Private Wires: First Principles
In Ireland, Government policy supports economic growth and direct inward investment. This requires adequate electricity supply.
Typically, this means that electricity producers and consumers can obtain a connection to the electricity grid. It is also possible for cables to be laid directly between producers and consumers and this is not unusual in many jurisdictions. It can play an important role when grid is a scarce resource, as it is in Ireland, and many countries in the process of decarbonising the energy system.
What does EU Law require?
The Internal Market in Electricity Directive provides for direct lines, which means “either an electricity line linking an isolated generation site with an isolated customer or an electricity line linking a producer and an electricity supply undertaking to supply directly their own premises, subsidiaries and customers”.
Under Article 7(1), Member States are required to take the measures necessary to enable: (a) all producers and electricity supply undertakings established in their territory to supply their own premises, subsidiaries and customers through a direct line, without being subject to disproportionate administrative procedures or costs; and (b) all customers within their territory, individually or jointly, to be supplied through a direct line by producers and electricity supply undertakings.
The Directive requires Member States to lay down objective and non-discriminatory criteria for the grant of authorisations for the construction of direct lines in their territory. Under Article 7(4), Member States may issue authorisations to construct a direct line, subject to the refusal of system access where the Member States lack the necessary capacity or to the opening of a dispute settlement procedure.
What is the Irish position?
In transposing EU law, Ireland has implemented the Article 7(4) option. The Commission for Regulation of Utilities (“CRU”) will not grant a direct line permission unless a person has applied for connection to the grid and, either the application has been refused because of lack of capacity, or a dispute has been referred to the CRU and the CRU forms the view that it is in the public interest to issue the direct line permission.
What happens in practice?
Applications to connect to the grid tend to be queued up rather than refused outright. In a more recent and worrisome development, in December 2021 the CRU directed EirGrid to treat certain applications from data centres as being ‘terminated’ rather than refusing them. This in each case means that the conditions that would allow the CRU to grant a direct line permission are not being triggered in, we would argue, precisely the circumstances in which the Directive intends that direct line consents should be available.
This is problematic for industry participants and large business customers given that a failure to accept or refuse a grid connection agreement within a reasonable timeframe frustrates the obligation on Ireland under Article 7(1). The requirement under the Renewable Energy Directive II that the permit-granting process should not exceed two years should assist, if it were complied with, even if the outcome of a permit-granting process is a refusal to offer a connection.
What would direct lines bring?
Assuming a direct line permission could be obtained in practice, Irish legislation provides that a person who receives a permission can use the line to supply their own premises, their own subsidiaries, and all customers within the State, individually or jointly.
Where do private wires come in?
Ireland’s Climate Action Plan 2023 states that, to accelerate renewable electricity generation, the State will “deliver a streamlined electricity generation grid connection policy and process and remove barriers for installation of renewables and flexible technologies without the need to build new grid, including hybrid (wind/solar/storage) connections and private wires”. The State will develop a policy on private wires and, if necessary, pass facilitating legislation by the end of 2023.
The Department of Energy, Communications and Environment (“DECC”) is now consulting on Private Wires.
What is meant by Private Wires?
The consultation states: “On a basic level Private Wires refers to private individuals or undertakings running their own electricity cables in order to transfer electricity...”. In essence, therefore, a “Private Wire” appears to be essentially the same as a “direct line”, without the optional precondition adopted by Ireland that access first be refused or a dispute be raised.
For the purposes of the consultation, DECC has classified private wires as either being ‘Private Lines’ or ‘Private Networks’ and described them as having both shared and distinct characteristics, shown in the table below.
The definition for Private Lines is narrower than the EU definition for direct lines, the second element of which (“lines linking a producer and an electricity supply undertaking”) is not explicitly captured in either set of distinct characteristics, though it is reflected in the shared characteristics, shown below.
|Private Lines||Private Networks|
|Both relate to electricity infrastructure. |
Both are privately owned, operated, and maintained.
