22 minute read
Routes to market and risk reduction
Nguyen Dinh, head of hydrogen and principal in Ireland and Vietnam at OWC, and Claire Atkins, OWC Ireland country manager and a specialist in offshore wind supply chain, infrastructure and installation, discuss routes to market options and further reduction of risk and costs for offshore wind energy.
Dinh contextualises where Irish offshore wind finds itself at the moment: “The Offshore Renewable Energy Development Plan Phase 1 identifies the potential for offshore wind farm development of up to 39GW without significant adverse effects on the environment. The potential for Irish offshore energy including wave and tidal could be 70GW, 10 times our national electricity needs. Ireland’s Climate Action Plan has very ambitious targets of 40 per cent of energy and 70 (now 80) per cent of electricity from renewables by 2030.
“However, we know that electricity consumes only 30-35 per cent of total energy and that the other 65-70 per cent is consumed by transport, heat and other sectors, which is mostly imported from other countries. So, the question is: how we can deliver that potential to all sectors?”
Dinh mentions that EirWind’s Irish Offshore Wind Blueprint 2020-2050, published in July 2020 and synthesised from more than 40 research reports, sets the vision for 2030 to meet the Government’s target and develop up to 7.3GW of wind generation. If the infrastructure required can be developed and scaled up by 2040, an expected 13.8GW of offshore wind is to be delivered. By 2050, Ireland expects to be a global exporter of offshore power and hydrogen exporting about 30 percent by 2040 and more than 60 percent by 2050 with regards to hydrogen production. Delivering the blueprint targets will bring in enormous economic, social, and environmental benefits to Ireland.
With this expectation looming over the development of offshore wind in Ireland, Dinh and Atkins explain the typical development of a project, particularly with regard to costs and possible risks: “In general, most offshore wind projects will have five stages. Stage 1, development and consenting, takes considerable investment and the risks here include regulatory uncertainty, costly surveys and experience of the consultant and other contractors used. The next stage, Stage 2, is component manufacturing which entails significant capital expenditure for components, structure and turbine manufacturing. There are multiple risks in this stage which include contracting risks, a lack of standardisation, lack of risk sharing, and insufficient capacity or inexperienced contractors.
“Stage 3, transportation and installation, these costs are heavily dependent on infrastructure availability and logistics. Particularly when you consider key elements such as port infrastructure. Stage 4, operations and maintenance, governs the revenue but is largely dependent on the reliability of O&M measures and sufficient infrastructure availability. The last stage, Stage 5, is decommissioning. It is important to weigh up the costs and the risks associated with all five stages, in order to
support the developers involved,” says Atkins.
Dinh expands into floating offshore wind (FOW), detailing the fact that research tells us that prospective costs for substructure and foundations, can carry considerably larger costs. Potential opportunities for cost reduction, he says, lie in further support for the FOW sector.
“The FOW sector needs experienced engineers as well; for example, OWC have gained significant FOW experience through the work that we have undertaken as Owners Engineer on the Erebus FOW project in the Celtic Sea and other projects,” he says.
“In Ireland, when we are developing FOW, besides infrastructure, route to market is the other important issue. Hydrogen may have its challenges but deepwater wind projects fitted with electrolysers could change the way we store and transport energy. Moving to FOW will not only change the way we deliver energy, but how we store and transport it as well, as mentioned in a recent article by RV Ahilan from the AqualisBraemar LOC Group.”
Turning his eye to the potential export market for offshore wind and hydrogen, Dinh cites the example of the German market. Recent estimates state that by 2050, Germans may have to import more than 50 per cent of hydrogen due to their limited capacity of green hydrogen production. Thus, how Ireland delivers green hydrogen to foreign markets should now be answered to facilitate the developers and investors as well the infrastructure and supply chain that will be required, that all take time to realise.
“There are several ways to transport hydrogen or ammonia to markets, for example through tankers or pipelines. Transporting hydrogen by tankers could be more economical past 1,500km as pointed out in our recent study. Converting to ammonia for transporting by tankers could be economical at both shorter and longer distances.”
For exporting electricity, developments of the existing interconnectors (East-West and Moyle) and the proposed ones, the Celtic, Greenlink and Organic Power interconnectors have together shown great efforts, however the increasing demand could exceed that capacity. In gas infrastructure, the Moffat Interconnector and the Shannon LNG project mean that by 2030, 30GW of capacity is expected. When the Celtic Interconnector is in operation, Ireland will have roughly 3GW of electricity interconnector capacity, and Dinh says it is “questionable as to whether or not this will be sufficient, so this is something that will need to be considered now for the future”.
