Irish minister seeks to calm solar expectations

Denis Naughten has said not all of Ireland's pipeline of solar projects can be supported by government. Image: Department of Communications, Climate Change and Natural Resources.

The Irish minister for communications, climate change and natural resources has sought to manage expectations for the country’s nascent solar market, indicating that not all of the applications currently in the pipeline will be supported by the government.

Speaking at an event organised by the Energy Institute, Denis Naughten confirmed what many in the Irish market already suspected and said the Irish government would not seek to subsidise the entire pipeline of solar developments.

Recent figures released by Commission for Energy Regulation (CER) show a pipeline of around 4.3GW of solar applications submitted through the market’s non-group processing approach (GPA) process. As Naughten pointed out, the “significant volumes of solar energy projects proposed” exceed Ireland’s winter level of demand.

Naughten explained that providing government support for such a sizeable number of projects would not represent value for money for consumers.

“While I do see a place for solar in the energy mix, we cannot have a situation where a new support scheme leads to an excessive increase in people’s electricity bills through a higher Public Service Obligation (PSO) levy,” he said.

“It is essential that the scale and pace of development are appropriate to the resource available and to the target physical and social environment where it will be constructed. I cannot see the significant volume of proposals for solar energy in Ireland being supported in the short-term.”

He added that large levels of early speculation towards the size of the market “can send poor signals to society and state bodies that facilitate delivery of projects”, even damage the industry.

Many of the projects in Ireland’s pipeline are widely considered to be speculative, with data from Solar Media’s in-house research team showing that of 550 grid applications, only around 90 had also applied for planning permission.

A policy briefing seen by SPP to be sent to Naughten’s office by the Irish Solar Energy Association (ISEA) agrees with the minister’s points and sets out the preferred level of support for up to 1.5GW of solar that it believes is ‘financially viable’.

“ISEA shares the minister’s concern that the high level of speculative activity in the market is creating a bad reputation for solar industry in Ireland as a whole and leading to reports in the press that the introduction of a support mechanism for solar could lead to costs going out of control and the PSO levy quadrupling,” it states.

It calls for enough government funding to support “an incremental rollout” of 250MW per annum in 2018-22. In the absence of a solar specific Renewable Energy Feed in Tariff (REFIT), ISEA suggests a two-way Contracts for Difference (CfD) mechanism with auctions likely to achieve an all-in support level of around 11c/kwh in late 2018.

This would be reduced by around 5% per annum for new projects each year, giving government full control over the PSO budget.

ISEA has calculated that the cost to support 250MW of solar in 2018 would be €11.9m/annum, with the total budget peaking at €38m/annum in 2022. This would result in the deployment of 1.25GW, requiring an expected €15.1m over 20 years in subsidy payments, less than 5% of the 2016/17 PSO budget. 

The total cost to the consumer would be €0.18/month in 2018, increasing to €0.57 in 2022.

The Department of Communications, Energy and Natural Resources has been considering a response to its consultation on a renewable electricity policy and development framework since it closed in April.

It remains unclear what timetable the government is now working to, however Naughten added in his speech that the next, and final, consultation on the new support scheme for renewable electricity will be carried out in mid-2017. It was originally expected in autumn this year.

To help understand the market in general, and to provide direct contact with the key stakeholders in Ireland, Solar Media is holding the first major solar conference in the Republic of Ireland next week. Solar PV Ireland will take place on 16-17 November 2016 in Dublin, with tickets still available here.

We have also released our new Republic of Ireland Solar Market Entry report as the definitive guide to companies looking to benefit from solar activity in the country from 2017 onwards. Details on how to order this report can be found here, or by emailing us directly.