Recent years have seen an explosion of installed PV capacity across the European Union, fueled by the well-documented rapid reduction in technology costs and favorable subsidy regimes in many jurisdictions. However, one corner of Northern Europe remains relatively untouched by the solar revolution, writes Adam Sharpe of Everoze. The Republic of Ireland currently has the second-lowest amount of installed PV capacity in the European Union, at just 36 MW by the end of 2019.
From pv magazine 07/2020
Despite a development pipeline estimated at 6.9 GW, lack of a route to market means build-out rates for PV continue to be sluggish. Ireland is on course to meet its 2020 target of 40% electricity from renewable sources, and this has mostly been achieved through 4.2 GW of wind capacity. The reduction of electricity demand created by the Covid-19 pandemic has also no doubt had a role to play. Attention now turns to the target of 70% renewables by 2030, which, factoring in expected growth in demand, will require a doubling of the current contribution.
The Department of Communications, Climate Action and Environment is running a competitive auction process known as the Renewable Electricity Support Scheme (RESS) – a series of annual auctions providing winners with a two-way contract-for-difference-based PPA.
Provisional results for the first round are due in August, and the prospects are good for PV to contribute to the minimum of 1,000 GWh/annum to be awarded. The terms of the auction feature a solar preference category, with up to 300 GWh/annum available on a priority basis to solar projects. But with an estimated 1.3 GW of PV capacity eligible to enter round 1 of the auctions (or 1,250 GWh/annum based on the capacity factors specified in the auction terms), many of the sites will be left empty-handed.
A bigger prize is available through the “all projects” category, for which solar is also eligible. A minimum of 1,000 GWh/annum will be awarded in this category, with the strongest competition expected to come from onshore wind. At face value the lack of established industry and supply chain relative to the onshore wind industry will count against PV. As always, however, the devil is in the details, and there are factors within the auction design and wider market context that will increase PV’s competitiveness.
Size matters
The established wisdom within renewables is that bigger is better. Larger capacity sites enable the spreading of fixed costs over a larger number of megawatts, reducing overall project costs. Aggregation of multiple sites enables the owner to tender for construction and operation contracts on a portfolio basis, with tenderers willing to offer lower prices due to economy of scale effects and the attractiveness of winning contracts for such portfolios.
On the face of it, smaller sites are therefore expected to be disadvantaged in the auction process, although an opportunity is provided through the way that ‘use of system’ costs for maintenance and upgrade of the electricity grid infrastructure are passed on to generators. The country levies high use of system charges, with the latest ranging from €400/month to €1,200/month per MW of connection capacity, depending on the location of the site. The first 5 MW of capacity for any site is exempt from paying use of system charges, and as such this will provide a competitive advantage to sites smaller than 5 MW. The published list of sites awarded connection capacity under the Enduring Connection Policy batch 1 framework (ECP-1) indicates that there is around six times as much PV capacity falling into this category in comparison to onshore wind.
Location, location, location
The Republic of Ireland’s location means it is not particularly blessed with solar resource, with only the most favourable sites toward the southern coast offering annual global horizontal irradiation in excess of 1,000 kWh/m².
The country operates a single electricity network combined with Northern Ireland, with a relatively small average demand of around 6 GW and only a small number of interconnectors to Scotland and Wales available for the export of excess power during periods of high generation and/or low demand. As a result, generators are frequently required to curtail output in response to periods of island wide excess of generation relative to demand, as well as localized constraints applied when the local network infrastructure is at capacity.
Modeling by the system operator, EirGrid, indicates that sites in the northwest of the country are likely to experience constraint and curtailment in excess of the 10% for which the generator will be compensated under the auction framework. Analysis of the ECP-1 grid connection offers indicates that around 50% of capacity offered to onshore wind lies in this high constraint region, compared to just 15% of the solar capacity. Over the medium to long term, network reinforcements will lead to a reduction in the level of constraint and curtailment applied, but bidders will need to factor uncertainty over timing of such reinforcement into their bids.
Location also plays a role in the “loss adjustment factors” applied to the metered output of the site to reflect the network losses between point of generation and consumption. These will be more favorable to sites in the south of the country, where the proximity to major population centers and the relative lack of generation deployed to date means network infrastructure is less at capacity and losses are lower than in the northwest.
Timing is everything
Sites awarded contracts under the first auction round are eligible for support no earlier than July 2021, with a reduced contract term applied for failure to achieve commercial operation by December 2022. This is likely to play into the hands of PV sites, which offer relatively short development and construction timescales compared to wind. Depending on the extent to which their contract tendering and procurement is progressed, it may be challenging for wind projects to meet these time scales, or investors may not be willing to accept the risk of reduced tariff duration or cliff edges.
Meaningful contribution
The big question is whether these factors will be enough to allow solar to compete with an established onshore wind industry which is also expecting to see a reduction in costs driven by the competitive nature of the auction.
Regardless of the results, the future for solar in Ireland looks bright. With the cost reduction trend for PV continuing, and the expectation that future auction rounds will feature technology based caps to promote diversity in the energy mix, it feels like just a matter of time before solar finally makes a meaningful contribution to the Irish energy mix.
About the author
Adam Sharpe is a technical consultant who has worked in the PV industry for more than six years, managing the delivery of due diligence services for more than 1 GW of PV assets worldwide. Sharpe’s current focus is on exploring new market opportunities and commercial models for PV in the United Kingdom and Ireland.
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