Government announces package of measures to secure electricity supplies into the future and to help mitigate rising household electricity bills
Cabinet has today approved a package of measures to help mitigate the rising cost of rising electricity bills and to ensure secure supplies to electricity for households and business across Ireland over the coming years. The package of measures includes changes to the Public Service Obligation (PSO) levy (beyond those announced earlier in the year). The changes will result in rebates, and thus savings, for domestic electricity bills over the course of the next PSO year beginning in October. This further reduction in the PSO levy occurs because of a fall in the relative cost of renewable energy, compared to fossil fuel generation.
The Government has also approved the final results of the second onshore Renewable Electricity Support Scheme (RESS 2) auction. This will bring significantly more indigenous wind, solar and hydro-electric energy onto the National Grid. This, in turn, will reduce our reliance on increasingly expensive imported fossil fuels. The package also includes Government approval for the provision of funding for back-up generation capacity, to address risks to security of electricity supply over the coming winters. The Commission for the Regulation of Utilities (CRU), which has statutory responsibility for security of supply, has directed EirGrid to procure additional temporary emergency generation capacity (for the winters of 2023/2024 to 2025/2026). This will ultimately provide flexible and temporary back-up capacity, to safeguard secure supplies of electricity for households and businesses as we deploy longer-term generation capacity. Today’s measures also see an increased borrowing limit (€3 billion) for EirGrid – to strengthen our National Grid as part of ‘Shaping Our Electricity Future’ and to deliver the Celtic (Ireland-France) Interconnector. An increased borrowing limit (€650 million) for Bord na Móna will drive greater deployment of indigenous renewable energy across the midlands and beyond – as part of its ‘Brown to Green’ strategy. Further details on each of the energy security and cost saving measures are outlined below.
Further reduction in Public Service Obligation (PSO) Levy
The Public Service Obligation (PSO) levy is charged to all electricity customers in Ireland and supports the generation of electricity from sustainable, renewable and indigenous sources. The levy is calculated and certified annually by the Commission for Regulation of Utilities (CRU) in line with relevant legislation. All energy suppliers are required to collect this levy from customers through bills. Levy payments are calculated on the basis of estimated generation and estimated wholesale electricity market prices for the year ahead. These payments are then corrected, for actual generation and prices. The Government previously announced that the PSO levy would go to zero from 1 October of this year (2022), which will lead to an annual saving of €52 (excluding VAT) on household bills. In a further move (and in a new announcement), the proposed PSO levy will decrease from €263 million for 2021/2022 to an estimated figure of minus €408 million for the forthcoming year. This will result in a rebate for domestic household bills – equating to an ‘indicative’ annual saving of €75 (excluding VAT) for householders and consumers. Combined with the €52 saving, this will result in a combined ‘indicative’ saving of €127 (excluding VAT) – for 2022/2023. At the end of July, the CRU will issue a final decision on the exact PSO levy that will apply for the period from October 2022 to September 2023. The legislative amendments, to enable PSO levy payments to be credited to electricity customers, were approved by Government today. This was done, in recognition of the rising cost of living and of the impact on households and businesses of increasing energy bills.
Final results of the second onshore Renewable Electricity Support Scheme (RESS 2)
Today also saw Government approval for the final results of the second onshore Renewable Electricity Support Scheme (RESS 2). RESS 2 is the second of a minimum of five envisaged auctions, to occur between 2020 and 2025. These auctions provide pathways for renewable developers, including solar and offshore wind projects through dedicated offshore auctions, to plan and develop their projects. They also allow Ireland to take advantage of new technologies as they emerge. The successful projects in RESS 2 represent a potential increase of nearly 20% in Ireland’s current renewable energy generation capacity. They will be delivered between 2023 and 2025. 2,748 GWh of the 3,772 GWh bids submitted were successful in the auction. This equates to approximately 414MW of onshore wind and 1,534MW of solar. The volumes procured today set Ireland on the right trajectory to achieve our ambitious 80% renewable electricity target by 2030, as set out in Climate Action Plan 2021. The final results will be published by EirGrid tomorrow (15th June 2022) on their RESS website, as per the RESS 2 auction timetable.