Finally, Dinh looks to how Ireland would see the benefits to the power system: “We have to maintain the frequency at exactly 50 Hz. Besides the important roles of pumped storage, batteries and demand response, the US Department of Energy considers the potential role of electrolysers in grid services, and we can see from their tests that grids with electrolysers are more stable than those without. That translates to the further consolidation of the whole integrated energy system, and it would be an answer.”
Atkins emphasises the critical role that infrastructure, including transmission systems, interconnectors, ports, legislation and consenting, all play in ensuring that our offshore wind projects and hydrogen projects are well planned.
“Ireland has strategically developed R&D capacity around offshore and marine renewable energy including the world-class Lir National Ocean Test Facility in Cork. It will be more beneficial if Ireland continues that strategy by advancing investment in planning, legislation, infrastructure and further R&D as those will help to bring down the costs of offshore wind and green hydrogen in a sustainable way,” Atkins and Dinh conclude.
Maritime area planning
Intended to be the centrepiece of a new streamlined consenting regime which will enable the swift deployment of offshore wind energy infrastructure, ultimately delivering 5GW by 2030, the Maritime Area Planning Act 2021 (MAP Act) was signed into law in December 2021.
The Maritime Area Planning Act 2021 is one component of the National Marine Planning Framework (NMPF) which was published in summer 2021. Parallel to the National Planning Framework, the NMPF illustrates the vision for Ireland’s maritime area, totalling approximately 495,000km2, until 2040.
The Maritime Area Planning Bill 2021 passed all stages of the Oireachtas on 17 December and was enacted on 23 December 2021.
It was heralded by government as “the biggest reform of marine governance since the foundation of the state”. The Act provides the legal and administrative underpinning for a new planning regime in the maritime area, facilitating the development of offshore energy. It is intended to strike a balance between unlocking Ireland’s offshore wind potential, while also protecting the marine environment.
Replacing existing development consent regimes with a single consent principle, or Maritime Area Consent (a seabed lease), it will enable development consent, or planning permission, with one environmental assessment. The new processes provided for within the Act will apply to foreshore licences and leases, as well as planning permissions for marine projects, from seaweed harvesting to offshore renewable energy infrastructure.
Significantly, the legislation seeks to ensure that the consent mechanism for offshore renewable energy projects:
• complies with EU environmental assessment obligations;
• complies with Aarhus Convention on public participation; and
• enables Ireland to deliver projects conducive to national climate targets for 2030.
Maritime Area Regulatory Authority
The legislation also creates a new regulatory authority, the Maritime Area Regulatory Authority (MARA). Alongside its enforcement functions, MARA will assume responsibility for issuing foreshore licences from the Minister for Housing, Local Government and Heritage. Likewise, the authority will also be empowered to issue Maritime Area Consents (equivalent to foreshore leases).
Beginning its work in January 2022, the MARA implementation committee has been allocated a €2 million budget. Until MARA is established (Q1 2023) and resourced, the Minister will retain responsibility for granting applications for licences and leases to legacy projects or “special MAC cases”.
Similarly, while aquaculture activities will continue to be processed by the Department of Agriculture, Food and the Marine, the Minister has indicated that this function will eventually transfer to MARA.
Maritime spatial planning
Ireland’s first maritime spatial plan, the NMPF, was published in tandem with the MAP Bill. While undertaking their functions, public bodies, particularly those responsible for issuing authorisation or consent for offshore activities, must comply with the objectives of the NMPF.
Designated Maritime Area Plans
Providing for Designated Maritime Area Plans (DMAPs), or portions of the maritime area which are selected for specific usage, the Act also requires applications for Marine Area Consents (MACs) within DMAPs to be subject to a specific process.
Marine Area Consent
The MAC regime requires that developers acquire a MAC prior to development permission applications to An Bord Pleanála. Therefore, MACs operate as a stepping stone into the development consent system and a decision on a MAC application must be made within 90 days.
Within Schedule 5 of the Act, there are several criteria used to determine approval for MAC applications. These include:
• public interest;
• ministerial guidelines;
• developer competence;
• consistency with the NMPF; and
• preparatory work undertaken by the developer, including stakeholder engagement.
