Horizon Scanner Infrastructure, Construction, Energy: July 2025 - Energy

KEY DEVELOPMENTS

Private Wires

The Government adopted a Private Wires Policy Statement, which we consider in our briefing, available here: Energy Update: Private Wires Policy Statement - Arthur Cox LLP.

Offshore Renewable Energy

Our briefing on the terms and conditions of Ireland's second auction in the offshore renewable electricity support scheme (ORESS Tonn Nua) is available here: Offshore Renewable Energy: Ireland's Second Support Scheme Auction - Arthur Cox LLP.

Grid: Price Review 6

The CRU is consulting until 11 September 2025 on PR6, the framework for approving investment in 2026-2030 in the transmission and distribution system. The proposed baseline allowances total €14.1 billion, comprised as follows:

The CRU states that the proposed baseline allowance would be an increase of 86.2% compared to the outturn expenditure in PR5.

Offshore figures assume completion by 2030 of one Phase 1 project. If more projects are completed, a high case estimate of €18.1 billion is accessible. The consultation sets out an 'Agile Investment and Monitoring Framework', a mechanism intended to allow funding to quickly flex up. It is also proposed to establish a new investment gateway monitoring process for the Phase 2 offshore infrastructure to be built by EirGrid.

It is also proposed that, for the most critical outputs/deliverables, the ex-ante allowances will be ring-fenced for delivery of the associated outputs/deliverables.

Accelerating Renewable Energy: Simplifying State Aid

A new State aid framework to support clean industry is intended to simplify State aid rules in the following areas:

• roll-out of renewable energy (including additional cost to repower) and low-carbon fuels;
• temporary electricity price relief for energy-intensive users to ensure the transition to low-cost clean electricity;
• decarbonisation of existing production facilities;
• development of clean tech manufacturing capacity in the EU; and
• de-risking of investments in clean energy, decarbonisation, clean tech, energy infrastructure projects and projects supporting the circular economy.

Accelerating Renewable Energy: Infringement Procedure

The European Commission sent Ireland a reasoned opinion (INFR(2024)0231) for failing to fully transpose the provisions of the Renewable Energy Directive related to the simplification and acceleration of permitting procedures.

Accelerating Renewable Energy: Guidance

The European Commission adopted recommendations and guidance aimed at accelerating renewable energy development:

• Recommendation on renewable energy technologies, grid and storage infrastructure, future proof network charges
• Communication on future proof network charges for reduced energy system costs
• Communication on the establishment of areas for grid and storage infrastructure
• Communication on innovative technologies and forms of renewable energy deployment

Included is guidance on several legal principles, such as Article 6a (flexible connection agreements) of the IME Directive. Offering non-firm connections should not delay necessary grid reinforcements, and Article 6a further states that conversion to firm connections should be ensured, based on established criteria, once the grid is reinforced. An example is given of the Dutch practice of offering three types of flexible connection (fully flexible agreements, minimal availability agreements, and timeslot agreements). The guidance also looks at adding capacity and time-of use elements to tariffs to reflect individual contribution to overall peak system need and to reduce peak demand. It also considers grid optimisation and non-discriminatory tariff design. Further information on all the guidance is available here: Commission continues action to lower energy bills with new guidance on renewables, grids infrastructure and network tariffs.

Renewable Heat Obligation Bill

Government approval has been given to introduce a renewable heat obligation for 2026-2045, based on Heads for a Renewable Heat Obligation Bill. The scheme would oblige suppliers of fossil fuels used for heat to demonstrate that a proportion of the energy they supply is from a renewable source. The Bill would not provide support to domestic producers. It would seek to encourage support of domestic production by (subject to approval at EU level) applying a multiplier of 0.5 certificates in respect of domestically produced units of biomethane.

CBAM

There are several developments regarding the Carbon Border Adjustment Mechanism. The amending Regulation to simplify the CBAM has been agreed at EU level and is expected to be endorsed by the co-legislators in September 2025, after which it will be published in the Official Journal of the EU. Meanwhile, the European Commission is consulting until 26 August 2025 on the extension of the CBAM to downstream products and the addition of anti-circumvention measures. The European Commission is also progressing plans to mitigate carbon leakage risk for exporters. We look at these developments in our briefing: Carbon Border Adjustment Mechanism: Simplification and Next Steps.

Climate Action Litigation against States

The UN International Court of Justice issued a significant advisory opinion on State liability for failing to protect the environment from greenhouse gas emissions, which may result in obligations to make full reparation to injured States. Some of the key points in the opinion are:

• Climate change treaties and customary international law set out obligations for States to ensure the protection of the climate system and other parts of the environment from anthropogenic greenhouse gas emissions.
• States have obligations under international human rights law to respect and ensure the effective enjoyment of human rights by taking necessary measures to protect the climate system and other parts of the environment.
• A breach by a State constitutes an internationally wrongful act, the legal consequences of which may include: (a) cessation of the act or omission, (b) providing assurances and guarantees of non-repetition, and (c) reparation to injured States.

