Key Contacts: Niall Donnelly – Partner | Max Bail – Associate
The European Union’s Net Zero Industry Act (NZIA), adopted in 2024, marks a pivotal shift in the bloc’s approach to industrial policy and climate action. As part of the EU Green Industrial Plan, the NZIA is designed to bolster the EU’s clean technology manufacturing base and accelerate the transition to net zero emissions by 2050. Amongst a series of measures, the NZIA requires Member States to incorporate non-price criteria when selecting successful projects in renewable energy auctions.
Current geopolitical uncertainty has brought the energy trilemma of security, decarbonisation and affordability to the forefront in most Member States. For Ireland, which has set ambitious targets to generate 80% of its electricity from renewables by 2030, the NZIA will have far-reaching implications for how renewable energy projects are selected, financed, and delivered through the Renewable Electricity Support Scheme (RESS) and any successor schemes.
These implications should be considered in the context of the overall objectives of the NZIA and Ireland’s climate ambitions of delivering 9 GW of onshore wind, 8 GW of solar and 5 GW of offshore wind by 2030 and reaching net zero by no later than 2050.
Overview of the Net Zero Industry Act
The NZIA is a cornerstone of the EU’s Green Deal Industrial Plan. Its primary objectives are to:
- Ensure that at least 40% of the EU’s annual deployment needs for key net-zero technologies are met by domestic manufacturing by 2030. Net-zero technologies include solar, onshore wind and offshore renewables and battery and energy storage.
- Streamline permitting and regulatory processes for strategic net-zero projects.
- Strengthen the resilience and sustainability of clean energy supply chains.
- Foster innovation and the uptake of advanced technologies.
A key mechanism for achieving these goals is the reform of auction systems for renewable energy. The NZIA requires that, for auctions that take place after 30 December 2025, at least 30% of the annual volume of renewable energy auctions (or a minimum of 6 GW per Member State) must include non-price criteria related to sustainability, supply chain resilience, and innovation.
Ireland’s Renewable Energy Auctions: The RESS Framework
Ireland’s RESS is the primary mechanism for supporting new renewable electricity projects. Since its launch in 2020, RESS has used competitive auctions to allocate support in the form of two way contracts for difference (CfDs), to wind, solar, and other renewable projects. The scheme has been influential in driving down costs and increasing renewable capacity, with successive auctions attracting strong interest from domestic and international developers. To date, RESS auctions have been largely price-based, with limited consideration of non-price factors such as local content, environmental impact, or supply chain diversity. The NZIA will require a significant recalibration of this approach at a time when a greater proportion of renewable capacity needs to be delivered rapidly with a focus on reducing energy costs.
Key NZIA provisions affecting Irish Renewable Energy auctions
Non-price criteria will be introduced in the pre-qualification and award criteria phases.
Pre-qualification: Member States will include responsible business conduct, cyber and data security, and the ability to deliver the project fully and on time as non-price criteria to be met for bidders to participate in renewable auctions. To this end, the draft Implementation Regulation for the NZIA expands on these elements and requires that, amongst other things, bidders:
- meet the European Sustainability Reporting Standards;
- provide a cybersecurity plan and demonstrate measures to protect the renewable energy installation’s network and information systems; and
- prove their financial capability to complete the project, such as requirements on minimum net worth or long-term debt ratings.
These conditions can either be a requirement to be complied with prior to application, or as a requirement that needs to be complied with after the project is awarded with support.
Award criteria: Member States will also introduce award criteria to assess sustainability and resilience contributions. These criteria include:
- Supply Chain Resilience: Projects must demonstrate reduced reliance on non-EU suppliers, particularly for critical components like solar panels, wind components, and batteries where the EU is reliant on more than 50% imports from such suppliers. This is intended to mitigate risks associated with geopolitical tensions and supply disruptions.
- Sustainability: Bidders may be incentivised to exceed baseline environmental standards, such as using low-carbon materials, contributing towards recycling, biodiversity and innovation, minimising lifecycle emissions, and ensuring responsible sourcing of raw materials.
- Innovation and Integration: Projects that integrate advanced technologies and/or enhance energy system integration may receive additional weighting.
Future RESS auctions will need to create new scoring systems that include these non-price criteria. Member States will assign to each of the sustainability and resilience contribution criteria a minimum weight of 5% and a combined weight of between 15% and 30% of the award criteria. Subject to the terms of the particular auction, bidders could potentially be re-ranked or receive additional marks depending on their scoring under the non-price criteria.
Member States may exempt auctions from these rules if compliance would cause an disproportionate increase in costs, noting that increases over 15% are presumed to be disproportionate.
