Onshore wind is the ‘low-hanging fruit’ for renewable investment
Wind turbines on the Bog of Allen in Co Offaly. Onshore wind in Ireland is probably still the cheapest way of delivering renewable generation on the island, says Eoin Cassidy of law firm Mason Hayes and Curran. Photo: Eamonn Farrell/RollingNews.ie
Interest rate reductions, cooling inflation and government commitment to renewable energy projects has led to increased appetite among investors to enter the Irish market recently despite chronic challenges that continue to hinder progress, according to an expert.
Eoin Cassidy, Mason Hayes and Curran partner in its construction team and energy law specialist, said an improved economic environment will improve the debt market for Irish renewable assets in the short term, which he suggested will assist the smaller developers that have been previously priced out and haven't been able to move forward on projects.
However, he added that reduced interest rates and cooling inflation “takes quite a lot of time to feed through into the actual delivery of constructed assets.” In the meantime, the Irish market needs to focus on creating certainty for investors where they can.
A recent poll by Mashon Hayes and Curran showed that three in four energy professionals (73%) see market uncertainty as the biggest barrier to financing new renewable technologies in Ireland.
Mr Cassidy noted that this uncertainty has been borne out of lingering obstacles including a contentious planning system but also several positive changes that have been implemented.
“I think what we've had is a constant movement of policy and regulatory framework all in the right direction, okay, but it's but there's a lot of stuff that's been changing,” explained Mr Cassidy.
“There's a lot of stuff that's been moving and what that does is it creates a kind of a pause and a hesitancy on the lack of investment, because they're not really sure what things are going to end up looking like,” he added.
Mr Cassidy noted the tweaks that the Government made to State supported onshore and offshore renewable energy development that have boosted confidence among stakeholders in the industry but said the level of changes to regulatory frameworks and legislations “is slowing things down”.
As stakeholders grapple with this uncertainty in a constantly evolving sector, Mr Cassidy indicated some areas are more reliable.
Mr Cassidy also said that when it comes to decarbonisation, offshore development continues to be a “distraction” and other projects are more likely to attract investment and become larger players in achieving the Government’s ambitious goal of 80% renewable energy by 2030.
“Actually, the low-hanging fruit for Ireland from a decarbonisation journey is our onshore wind and solar opportunities and well supported long duration energy storage,” said Mr Cassidy.
However, in the Mason Hayes and Curran survey, offshore wind was favoured by more than half of respondents (51%) as the most attractive proposition among new renewable technologies for low-cost project finance in Ireland.
“I think there is, certainly, huge support from the State around delivering an offshore market in Ireland,” said Mr Cassidy.
Momentum has picked up pace once more in the offshore piece of the renewable sector, as the Government just recently approved the terms and conditions for a second auction under the States Offshore Renewable Energy Support Scheme (Oress) but Mr Cassidy believes “offshore is going to continue to be a slower rollout than people expect it to be.”
The offshore wind market has been hit by the uncertainty that comes with change including grid connection updates to support capacity as well as enacting policy and consenting regimes which may have rattled some investors.
“This kind of made some investors look at the Irish offshore wind market and say, maybe we're not ready to go in there yet. Or, in fact, some of them have pulled out because it's been it's taken way longer than they expected,” said Mr Cassidy.
“There's been a number of high profile cases where major international investors have pulled out, have come into the market and then exited because they expect to be able to deliver the investment quicker and on more certain terms in other jurisdictions,”
One of the biggest blows to the offshore wind sector in Ireland was Doyle Shipping Group’s decision to back out of a multi-million euro development, labelled the Cork Dockyard Rejuvenation Project due to timing issues.
“We could probably deliver more and deliver quicker with onshore. Onshore wind in Ireland is probably still the cheapest way of delivering renewable generation on the island,” said Mr Cassidy.
Energy price volatility, which is more evident than ever following Russia’s invasion of Ukraine which led to surging prices, and the growing threat of climate change has made the deliverance of renewable energy sources a top priority for governments.
However, Big Tech has controversially become one of the biggest customers for renewable energy companies, with both sectors entering into agreements to fuel energy-guzzling data centres.
“Over the last three years, you've had these concerns around potential Amber Alerts and pressure on the grid. And the the biggest growth factor from a demand point of view, is the data centres,” said Mr Cassidy.
But many Big Tech firms are now entering into contracts with renewable energy companies to somewhat power data centres in a greener way.
This makes Ireland somewhat of an attractive place for both industries. The State’s reliance on corporation tax coming from multinationals to create padding for budgets has led to an abundance of corporations creating headquarters in Ireland. Meanwhile, Ireland’s coast, windy weather and a vast amount of land has also created a prime location for renewable energy companies.
Mr Cassidy, among many others, suggested the growing need for data centres as consumers become increasingly reliant on technology and that this creates an “opportunity” for renewable energy firms to establish a presence in Ireland.
“I think there are some very quick changes that could assist the private wire policy that's coming down the line. That's been long awaited and, when it's implemented, will allow a lot of data centres to actually have direct power from renewable generation,” said Mr Cassidy.
“The number one priority is ensuring that you know you have a safe and reliable grid system,” he added.
Mr Cassidy said that, overall, what is required to turn Ireland into an attractive proposition for renewable energy investment is a pipeline of new generation, short and medium-term certainty around policy and long-term economic benefit for delivering these assets.
“If you can do that, you start reducing the risk of the of Ireland as an investment proposition,” he said.
Ironically, Mr Cassidy said around 10 years ago Ireland provided a much simpler model for State-supported renewable energy generation, which may have been helped by the newness of the sector and subsequently caused fewer planning objections.
“I went back and had a look at the installed renewable capacity that was being delivered on an annual basis in the State, and it kind of peaked in 2017,” he said.
“It's so much harder to do that across a number of different types of generation and constrained by staffing levels in the Department,” said Mr Cassidy.
“It gets harder. The more you progress through the energy transition, the harder the next kind of percentages are to deliver because it just becomes more and more complex,” he concluded.