Seven offshore wind projects granted “relevant project” status in May 2020 –i.e., offshore renewable energy projects which hold a foreshore authorisation, are in the process of applying for
COMMENTARY
Minister of State for Planning and Local Government Peter Burke TD
Minister of State for Heritage and Electoral Reform Malcolm Noonan TD
foreshore authorisation, or are subject to an EirGrid connection agreement – can be invited by the Minister to apply for the first MACs. It is intended that these “special MAC cases” will contribute to the delivery of 5GW of offshore wind energy by 2030.
In January 2022, Minister for the Environment, Climate and Communications Eamon Ryan TD, launched a consultation the new MAC consent regime for offshore renewable energy. “As Minister for the Environment, I will have the responsibility of inviting Maritime Area Consent applications from an initial batch of offshore renewable energy projects,” he said.
Development Consent
Mirroring the consenting process for onshore strategic infrastructure development, the MAP Act provides that particular offshore developments, such as offshore renewable energy projects, obtain planning permission under the amended Planning and Development Act 2000. Decisions on such applications rests with An Bord Pleanála. Characteristics of this regime include:
• potential for An Bord Pleanála to receive ministerial direction on priority applications;
• pre-application discussions between An Bord Pleanála and developers;
• oral hearings and public participation as facilitated by An Bord Pleanála;
• completion of environmental impact assessments/appropriate assessments as required by An Bord Pleanála; and
• provision of reasoned decisions by An Bord Pleanála, within 18 weeks of the application being lodged.
Meanwhile, certain activities within the newly defined nearshore (three nautical miles from the high-water mark) will also require planning permission under the Planning and Development Act. However, the adjacent local authority, or coastal planning authority, will be responsible for processing these applications, not An Bord Pleanála.
Marine planning guidelines
Facilitating the Minister to issue marine planning guidelines, the Act requires that these are held in regard by public bodies in the performance of their functions. Such guidelines may also include specific marine planning requirements necessitating public body compliance. Similarly, the Minister may also issue policy directives which with relevant public bodies must comply in undertaking their work.
Judicial review
The MAP Act provides that decisions made by either the Minister or MARA on MAC applications and licences, as well as decisions made by An Bord Pleanála on permissions for offshore development, can be challenged by judicial review. Taken within eight weeks of a decision, any challenge the High Court must first demonstrate both “substantial grounds” and “sufficient interest”.
Regardless of challenge by judicial review, a developer can still apply for and receive development permission from An Bord Pleanála. When the judicial review proceedings have concluded, these permissions may come into effect.
While the Maritime Area Planning Bill 2021 received broad support, in the Seanad Final Stage, concerns were raised by independent Seanadóir Alice-Mary Higgins: “If marine and environmental protection is nowhere in this process, it is a travesty that the Government would go ahead with this process… allowing people to occupy it and carry out different activities as if it is an asset, rather than the part of the planet and the oceans we are responsible for. It is a worrying frame.”
Unlocking Ireland’s offshore wind pipeline will be key to meeting Ireland’s renewables targets
Russell Smyth James Delahunt
Ireland is the leader in Europe when it comes to onshore wind with the highest percentage of onshore wind generation as a percentage of our total electricity generation at over 40 per cent. This is a remarkable achievement for a country of our size and a testament to good policy support, visionary developers and committed investors over the last 25 years. As Ireland seeks to rapidly increase its share of renewable electricity generation over the coming decade and beyond, we will now need to achieve similar successes in offshore wind. Russell Smyth, Corporate Finance Partner, and James Delahunt, Corporate Finance Director, of KPMG write.
A clear offshore wind policy landscape is key to attracting international investment into the sector and enabling developers to progress with projects. This article considers where offshore wind sits in the context of Ireland’s Climate Action Plan targets, looks at the success of Scotland’s recent auction and considers what Ireland needs to do next.
Climate Action Plan targets
Ireland is expected to experience strong, sustained growth in electricity demand over the coming years, with estimates putting it at circa 30 per cent growth by 2030 and circa 80 per cent growth by 2040. These are remarkable growth rates, driven primarily by specific growth in high energy industries such as data centres and electric vehicles.
The Irish Government’s “80 by 30” target – whereby 80 per cent of electricity will be generated by renewable sources by 2030 – is an ambitious one and based on the Climate Action Plan, this will see current renewable energy generation capacity increase from 4.5 gigawatts (GW) today to circa 15GW by 2030, including 4GW of incremental onshore wind, 5GW of offshore wind and circa 2GW of solar capacity.
