Local Authorities and Renewable Energy ____________________ A Framework for Public Private Partnerships

Department of the Environment, Heritage and Local Government

First published February, 2003. Revised May, 2004.

Table of Contents
Introduction....................................................................................................................4 Background ....................................................................................................................6 National Development Plan .......................................................................................6 Economic Development.............................................................................................6 Importance of Renewable Energy..............................................................................6 Local Governments Responsibilities ........................................................................7 Public Private Partnerships ............................................................................................9 Public Service Contracts ................................................................................................9 Design and Build (DB) ..............................................................................................9 Design, Build and Operate (DBO)...........................................................................10 Operation and Maintenance Contract (O&M) .........................................................10 Private Finance Options ...............................................................................................10 Design, Build, Operate and Finance (DBOF) / Concessions...................................10 Joint Ventures ..........................................................................................................11 Stages of development of a PPP project in the Renewable Energy Sector..................12 Policy Framework for PPP's and Guidance Notes 12 Interim Guidelines from Department of Finance.....................................................14 Framework for Public Private Partnerships..15 State Authorities (PPP Arrangements) Act, 200215 National Development Finance Agency Act, 2002 15 Circular IPPP 4/03 of 19 December, 2003. 16 Project Identification.. 17 Option Appraisal 17 Statutory Processes ..................................................................................................18 Procurement .............................................................................................................18 Construction .............................................................................................................19 Operation..................................................................................................................19 Review .....................................................................................................................19 General Information on the Renewable Energy Sector ...............................................21 Completed studies ....................................................................................................21 Pre-feasibility study software...................................................................................21 Funding of feasibility studies...................................................................................21 Capital Funding........................................................................................................21 Electricity Market ....................................................................................................22 Tax Incentives ..........................................................................................................23 Licences and Authorisations ....................................................................................23 Categories of Renewable Energy.................................................................................24 Onshore Wind Energy..............................................................................................24 Offshore Wind Energy .............................................................................................25 Small Hydro .............................................................................................................25 Combined Heat & Power (CHP)..............................................................................25 Biomass....................................................................................................................26 Ambient Heat (Heat Pumps) ....................................................................................26 Geothermal...............................................................................................................27 Solar Energy.............................................................................................................27 Ocean Energy...........................................................................................................28 Community Schemes ...............................................................................................28 Appendix A Possible Sources of Funding ................................................................30 Appendix B - Sources of Information..........................................................................33

Appendix C Local Authority PPP Seed Fund- Review of Alternative Energy Projects- January, 2004..............................................................................................................................37 Appendix D Procurement Procedures.......................................................................50

Introduction
This document is intended to provide both general information and guidance to local authorities, who are considering implementing a Public Private Partnership project in the Renewable Energy sector. In this document, the terms sustainable energy and renewable energy are taken as being interchangeable.

The document aims to guide local authorities through the various stages of a project, from the initial assessment through to the contract stage. It is not meant to be a comprehensive guide to the development of sustainable or renewable energy projects but, as stated above, a guide to the development of such projects via the PPP route.

Whilst a majority of projects are likely to focus on the conversion of kinetic energy to electricity, other forms of energy projects may be eligible for funding, e.g. ambient heat (heat pumps) and geothermal energy.

Whilst all efforts have been made to ensure that the information provided within this document is up to date, it is important for local authorities to assure themselves of the current position, especially where the commercial viability of the project is dependent on capital grants. In such cases, the authorities should seek clarification from the relevant funding body on the possibilities of funding provision.

Throughout this document reference is made to the set of guidance notes produced by PricewaterhouseCoopers (PwC) et al, contained in A Policy Framework for Public Private Partnerships: A Report to the Department of the Environment and Local Government. This document should, therefore, be read in conjunction with the PwC guidance notes, and with the Framework for Public Private Partnerships, issued by the Department of Finance. More recently the Department of Finance issued Interim Guidelines for the Provision of Infrastructure and Capital through Public Private Partnerships: Procedures for the Assessment, Approval, Audit and Procurement of Projects July, 2003 and IPPP Section issued Circular IPPP 4/03 of 19 December, 2003 to local authorities with a Policy Framework Document (PFD) which seeks to bring together the various guidelines and instructions concerning the appraisal, approval, management and review of PPP projects insofar as they relate to local government. It is a comprehensive two part documentPart 1 relates to the Evolution of PPP Policy in Ireland and Part 2 to Project Implementation in the Local Government Sector- available on Departments website- www.environ.ie 4

IPPP Section Department of the Environment, Heritage and Local Government May, 2004.

Background
National Development Plan The National Development Plan 2000-2006 recognises the importance of the Public Private Partnership approach in delivering infrastructure. In its November 2001 Framework for Public Private Partnerships, the Government restated its commitment to developing the PPP approach for the provision of public infrastructure and services. This commitment has been endorsed by a number of cross-sectoral organisations, including the NESC, and the PPP principle is reiterated in the Programme for Prosperity and Fairness and its successor Sustaining Progress. Whilst most of the PPP projects envisaged under the NDP will be for major infrastructural requirements covered by mainstream investment programmes, there is considerable potential for developing PPPs in other areas, including alternative energy generation, for which there is no specific NDP investment programme.

Economic Development Irelands growing economy and increasing population have resulted in increased demands on energy, which in turn have increased pressure on the environment and natural resources. In 1998 Ireland ratified the Amsterdam treaty, which introduced the principle of sustainable development within the European Union. The regulations imposed by the Treaty are not merely aspirational, but a legal requirement of Member States. In May 2002, Ireland ratified the Kyoto Protocol on Climate Change. As a result of this and subsequently agreed EU arrangements for meeting our targets collectively, Ireland is now legally bound to limit our greenhouse gas emissions to 113% of our 1990 levels by the period 2008 - 2012. Latest figures (2002) show emissions at 129%. Meeting our Kyoto commitment, while still maintaining a competitive position, is one of the main environmental challenges we face. The Government acknowledges the difficulties in achieving this commitment in the context of a rapidly developing economy. It also acknowledges that economic and social development should not be detrimental to environmental quality. Local authorities can make a significant contribution to achieving the twin goals of sustainable economic development whilst helping to meet our international commitment to the reduction of greenhouse gases. In the energy sector, a key priority under the NDP is to identify those areas of expenditure that will assist Ireland in complying with its obligations under the Kyoto Protocol. Importance of Renewable Energy Renewable Energy (RE) is energy from sources which are inexhaustible (such as wind, tidal, solar, hydro, etc.) or which are replenishable at or about their rate of consumption (such as forests and other forms of biomass). This contrasts with energy from fossil fuel sources that cannot be 6

replenished when consumed, and hence will eventually run out. Renewables can therefore help to ensure security of energy supply and contribute to price stability. Renewables have the added advantage of being more environmentally friendly than fossil fuels, in that their harnessing produces little or no net greenhouse gas emissions.

Ireland has one of the lowest production rates for renewable energy in the EU, at about 2% of our total consumption, compared with an EU average of 6%. On the other hand, Ireland has one of the most favourable wind energy resources in the EU. Up to 2001, however, Ireland only produced 0.9% of the total EU wind energy generation compared to Denmarks 16.6% of total production.

Economic growth and energy consumption are positively related and it is difficult to de-couple these components. Future economic development will be restricted unless we can move energy production away from non-renewable sources, such as fossil fuels, to more sustainable production methods. Every region in Ireland has the potential to take advantage of renewable energy

generation and reap the accompanying environmental rewards, by utilising one or more of the available technologies. Properly harnessed, renewable energy sources could practicably supply a quarter of Irelands energy requirements by 2010.

Local Governments Responsibilities Energy consumption is unavoidable. It is fundamental to all sectors of the economy. Irelands isolation from European energy infrastructure increases the need for efficient energy usage and the development of indigenous renewable energy resources to the maximum level possible. This has to be done while respecting the need for that development to be sustainable.

Local Government, because of its position in society, has a major role in promoting and working towards sustainable development. This means that local authorities should not only look into opportunities for energy generation from renewable resources, but also into ways of improving the efficiency of energy usage within their own facilities. Therefore, as a precursor to the development of projects, local authorities should undertake an energy audit of their own operations highlighting, for example, current usage, possible areas of excessive consumption, potential untapped resources, etc. This could be done in conjunction with the local Energy Agency1, or via an authority appointed Energy Officer.
1

As an example, Galway Energy Agency, as part of its Energy Management Services promotion, offers Public

Buildings energy surveys (including Local Authority Water Pumping Stations).

Increased education is one way of improving awareness of RE and the opportunities that exist in the sector. Some educational institutions provide training on areas specific to renewable and Tipperary Institute

sustainable issues, including part time, non-vocational evening courses.

(http://tippinst.ie/certrenewenergy.htm), for example, offers the Certificate in Renewable Energy, covering topics such as RE technologies, Policy & Legislation, Planning, Consultation and Project Finance.

Any local authority interested in availing of such training should check locally to see what suitable courses may be available.

Public Private Partnerships

The State Authorities (Public Private Partnership Arrangements) Act, which became law on 21st March 2002, confirms the powers of local authorities to enter into joint venture Public Private Partnership arrangements with the private sector. A Public Private Partnership (PPP) is an

arrangement between the public and private sector for the provision of infrastructure or services, which would otherwise have been advanced through the traditional procurement route. Under the PPP model, the private sector contractors become long-term providers of a service rather than upfront asset builders. In a PPP arrangement, the private sector is responsible for not only

constructing the asset, but also for the long-term operation and maintenance, and possibly financing, of the asset. Fundamental to the development of a successful partnership is agreement on the longterm objectives and contractual responsibilities of each of the partners and also the allocation of risk to the party best able to manage that specific risk. This arrangement leaves the local authorities free to plan resources and monitor services, rather than directly provide them. To date 105 projects have been approved to proceed under a PPP arrangement and are at different stages of development. There are a further 74 projects which have been identified as potential PPP projects.

More detail on Government policy on the use of PPPs can be found in the Framework for Public Private Partnerships, issued in November 2001 by the Department of Finance- see national PPP website- www.ppp.gov.ie

Public Service Contracts

A wide range of contractual forms may be adopted by the public sector in establishing partnerships with the private sector, ranging from those where there is a great deal of public sector involvement to those where public authority involvement is very limited.

