Merchant renewables still face challenges

In light of delayed RESS-2 auctions in Ireland, and the prospect of buying constraints in the next CfD auction (for established technologies) leading to many disappointed developers, the question of whether “merchant” project development is viable will soon be occupying the minds of our customers in both Ireland and Great Britain. In fact, we know from work we are already doing in both markets that this question is more than just theoretical, as we work consultatively with developers who are starting to make choices about projects they have steered through the long game of grid and planning, where they are now hungry to start seeing returns. 

To move this debate beyond power market modelling, conjecture, and theory, we conducted survey-based research in May to illuminate what type of merchant onshore wind projects are most likely to succeed, and what the implications might be for the developers who take them forward. 

In this short insight paper, we discuss our five key findings, based on our recent research.

Our analysis shows that to meet decarbonisation objectives more low marginal cost capacity will need to be added, leading to reductions in capture prices and further intervention in wholesale markets (subsidies or market redesign) to make projects viable. Merchant projects, even part merchant, are unlikely at this stage to lead to mass capacity additions to the generation fleet.

Daniel Atzori, Research Partner

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