Renewables at a crossroads

Utility Regulator Jenny Pyper looks at what the future holds for the renewables sector and reflects on developments since the Strategic Energy Framework.

Renewables development in Northern Ireland is at “something of a crossroads,” reflects Utility Regulator Jenny Pyper. Currently meeting at this renewables crossroads is Electricity Market Reform (EMR), the Integrated Single Electricity Market (I-SEM) and electricity network issues and limitations.

Pyper states: “I can’t think of anything more significant right now for renewables than Electricity Market Reform.

“This is going to mean the end of the very successful Northern Ireland Renewable Energy Obligation in March 2017.”

Describing it as a “huge policy change,” she adds: “The NIRO has been a very, very good value for money scheme for Northern Ireland consumers because the obligation level for Northern Ireland was set much lower than elsewhere in the UK.”

DETI has gone out to consultation on what changing to a Contracts for Difference Scheme implications could have on the region and is currently reviewing responses to this.

The new I-SEM also means the prospect of “very significant change for renewables” which will put considerable challenges in the direction of renewables developers – a big change from the simple gross mandatory pool that is the SEM.

“If EMR is one of the biggest challenges from a policy perspective,” she continues, “the regulatory authorities also have to take their share of responsibility for significant regulatory changes that are going to impact on renewables.”

She describes I-SEM as a “huge piece of work” aimed at delivering a more efficient, more competitive market to meet EU objectives.

Economic influences
Pyper worked on the Strategic Energy Framework during her time as Head of Energy Policy at the Department of Enterprise, Trade and Investment (DETI).
Back in 2010, when the framework was published, carbon issues, green energy, environmental issues and sustainability were “right at the top” of the regulatory trilemma.

“Nothing was more important in terms of energy policy,” she comments. “At the time, we had great success in agreeing a shared target – a joint target for both parts of the island. Both governments committed to 40 per cent renewable energy by 2020.”

However, the recession changed that, concedes Pyper. “For the last few years, there is no question that economic drivers have been right at the top of the trilemma.”

The pressure on regulators to deliver downward pressure on prices for both domestic and business consumers has been “tremendous.”

She adds: “In Northern Ireland that is almost all, I think, that the politicians have focused on – how do we get efficiencies and economies into our electricity prices as a key driver for economic success?

“In the last year, however, the focus of the trilemma has definitely shifted to security of supply,” she says.

Developing renewables
The period since the framework, Pyper describes as “a positive story.” She explains: “We’ve seen very considerable development of the renewables industry, over treble in capacity since 2007.”

This comprises over 650MW of large scale renewables, about 80MW of small scale and about 50MW of micro scale. There is also a further 400MW of large scale onshore wind in the pipeline and 100MW of small scale. Every month, there is about 1.5MW of micro generation being added.

Pyper says: “What we are seeing at the minute is 20 per cent of total energy consumption from renewables but our installed capacity is going to be about 33 per cent by the time everything in the pipeline is delivered.”

So far, the Utility Regulator has facilitated over £5 billion of investment in energy and water markets since 2006. In the last two years, the regulator has approved around £30 million of investments to increase renewable generation in the north and north-west and £2.3 million for connections has been facilitated, primarily for sub-station upgrade work. Pyper describes the latter investments as “game-changers in terms of connections.” She adds that to date, the Utility Regulator has “never turned down an investment bid for connections”.

Issues and limitations
One of the biggest challenges facing Northern Ireland is that its grid was never developed to incorporate such a level of renewable energy generation, Pyper admits.

The network is saturated in the north and west of the region and in many other areas, it is close to saturation. She says: “Both NIE and SONI have recognised that very considerable investment is needed to enable further penetration.

“NIE has been working on a number of initiatives to try to improve renewable connections,” she adds, providing the example of Project 40 which will result in a new statement of charges for small scale renewables before the end of the year.

The Utility Regulator has also been looking at contestability to try to facilitate connections to the network and hopes to have licence modifications before the end of this year that will allow this.

Future decisions
Pyper says while it is a hugely challenging time for the renewables industry, as regulators, policy-makers and industry participants, there is an opportunity to reflect on the issues and options. There is also the potential for new developments, for example, in storage solutions and compressed air.

Pyper also highlights the “criticality” of the North/South interconnector in relation to security of supply.

“We have real pressures from 2020-2021 and if we don’t have certainty about that north-south interconnector being in place before 2020 then policy-makers and politicians in Northern Ireland might make, what I believe could be, sub-optimal decisions about keeping the lights on in Northern Ireland,” Pyper notes. “So that creates quite an anxious and febrile environment for policy makers as well.”

If there was absolute certainty on the interconnector, she believes some of the future decisions would fall into place.

She admits that if she was still at DETI and faced with the policy decisions of today, she might be looking at options like: “Should Northern Ireland go it alone and try to develop its own renewable support mechanism?” or “Is there an opportunity for an all-island mechanism?”

“Obviously there is the option to join EMR and be part of that UK-wide regime with socialised costs across the UK. But there’s also the option not to have any renewable support in Northern Ireland at all,” she continues.

One of the biggest fears from the business community is that in an EMR regime Northern Ireland could end up subsidising energy intensive industries elsewhere in the UK. “I can see how politically difficult that is going to be for the Northern Ireland Assembly.” These are huge issues which the Department is going to have to weigh very carefully over the coming weeks, she highlights.

Pyper concludes that while there is a time to pause and make careful decisions, the pause should not be for too long: “Hopefully policy-makers, informed by market participants, and working alongside the Utility Regulator in Northern Ireland in particular, will make the right choices for the future of the industry and consumers.”