Design and Build (DB) Although not strictly a form of PPP, DB contracts have a number of features in common with them. Under this type of contract, the private sector is contracted to design and build an asset. On completion of the construction phase, the asset is handed over to the contracting authorities, who operate and maintain the plant throughout its life. However, this form of contract may not

maximise the value for money potential, as the operational and maintenance risks remain with the local authorities, as would any risk of latent defects in design or construction. This type of arrangement is of limited application, as the main benefits from PPP projects arise from designing 9

and constructing on the basis of whole life costings, combined with operating a long-term service contract. DB contracts do not involve the full ambit of risk transfer that is anticipated in a PPP project. As such, this is generally the least desirable type of arrangement from a PPP viewpoint and would appear to be the least suitable for projects in the renewable energy sector.

Design, Build and Operate (DBO) Under this type of contract, the private sector will not only design and build the asset but will undertake to operate and maintain the asset over an agreed period, generally not less than fifteen, and up to thirty years. Here the emphasis is on the provision and delivery of a service by the private sector, which bears the additional risks of providing the service. Cost efficiencies (over traditional contracts) may be obtained through a more appropriate allocation of risk between the parties, the use of a single contract based on whole life costing, the encouragement of innovation, and enhanced competition. The asset, as with a DB contract, remains in public ownership with

responsibility for the operation and maintenance returning to the local authorities after expiry of the contract period, although the option to extend the operations and maintenance contract may exist. A Public Private Partnership DBO contract is the type most commonly used for the provision of assets and services covered by the Water Services Investment Programme.

Operation and Maintenance Contract (O&M) These are contracts awarded to the private sector for the operation and maintenance of a public asset, which formerly had been operated and maintained by the public sector. Here the emphasis is entirely on the provision of a service and the associated risks are transferred to the private sector. O+M contracts would seem unlikely to arise in the renewable energy sector, because of the limited amount of existing infrastructure owned or operated by local authorities. Where the infrastructure does exist, the opportunity may arise to group a number of projects under one operational contract.

Private Finance Options

Design, Build, Operate and Finance (DBOF) / Concessions These forms of contract differ from a DBO contract in that the private sector not only designs, constructs, operates and maintains the asset but also finances the project from their own resources. In a DBOF contract, the private sector recovers the investment out of regular payments from the public sector over the operational period. Concession contracts are similar in form to DBOFs, except that the private sector recovers some or all of its costs from direct user charges. For projects

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outside the main investment programmes and where public finance is limited or unavailable, this type of contract may be the most favoured or, indeed, the only viable option.

Joint Ventures An effective approach to PPP for local authorities, other than through the award of Public Sector Contracts, is through the formation of Joint Venture arrangements with a private company or companies. Under the State Authorities (Public Private Partnership Arrangements) Act, 2002, local authorities and certain other public bodies may enter into such arrangements for advancing a PPP project, subject to the approval of the Minister for the Environment, Heritage and Local Government.

It should be borne in mind, however, that this is not a vehicle for avoiding public procurement rules. In most cases the selection of a suitable private sector partner will be by way of public competition. Where this is not possible, it should still be the case that any company having been set up by a public body and in receipt of public funds would, in itself, be subject to public procurement law.

IPPP Section in co-operation with the Department of Enterprise, Trade and Employment, Department of Finance, Fingal County Council and Local Government Finance Section has recently produced Technical Note: 4 Guidance on PPP Joint Venture Companies- Guidance on the adoption of a Joint Venture Company approach for a Public Private Partnership in Ireland. The purpose of the document is to set out the relevant issues for a local authority in establishing a Joint Venture company- see Joint Venture Process Flowchart on page 19 of document.

The Joint Venture Guidance document is available on the Departments website- www.environ.ie

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Stages of development of a PPP project in the Renewable Energy Sector

There are a number of important documents with which State Authorities or those wishing to advance a project through a Public Private Partnership require to be familiar. These include:-

- Policy Framework for PPPs and 15 Guidance Notes issued by DOEHLG 14 April, 2000.

- Framework for PPPs agreed by Social Partners- 21 May, 2001.

- State Authorities (PPP Arrangements) Act, 2002.

- National Development Finance Agency Act, 2002.

- Interim Guidelines on PPPs issued by Department of Finance 7 July, 2003.

- Circular IPPP 4/03 of 19 December, 2003 regarding The policy framework for the development of Public Private Partnerships within local government and accompanying comprehensive Policy Framework Document- Part 2 of this PFD related to Project Implementation in the Local Government Sector.

- Technical Note 4: Guidance on PPP Joint Venture Companies- January, 2004.

Policy Framework for PPPs and Guidance Notes- 14 April, 2000.

This Framework and accompanying Guidance Notes was prepared by a team led by PricewaterhouseCoopers . While the Framework relates to the advancement of PPP projects in the roads, water and waste sectors, the guidance provided is in most cases applicable to all sectors including Renewable Energy.

As part of the Guidance, a PPP Route Map was developed which outlines the steps required for a PPP project. These are:-

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Project Identification. Assessment of PPP Suitability. Project Appraisal. PPP Assessment. Statutory Process Assessment. Procurement Procedure Selection. Project management. Stakeholder Consultation. Sharing of Statutory process Risk between Public Authority and Private Sector- Elements of Statutory Process Risk likely to be retained by Public Sector would be Preparation of Contract Documentation, Tendering Process and Contract Management of Planning Phase- Elements likely to be transferred to Private Sector are Contract and Performance Management of Construction and Operation.

The Policy Framework referred to above comprises a series of 15 individual Guidance Notes dealing with the following topics and which should be consulted by anyone engaging in a PPP project, i.e.,

Introduction to Public Private Partnerships. Financial Context. Legal Context. Public Private Partnership Assessment. Statutory Process Assessment. Procurement Procedure Selection. Project Management. Stakeholder Consultation. Procurement Management. Output Specifications. Risk Assessment. Payment Mechanisms. Key Contractual Issues. Accounting Treatment. Contract and Performance Management.

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Interim Guidelines for the Provision of Infrastructure and Capital Investments through Public Private Partnerships: Procedures for the Assessment, Approval, Audit and Procurement of Projects- Department of Finance, July, 2003. These Guidelines are very important. Appendix 1 of the Guidelines integrates PPP Procurement steps into the Guidelines on the Appraisal of Capital Expenditure Projects. The Capital Expenditure Appraisal Guidelines view projects from viewpoint of Appraisal Stage, Planning Stage, Implementation Stage and Post Project Review. The Interim Guidelines view projects as having a number of streams- Project Assessment stream, Approval stream and Audit stream. These Guidelines impose additional requirements over and above those which had been in place. For each PPP project, the Interim Guidelines require that the following steps should be taken:A1 Preliminary Appraisal. A2 NDFA assistance. A3 PPP Assessment. B1 Approval to proceed and approval to appoint client advisors. C1 Accountable Officer (Secretary General) appoints Process Auditor. A4 Public Sector Benchmark. B2 Affordability Cap C2 PSB and Affordability Cap recorded by Sanctioning Authority. A5 Procurement Process. A6 Tender Evaluation. A7 Value for Money Comparison. A8 Contract Close Post Project Review. One of the significant controls built in is that if the Affordability Cap is exceeded at any point during the procurement process, the Sponsoring Agency must immediately revert back to the Sanctioning Authority. The Interim Guidelines expand on each of the above steps in more detail. The most significant additional requirements imposed by these Guidelines for PPP projects are:For all PPP projects (or grouped projects) with a capital value of 20m or more: The appointment of a Process Auditor (PA) to certify that proper procedures have been followed throughout the project. The PA will be appointed by and report to the Secretary General of the DOEHLG.

For all PPP projects: The appointment of a Project Board to manage the project. 14

The undertaking of a Public Sector Benchmark (PSB) to determine the estimated cost of carrying out the project by traditional means. The preparation by the DOEHLG of an Affordability Cap for each project based on the PSB. If at any time the estimated cost of the project increases beyond the Affordability Cap, the local authority concerned muse immediately seek Departmental approval before proceeding further. The carrying out of a formal post-project review following completion of the construction of the works.

Framework for Public Private Partnerships- Working Together for Quality Public Services- May, 2001. This is also an important document having been endorsed by IBEC, ICTU, CIF, the Department of Finance and the Departments and Agencies engaged in the PPP process. The principal features of the Framework include clear statements of the scope (section 2), principles (section 4) and goals (section 5) of the PPP programme, the identification of key project implementation issues (section 9) as well as a clear recognition of the critical role of social partnership and stakeholder consultation (section 7) in underpinning the success of PPPs. State Authorities (Public Private Partnership Arrangements) Act, 2002. This legislation which became operative on 21 March, 2002 was introduced to remove any uncertainties regarding the powers of State Authorities, including local authorities, to enter into PPP arrangements. National Development Finance Agency Act, 2002. The National Development Finance Agency (NDFA) was established on 1 January, 2003 under the National Development Finance Agency Act, 2002. The main functions of the NDFA are to: Providing advice to State Authorities, including local authorities, in order to assist in the evaluation of financial risks and costs of infrastructure projects and to facilitate them in availing of the best financial package for each project. The NDFA will also advise on project insurance issues. Assessing optimal financing for major infrastructure projects as set out in the National Development Plan and other infrastructure priorities.

Raising finance for projects (including PPP projects) where this could be more costeffective than private funding and where, in the case of conventionally procured capital projects, there are clear financial benefits in using Agency funding over Exchequer funding; and

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 Creating special-purpose companies that can raise project finance with guarantees, raise revenues from projects with user-charging and receive land or other property assigned or transferred from local authorities for use in financing infrastructure projects.

The legislation establishing the NDFA places a number of obligations on local authorities. In instructions issued by the Department of Finance these obligations are to be seen as follows:-

[i]

for all major projects and grouped projects with capital costs estimated to exceed 20 million, to seek the advice of the Agency on how best to finance the project as soon as practicable before commencement of the project,

[ii]

for projects where local authorities intend to appoint financial advisers, to ask the NDFA to act as financial adviser. Where the NDFA agrees to act as financial adviser to a project they would expect to be represented on the Project Board and to have access to all relevant correspondence,

[iii]

for projects involving the use of private finance, to provide the NDFA with the opportunity at an early stage of reviewing the financing options, including where appropriate providing the funding itself. In this regard local authorities should take care in framing the contract conditions for projects to ensure that sufficient
flexibility exists to allow for NDFA involvement at any stage of the project.

Circular IPPP 4/03 of 19 December, 2003- The policy framework for the development of Public Private Partnerships within local government.

This Circular was accompanied by a comprehensive two part Policy Framework Document (PFD).

