Ireland allocated around 960 MW of PV capacity in the fourth Renewable Electricity Support Scheme auction (RESS 4) it held on Aug 28. The procurement exercise concluded with an auction final average price of €0.09685/kWh, which is 4% less than in the previous round. The final average prices for the PV and wind technology were €0.10476/kWh and €0.09047/kWh, respectively.
Compared to other auctions held this year in Germany, Croatia, the UK, and Italy, Ireland’s RESS 4 auction prices were very high.
The Irish Solar Energy Association (ISEA) said that government intervention is needed to further reduce final prices, both for industry and end consumers. Ahead of RESS 4, the association lobbied for a price cap of €0.12/kWh to cover the industry’s costs, but the request was not granted and the final cap for solar was €0.11/kWh.
Speaking to pv magazine after the final auction results were announced, the ISEA’s CEO, Conall Bolger, said there needed to be “a state focus on cost reduction” overall.
In a statement to pv magazine in response to questions about the high RESS 4 prices, a spokesperson for the Irish government’s Department of the Environment, Climate and Communication (DECC), said the RESS 4 results compare well with other recent renewable energy auctions in Europe in terms of volume procured and auction prices when adjustments for scheme specific designs are accounted for, such as indexation or contract length, among other factors.
“In terms of what can be done to bring down prices, there are a number of topics which are always kept under consideration for each auction such as support duration, indexation, compensation for dispatch down,” the spokesperson said.
From an industry perspective, the final RESS 4 strike price was not so high when the costs associated with planning and developing solar plants are factored in. “To be honest, it's not a high price. It's still a significant discount to what we're seeing as the day ahead market price for energy in Ireland,” Justin Brown, co-CEO of Power Capital Renewable Energy (PCRE), one of Ireland’s biggest independent power producers (IPPs), told pv magazine.
“Ireland's day ahead price is set by imported natural gas. So, we have three or four days of gas supply here in Ireland at any one stage and therefore the day ahead price is set by the price of gas and what you're seeing is the day ahead price on average has been well in excess of 100 euros per megawatt hour. So, it’s comparable to what the market is getting already in terms of natural gas,” he further explained.
According to the spokesperson for the government, the department regularly monitors levelized cost of energy (LCOE) modeling around each auction to see what impact these changes should have on both LCOEs and bid prices to try to balance the risk profile for developers and consumers. The results impact the design of the auction, they added. Stakeholders are involved in consultation along the way.
PCRE expects to achieve the financial close on the two projects it secured in RESS 4 in early 2025. The company has been successful in all four Irish auctions. From the auctions, it has more than 1 GW of projects either in the construction phase or ready-to-build phase.
According to Brown, Ireland’s solar market makes it extremely difficult for smaller developers to operate. Cost is a big factor. “Our industry is no different to any infrastructure industry,” he added. “We've seen an increase in the cost of infrastructure right across the board. The cost of building and development in Ireland is higher. That affects everything from the cost of construction, the cost of materials, the cost of labor. Even grid connection is substantially more expensive here than it is in the UK or in mainland Europe.”
Brown added that the auctions coincided with a high-interest rate environment. “But that may be tailing off now so we might see a compression in the next auction, but ultimately what we have felt is any benefit that the reduction of interest rates is having is probably being absorbed in terms of the other costs.”
Other contributing factors to high prices are Ireland’s slow planning system and limited grid connection. As Brown said, it can be extraordinarily difficult to get planned projects agreed at local government level. This squeezes smaller developers out of the market.
“We also have very limited interconnection here. We are the furthest West, non-land connected European country, so even transport costs, logistics, getting your deliveries to Ireland, as opposed to somewhere else, is more expensive. This means your cost per unit is higher, and that's from legal costs, right through to county council costs, planning, grid connection, installation cost, all this stacks together to drive prices up,” said Brown.
The Irish government’s level of intervention may be unsatisfactory for many stakeholders, but it has made some modest progress on grid connection and planning and development. The Planning and Development Bill 2023 was signed into law by the president of Ireland on October 17.
Eva Barrett, director of policy and regulation at the ISEA, said the Act represents “a significant shift in the planning landscape, introducing both opportunities and challenges for the solar sector.” However, she added that the practical impacts on solar project approvals remained uncertain for the time being.
An update to Ireland’s Electricity Connection Policy by its utilities watchdog in September of this year may also shake the market up somewhat. The new policy is designed to allow for more small-scale projects and faster permitting processes. The ISEA welcomed it as “a positive step forward for Ireland’s renewable energy sector.”
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