It is expected that the majority of this 5GW of offshore will be met by the existing Relevant Status offshore wind projects, which have a combined capacity of circa 4.5GW. Much needs to be done to deliver on these projects alone, but the question is also being asked as to whether Ireland’s offshore wind ambition is big enough, particularly when we look at our counterparts across the Irish Sea.
Scotland has set a good example in offshore wind that Ireland should follow
From a development perspective it was notable to observe the Scottish Crown Estate, which is the semi-state agency that manages the rights to British foreshore licences, announce in January 2022 the results of its ScotWind tender process to secure development rights for offshore wind projects off the coast of Scotland.
The Scottish Crown Estate awarded contract rights to 17 energy companies to build almost 25GW of offshore wind in Scotland, almost two thirds of which will be floating offshore wind. A cohort of some of the largest energy companies in the world paid a combined €838 million to secure licences to develop
both floating and fixed offshore wind projects off the Scottish coast, with one single large project being a 3GW floating wind farm proposal from Scottish Power Renewables, a subsidiary business of Spanish utilities company Iberdrola. This project alone would represent 60 per cent of Ireland’s offshore wind ambition to 2030.
Other successful bidders included SSE Renewables, Falck Renewables, Vattenfall, BayWa, DEME, Magnora and Northland Power.
It is notable that this auction has been achieved despite Scotland having poor grid capacity (similar to Ireland), resulting in limited options for local uptake of the huge volumes of power that will be generated from these projects. However, rather than wait for upgraded grid infrastructure, Scotland have deemed that the excess energy will find a suitable offtake or use through the utilisation of electricity from offshore wind to facilitate the production of green hydrogen and ammonia.
The successful development of these projects should see Scotland set to become a major hub for the further development of this sector in the years ahead.
What Ireland needs to do
From an Irish perspective, 2021 saw initial signs of growing frustrations from some of the existing participants in the market at the pace of development in the sector. In November 2021, Equinor announced that it had pulled out of the Irish market in what was a blow to Ireland’s climate ambitions, particularly that it happened in the same week that the government published its new Climate Action Plan.
Whilst senior government ministers, including Minister Eamon Ryan and Minister Michael McGrath were quick to downplay the significance of Equinor’s exit, the energy industry itself was concerned, highlighting that a key issue was the long outdated regulatory and planning system for foreshore developments in Ireland that were legislated for in the 1933 Foreshore Act.
It was positive to see the Maritime Area Planning Bill 2021 pass through all stages of the Oireachtas in December 2021. The Bill establishes in law a new planning regime for the maritime area and will replace the existing State and development consent regimes and streamline arrangements on the basis of a single consent principle, i.e., one state consent (Maritime Area Consent) to enable occupation of the Maritime Area and one development consent (planning permission), with a single environmental assessment.
However, this is just one step with regards the policy changes that Ireland needs to deliver. These include the establishment of the Maritime Area Regulatory Agency, the introduction of legislation for designation of Marine Protected Areas, the design of a process for issuing seabed leases akin to ScotWind, and the delivery of the first offshore renewable energy support schemes.
International appetite for Irish projects remains strong, but should not be taken for granted
From a KPMG perspective, we spend a lot of time speaking with large international players in the energy markets who have an appetite to invest in projects in Ireland. This appetite remains strong, notwithstanding the Equinor news in 2021. However, it is important that Ireland recognises that these international investors have opportunities in dozens of countries throughout the world, and Ireland is ultimately competing for their capital, against the likes of Scotland. We should not take their interest and appetite for granted and do what we can from a policy perspective to ensure that both the existing market participants are supported and enabled to deliver their projects and the Phase 2 projects are accelerated as quicky as possible to ensure Ireland harnesses its energy generation potential, become a leader in offshore wind and ultimately help insulate Ireland from price shocks in years to come.
E: russell.smyth@kpmg.ie / james.delahunt@kpmg.ie W: www.kpmg.ie
Maritime Area Planning Act signed into law 23 December 2021
Alison Fanagan
The Maritime Area Planning (MAP) Act provides for new consenting processes for foreshore licences, foreshore leases and planning permissions for various marine projects, including offshore renewable energy infrastructure, write Alison Fanagan, Consultant, Environmental and Planning, and John Dallas, Partner, Energy, Infrastructure and Natural Resources, at A&L Goodbody.