Implications for Ireland’s Renewable Energy Sector
This use of non-price criteria in auctions could help develop a renewable energy sector which delivers long term value for society. For example, the requirement for local content and supply chain resilience could stimulate investment in Irish and European manufacturing, creating new opportunities for SMEs and supporting regional economic development. While this could increase upfront costs, it may reduce exposure to global supply chain shocks. By rewarding projects that deploy innovative solutions, NZIA can also help position the EU at the forefront of emerging clean energy technologies.
Despite these opportunities, the implementation of non-price criteria will not be without challenges. These challenges may undermine the chances of achieving Irish and European 2030 climate targets. We consider some of these below.
Higher costs: While non-price criteria are intended to deliver broader societal and environmental value, they often require developers to make significant investments in local supply chains or adopt innovative practices, which can drive up the overall cost of renewable energy projects in the region of 10-20%. This is particularly challenging in markets where the domestic supply chain is not yet mature or competitive, making it costly and sometimes impractical to mandate local content or other non-price requirements. The issue is particularly relevant in Ireland where high connection costs, property rates and complex consenting processes already contribute towards high project costs. The State will need to carefully assess the impact of the non-price criteria on bid prices, including on the setting of any price cap in an auction. The State should also consider if the additional PSO monies would be better used for other infrastructure schemes, such as a route to market for energy storage or funding of grid infrastructure.
Regulatory complexity: Applying non-price criteria also adds complexity to the auction process. This may undermine investment certainty and ultimately result in undersubscription. This would be an unfortunate outcome when significant progress has been made to re-disk the RESS terms and conditions and increase participation in auctions.
Market concentration: Smaller developers may struggle to compete if compliance costs are high, potentially leading to greater market concentration.
How can the State mitigate these challenges?
Given these challenges, there are a number of measures that the State should take into account when designing non-price criteria under future RESS schemes. These include:
Transparency and objectivity: It will be crucial for the State to define a transparent, objective and non-discriminatory methodology to assess bids against the selected non-price criteria, in particular through a quantitative assessment of the criteria based on a scoring method set up and published in advance of the bidding process. Non-price award criteria which are too general, incoherent or too broad should be avoided. Otherwise, there is a risk that projects will end up in prolonged litigation. It is crucial that the State engages with the industry in designing the terms and conditions for future versions of RESS.
Competing policy objectives: Renewable energy auctions need to remain competitive and timely. Including too many policy objectives may undermine the pace of deployment of renewable energy projects and risk cost effective delivery of projects. To the extent that policy objectives can be achieved through other European or domestic legislative measures, then that should be pursued. For example through EU cyber security legislation and/or supply chain transparency reporting.
Accountability: Non-price criteria may give rise to a risk of bidders making promises that they ultimately can’t stand over. It is important that mechanisms are in place to hold bidders to account for the commitments they make, with appropriate remedies/consequences to address defaults.
Resilience: The argument that relying on supply chains outside the EU poses unacceptable risks is not always substantiated. While concentration of supply chains in specific regions, such as the dominance of Chinese manufacturers in solar and wind components, may introduce vulnerabilities to geopolitical tensions and supply disruptions, it also enables economies of scale and cost efficiencies that have been crucial in driving down renewable energy prices globally. The real risk lies in over-concentration, not necessarily in the mere fact that supply chains are international. Diversification, rather than strict localisation, may offer a more balanced approach to resilience without unduly inflating costs.
Flexibility: In assessing resilience requirements, it is also important that any auction design recognises the differences between various net-zero technologies and the particular features of the country’s energy system. For example wind and solar differ in terms of their supply chains, cost structures and development timeframes. There is also a risk that the use of non-price criteria leads to an increase in additional technologies/systems being required which increases overall costs but at the expense of what is actually required in the particular country.
Conclusion
The NZIA represents a significant shift in how renewable energy projects are procured and supported across Europe. The NZIA offers both challenges and opportunities for Ireland. By embedding sustainability, resilience, and innovation into the centre of its auction system, Ireland could not only accelerate its transition to a net-zero electricity system but also strengthen its industrial base and enhance energy security.
However, successful implementation will require careful auction design, proactive engagement with industry stakeholders, and investment in local supply chains and innovation in EU Member States. This will take time to establish. It will be crucial for the State to thoroughly interrogate whether any higher costs associated with non-price criteria are justified in all cases, especially when they may slow down deployment or make projects less economically viable. Policymakers must carefully weigh the benefits of non-price criteria against their impact on project affordability and the pace of the energy transition, and ensure the terms and conditions contain sufficient transparency and flexibility in this respect. Otherwise there is a risk of undermining the objective of rapid, efficient and sustainable deployment of renewable energy in the EU.