Both can relate to the generation for self-supply or for sale and/ or onwards distribution.
Both do not utilise the national electricity grid.
Both can be at either Transmission or Distribution level.
|A ‘Private Line’ is a privately owned electricity line, and associated infrastructure, used to supply electricity and which links a single generation site with a single demand user.||A ‘Private Network’ is a privately owned electricity system consisting of associated cables and infrastructure, used to transport and supply electricity, which: |
• links a single generation site with multiple demand users; or
• links multiple generation sites with a single demand user; or
• links multiple generation sites with multiple demand users; or
• entails variations of the above involving more than two undertakings.
An extensive questionnaire
The consultation sets out nearly 200 questions. A first group of questions looks at the grid, asking whether more than one transmission system owner, transmission system operator, distribution system owner and distribution system operator is needed.
This is characteristic of the very broad-ranging nature of the consultation, albeit that unlocking the potential of current regulation for direct lines could already be achieved in the context of the existing sectoral structure.
A second group of questions seeks views on potential opportunities asking, for example, whether and under what conditions:
- Private Wires should be permitted to transport electricity for hydrogen production;
- Private Lines should be permitted where a demand site abuts a generation site, or where they are located apart;
- Private Networks should be permitted for Renewable Energy Business Parks, or for the purpose of generation and demand located in different places.
It is asked whether private wires could support the development of hybrid connections or community involvement in the energy transition. It is asked whether current restrictions impede delivery of EV charging infrastructure and onsite generation and consumption.
Private wires are essentially cables useful in a situation where electricity is required to be transmitted from source to use. Whatever the nature of the applicable regulatory framework, wires will be needed for the above opportunities.
A third group of questions looks at regulation, including the potential for Private Wires to be Transmission or Distribution for regulatory purposes. Views are sought on standards that should apply from the perspectives of safety, equipment and installation; public safety; ability to change electricity supplier; electrical safety regulation; and cyber security.
A fourth group of questions looks at ‘barriers to overcome’. These ask about the potential impact of private wires on electricity and gas security of supply, because it has been submitted that large energy users off-taking by Direct Wire from renewable generation projects will sometimes need supply from the grid. Questions are also asked about whether direct lines should be permitted where an energy user is grid connected, and how their use of systems tariffs should be reformed.
Many of these issues are capable of being regulated in a scenario where Private Wires can be permitted. They also engage existing Member State obligations under EU law. Obligations around access and use of systems, for example, are relevant to the questions around network charges for connected customers with private wires.
The consultation also considers whether Private Wires would impact efficient development of the grid. Efficient and coordinated infrastructure development is critical and may be pursued through State spatial planning in coordination with relevant stakeholders. The suggestion that the system operators would have a right to veto potential private wire routes should, however, undergo scrutiny from an EU law perspective. Further, given the scale of investment in enabling infrastructure needed to meet 2030 decarbonisation targets and the slow progress so far, it is unfortunate the consultation describes Private Wires as competing, rather than complementary, infrastructure.
Similarly, the idea of restricting private wires to renewables generation assets begs the question of how this is enabling “all producers and electricity supply undertakings … to supply their own premises, subsidiaries and customers through a direct line”. Electricity lines are enabling infrastructure. Regulating / incentivising a certain generation fuel mix, whether grid connected or not, can be done in more targeted and appropriate ways.
Questions also address security of supply and note Ireland’s requirement to reduce final energy consumption under the Energy Efficiency Directive asking, for example, whether there is a difference between Private Wire projects that seek to meet current electricity demand and projects that seek to bring new demand to Ireland. The recent Recast Energy Efficiency Directive rightfully increases the ambition of our targets, with obligations aimed at increasing efficiency in the supply, transmission, storage and use of energy, for example through better energy systems, building methods, industrial processes, and transport systems. Suggesting that new customers should, as a matter of law or policy, not be accommodated as regards transport and supply of electricity is an entirely different proposition.
The consultation closes at 5.30 p.m. on 13 October 2023. Further information is available here.