Bright future: sun shines on Irish solar power sector

Ireland’s target is to have 70% of its energy produced via renewable means by 2030. This ambitious target, set by the government in the 2019 Climate Action Plan, is ahead of its goal to be carbon neutral by 2050.

While there are doubts from some about the country’s ability to hit the target – in 2018, Ireland’s renewable energy share was 11%, whereas the target set for gross final consumption of energy under the EU’s Renewable Energy Directive was 16% – there is a concerted drive from government to get there.

This will be done through a mixture of public and private sector development. While onshore wind power has led the way in the past in renewable energy production in Ireland – perhaps not surprisingly given its geography – there is an increasing emphasis placed on solar energy for helping to meet that target.

It is acknowledged that there needs to be diversity in the renewable energy portfolio, especially for days when wind is low, especially in the summer months, and this is where solar fits in.

How solar power works

In basic terms, solar power turns sunlight into energy. While the old joke might be that it wouldn’t be useful in Ireland given how much it rains, today’s solar technologies are much more efficient at harnessing the power of sunlight, even on grey days.

Solar photovoltaics are the most used technology around the world and in Ireland. Meanwhile, concentrated solar power technologies use sunlight to make heat and drive an engine connected to an electrical generator. These are most often used in countries where it is sunny all year.

Photovoltaic panels are now common on the roofs of houses and businesses, and solar farms are now being developed around the country.

The cost of producing solar energy is also falling due to increasing efficiencies, economies of scale and better photovoltaic technology that captures more sunlight.

Government backing

Solar energy received a major boost in August last year when the Irish government unveiled its renewable Electricity Subsidy Scheme (RESS). This was the first of five auctions that aim to help Ireland meeting its target of 70% of its electricity provided by renewable sources by 2030. In it, 63 solar projects totalling over 1,000MWdc were provisionally awarded a contract for up to 16.5 years at an unindexed fixed price (€/MWhr).

These projects are in the form of solar farms, which will be built during the next few years across the country – including in Meath, Cork, Wexford and Tipperary – and connected to the grid.

“After a four-year wait for solar farms to participate in Ireland’s renewable energy mix, [the] RESS-1 provisional results were very positive for the solar industry, that will create new green jobs, support rural Ireland and meet 2030 renewable energy targets,” said Irish Solar Energy Association [irishsolarenergy.org/] chairman David Maguire.

Acquisitions

With developing interest in the sector, Irish solar energy providers have proved attractive to domestic and international acquirers in the past year. For example, in November 2020, Irish solar photovoltaic developer Power Capital Renewable Energy (PCRE) was acquired by Omnes, a French infrastructure investor.

Following the deal, PCRE is focusing on developing and building a 500MW solar photovoltaic portfolio in Ireland – the company was awarded a feed-in tariff for four projects in the RESS auction last year.

PCRE is set to be a leading player in the Irish solar market in the coming years, with a pipeline of 300MW and hopes for more projects to be included in the second RESS auction.

With Omnes backing, PCRE is shifting its emphasis from building solar developments with a plan to eventually sell them to become an independent power producer. The company also stated it plans to grow further through acquisition and developing opportunities with partners.

Meanwhile, in February, energy investor NTR acquired a 54MW portfolio of solar and battery storage projects in County Wexford from renewable energy developer RES for €29 million.

The portfolio is made up of two battery storage projects of 25MW storage capacity, along with 29MW of solar photovoltaics. Two of the solar projects were awarded 16-year CFD tariffs in the RESS auction last year and the battery storage projects will apply to provide grid services through the Irish DS3 grid services scheme. The solar and battery storage projects will both be operational next year.

“This mix of solar and battery storage brings much-needed diversity of renewables technology onto the Irish grid, particularly for lower wind days,” said Manus O‘Donnell, chief investment officer of NTR. “Co-location of solar and battery projects can be particularly effective, as they can share grid connections and obtain economies of scale. In the future they should be able to take further advantage of storing excess power produced on site and we expect to see more co-location of solar and battery storage throughout Europe.”

Raising investment

In the past year, several Irish solar energy providers have successfully raised finance. For instance, in April, Dublin-based Alternus [www.alternusenergy.com], raised €9 million by issuing convertible notes.

Most of the funding was provided by Luxembourg-based asset manager AVG Group.

Alternus invests in solar photovoltaic parks across Europe and now owns or contracts 39 parks in several countries across Europe with a capacity of more than 140MW.

As well as the funding, AVG Group will help to supply Alternus with new solar technologies being developed in the Nordic countries.

Meanwhile, early-stage investors in solar energy are already enjoying returns. For example, in July 2020, investors in Arclight, a solar energy fund, received a €20 million-plus pay-out. [www.irishtimes.com/business/retail-and-services/investors-in-irish-solar-energy-fund-in-line-for-20m-payout-1.4302665]

The windfall came after Arclight, which develops and runs solar farms in the UK and Spain, raised €43 million through a bond issue, which was wholly taken by private equity firm Blackrock.

Declan O’Halloran, managing director of Arclight’s investment manager Quintas Energy, said at the time of the deal the money raised would be split roughly 50-50 between returning money to investors and refinancing debt. Back in 2008, a group of private investors paid €40 million into Arclight in 2008 either directly or through their pension funds.

Following the deal, these investors also continue to receive money generated by the Arclight-funded solar farms that are now operational.

Future prospects for the Irish solar power sector As this deal demonstrates, there are already high potential returns for investors in solar energy in Ireland. With the government’s stated goal of hitting 70% of energy from renewable sources by 2030, the growth prospects for the Irish solar power industry are exciting. Much more renewable power will be needed, and quickly, and solar power will likely play an increasing role, especially as the technology is developing rapidly, meaning that it is much more efficient and effective than earlier iterations.

Consequently, there will be plenty of opportunities to develop new solar power companies, invest in or acquire existing providers in the coming years. In the short-term, a second RESS auction is planned by the government for next year, which, it is hoped, will build on the success of the first.

In addition, for those wanting to establish a solar farm, there are no specific planning guidelines in place for these. Such developments are subject to the provisions of the Planning and Development Act 2000, with planning applications made to the relevant local planning authority. Planning authorities make decisions on plans based on the merits of the applications.

About Us

Malone & Co Accountants https://www.maloneaccountants.ie/ can assist on all the relevant aspects from setting up a company to the provision of cross jurisdictional tax planning services through our extensive international networks and associations. We also have specialist knowledge of the sector in Ireland – including its history, the leading players and local norms.