Is the future bright for the NI energy market?

It is clear that there are a number of significant challenges facing the energy sector in Northern Ireland but where there are challenges, there are also opportunities, according to law firm Cleaver Fulton Rankin.

THE EXECUTIVE

Northern Ireland has just completed its second year without a functioning local government and in the words of David Sterling, head of the Northern Ireland Civil Service, the Civil Service is “… doing everything we can in the prevailing circumstances…but civil servants cannot take the place of ministers when it comes to strategic policy development or in taking transformative decisions”.

This is very much the case with regard to energy policy. The Department of the Economy’s Strategic Energy Framework, which was endorsed by the Executive in 2010, has over the last nine years, led to some very positive changes to the energy generation and supply mix, particularly from renewable sources. However the 10 year framework is nearing its end and needs to be replaced. The Department is making such preparations as it can on a draft Strategic Energy Framework across the areas of heat, electricity, transport and energy efficiency which it aims to make public some time in the spring. Whether or not this region has its Assembly back to adopt such a framework will remain to be seen, but in the meantime it will ensure the subject remains live and high on the agenda.

BREXIT AND I-SEM

The new wholesale electricity market known as the Integrated Single Electricity Market (I-SEM) went live on October 1, 2018. It is designed to deliver increased levels of competition which, it is hoped, will help put downward pressure on prices as well as encouraging greater levels of security of supply and transparency. While the island of Ireland is now integrated more closely with European markets, there is a risk that Brexit could halt this integration.

British and Irish business groups and energy trade associations such as the CBI, IBEC, Electricity Association of Ireland, RenewableUK, British Irish Chamber of Commerce and EnergyUK all refer to the delivery of I-SEM, or to the UK’s continued access to the IEM, as post-Brexit priorities for security of supply and/or consumer protection. I-SEM is clearly a priority that must be preserved.

While Brexit may present challenges and continuing uncertainty, there are certainly opportunities for investment and acquisition in the electricity market as more complex, specialist expertise will be required to effectively trade power on the I-SEM. Policy barriers or inaction cannot be allowed to prevent I-SEM from realising its potential of fully integrating the market by efficiently moving energy from producer to demand.

RENEWABLE INCENTIVE SCHEMES

Despite being on track to hit its target of 40% of electricity generation from renewables, Northern Ireland risks being left behind. The lack of a replacement for the development support mechanism, Renewables Obligations Certificate (ROCs) after its closure in April 2017, means Northern Ireland is lagging behind Great Britain which has established the Contract for Difference regime and Ireland, which has started work on its Renewable Electricity Support Scheme (RESS).

While neither scheme is perfect, doing nothing is not an option. The devolution of energy presented Northern Ireland with the opportunity to shape its own policy but without a government, will the sector and the infrastructure be able to remain fit for purpose?

GAS

With its development over the last 20 years, the gas network in Northern Ireland, with its low population density, must be seen as a success story. Consumers and businesses have been offered greater choice in terms of price and security of supply. Nevertheless there are certainly further opportunities for gas distributors and suppliers to expand the natural gas network, particularly in the west of the country and east Co Down.

So despite the apparent obstacles and challenges, there is opportunity for development and progress in Northern Ireland’s energy sector. The benefits for Northern Ireland will be in terms of security of supply, price and environmental sustainability

 

The Energy & Renewables team

Cleaver Fulton Rankin’s Energy & Renewables team understand the key issues faced by organisations involved in the energy and utilities sector, the political and regulatory background and the specialist nature of the work involved

The team act for developers, utilities, investors and funders across the full spectrum of energy related projects and deals, and have been at the forefront of renewable power development since 2002. The team has recently been providing regulatory advice in relation to the Single Electricity Market in Ireland and electricity market reform. In addition, they have worked on most of Northern Ireland’s major (ie 10MW plus) operating wind farms and large scale (5MW plus) solar farms and many of the region’s successful biomass projects.

The team combines energy lawyers from across all of Cleaver Fulton Rankin’s legal disciplines. Led by Stephen Cross, director, the integrated team brings together expertise in real estate, construction, planning and environmental, corporate, banking and finance.

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