As Storm Ciara was bearing down menacingly on Ireland recently, not everyone on the island was cowering for safety. Ireland’s wind energy sector was heading into a landmark few weeks and had good reason to celebrate the gales as a new record for the amount of power generated by wind across the island was set. At 5pm on a busy Friday evening, as the nation’s lights began to switch on and with Met Éireann issuing storm warnings for the weekend ahead, wind farms around the island were pumping out 4,166MW of power, breaking the previous record set just three weeks earlier.
It was just one of several important moments for the wind industry in recent weeks and has given further confidence to those in the sector who believe that the Irish electricity system will, by 2030, regularly operate with as much as 100pc renewable energy averaged out on an annual basis. Indeed, over the past number of weeks, windy weather has meant that at certain times, up to 70pc of electricity has been coming from renewable sources. And, over the past week alone, on average more than 50pc of Ireland’s electricity came from renewables, according to Eirgrid figures.
Not surprisingly, with this level of wind power coming on to the national grid, Ireland’s big coal-fired station at Moneypoint on the Shannon estuary – long the dirty but reliable bedrock of the Irish electricity system – was not called on to produce any power for the past seven weeks. Success like this has turned the heads of investors and pushed the wind sector into the mainstream. Industry sources suggest that between investment and M&A over the past five years, Ireland’s renewable energy market has seen over €10bn of capital spent. That, they say, is just for starters. The expected finalisation of the new Renewable Electricity Support Scheme (RESS) for the sector has already seen a flood of interest and investment come into the market, according to sources. The RESS will establish a system of auctions to provide State support to renewable electricity projects in Ireland. The promise of this system has seen wind and solar projects proliferate on the planning lists of local authorities in recent months – as renewable energy investors and developers gear themselves up to get a slice of the action in future auctions that will look to back the cheapest power available from renewable projects.
“The future for renewable electricity in general is really positive,” said Noel Cunniffe, head of policy at the Irish Wind Energy Association (IWEA). “The Government’s Climate Action Plan and now the RESS scheme have almost been like pressing a ‘go’ button on the development of a pipeline over the next 10 years. “There was a quiet time when there was ambiguity over what the support scheme would look like, what the target would look like, what grid connection policy would look like, but we have got really positive directions on all of those things in the last 12 months. We are really seeing a thriving pipeline emerging from that. If you talk to people on the ground in the industry, they have never been as busy doing environmental analysis, surveys and grid connection studies.”
But there are concerns within the industry about potential problems also. Wind and solar farm developers that win out in the auctions – the first of which is scheduled for June – will also have to develop their projects under strict new rules. The new Wind Energy Development Guidelines are causing concern in the industry, not least with a tough new stance on noise limits and setback distances. A public consultation on these new guidelines closed last week. The industry will anxiously wait to see if the Government backs down on a proposal that could push up the price of wind-generated electricity and, at a stroke, put 40pc of the land currently available to it for development out of bounds, according to Cunniffe.
The IWEA insists that there are, on average, about 20 noise complaints a year, but it says the new guidelines will bring in strict limits that could push up the cost of wind-generated electricity by 11.4pc. This, says Cunniffe, would make many projects in the wind pipeline unfeasible. The Government’s Climate Action Plan, which was announced last year, has driven the current wave of interest in Irish renewables from investors, not least because of its ambition to use renewables to generate 70pc of the country’s electricity by 2030. To achieve this target, onshore wind farms will need to produce 8.2 gigawatts of electricity per annum, compared with the 4.1 gigawatts that are produced today. A further 3.5GW would need to come from offshore wind farms. Some of this increase will come from retooling the country’s original wind farms with new, taller turbines. For example, the oldest wind farm in Ireland, Bellacorick in Co Donegal, has 22 turbines that are 50 metres tall and generate 0.3 megawatts. They will be replaced with just two 180-metre-tall turbines. “This improvement in technology is why we will be able to double wind capacity by 2030 without doubling the number of turbines,” said Cunniffe.
Nevertheless, according to figures from the IWEA, hitting the target requires a pipeline of wind projects equivalent to up to 12GW, with only a portion of that ultimately getting built. About a gigawatt of wind projects are already approved in the planning system, as well as having a grid connection approved, and so are ready to compete in the first RESS auction this summer. On top of that, there is another almost 500MW with planning permission but no grid access yet. There is a further 300MW to 400MW worth of wind farm projects seeking planning permission, with a further 2GW to 3GW estimated to be in the pre-planning and feasibility stages. “Overall, there is currently a pipeline of about 8GW at the moment. But there will be attrition in that because not all of those projects will come through environmental analysis or the planning system, for example, and some of those projects will fall away. With the auction system, you also need a competition element, so there have to be losers as well as winners.”
Now, with the RESS auctions approaching, and the introduction of industry guidelines, more investment is being earmarked for Irish renewables globally, according to numerous industry sources. Earlier this month, French utility firm EDF Group took a 50pc interest in the Codling Bank wind farm, 13km off the coast of Co Wicklow. The energy giant is rumoured to have paid €100m to acquire the stake from a company linked to property developer Johnny Ronan. Last week, Greencoat Renewables, a renewable energy investment company focused on Ireland, also got in on the action. It acquired a 14MW wind farm in Co Clare for €35.4m.