Part 2 of the PFD is relevant in the context of this Framework as it deals with Project Implementation in the Local Government Sector,

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Indeed the Project Implementation Guidance is consistent with the Guidance Notes referred to above and the Interim Guidelines. It would again be a useful document for anyone using the PPP procurement route. The following chapters contain detailed Project Implementation guidance, i.e.,

Chapter 3- Project Identification Chapter 4- Option Appraisal. Chapter 5- Statutory Process (and Pre-Procurement). Chapter 6- The Procurement Procedure. Chapter 7- Construction and Operation. Chapter 8- Review of PPP Process.

Project Identification

The local authority may either identify a need that can be satisfied from local resources or alternatively identify a local resource that has the potential to be commercially developed. Once identified, an initial assessment is made of the project's commercial viability and its suitability for procurement as a Public Private Partnership. This can be done by comparing the characteristics of the proposed project with those of successful Public Private Partnership projects.

Presently there is no mainstream investment programme for renewable energy projects so funding will most likely be a key issue, and more information on possible sources of funding can be seen in Appendix A.
PwC Guidance Note No.1 Introduction to PPP and Chapter 3 of Project Implementation in the Local Government Sector.

Option Appraisal A feasibility study may be undertaken, either by the authority themselves or more likely by an independent consultant employed by them, to determine the viability of the project. In addition, a PPP Assessment should be carried out which should consider the following issues; -

the potential for improved value for money in pursuing the project as a PPP, the most appropriate form of PPP, if any, the most appropriate allocation of risk between the parties, the procurement route, and, any other relevant matters.

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The various risks associated with the project, including statutory process risk, should be allocated to the party best able to manage that risk.
PwC Guidance Note No. 4 Public Private Partnership Assessment PwC Guidance Note No. 11 Risk Assessment Chapter 4 of Project Implementation in the Local Government Sector

Statutory Processes Generally, the contracting authorities will perform the statutory processes, but these could be shared between the parties or even transferred entirely to the private sector, if considered the most costeffective option. Unless the contracting authorities are transferring some of the statutory process risks to the private sector, the contracting authorities may have to ensure that the necessary statutory approvals are in place before tenders are invited.
PwC Guidance Note No. 5 Statutory Process Assessment and Chapter 5 of Project Implementation in the Local Government Sector.

Procurement If it is decided to proceed via the PPP route, the Clients Representative (CR)2 will prepare the contract documents, such as the Project Agreement, Employer's Requirements, etc., on behalf of the contracting authorities, and also advise on the procurement and assist in evaluating the bids received.

Procurement of PPP projects tends to be more complex than that carried out by more traditional methods. The choice of procedure will be dependent on the nature, size and complexity of the project. Most PPP projects will be of a size that requires that they comply with EU Procurement Regulations. The procedure will depend on the nature of the project, but it is likely to be either the restricted or in very limited circumstances the negotiated process or competitive dialogue which is a new procedure provided for in the recently amended and consolidated Procurement Directive.

In the case of the restricted procedure, a two-stage process, involving the pre-qualification stage and invitation to tender, is used, with the addition of a third stage for the negotiated procedure, e.g.:

(i) (ii)
2

Invitations to submit expressions of interest and pre-qualification, Invitation to tender, assessment of tenders and selection of the preferred bidder, and

The Clients Representative, acting as the lead advisor in a project, is normally a technical advisor with extensive PPP experience who may call on other expert advice (including the Contracting Authority's legal and financial advisors) as required. The skills required by the Clients Representative to successfully develop a PPP project depend on the nature and scale of the project.

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(iii)

Negotiations between LA and the preferred bidder on final contract terms.

More information on Procurement procedures can be found in Appendix D.

PwC Guidance Note No. 6 Procurement Procedure Selection PwC Guidance Note No. 9 Procurement Management PwC Guidance Note No. 10 Output Specifications PwC Guidance Note No. 12 Payment Mechanism PwC Guidance Note No. 13 Key Contractual Issues Chapter 6 of Project Implementation in the Local Government Sector.

Construction The PPP contractor has responsibility for the construction and commissioning of the asset. The contracting authority, acting in a more regulatory capacity, maintains a management and monitoring role during the construction period, with the assistance of the Clients Representative. For

renewable energy electricity projects, a link to the national grid is almost always necessary. Negotiations for connecting to the grid can be a long process and this should be undertaken at the earliest stage possible, even in parallel with the other statutory processes. Issues may arise, for example, in relation to distribution, transmission and metering. Further information on grid

connection issues can be found in the publications Guide to the Process for Connection to the ESBs Distribution System, available on www.cer.ie/cer0213.pdf and Process for Connection of a Power Station to ESBs Transmission System, available from connections@ngrid.ie.
PwC Guidance Note No. 15 Contract and Performance Management and Chapter 7 of Project Implementation in the Local Government Sector.

Operation In all but DB contracts, the operation and maintenance of the asset is the responsibility of the PPP contractor with the contracting authorities maintaining a monitoring role. After the expiry of the contract period, responsibility for the operation and maintenance of the asset will normally return to the contracting authorities. There may be an option to extend or renew the period of the operation and maintenance contract.
PwC Guidance Note No. 15 Contract and Performance Management and Chapter 7 of Project Implementation in the Local Government Sector.

Review A review of a project should be undertaken within six months of the commissioning of the works. This review should focus on the management of the process, and whether the project was delivered in a timely, efficient and cost effective manner. It will not be possible to determine the overall economic success or otherwise of the project at this stage but details of the cost breakdown for the 19

planning and construction stages should be provided. There is also the need for ongoing reporting on the operational performance by the PPP contractor. Post Project Review is also a fundamental requirement of the Department of Finance Interim Guidelines.

Chapter 8 of Project Implementation in the Local Government Sector and Department of Finance Interim Guidelines.

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General Information on the Renewable Energy Sector

Completed studies IPPP Section, under the Local Authorities PPP Fund, has granted funding for several feasibility studies in the renewable energy sector. These studies are a useful reference and primary source of information for local authorities that are considering similar type projects. A Review of these Alternative Energy projects is to be found in Appendix C.

Pre-feasibility study software Another option/first step when considering a potential energy project would be to avail of prefeasibility study software from Sustainable Energy Ireland (formerly the Irish Energy Centre). This software may help authorities identify critical issues that may fundamentally effect the potential viability of the project. Sustainable Energy Ireland, which is also one possible source of capital funding for energy related projects, requires that potential applicants for grant aid must have undertaken a pre-feasibility study assessment.

Funding of feasibility studies One possible source for the funding of feasibility studies is Sustainable Energy Ireland. In general they do not fund feasibility studies, but they may do so in certain circumstances. The Renewable Energy Research, Development and Demonstration - Program Strategy and Call for Proposals documents, available from their Website www.sei.ie, outlines the priorities for renewable energy and the areas most likely to be granted funding for feasibility studies. These areas include wind projects, biomass projects, small hydro projects, solar projects and geothermal energy projects.

For more information on possible sources of funding, see Appendix A.

Capital Funding Obtaining finance for RE projects can be difficult, due to a perceived high level of risk amongst potential fund providers (as a consequence of a lack of knowledge and experience). Also, providers can often associate RE projects with a need for higher capital investment, even though very often this is offset by lower operating costs. Sustainable Energy Ireland may provide funding of between 10% and 25% for a projects capital costs in the renewable energy sector. The amount of funding will depend on the type and scale of the project. These amounts may be subject to change, so it is important for the applicants to establish the current level of funding available in respect of their

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specific project, particularly where the economic viability of the project is dependent on this funding.

For more information on possible sources of funding, see Appendix A.

Electricity Market The Alternative Energy Requirement (AER) programme, where potential projects bid to supply electricity, is the principal Government support mechanism for renewable energy in the Irish market. It guarantees successful bidders a 15-year power purchase agreement (PPA) with the ESB at guaranteed prices, which are index linked. The amounts paid in terms of eurocent per kWh will vary according to the scale and type of project. As a guide, the agreed prices paid for sustainable energy facilities under the previous competition for this scheme (AER5), which closed in November 2001, was as follows: Large-scale wind category 3 Small-scale wind category 4 Hydro Biomass (including landfill gas) 4.812 eurocent/ kWh 5.297 eurocent /kWh 6.475 eurocent /kWh 5.916 eurocent/ kWh

A number of conditions were attached to the AER5 competition and prospective applicants should familiarise themselves with these. For example, any electricity plant constructed in relation to this programme had to be a brand new plant, neither built nor under construction on 1st May 2001. Projects successful under the scheme could, however, locate at any site, e.g. adjacent to an existing site. It may be advantageous locating close to an existing scheme, as connection costs to the national grid can be significant, and may well impact on the projects business case. Another important condition was that applications for the large-scale wind projects category could not also be applicants in the small-scale category. The reason for this was to increase awareness and to encourage the involvement at local community level.

AER6 was launched in November 2002, to support the development of an additional 578 MW's of new renewable energy based electricity generating plant, predominantly wind power, Biomass

Large-scale wind projects have a capacity of more than 3 MWe Small-scale wind projects have a capacity not exceeding 3 MWe

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(biomass steam CHP and anaerobic digestion) and small-scale Hydro, by the end of 2005. The details of the scheme have now been announced, and can be accessed from www.dcmnr.ie

Tax Incentives In the Finance Act of 1998, the Minister for Finance provided tax relief for corporate investment in certain renewable energy projects. To qualify for relief, the project must be in the wind, solar, hydro or biomass categories and must be approved by the Minister for Communications, the Marine and Natural Resources (formerly the Minister for Public Enterprise). The relief, subject to certain condition, takes the form of a deduction for tax purposes from a companys profits for investment in new ordinary shares in a company setting up a renewable energy project. The relief is capped at 9.5m for an individual project and 12.7m for a company or group. In addition, there is a capital allowance incentive which allows for plant and machinery to be written off over a five-year period at 20% P.A. These concessions were due to expire in 2002, but the Minister has extended the qualifying period until the end of December 2004, subject to EU approval.

Licences and Authorisations The Commission for Energy Regulation (CER) is an independent body established under the Electricity Regulation Act 1999, which has the responsibility for the licensing and regulation of the generation and supply of electricity and overseeing third party access to the ESBs transmission and distribution systems. An authorisation to construct or reconstruct a generation station is required under Section 16.1 of the Electricity Regulation Act of 1999. Licences are also required for the generation of electricity [Section 14.1(a) of the E.R. Act 1999] and the supply of electricity [Section 14.1 (b)(c)(d) and 14.2 of the E.R. Act 1999]. Supply licence requirements may differ depending on the nature of the project. It is important that local authorities ensure there will not be any potential problem in relation to procuring of the necessary authorisation or licences and, therefore, contact should be made with the CER in the early stages of a project.

