Oireachtas Joint and Select Committees

Tuesday, 2 April 2019

Joint Oireachtas Committee on Communications, Climate Action and Environment

Energy Plant Certification: Commission for the Regulation of Utilities

Ms Aoife MacEvilly:

The CRU’s role regarding HE CHP is set out in Irish legislation which transposed certain provisions of the European energy efficiency directive of 2012. The aim of this directive is to improve the EU’s security of supply by reducing primary energy consumption and decreasing energy imports. It is also aimed at reducing greenhouse gas emissions in a cost-effective way and thereby mitigating climate change.

The directive specifically addresses HE CHP and provides a detailed methodology and criteria in annexes 1 and 2 on how to calculate the efficiency of the CHP process. European and Irish legislation, therefore, is detailed, technical and prescriptive. In 2012, following a public consultation process, the CRU set out its role and detailed guidance on how we would process HE CHP applications in a policy paper which gives further effect to this legislation. That is CER/12/125.

The methodology and the engineering analysis carried out on each application can be complex and must be applied by the CRU for all HE CHP applications. The assessment is based on specific information, including, technical and financial values provided by the applicant, which are then used to arrive at a specific answer regarding certification. The focus is not so much on the technical specification of the plant itself, although that is examined, but rather on the useful heat produced by the plant and whether this useful heat is economically justifiable and delivers primary energy savings, PES.

The CRU appreciates the committee has a broad remit and it is concerned with the regional economic impact of our certification decision regarding Mayo Renewable Limited. We are obliged to balance a range of competing priorities such as competitiveness, security of supply and sustainability when reaching many CRU regulatory decisions. Our role as the body appointed to certify HE CHP is prescribed in narrow and technical terms. It does not allow for consideration of broader economic, social or environmental factors. My colleagues will give an overview of this process but, in short, our role is to take the business case submitted by the applicant and apply the HE CHP methodology as prescribed in law.

We consider the rigorous application of this methodology important given the significant benefits arising from HE CHP certification. Those in possession of certificates gain priority dispatch in the all-island electricity market and can also avail of certain Revenue rebates. In addition, and perhaps most important, HE CHP certificates allow applicants to avail of relevant payments through the renewable energy feed-in tariff, REFIT, scheme. The REFIT scheme is funded by electricity customers through the public service obligation, PSO, levy charged to their electricity bills. The REFIT payments for HE CHP are among the highest level of REFIT payments available under the scheme and can be as high as hundreds of millions of euros over the 15-year term.

To give an example, REFIT payments for a plant of a similar scale to Mayo Renewable Limited, with a 100% certificate and operating at full output, could be in the order of €31.6 million annually, based on 2019 figures. If similar payments were made each year for the 15 years of the REFIT scheme, the total payable could amount to €474 million. Members will understand, therefore, why it is so important that the assessment for HE CHP certification is carried out by the CRU in a robust way to protect the public interest. In addition to the initial certification process, the CRU also audits the HE CHP plants awarded certificates to ensure that they are delivering useful heat and primary energy savings in line with their certification.

The CRU has amended HE CHP certificates based on actual outcomes following audits. The HE CHP certificate is not, therefore, enduring in nature and can be amended when circumstances change. This is also why there is a time limit for planned HE CHP certificates, beyond which a new application must be made if the plant is not operational. It would be expected after five years that the inputs to the application, including the business plan and economic factors such as prices, would have changed and warrant a new application. I hand over to my colleague, Ms Karen Trant.

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