It also creates a new regulatory authority, and a regime for designating protected marine areas. It provides a “fit for purpose” mechanism for the consenting of offshore renewable energy projects in a way that complies with European environmental assessment obligations and facilitates public participation. It gives Ireland a realistic chance of delivering new renewable energy sources to meet its 2030 climate change targets.
Maritime Area Regulatory Authority
The MAP Act establishes the Maritime Area Regulatory Authority (MARA). MARA will issue licences to conduct surveys in the marine environment (currently termed foreshore licences in Ireland, equivalent to England’s seabed survey licences), and Maritime Area Consents (MACs) (currently termed foreshore leases in Ireland, equivalent to a Crown Estate Lease). MARA will also have various enforcement functions. MARA’s functions will transition across once it is set up and resourced, likely in early 2023. The Minister will grant applications for licences and MACs in the interim.
Licensing for marine surveys
The MAP Act allows for public participation and environmental assessment as part of the licence application process. The conditions that can attach to a licence are very similar to those that currently apply to foreshore licences.
Maritime Area Consent (MAC) regime
A MAC is the new “State consent” to allow for the occupation of a specified part of the maritime
John Dallas
area, on an exclusive or non-exclusive basis. MARA will be the authority responsible for determining these applications from 2023. The relevant Minister will exercise MARA’s functions in the meantime. Developers must hold a MAC before they can apply to An Bord Pleanála for development consent.
It is expected that the "relevant projects” announced on 19 May 2020 will be invited by the Minister to apply for the first MACs in or around April 2022. These are offshore renewable energy projects which were, as of 31 December 2019, either the subject of an application for a “foreshore authorisation" (i.e., a foreshore lease under the Foreshore Act 1933); or already held a foreshore authorisation or had a valid connection agreement from a transmission system operator (or confirmation of eligibility for such an agreement). The stated hope of the Irish Government (announced when launching its draft Climate Action legislation) is that many of these projects will be consented and operational so as to deliver 5GW of offshore wind energy to help Ireland meet its 2030 climate targets.
The criteria to be applied when determining whether to grant a MAC are set out in Schedule 5 of the MAP Act and are focused on the technical and financial competence of the applicant rather than the merits of the project itself.
The MAP Act requires decisions on MAC applications to be made within 90 days. The MAP Act does not provide for public participation, appropriate assessment, or environmental impact assessment in relation to these applications as a MAC is not a “development consent” for the purposes of the applicable EU requirements. However, evidence of stakeholder engagement on the project is one of the Schedule 5 criteria, which the Minister/MARA must take into account when deciding whether to grant a MAC. MARA can attach conditions to a MAC, as set out in Schedule 6.
Development consent
The MAP Act requires specified categories of marine development, including in particular offshore renewable energy projects, to obtain planning permission under the existing Planning and Development Act 2000 (the PDA), amended by the MAP Act for that purpose. An Bord Pleanála will be the decision-maker for offshore renewable energy project applications. The consenting regime is closely modelled on the existing consenting regime for onshore strategic infrastructure development, which applications are also made directly to An Bord Pleanála, who then carry out public consultation and environmental assessment. Certain activities within the nearshore area will require planning permission under the PDA, with the adjacent local authority, referred to as a Coastal Planning Authority, rather than An Bord Pleanála, responsible for processing such applications.
Maritime Spatial Planning and Designated Maritime Area Plans
The MAP Act expands on the existing regime for maritime spatial planning, required under the European Union Maritime Spatial Planning Directive. The first such spatial plan published in 2022 – the National Marine Planning Framework – sets out various objectives and policies to guide activities and development in the offshore area. Separate legislation is underway for the designation of more marine protected areas.
Ministerial Guidelines and policy directive
The MAP Act allows the Minister to issue accompanying regulations, as well as marine planning guidelines and policy directives, all very similar to existing provisions for land-based planning. These are expected to be published/consulted on during 2022.
Next steps
A consultation process has now opened on the intended MAC application process for Phase 1 and Phase 2 projects, as well as on the detail of the financial and technical competence criteria to be fulfilled. The Government is hopeful that the first MAC applications will be lodged in April 2022, with the planning applications being submitted to the Board in Q3/4 2022. An Offshore Renewable Energy Support Scheme (ORESS1) is expected to open for applications in Q4 2022.
Authors:
Alison Fanagan afanagan@algoodbody.com
John Dallas jdallas@algoodbody.com
Other key contacts:
Alan Roberts aroberts@algoodbody.com
Ross Moore rmoore@algoodbody.com
W: www.algoodbody.com