To protect households from excessive costs, Minister caps auction volume while still delivering nearly 20% increase in renewable energy generation capacity
In the context of inflationary pressures and higher prices (in RESS 2 versus RESS 1), and to reduce the cost burden on consumers and ensure that the RESS delivers long-term value, the Minister exercised his reserved rights (under RESS 2 Terms and Conditions) and only accepted the capacity needed to clear the auction’s target volume. This decision has resulted in a lower volume of capacity (than might otherwise have been the case), but at a more competitive price. In so doing, the Minister availed of one of a number of strong, inbuilt consumer protection mechanisms, which have been designed into the auction. The intent of such mechanisms is to minimise the cost to households and businesses.
Provision of funding for the CRU’s second tranche of temporary back-up generation capacity, to secure our supply of electricity over the coming winters
The Commission for Regulation of Utilities (CRU) currently has a programme of work underway to ensure the security of our electricity supply over the coming winters. As part of this work programme, the regulator has directed EirGrid – the Transmission System Operator – to source and deliver approximately 450MW of additional generation capacity for the winters of 2023/2024 to 2025/2026. This additional generation capacity will be contracted for a limited period. It will be available when needed and will be in addition to existing generation capacity in the electricity market. As part of today’s broad-ranging announcement, the Government approved the necessary capital funding – in the order of €350 million for EirGrid. This will support and enable implementation of the initiative for winter of next year (2023/2024). Under the oversight of the CRU, which has statutory responsibility for security of (electricity) supply, EirGrid will subsequently enter into agreements with suitable site owners – to roll-out and deploy the generation plants. The cost will be recovered from electricity customers through use of system charges spread over a three-year period, resulting in a nominal impact on electricity bills. However, any resultant impact is expected to be more than offset by the aforementioned savings accruing from changes to the PSO levy. This enlarged tranche of temporary back-up generation capacity, for the winters of 2023/2024 to 2025/2026, is being secured to mitigate any potential risks of a shortfall in electricity supply. Concerns over such risks had arisen largely due to non-delivery of previously contracted capacity, increasing electricity demand and the increasing unreliability of some existing plants. Further operational details of this measure are available from the CRU media@cru.ie
Increased borrowing limits for EirGrid – to strengthen our National Grid
The Government today approved an increased borrowing limit (€3 billion) for EirGrid, as it strives to strengthen our National Grid as part of ‘Shaping Our Electricity Future’ and to deliver the Celtic (Ireland-France) Interconnector. EirGrid is readying the grid to achieve our ambitious 80% renewable electricity target by 2030. At present, around 40% of electricity comes from renewable generation. ‘Shaping Our Electricity Future’ will deliver a stronger and more flexible grid – one that will ultimately carry more power. Where it can, EirGrid will use the existing grid to meet this goal. However, given the scale of change needed, plans are underway for significant new grid infrastructure – such as cabling and substations. Since 2011, EirGrid has been working with its French equivalent Réseau de Transport d’Electricité (RTE) – on the ambitious Celtic (Ireland-France) Interconnector. Work is progressing at pace; An Bord Pleanála granted approval for the project last month, subject to a number of conditions. Upon completion, this project will benefit electricity customers and markets in Ireland, France and the EU.
Increased borrowing limits for Bord na Móna – to accelerate the deployment of renewable energy
Today also saw Government approval for an increased borrowing limit (€650 million) for Bord na Móna. This will underpin the company’s ‘Brown to Green’ transition, as it strives to accelerate the development and deployment of renewable energy. Bord na Móna plans to deploy up to 2GW of generating capacity by 2030. A key part of Bord na Móna’s mission is to provide Ireland with sustainable energy from renewable sources – at scale.