13/05/2021 Briefing

There will be a phased transition this decade from a decentralised offshore transmission system model to a centralised model which will happen over three phases.  The phases will align with auctions for financial support for offshore renewable energy (under the Renewable Electricity Support Scheme, ‘RESS’):

  • First Phase: projects successful in the first offshore RESS auction will develop the associated offshore transmission system requirement,
  • Second Phase (coinciding with the second RESS offshore auction): planning and development of the offshore transmission system may be carried out by either renewable energy projects or EirGrid, and
  • Third Phase (coinciding with the third offshore RESS auction): the offshore transmission system will be exclusively developed by EirGrid, with maritime areas in which renewables development may take place to be provided for by the second Offshore Renewable Energy Development Plan (OREDP II).

Ownership

Ownership will rest with EirGrid at all stages of the phased transition, regardless of whether the grid has been developed by individual renewable energy projects or EirGrid.  Transmission system assets to be owned by EirGrid will include the high voltage transmission circuits and associated onshore and offshore transmission infrastructure connecting offshore generation sites to the existing onshore system, as well as any necessary offshore reinforcements to accommodate electricity flows.  Transmission system assets developed by renewable energy projects must accord to functional specifications provided by EirGrid in order to ensure a level playing field in transmission system costs across prospective renewable energy developments.

Onshore transmission system assets, including any necessary onshore reinforcements to accommodate offshore electricity flows, will remain with ESB, with development of the onshore grid continuing to take place in line with the infrastructure agreement between ESB and EirGrid.

Cost Recovery

The policy states that the cost of building out the offshore transmission system will ultimately be recovered from electricity customers (consistent with existing practice for the onshore transmission system).

However, the manner in which costs will be recovered will vary in different phases.  In the First and Second Phases costs will be borne by Generators and incorporated in RESS bids, while in Phase 3 the costs of developing offshore grids will be borne by EirGrid and recovered through use of system charges.  This means that grid connection costs will impact on generator bids in RESS in Phases 1 and 2, but not Phase 3, which may result in strategic decisions in relation to auctions into which projects are bid.

It also means that the PSO will be significantly increased by projects in Phase 1 and 2, while also exposing such projects to cash flow and sovereign risk issues associated with RESS that would not be present if grid costs were recovered through use of system charges.  Generators in Phase 3 will face a range of other challenges, as they are no longer in control of transmission planning and delivery.  It remains unclear whether these risks will be managed in Ireland in ways that have proved bankable in other jurisdictions.

Phased transition

The Policy notes that, as compared to a decentralised approach, a significant lead-in time will be necessary to develop the capacities required to fully leverage the advantages of a centralised, plan-led system.   Thus the decentralised approach features in the short term to avoid delay to early mover projects.

Taking stock

It is very positive that the ambitious commitment in the Programme for Government to achieving 5GW of installed offshore wind generation by 2030 is restated here.  However, this policy raises as many questions as it answers.  All eyes will now be on the timing of RESS auctions and Phases of this Offshore Transmission System Policy.  The first three RESS auctions were anticipated to take place yearly, followed by every two years.  It has been necessary to delay the next auction (the first to deal with offshore power) until next year.  It will be critical for all stakeholders to work together to facilitate clarity for projects being planned now, particularly as regards location and grid capacity for projects to which the Second and Third Phases will apply.