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Categories of Renewable Energy

Onshore Wind Energy Wind energy is one of the most cost-effective technologies for electricity generation. In 1992, the countrys first wind farm, comprising of 21 wind turbines, commenced generating electricity in Bellacorrick, County Mayo. It had a rated capacity of 6.45 MW. By the end of 2001, there were over 20 wind farms operational in Ireland, with a combined capacity of 125 MW - generating enough energy for over 80,000 Irish homes and avoiding the emission of 300,000 tonnes of CO2. A stated Government objective is for an additional 500MW of electricity from renewable sources by 2005, most of which is expected to be generated from wind energy. Irelands onshore wind resource is among the best in Europe, particularly along the western seaboard, but the current production of green electricity from this resource is amongst the lowest in Europe.

Wind turbine technology for converting wind energy to electricity is well-developed and is now commercially available and approaching open market competitiveness, particularly onshore turbines in the 0.5 to 1.5 MW range. Capital costs for onshore, grid-connected systems in Ireland are typically about 900-1,100 per kW installed. The cost of delivered energy depends mainly on the capital costs and wind speeds but is estimated to be in the region of 0.03- 0.06 /kWh for onshore wind. (Source: Sustainable Energy Ireland).

Other than capital costs, the main constraints to the development of wind farms is likely to be local planning objections to the farm itself and to the means of physical connection to the national grid. As local gridlines approach their maximum carrying capacity, so does the potential for further development in the area. This carrying deficit can only be addressed by upgrading the local network, which may be a low priority for the ESB. Past experience would suggest it is likely that most planning objections would be on the grounds of visual intrusion. Besides the visual impact of the turbines themselves, probably the most contentious issue is connecting the windfarm to the national grid. Overhead power lines can have a significant negative impact on the landscape and are probably the main source of objections to a scheme. The cost of putting the powerlines underground can impose a significant, and in some cases prohibitive, additional cost on the developers which may render the scheme uneconomical. Every effort should therefore be made to take account of the visual impact when planning the project, and early stakeholder consultation is essential in order to assess the level of local concern about a development, and also to inform and educate the local community of the positive benefits of a project.

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Offshore Wind Energy Irelands offshore wind resource is particularly well suited to the development of offshore wind energy because of a very favourable wind resource available in relatively shallow waters close to shore. There is enormous potential for offshore developments around the whole coastline, but particularly close to major centres, as with the proposed development off the East Coast, which is on a significantly larger scale than existing onshore developments. Although the technology for offshore wind farms is less developed and likely to be more expensive than for onshore developments, there are many positive benefits of locating offshore. These may generally include less difficulty in securing planning permission, a superior wind resource, economies of scale and reduced visual impact. The estimated capital cost for grid-connected offshore wind farms is

between 1,500-2,000 per kW installed and the estimated cost of delivered energy is in the region of 0.05 to 0.08 /kWh. As there are no existing offshore windfarms in Ireland, these figures should only be treated as tentative. (Source: Sustainable Energy Ireland)

Small Hydro Hydroelectric power is one of the most developed forms of renewable energy both in Ireland and world-wide. In Ireland, most of the larger rivers have been harnessed for the production of

electricity and, as such, the current programme excludes large-scale developments. The total resource of small hydroelectric schemes has been estimated at 30-40 MW. Capital costs for smallscale schemes are relatively constant although the implementation costs may be high due to stringent environmental regulations. Depending on its proximity to the gridline, it is estimated that production of electricity from a small hydroelectric scheme would range from 0.05-0.10/ kWh (Source: Sustainable Energy Ireland)

Combined Heat & Power (CHP) Combined heat and power systems generate electricity and usable heat simultaneously from the same plant. CHP covers a range of technologies, but always includes a prime mover (an engine or turbine) driving an electrical generator, plus a heat recovery system. In most CHP installations, the heat recovered supplements heat from the site's boilers and the electrical output displaces some (or all) of the electricity bought from the local supply network. In general, the fuel sources currently utilised are non-renewable, but there is no reason that renewable fuels (biomass, for example) cannot be used.

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CHP can provide a secure and highly efficient method of generating electricity and heat at the point of use. Due to the utilisation of heat from electricity generation and the avoidance of transmission losses because electricity is generated on site, CHP can achieve a 35 per cent reduction in primary energy usage compared to conventional power stations and heat-only boilers. This can allow the CHP operator to make economic savings where there is a suitable balance between the heat and power loads on his site. The net result will be a significant reduction in greenhouse gas emissions in comparison to the generation of heat and power from individual systems. There are a number of successful schemes in operation in Ireland and more are in the process of being developed. (Source: Sustainable Energy Ireland)

Biomass The term biomass refers to a whole range of organic materials that have the potential to be converted into forms of energy, for example heat, electricity, gas and liquid fuels such as biodiesel. Biomass can be specifically grown for conversion to energy, or may be the residue from industries such as agriculture, forestry or timber and wood processing. Energy can also be recovered from the organic component of municipal and agricultural waste. Although the lack of research and development into biomass as a viable source of renewable energy has limited the technical and economic information available in Ireland, biomass has the potential to make a significant contribution in the sustainable energy sector. Ireland has an ideal climate for growing energy crops like short rotation coppice and oilseed rape and the agricultural industry is also a potential source of materials for energy production. The area of the country under forestry is increasing each year and the residue from this industry can provide another valuable source of material for renewable energy production.

Irelands renewable energy resources have been quantified in the ALTENER supported study Total Renewable Energy Resources in Ireland, conducted by the ESBI and ETSU (March 1997). This study summarises the potential capacity for electricity generation from each form of biomass on a county by county basis. The best estimated cost of electricity production using biomass is between 0.03-0.07 /kWh (Source: Sustainable Energy Ireland)

Ambient Heat (Heat Pumps) Ambient heat pumps extract solar heat from water, air or ground and use this energy for space or water heating. This form of energy can reduce energy consumption for heating by as much as 75% in comparison to conventional systems. Although the technology is still developing, there are a

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number of successful schemes operating in Ireland, such as that in the Tralee Motor Tax Office. The capital costs of heat pumps are higher than for conventional system but with an estimated payback period of between 5 and 10 years, it can be economically viable. The estimated cost of energy using this form of system is between 0.04-0.07/kWh. (Source: Sustainable Energy Ireland)

Geothermal Geothermal energy is renewable heat energy emanating from deep in the earths crust. Geothermal resources range from surface hot water springs to hot rocks several miles beneath the earths surface. This energy can be used for space and water heating and even for the generation of electricity. In countries such as Iceland, Italy, France and the USA geothermal energy is

commercially exploited. In Ireland, near surface geothermal resources are limited but there are several geothermal heat pumps in operation, like that in Trinity College Dublin, for example. While site variability produces a wide range of capital and operating costs, it is estimated that the costs of energy using this form of system would be similar to that of ambient heat (heat pumps), at between 0.04-0.07/kWh. (Source: Sustainable Energy Ireland)

Solar Energy There are a number of ways in which solar energy can be exploited, for example using it directly for lighting or converting it into electricity or heat. Although Irelands climate is not ideal for

exploiting solar energy such as Solar Thermal Power or Photoconversion, the climate is quite suited to development of Solar Thermal Heat, Passive Solar and Solar Photo Voltaic systems. Solar Thermal (Heat). Active solar energy systems convert direct solar energy into heat, which can be used immediately or stored for later use. Solar collectors are normally placed on the roofs of buildings or in other areas that have a maximum exposure to solar radiation. The collectors absorb energy and transfer it to a circulating fluid, which heats the water in a tank. Solar thermal technology for water heating is well developed and although the capital cost of a solar thermal system is expensive, prices have decreased by between 30% and 60% over the past decade and will probably decrease still further as technology develops. It is estimated that the cost of producing an equivalent kWh of energy is between 0.04-0.07. (Source: Sustainable Energy Ireland)

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Passive Solar. Buildings are designed to utilise the solar energy available to reduce energy consumption and, as a consequence, reduce energy costs. Buildings are designed in such a way as to maximise the passage of solar energy into the building and materials within the building maximise the absorption of this heat. The heat is built up during the day and slowly released during the night. Passive heating can be used for both domestic and commercial buildings. Savings using this form of heat can be quite significant. To maximise cost effectiveness of this type of energy, it is best to incorporate a passive solar design into the building at the planning stage. It is estimated that the equivalent cost of energy saved is in the region of 0.00-0.07 per kWh. (Source: Sustainable Energy Ireland)

Solar PhotoVoltaic (PV). Photovoltaic cells, made of semiconductor materials, directly convert the sunlight energy into electricity. Its use is widespread, especially in small scale stand alone developments such as isolated housing, and telecommunications and navigation aids. Although capital costs have decreased by about 40% over the past decade and similar decreases are expected over the next decade, it is still a relatively expensive energy system. It is estimated that the cost of electricity using this form of solar energy is in the region of 0.20-0.50 per kWh. (Source: Sustainable Energy Ireland)

Ocean Energy Ocean energy includes wave and tidal energy, whereby the energy from the waves or tides is converted into electricity. The tidal form is similar to a conventional hydro scheme where water is released from a dam, which drives turbines, which in turn converts the energy into electricity. In this case it is the tide which fills the dam rather than rivers. The technology is well understood and the only barrier to development is the high cost of construction.

The wave form is somewhat more complex and still very much at the development stage. Irelands combination of high wave power and deep water close to the west-coast make it an ideal country to exploit this form of energy. Although there are no existing commercial developments of either of these forms in Ireland at present, it is thought that electricity from a successful project could be produced at a cost of between 0.04-0.07 /kWh. (Source: Sustainable Energy Ireland)

Community Schemes Research, Development and Demonstration funding that encourages or enables community schemes which aim to make that community more environmentally sustainable or completely green can be

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particularly useful in educating and raising community awareness. Details are available from Sustainable Energy Ireland.

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Appendix A Possible Sources of Funding

In general, RE technologies have yet to become fully cost competitive with traditional fossil fuel technologies. As a result, a number of support mechanisms and incentives have been put in place in recent years. Some of these are explained in the following pages.

EU Framework Programme for Research, Technological Development and Demonstration The EUs RTD Framework Programme has been an important source of funding for the renewable energy sector in Ireland. The Framework Programme is the EUs main instrument for research funding in Europe and was proposed by the European Commission and adopted by Council and the European Parliament following a co-decision procedure. Framework Programmes have been implemented since 1984. The 5th Framework, with objectives relating to cleaner energy systems and economic and efficient energy, is due to end in 2002 but its successor, the 6th Framework, is due to be fully operational as from January 1st, 2003 and will run until to 2006. This Programme includes objectives on efficient and sustainable use of natural resources, and is likely to have support provision of 810M for projects in the field of sustainable energy. Any legal entity can apply and may receive support under this programme.

