Feilim O'Caoimh takes a closer look at the Memorandum of Understanding signed between Ireland and the UK in January 2013 and the challenges Ireland faces if it is to establish an export market for wind energy. At the end of January Ireland and Britain signed a memorandum of understanding the aim of which is the possible export of wind generated electricity from Ireland to the UK. If delivered in due course, the plan is game changing news for Ireland Inc. Expectations need to be tempered, however, as the memorandum of understanding is the first step in a long road. Two sets of civil servants now have to work towards the development of a full intergovernmental agreement between the two jurisdictions. DCERN minister Pat Rabbitte TD, has signalled that he wants the intergovernmental agreement to be in place by the end of January 2014.

LEGAL HURDLES

The project consists of a number of elements, namely the construction of high capacity grid interconnectors across the Irish Sea, the linking of those interconnectors in Ireland (both onshore and offshore) to the sites on which the wind farms will be built, and the construction of the wind farms themselves. The foregoing is what needs to happen on the ground, however, far more complicated than that is the development of a cross-border regulatory regime that can successfully accommodate works on this scale. The legal framework comprised within such a regime will need to deal with planning and consent, licencing and ownership of the interconnectors themselves. It would appear most likely that interconnectors will be built privately following competitive tender processes, with the interconnection assets perhaps coming into state ownership upon the completion of construction works. Critically, the development of an appropriate mechanism for the purposes of purchasing the electricity produced, or more likely its accommodation within the existing off-take regime in the UK, will need to be undertaken. Clearly Britain will be in the driving seat on this latter issue. In any event, the announcement is a major boon for developers who have been seeking, for the most part unsuccessfully to date, to develop offshore wind farms in Ireland. There is now a far greater likelihood of an offshore grid network, linked to interconnectors, coming into being.

LAND GRAB

The export market if developed will be serviced by Irish wind farms both on-shore and off-shore. In anticipation of the January announcement, a number of substantial developers have for some time been acquiring land rights in the midlands for the purposes of servicing the anticipated demand in due course. Given the relative early stage of the overall process, incurring such expenditure at this level may be viewed by some as high risk, however, given pressures to meet 2020 RES-E targets and the fact that a significant portion of the UK’s existing electricity portfolio will be coming off-stream in the years ahead, the probability of the export project’s ultimate success seems high. This being said, Ireland’s opportunity is not open ended. If we do not grasp the opportunity now, Britain will obtain their power elsewhere.

COMPARATIVE ADVANTAGE

Ireland’s wind resource is enviable by any standards. We enjoy a clear comparative advantage in wind and ocean energy over all other member states in the EU. For Ireland, the establishment of a robust electricity export arrangement with the UK should also be seen as an opportunity for integration into the wider European energy market. This sits neatly with the impending EU single market for energy which Ireland will become bound by in 2016, as per the Third Energy Package.

CONCLUSION

While the challenges in establishing an export market for electricity are many, it can be done if an integrated approach to regulatory hurdles is adopted. One question industry and government must ask themselves is what would Germany do it if had Ireland’s renewable resource?

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Feilim O'Caoimh is a partner and head of the Renewable Energy Unit at McDowell Purcell Solicitors.