Powering ahead: investing in Ireland’s greener future
Ireland has ambitious targets for its renewables energy sector in the coming years. This will give plenty of opportunities for domestic and overseas firms looking to capitalise on the country’s greener future.
It is an ambitious target, but one that needs to be achieved: Ireland plans for 70% of its energy to be provided by renewables sources by 2030.
Renewable energy is set for huge growth in the coming years as Ireland, in common with many other nations, seeks to decarbonise its energy output. This includes everything from generating clean electricity to zero emission transport, so the country can meet the targets for reducing CO2 by 2050, as set out in the Paris Climate Accords. The Accords, signed by 195 nations in 2016, commits countries to reduce the risks and potential outcomes of climate change by drastically cutting greenhouse gas emissions such as carbon dioxide.
Currently, Ireland had a 16% renewable energy target for 2020, but if future targets are to be met it will mean that much more will be needed to develop renewable energy production.
Unsurprisingly, all this makes renewable energy a desirable sector for investors in Ireland. For instance, there have been calls for more investment in the offshore wind sector. A report by the Carbon Trust for the Irish Wind Energy Association called ‘Harnessing our Potential’ urged investment – from the state and private sector – into east coast locations to develop offshore wind farms. Moreover, with 6,200 kilometres of coastline Ireland has huge potential for offshore wind resources that is attracting investor interest, domestically and overseas.
Deals in the Irish renewable energy sector have been signed off in the past 12 months despite the Covid-19 pandemic. For instance, in May 2020 Irish electricity company ESB (www.esb.ie) and Irish renewable energy business Harmony Solar (https://harmonysolar.ie) revealed they had struck up a partnership to develop a solar project in Ireland, including developing Harmony Solar’s 300MW portfolio in Wexford and Kildare. There are also plans for a portfolio of more than 1,000MW of other solar projects.
The deal saw ESB initially invest €30 million, while more investment is planned in the years ahead. The partnership is predicted to provide electricity for about 230,000 homes in Ireland – more than 10% of households.
The deal is part of ESB’s Brighter Future strategy that aims to develop large renewable energy projects to help the company move away from generating electricity from fossil fuels.
Another big renewable energy deal was announced in December when Greencoat Renewables (www.greencoat-renewables.com) reported that it would be purchasing two windfarms from Norwegian company Statkraft, once operational in 2022. Work on building the windfarms in Co Offaly and Taghart in Co Cavan is scheduled to begin early this year, which Statkraft will manage. The project is valued at €123 million.
Earlier in 2020, Statkraft secured fixed-price contracts for 15 years for these windfarms, which was undertaken by the Irish government’s Renewable Electricity Support Scheme (RESS).
This deal closely followed news that Greencoat Renewables had raised €125 million in a share placing to invest in renewable energy in the country. Moreover, the placing had been oversubscribed, which is an indication of the appetite for renewable projects among the investor community in Ireland and elsewhere.
Renewable Energy Support Scheme
The RESS is a government scheme to provide support for Irish renewable electricity projects. This includes broadening the technology mix in renewable electricity and increasing its cost effectiveness.
The first round of auctions for RESS have closed, but other auctions will be announced at a later date.
Renewable energy sources
The prime sources for renewable energy in Ireland attracting investment – either through acquisition of a business or investment – include:
- Wind. This has huge potential for generating energy from onshore and offshore wind farms. Wind turning turbines are either placed in exposed areas inland or out at sea – although the former is far more developed in Ireland than the latter. In 2018, 85% of Ireland’s renewable electricity came via wind power. This equates to 30% of Ireland’s entire electricity demand. Only natural gas is a larger source of electricity generation in Ireland, according to the Sustainable Energy Authority of Ireland (SEAI) [www.seai.ie].
- Hydroelectricity. This is generated by the flow of water, usually fast-flowing rivers, and given Ireland’s large annual rainfall it is a reliable form of energy production, although it can fluctuate depending on the seasons. Currently, about 6% of Ireland’s electricity comes from hydro power. In fact, hydro power has been used in Ireland for many years; the Ardnacrusha hydroelectric station was built almost 100 years ago, for instance, and is still operational.
- Solar. This is where energy from the sun’s rays are captured by photovoltaic modules – known as solar panels – and turned into electricity. Again, this is a reliable form of electricity production and is generating keen investment interest from domestic and overseas firms.
- Biomass. This involves organic material such as household waste, wood pellets and harvest residues that are burnt to produce heat, which is then turned into energy. It is a good renewable fuel; the source will always exist and a lot of it includes burning material that would otherwise be left to rot
- Wave energy. As indicated above, the long Irish coastline has only recently started to be exploited for its energy generating properties. A lot of companies and organisations are expected to focus their attention on this sector for potential investment in the future.
Why invest in Irish renewable energy companies
There are many reasons to consider investing in or buying a renewable energy company based in Ireland. For instance, Ireland has a favourable tax regime, with corporate tax at 12.5%.
Another consideration is that Ireland’s workforce is young, flexible and highly qualified and many of these people are eager to enter greener, high-tech industries that are now setting up in the country.
In addition, Ireland has highly competitive commercial property and rental prices and a decent cost of living across the country.
Of course, one of the stronger pulls for investors currently, especially those in the UK, is that Ireland is part of the European Union, and therefore has access to the single market and the 26 other member countries in it. While the UK and EU finally signed a free trade deal just before Christmas 2020, once the UK leaves the single market renewables could be a difficult investment for overseas firms given the current grey area on future UK environmental laws – which are predicted to shift away from the EU.
Other advantages EU membership include:
- Ireland is the only EU country to have English as its first language.
- Irish companies can potentially access EU research and development grants – and the EU’s push for a greener future is a huge attraction for renewables investors.
- Ireland is part of the Euro, which is a stable currency and unlikely to fluctuate significantly in its value, which can affect exports and business confidence.
- The EU is pushing for greener data centres across Europe. These data centres are home to much of the data stored by tech giants such as Amazon, Facebook and TikTok and Ireland is currently viewed as an ideal destination for huge, greener data centres in the coming years.
Investing in Irish businesses
If you are interested in investing in or buying an Irish renewable energy company, it is important to ensure you have local knowledge to ensure the best deal possible is made. Ireland shares a land border with the UK, but across that line there are some clear legal differences in how business is conducted. Having advice from accountants based in Ireland that understand the local market and how business is done means that any potential pitfalls can be avoided. The result is that time and money can be saved – and that can be the difference between an acquisition or investment delivering the value sought or not.
With Ireland having to meet strict renewable energy targets, there will be opportunities for acquisition and investment in this sector in the short, medium and long-term, so for budding investors it’s worth keeping an eye on.