmers a chance take part in the renewable energy transition in a meaningful way.