ALTENER II This is an EU programme targeted exclusively at the area of renewable energy technology. Originally intended to operate from 1998 to 1999, an extension until December 2002 has been put in place. Objectives of this programme include the encouragement of private and public investment in the production and use of energy from renewable sources.

ALTENER II is focusing on renewable energy sources that are already viable or approaching viability, such as Biomass, Solar energy, Small-scale hydroelectricity, Wind power and Geothermal energy.

In April 2002, the European Commission proposed Intelligent Energy for Europe, a new programme to follow on from ALTENER when it closes at the end of 2002. The new proposal is for a four-year programme with a total budget of 215million, 86 million of which is targeted as support for promoting renewable energy.

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INTEREG IIIA Under Priority 2 of the INTERREG IIIA Programme, Measure 3 will focus on addressing the energy problems within the INTERREG region through cross-border measures designed to increase the use of renewable energy and energy efficiency technologies at a local level. A call for project proposals was made in late February 2003. Further information on the application process is available from the Special European Union Programmes Body (SEUPB) website

www.eugrants.org. Division,

Alternatively, information packs are available from the Renewable Energy of Communications, the Marine and Natural Resources.

Department

Sustainable Energy Ireland Research, Development & Demonstration Programme. Sustainable Energy Ireland promotes and assists environmentally and economically sustainable, production, supply and use of energy in Ireland. The National Development Plan has made funding provision of 234 million to support implementation of the Government's sustainable energy policy through Sustainable Energy Ireland.

Under this policy, a 16.25 million programme of support was launched in July 2002, offering support for projects aimed at generating and applying technologies, products, systems, practices and information leading to the increased utilisation of renewable energy. The focus of the programme is on stimulating deployment of renewable energies that are close to market and to assess and develop technologies that have prospects for the future.

Department of Communications, Marine and Natural Resources Since 1994, the development of electricity generating capacity from renewable energy has been encouraged through a series of Government-supported Alternative Energy Requirement (AER) competitions. The objective of the AER is to increase the contribution of renewables in the overall electricity generating mix. The AER programme involves a series of tendering competitions, in which prospective generators are invited to compete, based on price per unit of electricity, for contracts to sell electricity to ESB. Successful competitors are offered ESB power purchase agreements of up to fifteen years. Securing a PPA often makes a potential project more attractive to investors.

The latest of these competitions, AER5, closed in November 2001, and its replacement, AER6, was launched in November 2002. The details of this have now been announced, and it will concentrate on wind energy, several categories of biomass, and small hydro power schemes. Information on 31

how to apply, price caps pre kWh, and effective dates can be found in the energy pages of the Departments website, www.dcmnr.ie

(Projects receiving funding under the EU RTD programme above are also guaranteed power purchase agreements on similar terms to AER projects.)

Department of the Environment, Heritage and Local Government The Local Authorities Public Private Partnership Fund was launched in December 1999 to encourage and assist local authorities in developing partnership approaches with the private sector for the provision of infrastructure and services. The 5m grant scheme is confined to projects outside the mainstream investment programmes and applications for funding have only been considered where no other source of funding was available from any other state agency. Feasibility studies, for example, were eligible for funding under this scheme in certain circumstances. The PPP Fund has provided grant assistance to 50 PPP proposals to date, some of which have renewable energy elements - see Appendix C. The Fund, which was due to expire at the end of 2002, was extended to the end of 2004.

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Appendix B - Sources of Information

Sustainable Energy Ireland (Formally Irish Energy Centre) Glasnevin Dublin 9 Tel: 01 836 9080 Fax: 01 837 2848 Email: info@irish-energy.ie Sustainable Energy Ireland Finnisklin Business Park Sligo Tel: 071 915 9705 Sustainable Energy Ireland Industry House Rossa Avenue Bishopstown Cork Tel: 021 454 7050

Energy Hotline

1850-376.666

Fax: 071 915 9701

Fax: 021 454 7059

Sustainable Energy Ireland Renewable Energy Information Office Shinagh House Bandon Co. Cork Tel: 023 42193 Fax: 023 41304 E-mail: renewables@reio.ie Department of the Environment, Heritage and Local Government Custom House Dublin 1. Tel: 01-8882000 Fax: 01 888 2107 ENFO (environmental information) 17 St. Andrew Street Dublin 2 Tel: 1890 200191 Fax: 01 883946 Web: www.enfo.ie E-mail: info@enfo.ie European Commission Energy & Transport Directorate XVII Directorate D Rue de la Loi 200 B-1049 Brussels Belgium Tel: +32-2 299 11 11 Telex: 21877 COMEU B E-Mail: eesd@cec.eu.int Commission for Energy Regulation Plaza House Belgard Road Tallaght Dublin 24 Tel: 01 4000 800 Fax: 01 4000 850 E-Mail: info@cer.ie

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Electricity Supply Board (ESB) Corporate Centre, 27, Lower Fitzwilliam Street, Dublin 2. Tel: 01 676 5831

Fax: 01 661 5376

Irish Wind Energy Association (IWEA), Arigna, Carrick-on-Shannon, Co. Roscommon, Tel: 071 9646072 Fax: 071 9646080 E-mail: office@iwea.com Danish Wind Industry Association Vester Voldgade 106 DK-1552 Copenhagen V Denmark Tel: +45 3373 0330 Fax: +45 3373 0333 E-Mail: danish@windpower.org European Wind Energy Association Rue du Trone 26 B-1000 Brussels Belgium Tel: +32 2 546 1940 Fax: +32 2 546 1944 E-mail: ewea@ewea.org Irish Bioenergy Association (IrBEA) Education Centre, Church St. Cahir, Co. Tipperary. Tel: 052 43090 Fax: 052 43012 E-Mail: tippenergy@eircom.net Irish Hydropower Association C/o Darrell Nightingale Glengarriff, Co.Cork Tel: 027-63212 E-Mail: darrelln@eircom.net

Fax: 027-63187

Tipperary Energy Agency Limited, Education Centre, Church St, Cahir, Co. Tipperary, Tel: 052 43090 Fax: 052 43012 E-Mail: tippenergy@eircom.net Carlow Kilkenny Energy Agency Castle Hill, Carlow Co Carlow Tel: 059 9143871 Email: ckenergy@eircom.net

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City of Dublin Energy Management Agency (CODEMA) Unit 32, Guinness Enterprise Centre, Dublin 8 Tel: 01 4100659 Fax: 01 4100576 Web: www.codema.ie E-mail: codema@codema.ie Cork City Energy Agency (CCEA) The Lord Mayor's Pavilion, Fitzgeralds Park, Mardyke Walk, Cork Tel: 021 4251104 Fax: 021 4251056 E-mail: corknrg@iol.ie Cork County Energy Office Spa House, Mallow, Co. Cork Tel: 022 43610 E-mail: mallowre@indigo.ie

Mobile: 087 816 9722

Fax: 022 43678

Donegal Energy Action Team (DEAT) Station Island, Lifford, Co. Donegal Tel: 074 9172497 Fax: 074 9142130 E-mail: deat@donegalcoco.ie East Connacht Energy Agency Ltd (ECEA) (Currently Inactive) King House, Boyle, Co. Roscommon Tel: 079 64048, Freefone: 1800 461100 Fax: 079 64049 Web: www.iol.ie/~eceal E-mail: info@ecea.iol.ie Galway Energy Agency Limited (GEAL) City Hall, College Road, Galway Tel: 091 566 954 Fax: 091 567 493 E-mail: pkeavney@galwaycorp.ie Kerry Energy Agency c/o Kerry County Council, County Buildings, Rathass, Tralee, Co. Kerry Tel: 066 7123576 E-mail: energy@kerrycoco.ie

Fax: 066 7120927 Web: www.kerryweb.ie/kerryenergy/energy.html

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Mayo Energy Agency U{PRIVATE}nit 1, The Quay, Ballina, Co. Mayo Tel : 096 76113 Email : mayonrg@eircom.net

Fax: 096 76199 Web: http://homepage.eircom.net/~mayonrg

Meath Energy Management Agency (MEMA) Environmental Dept, Meath County Council 2A Cannon Row (Ground Floor) Navan, County Meath Tel: 0 46 9060538 Fax: 046 9060537 Email: gcusack@meathcoco.ie Waterford Energy Management Bureau Civic Offices Tankfield Tramore, Co. Waterford Tel: 051 395555 Email: lfleming@waterfordcoco.ie Wexford Energy Management Agency Ltd WORD Building Johnstown Castle Co Wexford Tel: 053 47400 Fax: 053 46456 Email: wexenergy@eircom.net

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Appendix C Local Authority PPP Seed Fund- Review of Alternative Energy Projects- January, 2004. Introduction
Circular PPP 2/99 of 1 December, 1999 notified Local Authorities of the setting up of a Public Private Partnership Fund for Local Authorities. The purpose of the PPP Fund is to encourage Local Authorities to become more actively involved in the development of new forms of commercial arrangement with the private sector. The Fund provides grants to assist Local Authorities that are interested in developing innovative projects in partnership with the private sector. Since the Funds launch 50 projects, amounting to 4.076 million, have been approved for funding. The categories covered by the successful applications are Business Parks/Industrial sites, Alternative Energy, Crematoria, Urban Development, Tourism/Leisure, Car Parks, Public Sector, Housing and miscellaneous. The I/PPP unit, as part of a Review of the Seed Fund under all categories, is reviewing all grant aided projects with the objective of extracting information and lessons to guide and assist Local Authorities who might be considering similar projects, now or in the future. This Report outlines details in relation to Alternative Energy projects. Seven projects in four different Local Authorities are reviewed. A Local Authority considering a project in this sector should have regard to the contents of this document and also the following: Circular IPPP 4/03 of 19 December, 2003 issued to Local Authorities together with a Policy Framework Document covering, inter alia, Project Implementation in the Local Government Sector. These documents are available on the Departments website www.environ.ie Local Authorities and Renewable Energy A Framework for Public Private Partnerships, first published by the I/PPP unit in February, 2003 and currently being revised, will be accessible on the national PPP website, www.ppp.gov.ie and the Departments website.

I/PPP Unit Department of Environment, Heritage and Local Government January 2004.