The ICJ opinion and summary are available here: Obligations of States in respect of Climate Change.

EU DEVELOPMENTS

2040 Target

It is proposed to amend the EU Climate Regulation to set a target of reducing greenhouse gas emissions by 2040 by 90% compared to 1990 levels. The Regulation currently binds relevant EU institutions and Member States to take the necessary measures to enable the collective achievement of the climate-neutrality objective set out in the Regulation.

Electricity

• Demand response: The Commission is consulting until 12 September 2025 on ACER's proposal for an EU-wide network code on demand response established under the IME Regulation.
• Peak shaving: ACER has found that drawbacks of introducing peak-shaving products under normal market conditions outweigh the potential benefits. ACER does not recommend amending the existing legal framework to allow their use outside of electricity price crisis situations.
• Best available technology: The Commission published a correction to Decision (EU) 2021/2326 establishing best available techniques conclusions, under Directive 2010/75/EU, for large combustion plants.
• Network Development Plans: ACER calls for greater alignment of national plans with the EU-level TYNDP.
• UK: Application of Title VIII on Energy of the Trading and Cooperation Agreement is to be extended. In addition, ENTSO-E agreed new working arrangements with the UK's electricity transmission system owners and operators to formalise post-Brexit cooperation on areas including efficient use of interconnectors.

Gas

• Low-carbon fuels: The recast gas Directive (EU) 2024/1788 sets out a certification framework for low-carbon fuels, complementing the Renewable Energy Directive. Article 9 requires the Commission to adopt a methodology for evaluating the emission savings of low-carbon fuels by 5 August 2025. The Commission has now published a regulation specifying a methodology for assessing greenhouse gas emissions savings from low-carbon fuels, which may be adopted after the two-month scrutiny period. To be considered low carbon, hydrogen and related fuels will need to reach a threshold of 70% greenhouse gas emissions savings compared to the use of unabated fossil fuels. Further information on the delegated regulation is available here: Clarity to hydrogen sector with new EU methodology for low-carbon hydrogen and fuels.
• Hydrogen mechanism: The Commission launched a Hydrogen Mechanism under the EU Energy and Raw Materials Platform to host mechanisms covering hydrogen, raw materials, natural gas and biomethane. The first action of the Hydrogen Mechanism will be a round of matching demand and supply in September 2025 for low-carbon hydrogen and its derivatives (ammonia, methanol, and electro-sustainable aviation fuel (eSAF)).
• Methane: The Commission sent Ireland a letter of formal notice (INFR(2025)2112) for breaching the Methane Regulation (EU) 2024/1787 by failing to appoint, and notify to the Commission, a competent authority responsible for monitoring and enforcing the application of the rules.
• Russian imports: The Commission proposed a Regulation to phase out Russian natural gas imports, improve monitoring of potential energy dependencies, and to amend Regulation (EU) 2017/1938 on gas security of supply. ACER has suggested phasing out Russian gas supply in ENTSOG's future supply outlooks.
• Security of gas supply regulation: The Commission is consulting until 14 August 2025 on a delegated regulation to amend the composition of risk groups for risk-associated cooperation under the Gas Security of Supply Regulation (EU) 20171938. Ireland is to be in the LNG supply risk group and North Sea gas supply risk group.
• Storage: Proposed changes to extend the Gas Storage Regulation until the end of 2027 has been adopted.

Electricity & Gas

• PCIs/PMIs: ACER reported on cross-border cost allocation decisions for electricity and gas infrastructure projects, designed to fairly distribute investment costs across countries involved. One of the trends that has emerged is that access to grants, not the need to share costs, is the main reason promoters submit investment requests.
• Balancing: ACER notes a downward trend in gas balancing in the EU, potentially arising from lower gas consumption and higher prices incentivising users to stay in balance and avoid charges.
• TYNDP: ENTSO-E and ENTSOG are consulting until 29 July 2025 on Draft TYNDP 2026 Scenarios Economic Variants Methodology.
• Annual Report: ACER's consolidated annual report details activities on the integration of EU electricity and gas markets and market surveillance under REMIT.

Market Data

• European Commission market reports are available for Q1 of 2025. They indicate that solar generation reached a record level, but there was a decline in wind generation. There was a significant drop in Russian gas imports.

Consumers

• Energy transition: The Commission is consulting until 11 September 2025 on a Communication on how the EU plans to protect and involve consumers in the energy transition by enabling them to save, produce and consume energy; to support vulnerable households; and to undertake other initiatives.
• Retail markets: ACER provided a high-level assessment of retail markets across the EU, including each market's strengths, weaknesses, opportunities and threats. The assessment compares data in several areas including smart meters, prosumers, retail prices, and dynamic-price contracts.
• Advisory hub: A new EU Citizen Energy Advisory Hub is intended to enhance citizen participation and strengthen the social dimension of energy transition. Aims include providing technical assistance, developing resources, and providing networking opportunities.

