Irish renewables ‘dispatch down’ decision passed up to EU court

Zara West of Pinsent Masons in Dublin was commenting after the Court of Justice of the EU (CJEU) was asked to clarify the scope and application of EU law requiring generators of renewable energy to be fully compensated when they are required to temper their supply of energy to national electricity grids in EU countries. They have also been asked whether compensation rights extend to lost payments that would otherwise have been made under corporate power purchase agreements (CPPAs).

Questions on how article 13(7) of the EU Clean Energy Package Electricity Regulation should be interpreted have been referred to the CJEU by the Supreme Court of Ireland, where a dispute has arisen between wind farm operators in Ireland and Northern Ireland and intermediaries for renewable energy generators on the one hand – together, the applicants – and the Commission for Regulation of Utilities (CRU) on the other.

Article 13(7) provides for generators to be provided with financial compensation by system operators when they are told to reduce their energy output due to "non-market based redispatch", such as constraints or curtailments on the network.

According to the Supreme Court, the applicants believe that the wording in article 13(7) entitles them to be “fully compensated for all loss sustained by them as a result of being redispatched, such that generators should be ‘indifferent’ to the prospect of being redispatched”. However, the CRU disputes that interpretation and believes that the wording provides broad discretion to system operators over the level of compensation they should pay.

In 2022, the CRU, acting through its Single Energy Market Committee, adopted a policy that addressed article 13(7) rights. The policy was challenged by the applicants in judicial review proceedings, with the High Court in Ireland ruling in their favour in November 2023. The CRU has appealed against the High Court’s decision before the Supreme Court. The Supreme Court has decided that the legal interpretation of article 13(7) is uncertain, and so has asked for the CJEU to clarify certain points to enable it to resolve the dispute before it.

The central question the CJEU has been posed is whether article 13(7) requires “that generators with firm access who are dispatched downwards by the system operator be fully compensated for the revenue lost as a result of being redispatched (including any foregone financial support) such that the generator is put in the same financial position as it would have been in had it not been redispatched and is accordingly indifferent to the prospect of being redispatched”.

Other questions are aimed at clarifying the scope of rights to financial compensation under article 13(7), with the applicants having raised concern in the Irish proceedings that compensation is available only to those generators active in the “day ahead” electricity market and therefore the CRU's proposed approach excludes "de minimis" generators below 10 megawatts and generators selling their output to off-takers under CPPAs.

Further questions seek to establish whether the wording of article 13(7) can be said to be sufficiently clear to have direct effect in EU member states – a question that goes to the heart of whether the wording can be challenged before the national courts of those countries or not – as well as the extent to which national policymakers and regulators can adopt implementing measures for the provisions in their own country.

Zara West said: “The proper calculation of the compensation payable where renewable energy is redispatched downwards under the EU Clean Energy Package Electricity Regulation is a matter of huge commercial significance, including for the future of CPPAs. Hopefully, the CJEU will soon provide clarity on this issue, which is of systematic importance for the functioning of the electricity market in the island of Ireland.”