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Alternative Energy Projects

Index of Projects
South Tipperary County Council Cork City Council Kerry County Council 1 (Hydro-electric) Kerry County Council 2 (Wind power) Kerry County Council 3 (Landfill) Kerry County Council 4 (Hydro-electric 2) Donegal County Council Appendix I General Lessons Appendix II Additional Funding Sources

Page
2 4 5

6 6

7 8 9

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South Tipperary County Council Feasibility study for the potential of a CHP PPP project for Council offices and leisure facilities. Amount requested 33,013 Amount drawn down to date 0 Contact name: Contact number: Denis Holland 052 34455

DBOF option provided the worst annual savings. The Council, through IEM, applied to Sustainable Energy Ireland (SEI) for capital funding. SEI granted 50% funding in May 2003, on the proviso that the project takes on a unique and/or promotional aspect in regard to sustainable energy. In order to fulfil this the project will now have a live reporting system that is accessible to the public. This can be viewed on the Councils website (www.southtippcoco.ie) once the project goes live. However, the project experienced a delay of about 2-3 months due to objections by ESB networks. They felt that it would not be possible to connect the Council headquarters from the swimming pool as this would entail traversing a car park, which they deemed a public road. ESB networks were very adamant on the matter stating that Grid Code (see www.cer.ie) did not allow the crossing of a public road and the dispute had to be referred to the Commission for Energy Regulation (CER). The CER adjudged the car park not to be a public road and gave permission for the project to go ahead. The Council completed their negotiations with Edina in September and the plant is currently being built in Austria with a delivery date of 20 January. It is expected that it should be fully commissioned by the end of February. Lessons learnt on this project.

Progress to date South Tipperary County Councils remit has extended over the years and now includes, in partnership with Clonmel Borough Council, the provision of swimming facilities in Clonmel. The Council also has responsibility for its headquarters, museum, library and other amenities. These facilities are located centrally in the town and are adjacent to each other. In order to reduce energy costs and CO2 emissions the Council decided to implement a Combined Heat and Power (CHP) plant on the site. The preliminary study by Irish Energy Management Ltd (IEM), at a cost of 2,540 concluded that the relatively high capital costs coupled with low annual revenues made the project unviable at that stage. However, changes brought about by the Electricity Amendment Act, 2001 prompted a revision of this thinking and IEM proceeded with a full feasibility study on 5 November 2001. Expressions of interest were invited and 6 were received by the closing date of 29 May 2002. The Council then issued an invitation to tender; this task was completed by mid September. The feasibility study was presented on 7 March 2003 and it found that a DB basis with a separate O&M contract was the most economical option for this project. It provided the highest annual savings and best met the needs of the project. The

Funding An important lesson to be learnt from this project was the Councils awareness of additional means of funding. The 50% grant received from SEI was crucial in ensuring the viability of this particular project with side benefit of promoting the use of such technology to the general public.

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Network issues A problem that could arise in future energy PPPs is that of electricity networks. In this case, ESB networks were opposed to the progress of this project. This difficulty may arise again in regard to similar projects, i.e. those that are not self contained. While the CER did support Tipperary County Councils case in this instance, delays such as this should be either a) factored into a project or b) ESB networks (soon to be EirGrid) should be approached in the preliminary stages of the project and CERs Grid Code should be consulted. On inspection of the Grid Code the proviso in regard to traversing a public roadway could not be found.

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Cork City Council Start up phase for the installation of a PPP managed CHP plant at the Leisureworld complex, Bishopstown, Cork. Amount requested 25,234 Amount drawn down to date 25,234 (September 2001) Contact name: Michael OBrien Contact number: 021 4924119 Progress to date Cork City Council identified the potential for a CHP plant at the Leisureworld complex through an EC funded programme, SAVE II. They applied for start up funding under the Local Authority PPP fund to conduct a feasibility study on the possibility of installing a CHP unit under a PPP arrangement. IEM were appointed as clients representatives. In mid January 2001 the design and engineering phase was finished. Invitations to tender were sought from interested parties and tenders were made on a DBO and DBOF basis. The bid made by Edina, on a DBO basis, provided the highest annual saving. Added to this the DBOF bid, made by another bidder, proposed the use of a 167kw engine. While savings were generated using this method the engine was oversized for the needs of Leisureworld both now and in the future. Edina was selected to carry out the project and contracts were signed at the end of May 2002. Two contracts were involved, a) for the capital purchase of the unit and, b) for the operation and maintenance of the plant. On 11 June 2002 the CHP generator was delivered. However, work was stalled due to payment arrangements for the engine. This was due to an ownership issue. Edina was purchasing the engine from a third party and wanted Cork City Council to provide the finance for this. However, in this scenario Edina would still retain ownership of the engine. The Council

were concerned that if Edina were to go out of business then the Council would have paid for the engine but would not have any rights to ownership. This was resolved by Edina paying the supplier up front for the engine. The Council paid part of the cost upon delivery (21 October 2002) and the remainder when installation was complete (10 March 2003). In addition to this, the Council also sought and gained a guarantee from the manufacturer then in the event of Edina going out of business then ownership of the engine would revert to Cork City Council. The plant was commissioned on 23 May 2003 and is working well. IEM are currently compiling a 3 month report on the running of the plant, which will be forwarded to this Department when finalised. Lessons learnt on this project Council Acceptance The main problem this project encountered, prior to undertaking the study, was the acceptance of the Council of the involvement of a private partner. The experience of the project has been largely successful and should encourage other Local Authorities of the benefits of PPP projects. Michael OBrien, the project engineer, commented that, this project was the first PPP project that many staff of Cork Corporation were involved in. This was the beginning of a learning process for legal, technical and administrative staff. The process proved a valuable experience and highlighted the advantages and disadvantages of PPPs as well as procedures and considerations that have been involved. Contract Issues It was Cork City Councils experience that the contract process for a small project was as equally complicated as that for a large one. The Council felt it was very important to secure their investment and protect against unnecessary financial losses. 41

Kerry County Council 1 Feasibility study for two hydroelectric schemes in Co. Kerry. Amount requested 50,790 Amount drawn down to date 26,200 (May 2002). The balance of 24,588 has been decommitted. Contact name: Willie Moynihan Contact number: 066 7183576 Progress to date Kerry County Council submitted an application under the Local Authorities Seed Fund to carry out a feasibility study into two hydro electric schemes, Torc and Curraheen. Torc catchment is in Killarney National Park and Curraheen catchment is 5 kilometres west of Tralee. Fehily, Timony & Co. was commissioned to undertake the study. The report was finalised on 5 May 2002. It concluded that while both were technically feasible neither the Torc or Curraheen projects were economically feasible as the payback periods exceeded 25 years. In addition to this there would have been planning difficulties and construction constraints in regard to Torc as its catchment area is in a National Park. Lessons learnt on this project Preliminary Work Before commissioning consultants to carry out a feasibility study, it is advisable that the local authorities perform a certain amount of preliminary work and stakeholder consultation. In this case initial consultation with the Councils own planning office would have highlighted the planning difficulties and construction constraints in regard to Torc. This may have reduced the cost of the feasibility study.

Kerry County Council 2 Start-up phase for installation of wind farm at a landfill site in the Stack Mountain, Co. Kerry. Amount requested 12,697 Amount Spent to date 0, all funding has been decommitted. Progress to date Fehily, Timony & Co. was commissioned to undertake the study. However, there was unrest in the community about the landfill site itself. Due to this loss of public support the Council decided not to proceed on 9 May 2002. The Council and community have resolved the dispute in regard to the landfill site and relations between them are now good. In addition to this Kerry County Council have since granted planning permission for a windfarm on a site adjacent to the landfill. In light of this the Council hope to restart the project in the future. Lessons learnt on this project Preliminary Work Previous to the feasibility study stage, it is prudent for local authorities to perform a certain amount of preliminary work and stakeholder consultation. In this case the Council abandoned the project due to local opposition. While the grant was decommitted in this instance and there was no financial loss, the Council spent considerable time on this project that could have been used for seeking out alternative sites.

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Kerry County Council 3 Feasibility study to examine the economic and technical merits of a scheme to extract landfill gas for conversion to electricity at Muingnaminnane landfill site, on a PPP basis. Amount requested 32,000 Amount drawn down to date 0 Progress to date Fehily, Timony & Co. was commissioned to undertake the study. The draft report was presented in June 2003.The landfill site located at Muingnaminnane, 10 km north east of Tralee, was commissioned in 1994. It has a capacity of 600,000 tonnes. On the current disposal rate this capacity is expected to be reached by 2008. The decomposing process produces methane, which is almost 20 times more effective as carbon dioxide over a 100 year period. To ameliorate the greenhouse effect, the methane is being free burned on the site. The site is capable of producing 600m3 of methane per hour. This is sufficient to produce 800 kWh of electricity. The council has already been awarded a Power Purchase Agreement (PPA) under AER V (please see Appendix II, p.12). However, financial analysis concluded that with an IRR of 10% and a payback period of 5 years that it would be attractive to the private sector. The County Council submitted a tender for AER VI. This competition has more favourable terms than AER V in that it provides for full indexation. The consultant concluded that, under AER VI, the project is viable as a DBOF PPP. The project is currently on the reserve list for AER VI. Lessons learnt on this project Landfill gas to power projects still require subsidies for viability. This is the case for

many renewable energy schemes, with the exception of onshore wind power. As such, additional funding will be essential to these projects, for the near future at least. Thus, before such a development reaches the feasibility stage extra funding will need to be sourced to make it worthwhile. In this case Kerry County Council did seek such funding through the AER competitions and, if awarded, this should make the project viable. Kerry County Council 4 Feasibility study to examine the economic and technical feasibility of developing the Hags Glen hydro-electric and water supply scheme on a PPP basis. Preliminary studies have indicated that Hags Glen has a potential to deliver a 1 MW output. It is suggested that the project will piggyback on the water supply scheme; this should make the supply scheme self-financing. Amount requested 135,000 Amount drawn down to date 0 Progress to date Initially the Council wanted to use inhouse expertise, however, the funding was available only if outside consultants were used. Fehily, Timony & Co. was commissioned to undertake the study in March 2003. The Council decided to split the study into two parts, a feasibility study, concerning economic and technical issues, and a design/build report. The consultants presented a preliminary report to the Council Senior Management on 22 December 2003. The finalised report is expected by the end of January 2004.

