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Minister Eamon Ryan announces 15 year support for renewable energy sector

DATE: 24.06.2011

 

On 9 September 2009, Eamon Ryan, the Irish Minister for Communications, Energy and Natural Resources announced that new payment categories are to be created under the Renewable Energy Feed in Tariff (“REFIT”) support scheme in order to stimulate investment and compensate investors for the high start-up costs in the sector.  The new payment categories will be for three specific technologies: biomass (anaerobic digestion and high efficiency CHP), offshore wind and "ocean energy" (wave and tidal).

REFIT is a Government support scheme administered by the Department of Communications, Energy and Natural Resources through Ireland’s Public Service Obligation (“PSO”) framework. It is based on a feed-in tariff that provides a hedge for an electricity supplier in the event that the price that such supplier agrees to pay to the generator under a renewables power purchase agreement exceeds prices payable generally for electricity in the wholesale market.  While REFIT has since 2006 been available in relation to wind generation and biomass, the newly-announced categories are defined differently and are governed by a new and distinct set of REFIT rules.

The new payment categories feature the following reference prices:   

  • Biomass (AD and high efficiency CHP):  
    €120 per megawatt of energy produced
     
  • Offshore wind:
    €140 per megawatt of energy produced
     
  • Ocean Energy (Wave and tidal):             
    €220 per megawatt of energy produced 

It is worth noting that the new payment categories announced by Minister Ryan include much higher reference prices than the prices paid to wind generation and biomass under the 2006 scheme. For example, the 2006 reference price applicable to large scale wind energy projects (whether onshore or offshore) is currently  €66 per megawatt of electricity produced, compared with €140 per megawatt available to offshore wind projects under the new rules.  However, unlike the 2006 reference prices, the new reference prices are not subject to inflation-related indexation.

While the new REFIT categories and reference prices are to be welcomed by the sector, further administrative and legislative steps are likely to be required at both EU and Irish level before payments at the new rates can be made in respect of the new technology categories. While the Minister's announcement did not include any indication as to the anticipated timing of the commencement of the new payments, we understand that steps are currently being taken by the Department to secure EU approval to the proposed amendments to the REFIT scheme. The existing Irish PSO legislation will also need to be modified so that payments for the new technology categories can be incorporated into the existing REFIT payments mechanism.

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