Guarantees of Origin

A European Commission report on the functioning of the Guarantees of Origin ("GOs") system includes the conclusions that, overall:

• the system is effective in tracking renewable energies but requires further harmonisation to reduce risk of misconduct,
• the concept and system is trusted to provide the information required and informed market participants acknowledge a sufficiently applicable level-playing field established over the past year,
• structural oversupply allows GOs to at best contribute additional revenue streams after an investment decision into renewable energy production is reached, but where the market stability and created value is not sufficient to induce the investment decision. However, the GO system also creates indirect effects that support renewable energies build-out, including especially PPAs,
• the system and the disclosure and reporting requirements do not create pressure or guidance from the end-consumer to the market to differentiate renewable energies. The focus lies on GHG emission reduction, and
• the impact of private household consumers on the GO price remains very limited and provides hardly any guiding function to the GO market.

Appeal of ACER Decisions

In cases T-95/23 and T-96/23, two energy companies sought annulment of a decision by ACER's Board of Appeal. The Board of Appeal had dismissed challenges against ACER's decision to amend the methodology for pricing balancing energy and cross-zonal capacity: ACER had set a limit for 48 months on the price at which balancing energy suppliers could trade that energy on the European platforms PICASSO and MARI. The companies failed to establish that the decision was of "individual concern", as required by the appeal provision at Article 28(1) of the ACER Regulation.

Connecting Europe Facility

The European Commission proposed a Regulation to establish the Connecting Europe Facility for 2028-2034, and the rules for providing funding under the Facility to projects in the trans-European networks for transport and energy, including renewable energy projects.

Batteries

Under the EU Battery Regulation (EU) 2023/1542, battery producers and exporters must put in place due diligence policies to prevent or reduce batteries' adverse impacts on the environment, including their waste management. The Council adopted amendments to ease these rules, chiefly by postponing their application by two years.

Nature Credits

A European Commission Roadmap towards Nature Credits is intended to incentivise private investment in actions that protect and preserve nature. The premise is that nature-positive actions by companies, financial institutions, and other entities can be valued and certified by an independent organisation, and used to vouch for the green credentials of investors.

DOMESTIC DEVELOPMENTS

Affordability

A cross-Government National Energy Affordability Taskforce has been established to make recommendations for structural reforms to benefit consumers in the medium (2026-2030) and longer term (post 2030) while delivering renewable energy commitments in the Climate Action Plan and protecting security of supply.

Emissions

Latest data on greenhouse gas emissions published by the EPA indicate that, for a second year in a row, Ireland's emissions are below the 1990 baseline. Emissions from electricity generation were at a 35-year low.

Small-scale Renewable Electricity Support Scheme

Terms and conditions for participating in SRESS are available here: Small-Scale Renewable Electricity Generation (SRESS). The Government has now published practical first steps for SRESS Phase Two export projects.

UK

The UK and Irish Ministers extended a Memorandum of Understanding on the Energy Transition, Offshore Renewables and Electricity Interconnection. Topics covered include decarbonising industry, buildings, community benefit from infrastructure, and renewable and low-carbon hydrogen value chains.

FURTHER CRU BUSINESS

National Energy Demand Strategy

The CRU biannual update on the implementation of the National Energy Demand Strategy indicates that a decision on connection policy for data centres will be published later this year. We looked at the proposed policy in our briefing: Data Centres: Key points in Consultation on Electricity Connection Policy - Arthur Cox LLP.

The update also indicates that EirGrid is developing a consultation on the mechanism to procure Long Duration Energy Storage, anticipated in September 2025. As regards ESBN's demand flexibility product, ESBN is expected to begin a tender process in Q3 of 2025.

Risk Preparedness

The CRU is consulting until 11 September 2025 on the update of the Risk Preparedness Plan, required under Article 10 of the IME Regulation. Publication of the final plan is expected in January 2026.

Customers

The CRU's Customer Care Team annual report on its activities in dispute resolution and customer information, and the monthly change of supplier update are available.

SEMC BUSINESS

Imperfections Charges

The SEM Committee consulted on Imperfections Charges for the next tariff year and intends to publish a decision in September 2025. The forecast cost of imperfections is €699.81 plus €183.43 for under recovery in previous years. The price of imperfections is to rise from €22.28/MWh (up from €14.62/MWh in 2024/25).

Capacity Market

The SEM Committee has made available the briefing note pack on the Exception Application and Opt-out Notification Process for T-4 2029/30.

This article contains a general summary of developments and is not a complete or definitive statement of the law. Specific legal advice should be obtained where appropriate.