DECC have called for evidence on the extension of the CfD mechanism into Northern Ireland – it poses some interesting issues which we discuss below. we’ve clients in ther reneable sector in Northern Ireland so wanted to share some of our thoughts.
The potential extension of CfD is being promoted as a potential means to ensure that the NI consumer pays the lowest possible cost for renewable generation by only focusing support on the most profitable renewable generation developments.
With NI being planned to be part of the I-SEM capacity market, there is a question over the the rationale of extending the CfD from GB. On balance the extension of the GB CfD may be the only viable option – particularly given the short time frame within which an alternative to the NIRO must be introduced.
But unlike the previous NIRO scheme there is no guarantee that proposed large scale renewables developments in Northern Ireland will secure CfD support. Ongoing support for the renewable sector in NI is essential and t and it may well be that further consideration should be given to the transition and interim phases.
The extension of the CfD NI has the potential to be competitively disadvantageous to indigenous projects. Eligibility criteria for CfD include the requirement that schemes have secured full planning permission and a countersigned offer of grid connection. However, in Northern Ireland the lack of investment in the distribution and transmission system means that there are absolute limits to the capacity of the grid. This limits the potential number of schemes that will be able to bid in future auctions. This presents a ceiling on the potential schemes that can be successful in NI and as such a ceiling on the potential economic benefits that can accrue. This means that not only must there be a low limit on the number of schemes that can be successful but that there is no guarantee that NI will get its ‘share of the allocated funding.
The NI system of securing a quotation for a grid connection is different to Great Britain and places NI at a competitive disadvantage. Few businesses are prepared to expend the risk capital to obtain planning permission if there is no certainty of being able to either connect to or afford the cost of a grid connection.
The direct cost of renewables support under the CfD scheme, (which currently accounts for £17.25 (2.9%) of an average domestic annual electricity bill). There are projections that indicate that this could result in an almost three-fold increase by 2020.
Many businesses are vulnerable to increases in energy costs. Only large energy users are likely to be given exemption from some of the costs of the CfD scheme. its not clear if DETI is considering the vulnerability of all businesses .
The lack of support mechanisms for small scale power generation is a barrier to inward investment, decarbonising power generation, and to stimulating the NI low carbon economy. The extension of the Feed-In Tariff to NI can only be a good idea and surely DECC should support this.
The impending withdrawal of the NIRO means that there will be no support for the rapidly growing small scale renewable businesses.
In the absence of guaranteed support mechanisms the NI Executive target to produce 40% of electricity from renewable sources by 2020 is unlikely to be achievable. This calls into the question of investing in further improvements to the NI Grid infrastructure to accommodate new renewable generators.
The CfD has great potential for NI and on balance would support its extension. However it does not seem that he consequences of this extension are fully understood. Thre would seem to be benefits from carrying out further detailed assessments of the potential; direct and indirect costs and benefits that would accrue to businesses in advance of any decision being taken by DETI and DECC on the extension of CfD to NI.