There was considerable growth in the development of renewable electricity over the previous Northern Ireland Assembly mandate. Changes to renewable electricity support may impact the ability to achieve similar levels of growth in the future.
How much of our electricity comes from renewable sources?
The Department of Enterprise, Trade and Investment’s (DETI) Strategic Energy Framework (SEF), published in September 2010, introduced a target of securing 40% of Northern Ireland electricity consumption from renewable sources by 2020.
At the time of the SEF’s publication, renewable electricity accounted for 10% of Northern Ireland consumption. According to the latest figures from DETI, 25.4% of total electricity consumed in the 12 month period from January 2015 to December 2015 was generated by renewable sources, predominately wind generation. Renewable electricity generation has exceeded the interim target set in the Northern Ireland Programme for Government to secure 20% of electricity consumption from renewable sources by 2015.
The Northern Ireland Renewable Obligation
The Northern Ireland Renewable Obligation (NIRO) has underpinned Northern Ireland’s success in developing renewable electricity. First introduced in 2005, the NIRO has allowed Northern Ireland renewable generators to participate in a UK-wide market for Renewable Obligation Certificates (ROCs). This has provided generators with two sources of income: the first from selling their electricity to the grid and the second from selling ROCs on the UK-wide market.
Two aspects of the NIRO have been particularly favourable to Northern Ireland generators. Northern Ireland consumers pay less for subsidising renewable development than their GB counterparts due to lower obligation levels. Furthermore, as a non-competitive scheme, the NIRO has supported all eligible renewable projects.
What will the future look like?
The NIRO is in the process of being phased out, along with equivalent schemes in GB. Support for new large-scale onshore wind ended in April 2016. The NIRO will remain open to small-scale onshore wind pending further consultation. The overall scheme is due to end in 2017, to be replaced by a scheme known as contracts for difference (CfD).
CfDs will replace current support arrangements with direct private contracts between low carbon generators and the Low Carbon Contracts Company (LCCC), a Government-owned company. CfDs are based on the following principles:
- A generator is offered a 15 year contract with a known strike price (defined as ‘a price for electricity reflecting the cost of investing in a particular low carbon technology’) for the renewable electricity sold.
- If the market price for electricity is below the strike price, the generator gets paid the difference between the two (funded through a levy on consumers’ bills).
- If the market price for electricity is above the strike price, the generator pays back the difference.
Higher electricity bills?
Importantly, CfDs will remove elements of the NIRO favourable to Northern Ireland. The costs of the scheme will be socialised across the UK evenly. DETI estimated this could see the direct cost of renewable support (£17.25 on the annual domestic electricity bill) triple, with industrial bills increasing by 7-9%. Unlike the NIRO, CfDs are based on competitive auctions. This means renewable development taking place where it is most economic, potentially resulting in reduced levels of development in Northern Ireland.
In May 2015, consultancy firm RICARDO-AEA carried out a Review of the Costs and Benefits of the Northern Ireland Executive’s 40% Renewable Electricity Target on behalf of DETI. This report concluded that ‘increasing the levels of renewable electricity consumed has a positive net benefit for the NI economy’, but noted:
Whilst our economic analysis indicates that increasing the level of renewable electricity to 40% is the best option, the lack of guaranteed support for NI based projects means that it is difficult to justify the investment in further network reinforcement projects that may not be needed before 2020, if NI developers’ bids for support via CfDs are not successful.
DETI embarked upon a ‘Review and Refresh’ of the SEF. A survey of stakeholder opinion designed to inform this review concluded in September 2015, the results of which are yet to be published. Given the changes planned to renewable electricity support, as well as the ongoing review of Northern Ireland’s central energy policy, the future of renewable energy development in the region is likely to be an important topic during the new Assembly mandate.