Ireland: Commission approves RESS (SA.54683) — contract-for-difference auctions for 15 years

In July 2020 the European Commission approved Ireland's support scheme for electricity from renewable sources, RESS (Renewable Electricity Support Scheme), notified under number SA.54683. The scheme replaces the REFIT tariffs in Ireland with a system of auctions in which every winner receives a contract for difference for 15 years.

What was approved

According to the description of the scheme, the estimated budget is from EUR 7.2 to 12.5 billion, and the system is to operate until 2025. The auctions determine the strike price. If the market price of energy is lower than the strike price, the generator receives the difference. If it is higher, the generator pays over the surplus, which returns to energy consumers through lower bills. Such a model is called a two-way contract for difference (CfD) and differs from a one-way premium, in which the generator keeps the entire surplus above the strike price.

Under the scheme all eligible technologies compete in a single auction, which is meant to reduce the cost of achieving the target of 70% renewable energy in Ireland's electricity mix by 2030. According to the Commission's description (cited from Engineers Ireland), the scheme covers solar and wind energy, among others, and Ireland justified the preferential treatment of a small pool of solar energy and of offshore wind. Energy community projects compete in a separate category, and the municipalities in which RESS projects are built benefit from a fund financed by all beneficiaries.

What this means for biogas

For biogas generators the change means a move from a fixed tariff to price competition. The previous REFIT 3 system provided different rates for anaerobic digestion. In RESS the rate is set in the auction, and biogas competes with technologies that have a lower unit cost. The two-way CfD mechanism does, however, limit market price risk: the generator knows the strike price but gives up the surplus.

What to pay attention to

• The 15-year support period is a long horizon, which makes project financing easier.
• A two-way CfD means returning the surplus in periods of high prices; this cap must be taken into account when planning revenue.
• The energy community category has a separate track, so a farm or cooperative project can compete with similar entities.