Republic of Ireland Renewable Heat Obligation (RHO) draft bill

Overview

The Renewable Heat Obligation (RHO) policy, as outlined in the draft bill for 2025, aims to increase the use of renewable heat sources in Ireland. The policy sets a phased obligation for renewable heat generation, starting with 1.5% in the first year and increasing to 3% in the second year, with further increases subject to future legislation. This effectively establishes a 3% target for renewable heat generation.

Key Provisions

Obligation Levels:

   – Year 1: 1.5%

   – Year 2: 3%

   – Future increases to be determined by legislation

Renewable Heat Generation:

50% of the obligation must be met by fuels provided by the obligated parties, limiting traded Renewable Heat Certificates (RHCs) to a maximum of 50%.

Duration:

   – The policy is set to begin as soon as it can, assumed to be 2026

   – The policy is set to expire at the end of 2045

Legal Challenges:

The legislation conflicts with Article 34 of the Treaty on the Functioning of the EU, because it in effect restricts the volume of imports from within the single market. This necessitates registration under the Trade Regulation Information System (TRIS) and makes the policy subject to potential legal challenges.

Energy Context

To contextualise the policy’s impact, consider the energy content of natural gas, a significant energy source in Ireland. In 2022, natural gas consumption was 5.49 billion cubic meters (BCM), production was 2.65 BCM, and imports were 2.85 BCM. Converting BCM to terawatt-hours (TWh), 5.5 BCM of natural gas equates to approximately 58.03 TWh of energy. The Republic of Ireland has established a biomethane target of 5.7TWh to be implemented by 2030.

Implications

Increased Renewable Energy Use: The policy encourages a shift towards renewable heat sources, potentially reducing reliance on fossil fuels like natural gas.

Economic Impact: The obligation to generate 50% of renewable heat domestically could stimulate investment in renewable energy infrastructure and create jobs in the sector. But it is not clear that this will provided sufficient stimulus on its own to hit the 10% renewable gas target Ireland has set.

Trade and Import Restrictions: The policy’s import restrictions may affect international trade relations and require careful negotiation to comply with EU regulations.

Legal and Regulatory Challenges: The potential legal challenges related to import restrictions highlight the need for clear and compliant legislation to ensure the policy’s implementation.

Overall, the RHO policy represents a significant step towards Ireland’s renewable energy goals. It is far from clear if this form of the bill will achieve compliance with EU treaties. It also poses the question of whether the preference for domestic producers includes Northern Ireland in the “domestic” classification. If the north is considered domestic, this would ease the ability of the Republic to meet short-term targets as Northern Ireland has greater capacity to produce biomethane and indeed processes southern Irish waste feedstocks into biomethane already.

With only a 3% target for 2027 and no other mechanism established to encourage production, it is very unclear how far this will get to meeting the 2030 Irish biomethane target of 5.7TWh.

ADBA will keep a watching brief on this and analyse how this policy develops.