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Donegal County Council The development of a wind farm energy generation plant. Amount requested 69,836 Amount Spent to date 65,604 Contact name: Contact number: Roger Adair 074 9172497

The Councils senior management are now considering their options on the project. Lessons learnt on this project Preliminary Work Before commissioning consultants to carry out a feasibility study, it is advisable that the local authorities perform a certain amount of preliminary work and stakeholder consultation. This would aid in; determining whether a study was necessary identifying any barriers, which would prevent the project proceeding, e.g. legislative, stakeholder, environmental, etc. reducing consultancy costs. Public acceptance Another area worthy of comment is the acceptance of the project by residents of the area. Over the past 8 to 10 years windfarm projects have experienced considerable opposition. This indicates that people do not have an objection to windfarms per se but rather their proximity and scale. Such considerations are very important for future projects in the whole renewable energy area. Promotion The economic viability of the project is encouraging. As Prof. John Fitzgeralds report of July 2000, Strategy for Intensifying Wind Energy Deployment, points out, the Irish coastline is exposed to one of the most vigorous wind climates in the world with an accessible resource estimated to be 2190 MW with a cost limit of 3.81 cent/kWh (for onshore). The desire and impetus of a local authority to harness this resource is valuable in its persuasive impact on other authorities to take on such projects.

Progress to date The project was approved for funding in June, 2000. A consortium consisting of Du Quesne Environmental, Natural Power, Goodbody Economic Consultants and Philip Lee Solicitors were commissioned to undertake the feasibility study. The report considered the environmental, social and economic viability of a proposed windfarm at Meenalaban. The study was finalised on 15 August 2002 and concluded that the project ; 1. Was unlikely to have a negative impact on the environment. 2. Should not attract local opposition. 3. Be economically viable and bankable. The Environmental Impact Study (EIS) found little risk of environmental damage by situating the project at its potential site. The study also confirmed the economic viability of the project. The Internal Rate of Return (IRR) for the DBOF option was in excess of 11% and the payback period was 9.1 years. The conservative estimation of the turbine output and the price achieved for electricity generated points to the potential for a higher IRR and a shorter payback period. Currently the Council are in the process of contacting Coillte, the site owners, in regard to securing permission to locate the farm on their property. Coillte have not responded to Councils approaches.

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Appendix I General Lesson

While each project is unique in itself, with its own set of circumstances common recommendations can be drawn from these experiences and applied to PPP projects in general. Planning Permission Getting planning permission for energy renewal projects has proven to be a difficult experience in this country. Many residents object to, what they see as, unsightly marks on the landscape, e.g. wind turbines. Therefore, it is important to gauge, and perhaps engender, public support for such projects. Not doing so could risk the loss of the project further down the line. Preliminary Work Before commissioning consultants to carry out a feasibility study, it is advisable that the local authorities perform a certain amount of preliminary work and stakeholder consultation. This would aid in; determining whether a study was necessary. Identifying any barriers that would prevent the project proceeding, e.g. legislative, stakeholder, environmental, planning difficulties and construction constraints. reducing consultancy costs. Funding An important lesson to be learnt from the projects is the need to be aware of additional means of funding. The SEI grant was crucial to the Tipperary CHP project and, if awarded, AER VI will be essential to the Kerry landfill gas project. Public acceptance Another area worthy of comment is the acceptance of the Meenalaban project by residents of the area. Over the past 8 to 10 years windfarm projects have experienced considerable opposition. This indicates that people do not have an objection to windfarms per se but rather

their proximity and scale. Such considerations are very important for future projects in the whole renewable energy area. Network issues A problem that could arise in future energy PPPs is that of electricity networks. In the South Tipperary case, ESB networks were opposed to the progress of this project. This difficulty may arise again in regard to similar projects, i.e. those that are not self contained. While the CER did support South Tipperary County Councils case in this instance, delays such as this should be either a) factored into a project or b) ESB networks (soon to be EirGrid) should be approached in the preliminary stages of the project and CERs Grid Code should be consulted. On inspection of the Grid Code the proviso in regard to traversing a public roadway could not be found. (www.cer.ie) Contract Issues The contract process for a small project was as equally complicated as that for a large one. Capital investments should be secured against possible losses. Promotion The desire and impetus of local authorities to harness this renewable resource is valuable in its persuasive impact on other authorities to take on such projects. The Leisureworld CHP has been installed and is working while the Tipperary plant is expected to be installed by February 2004. Due to the provisions of the SEI grant for Tipperary, this will be a demonstration project and so it is quite important in promotion of renewable energy usage to other LAs. In addition, it will highlight what can be achieved using the PPP approach. 45

Appendix II Additional Funding Sources The Renewable Energy (RE) Research, Development & Demonstration (RD&D) Programme This is administered by Sustainable Energy Ireland under the Economic & Social Infrastructure Operational Programme of the National Development Plan. The full programme background, objectives, scope, priorities and programme management are detailed in the Renewable Energy RD&D Programme Strategy. The complete evaluation process and associated forms are downloadable from the Research and Development section of the SEI website: www.sei.ie. Costs should be realistic and within the norms of the participating organisation(s). A criterion of value for money will apply and an unrealistic cost structure may diminish the acceptability of a proposal. Scope of the programme The programme is open to a wide range of proposal types including policy studies, field research, feasibility studies and technology RD&D - in the following topic areas: Wind Energy Biomass Solar Ocean Energy Small Hydro Ambient Heat (Heat Pumps) Geothermal Energy Fuel cells Hybrid or Actions Community Schemes Cross-Sector Renewable RD&D Energy Who can participate? The programme is open to proposals specifically developed in response to Calls and to proposals that have been approved by another official R&D funding agency. Eligibility to participate will vary with each category of project proposal covered by a Call. Overall, however, participation in proposals is expected from: public, private and international entities located in Ireland (including Irish subsidiaries of 46 Details of priority categories will accompany each published Call. Proposals of a significant scale are encouraged, particularly in the case of demonstration projects aimed at early market influence. Demonstration and field research projects are likely to be of up to three years duration, with typical total eligible project cost expected to range from 50,000 to 500,000. The duration of most research, feasibility and product development type R&D projects are expected to be between six months and two years. Terms & conditions of contract Eligible costs Costs directly associated with delivery of a project will be eligible for support. These may include personnel, equipment, materials, travel, certain sub-contracting and other costs. However, for demonstration projects where the renewable energy aspect is not the entire scope of the project, it is important to note that the only eligible costs are those approved based on estimates of additional costs associated with deploying the renewable energy technology. In the case of successful applicants, only eligible expenditure incurred from the date of approval of the application by the Authority will be considered for funding by the approval committee. Expenditure incurred by a company before this date is ineligible.

overseas companies) and carrying out projects in Ireland. In some circumstances, the programme may support Irish entities on work undertaken overseas, where this is necessary for the completion of the work. In exceptional cases, funding of work overseas may be supported where there is a demonstrable contribution to resolving specific Irish issues. In addition, specialist consultants and researchers in the third level education sector and research agencies/institutions are encouraged to actively participate. Collaborative projects In the interests of effective management and impact of a project, a consortium of partners may be appropriate. Collaboration is encouraged where the experience and expertise of two or more entities will bring significant added value through achievement of an output from the project that would not otherwise be possible. Participation by prospective users of the project results is particularly encouraged. In such cases the project contract will be between SEI and the relevant eligible parties or project partners, represented by one partner who shall act as project coordinator. In addition, the partners may be required to enter an agreement between themselves binding them jointly and severally to the terms of the project contract. For this reason, proposals must have the formal endorsement of all applicant partners at the time of submission. Monitoring, reporting and dissemination A condition of funding is that applicants accept that the primary purpose of the programme is to generate research, development and demonstration results with potential for exploitation in Ireland (exploitation elsewhere may follow). Project participants are required to cooperate with Sustainable Energy Ireland in providing monitoring and reporting of results being delivered by the project, and

in promoting the exploitation and dissemination of the technologies, information and other results arising. Ownership, protection and exploitation of Intellectual Property The ownership of Intellectual Property (IP) arising from certain RD&D projects will reside with the participants as per the project contract. SEI recognises that the protection of IP and the ultimate ability to exploit the results must not be prejudiced by premature publication or other disclosure. Therefore the authority will endeavour to ensure that a reasonable balance is maintained between the need to protect IP and the desire to publish, and to assist relevant project partners in managing the protection of IP with commercial potential. Application/Project co-ordinator A project proposal shall be submitted by a person, or persons, suitably qualified to undertake such a project, who shall, on acceptance of the proposal for funding, act as project co-ordinator, duly authorised by and acting on behalf of the participating eligible parties. Project contract The project contract will be a performance contract between Sustainable Energy Ireland and the relevant eligible parties, represented by the project co-ordinator. All correspondence and matters relating to the contract will be conducted solely between Sustainable Energy Ireland and the project co-ordinator. The project coordinator shall be responsible for overseeing and verifying the implementation of the contract, and for the proper distribution of support to the eligible parties responsible for project fulfilment. Acknowledgement, evaluation & approval Acknowledgement Applications will be acknowledged within five working days of receipt of hard copy. 47

Evaluation Criteria Proposals will be evaluated to determine: Technical compliance with programme requirements. Relevance to the programme objectives: o Accelerate the development and deployment in the Irish marketplace of competitive renewable energy products, processes and systems; o Provide support for solutions that enable technical and other barriers to market uptake to be overcome; o Establish, where necessary, and strengthen, where possible, a national capacity to access, develop and apply international class RD&D in a way which can best meet specific Irish needs on a continuing basis; o Facilitate and provide guidance to policy makers on the practical, regulatory, technological and market opportunities to achieve greater penetration of RE in Ireland. o Contribution to the development of an indigenous RE industry Project management capability: o Methodology of approach o Strength and balance of the team o Efficient use of resources Provision for follow-up of the RD&D project and the application or dissemination of results to contribute to programme objectives. Administrative compliance with programme requirements. Given that the general aims of the programme are to increase the deployment of RE in Ireland, applications for funding may include details of plans to publish reports, independent monitoring for demonstrations, follow up seminars, opportunities for replication or for follow-on projects etc. Technical/financial audit The basis of funding will be the actual costs or the approved estimate of the additional costs incurred, whichever is

specified in the contract. All funded projects will be subject to financial/ technical audit at the discretion of Sustainable Energy Ireland and any other competent authority. The project partners are obliged to ensure that appropriate financial, administrative and technical records are maintained. Further information Further information on the programme can be obtained either by writing to the Grants Administrator (at the address given under Section 7.1) or sending an e-mail to rerdd@sei.ie, or calling (01) 808 2097.