Its UK subsidiary followed this investment up in Co Tyrone, purchasing a wind farm for nearly €61m from Scottish utility SSE.
For Paul O’Donnell, investment manager at Greencoat, Ireland is a valuable investment destination for international capital looking to back renewable energy projects and acquire operational developments, such as his one in Clare. His group has been supported by both overseas institutional funds and Irish backers, aiming to deliver a 6pc dividend to its investors. “Ireland is very attractive,” he said. “We’ve deployed over €1bn of capital over the past three years, acquiring 12pc of wind farms on the market. The reason it’s attractive for us is it’s a low-risk environment, a very stable regulatory environment. It obviously has a very good wind resource. We have a supportive Government policy to build out renewables, and we have the skill sets here to build out the wind farms. Ireland knows how to build wind farms. It’s been a really good market and one we’ve been able to make stable returns on and grow out the business in the meantime.”
To get to the target, O’Donnell said that Ireland would need to invest a further €12bn into renewables. “That’s an awful lot of investment that requires a lot of investment and a different kind of development,” he said. “Up until now, we’ve obviously just had on or offshore wind farms. Almost 35pc of our renewable electricity is coming from onshore wind, but we won’t get there with just onshore wind.” O’Donnell said that the growing pace of interest coming from the big European utilities, such as EDF and Energia, is due to the realisation that the country will need to back offshore in a big way to hit its 2030 targets. He recognised that Greencoat would not only continue to plough investment into onshore wind, but in future would also look at solar and offshore.
The pending RESS auctions, which will cover onshore and offshore wind and solar, will play a role in how Ireland hits its ambitious renewables targets. Up until now, however, the REFIT scheme, which guarantees a minimum price for power, has been attractive for investors buying into Irish projects. Brendan Slattery, head of the environmental and planning group at law firm McCann Fitzgerald, said that the attractiveness of Ireland was shown in market sentiment. “I joined McCann Fitzgerald to head up the unit in summer 2018,” he said. “In the 22 months since then, renewable energy has been the busiest part of my practice. It has absolutely been the most important part of what I have been doing. We’ve been tracking activity. There is blatantly a measure of confidence in Ireland’s approach to renewables. In between all that, I’ve literally lost track of the number of megawatts, turbines and wind farms transacting or refinanced [in Ireland].”
He said there are a couple of things driving investor confidence in Ireland, particularly the route to market offered by both REFIT and the upcoming RESS auctions.
Slattery said that three key things are vital to kicking off a renewable project anywhere in the world, including Ireland. The area of most concern in an Irish context is whether you can get planning approval and consents signed off.
Slattery said the planning system, particularly for the more significant projects, can be troublesome. He feels the industry needs more explicit guidelines for these big projects to overcome the issues with concerned citizens and public representatives.
After that, developers need to know whether the project can get a grid connection and then a route to market. He said there had been a gap in this area from 2015, following on from the closure of REFIT, as the industry awaited the next means of accessing the power market. With the RESS auctions slated for June, the competition is due to heat up.
The news of auctions has caught the attention of utilities, significant pension funds and other investors eyeing up renewable opportunities in Ireland. The country is home to €3trn in funds under management, with a new report from Mazars suggesting that this gives the investment industry the opportunity to leverage its fire power to take a leading role in the transition to environmentally sustainable finance.
“The most significant financial services businesses in banking, asset management and insurance are based here and positioned to support the European Green Deal objectives. This should be a key priority for our next government,” said Mark Kennedy, managing partner at Mazars Ireland.
The firm commissioned the report along with the Official Monetary and Financial Institutions Forum – a think-tank for central banking, economic policy and public investment.
Laurence O’Shaughnessy, a director of IBI Corporate Finance, an Irish investment bank, said that international fund investors and strategic investors were queuing up to get involved in the renewable industry – to its benefit. “From our own experience, most of the Europeans are looking at Ireland for trading in renewables, and a couple of them are doing so really aggressively,” he said. “That’s all really positive, and from our perspective, that’s probably going to continue for the next period of time. It’s a great thing for M&A and the economy, because when you have that level of appetite for inward investment, it is going to drive up competitiveness, drive down the price and drive up the quality of results.”
O’Shaugnessy said investors had been circling Ireland for the past 10 years, eyeing up renewable assets and opportunities. “Between investors on the buy side, the likes of Blackrock headquartering their business for renewables here, the Greencoat fund, etc. have made Ireland their home. That’s reflective of seeing real value in both the regulatory regime but also the fundamental characteristics of building renewable energy in this country. “For 10 years or more, people have been focused on Ireland. It probably is with RESS that you are seeing the big influx of [utilities like] the Statkraft’s and Iberdrola’s and all these guys, but they’ve been here a while. Our experience is that we have had dialogue with people on the financial and the strategic side over a number of years. We are seeing the next wave of development getting unleashed now. Because of that, a lot of effort is coming to the fore. Stuff is going to planning, changing hands, or packages of projects are being sold with planning in place. This is really a symptom of interest that has been building over a number of years.”
Source – The Sunday Independent