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Alternative Energy Competitions

Requirement

The development of renewables based electricity generating plant is achieved mainly through the administration of competitions under the Alternative Energy Requirement (AER) Programme. Prospective generators are invited to make a formal application to build, own and operate newly built plant and to supply electricity from these to the Electricity Supply Bord (ESB) under a Power Purchase Agreement (PPA) of up to fifteen years duration. Since the Programme was launched in 1995, six AER competitions have been held. The technologies supported include wind energy, small-scale hydropower, combined heat and power (CHP) and biomass (landfill gas). The sixth competition (AER VI), launched in February 2003, offered support for the first time for offshore wind energy, biomasscombined heat and power and biomassanaerobic digestion. These competitions have deliverd 240 MW of renewable energy (installed capacity) with another 560 MW in the offing. AER VI brings to a close targets set in the Governments Green Paper on Sustainable Energy. The Minister for Communications, Marine and Natural Resources, Mr. Dermot Ahern, T.D., has committed himself to a public consultation process before setting new targets and appropriate support mechanisms covering the period from 2005 to 2010. The consultation document will be launched shortly. This process will provide all interested parties an opportunity to influence the technologies which will be supported into the future and the appropriate support mechanisms

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Appendix D Procurement Procedures

This appendix is included for general and summary guidance only. The choice of which route to take lies, ultimately, with each Local Authority, and the onus is on them to correctly determine the procurement rules and procedures that are appropriate to particular projects. As such, it is imperative that they make themselves aware of the requirements of the relevant EU Procurement Directives and Departmental guidance, and refer to, inter alia, PWC Guidance Notes No.6 (Procurement Procedure Selection), No. 9 (Procurement Management), Circular IPPP 4/03 The Policy Framework for the development of Public Private Partnerships within local government and accompanying Policy Framework Document and Circular IPPP 1/04 regarding Public Procurement Directives- Revised threshold values for contracts which must be published in Official Journal of the European Communities when implementing projects. Of considerable importance also is the fact that the EU Public Procurement Directives have recently been revised. Three separate public sector Directives for works, supplies and services have been consolidated into one text. They have been adapted to modern market conditions by providing for the use of electronic means in tendering (eprocurement), providing for framework arrangements and for more flexible procedures for awarding complex contracts such as public private partnership projects (PPPs).

Selection of Contractor A number of EU Directives exist, which deal with the contract categories by which products and services are procured. These Directives, listed below, set legal obligations on all Contracting Authorities. Works Directive this category covers the full range of building and civil engineering contracts, including the supplies and services required in carrying them out. Supplies Directive this category covers the procurement of products whether financed through purchase, lease, rental or hire purchase, including the supply, delivery, installation and operation of equipment and machinery. Services Directive this category covers the provision of services including engineering, architectural and other professional services. - Amending Directive Consolidates the above three Directives into a single Directive. New or amended criteria must not be introduced in the course of the contract award procedure. If significant additional information or material is supplied to a candidate, on request or otherwise, it must be supplied to all candidates.

Where a project contains both works and service elements, choosing the correct Directive can be complicated. Generally, whichever element has the greater cost will determine that choice. Some further confusion could arise, however, in that a separate Utilities Directive allowing a more flexible approach exists, for use in certain circumstances where a Contracting Authority operates in the water, transport, communications or energy sectors.

Each category has a contract value threshold above which the relevant Directive will apply. Full details of the thresholds are set out in the Official Journal of the European Union (OJEU), they are also available on the e-tenders website and the EU procurement website http://simap.eu.int. Any contract placed by a Public Contracting Authority, if it is over the financial threshold in the relevant Directive, must be processed and awarded in accordance with the procedures of the Directive, unless it is covered by a clearly defined exception.

Where projects fall below the thresholds contained in the various Directives, National procurement rules still apply and, in any case, Contracting Authorities should refer to the Green Book on Public Procurement, issued by the Department of Finance.

The Directives allow for a number of different types of procurement procedure, after a call for competition has been advertised in the OJEU. These procurement procedures are: Open Procedure this procedure allows all interested private sector contractors to submit tenders in response to a notice in the OJEU advertising the existence of the project, Restricted Procedure any interested private sector contractor may submit a Request for Pre-qualification, but only those contractors shortlisted by the Contracting Authority based on meeting certain pre-determined qualification criteria, will be invited to submit tenders, and

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Negotiated Procedure as the restricted procedure above, but with the addition of a post tender negotiation stage. There is only a limited number of circumstances where the negotiated procedures can be use, although the procedure can more easily be applied where the Utilities Directive is used. For further information on Public Procurement access the National Public Procurement portal at www.etenders.gov.ie

In addition to the above procedures, the Amending Directive introduced a new procedure called competitive dialogue which is described as:Competitive Dialogue- is a procedure in which any economic operator may request to participate and whereby the contracting authority conducts a dialogue with the candidates admitted to that procedure, with the aim of developing one or more suitable alternatives capable of meeting its requirements, and on the basis of which the candidates chosen are invited to tender.

Competitive dialogue is a procedure introduced under Article 29 of the above Directive designed to provide more flexibility in the tendering process for more complex contracts, for example public private partnerships (PPPs). Contracting authorities must advertise their requirements and enter dialogue with interested parties, (pre-qualified on the same basis as for restricted procedure). Through the process of dialogue with a range of candidates, a contracting authority may identify arrangements or solutions that meet its requirements. Provided its intention is indicated in the contract notice or in descriptive documents supplied to candidates, a contracting authority may provide for the procedure to take place in successive stages in order to reduce the number of solutions or proposals being discussed. The reduction must be achieved by reference to the award criteria for the contract.

In conducting the dialogue, contracting authorities must ensure equality of treatment and respect for the intellectual property rights of all candidates. When satisfied about the best means of meeting its requirements, the contracting authority must specify them and invite at least three candidates to submit tenders. The most economically advantageous tender will then be selected. Aspects of tenders may be clarified or fine tuned provided that there is no distortion of competition or discrimination against any tenderer. 52

In the case of Concession contracts, the right of the private sector Contractor to exploit the asset by way of revenue generated through user charging also has a bearing on the Directive to be followed. This is because the nature of the services or risks involved does not permit prior overall pricing. Contracting Authorities should be aware that there are special rules set out in the Works Directive, in relation to the award of Concession contracts.

Required Advertisements The Classic Directives and the Utilities Directive have specific rules concerning the advertisement of contracts but there are differences between the approaches required under each Directive.

Classic Directives Broadly speaking the Classic Directives require the following advertisements to be placed in the OJEU (and provide models for such notices in the Annexes to the Directives); Prior information notice (PIN) - this notice gives brief details of the forthcoming contract notice, identifying the essential characteristics of the project and estimated value. In the case of the Works Directive, it must be sent as soon as possible after the decision approving the planning of the process. In the case of the Services and the Supplies Directives, when the total value of all services or supplies to be procured in a budgetary year is greater than the relevant threshold, then the prior information notice should be published as soon as possible after the beginning of the budgetary year. There is no requirement for a prior information notice in the case of a Concession contract. Contract notices Calls for Expressions of Interest and Requests for Qualification set out the details of the project being procured and invite prospective private sector contractors to express an interest in the project. The information supplied by the respondants allows the Contracting Authority to short list potential bidders

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for the next stage. (The process differs in the open procedure, where the notice invites tenders). Care should be taken when drafting any such notice in order to ensure that projects are described widely enough to accommodate any future changes that might be desirable, depending on the solutions offered during the tender process. Invitation to Tender this notice would only be publicly advertised where the open procedure is used. Otherwise, it is a specific invitation from the Contracting Authority to those bidders successfully short listed on the basis of the previous notices. It requests tenderers to bid against the specific detail of the contract requirements. Award notice - this notice is required to be published once a contract has been awarded and the notice gives details of the contract award. Where a prior information notice is published it allows a Contracting Authority to reduce the minimum tender periods set out in the Directives. It is important to note that, under the Classic Directives, a prior information notice is not sufficient to commence a restricted or negotiated procedure in its own right as opposed to the position under the Utilities Directive.

Utilities Directive The Utilities Directive has slightly different rules to those in the Classic Directives and the advertisements that can be placed in the OJEU are as follows; Periodic indicative notice - this is an annual notice giving estimates of the planned procurements under broad product groups. The periodic indicative notice may also be used as a call for competition but in this case it must refer specifically to the actual contract and indicate that the contract will be awarded by the restricted or negotiated procedure without the publication of a further call for competition. All interested parties responding to the periodic indicative notice must be asked to confirm their interest on the basis of the information provided on the contract, prior to the drawing up of a tender list.

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Qualification system notice - where a Contracting Authority wants to operate a system of qualifying suppliers for particular contracts, a notice must be published giving details of the qualification. The qualification criteria and rules must be made available on request to interested private sector contractors and so must be prepared in advance of the publication of the notice. A qualification system notice may also be used as a call for competition and the same rules will apply as for a periodic indicative notice.

Contract notice - this notice is used to invite interested private sector contractors for individual projects as and when they occur. The notice must specify which tender procedure (open, restricted or negotiated) is to be used.

Award notice - within two months of awarding a contract a notice giving details of the award must be published.

Other Advertisements Contracting Authorities may publish advertisements in the national and local press but these advertisements must not contain any more information than that which is published in the OJEU and cannot be published in the national or local press before the contract notice has been dispatched to the OJEU. The Office of the Official Journal of the European Community undertakes to publish notices within 12 days of a contract notice being dispatched. If a contract notice appears in the national press between the time it was dispatched to the OJEU and its actual appearance in the OJEU, the Directives have not been breached.

Evaluation of Tenders The contract should be awarded to the most economically advantageous tender having regard to technical merit, price, running costs, period for completion, etc. Public Private Partnership contracts also should be examined in relation to their potential to achieve Value for Money for the Contracting Authority. In this sector, consideration should also be given as to how well the solution integrates with the results of any energy audit carried out by the authority, and what the possible environmental impacts might be.

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Technical merit should be assessed, among other things, on the following criteria; whether the process proposed is proven in similar circumstances, the reliability of both the process and equipment offered, the flexibility of the process offered, architectural design of the works and landscape plan, method statements for construction and operation and maintenance of the facility, project quality control procedures, and the extent and quality of process performance guarantees etc.

Running costs should include both operating and maintenance costs over the contract term. In this regard the tender documents should advise the tenderers of the criteria that will be used to evaluate the whole life costs of their bids, in relation to the proposed process.

The period for completion might be taken into consideration in certain circumstances where early completion has an economic benefit to the contracting authority.

Award of Contract The award of the contract should be subject to the approval of the relevant Minister and subject to the usual requirements with regard to a performance bond, insurance, tax clearance, professional indemnity insurance, other insurances, collateral warranties etc.

Important Note:

The Amending and Consolidated Directive should also be examined under the headings of Advertisements, Notices, Evaluation of Tenders and Award of Contracts.

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