The changing port context
As an island nation on the edge of Europe, Ireland relies heavily on the maritime transport sector. A significant 90% of Ireland’s traded goods pass through our commercial port network, highlighting the importance of a resilient and efficient industry to enable economic success.
This was reflected in the National Ports Policy (2013) which identified Tier 1 and Tier 2 ports based on throughput and their ability to lead the development of future port capacity.
Whilst port capacity and trade volumes are still as important as ever, perhaps increasingly so post-Brexit, Ireland is now looking to the ports to enable the delivery of its climate targets, through the facilitation of the development, construction and long-term operation and maintenance of offshore wind projects.
Ireland aims to achieve 80% of its electricity generation from renewable sources by 2030 with 5 GW attributable to offshore wind, and a long-term goal of reaching 37GW by 2050. With Ireland’s sea area being seven times that of its land mass, the opportunity is enormous.
However, at present, none of the Irish ports possess the required facilities and capabilities to assist in delivering this ambition. There is also a target to have 2GW of Offshore Renewable Energy (ORE) dedicated to the production of hydrogen by 2030 which creates further economic and socio-economic opportunities for the ports’ hinterland and coastal regions through the development of ‘energy hubs’ and a wider green economy.
As Part 1 of the Public Consultation for the Review of the National Ports Policy ended last week, it is timely to consider the importance of ports and the challenges that Ireland must overcome to unlock the huge renewable energy and economic opportunity for Ireland.
Kieran Collins and our Infrastructure team explore how Government can best support Irish ports below.
It is in the earlier stages of projects that Government support and joined-up thinking is needed to get these projects underway.
Funding
The current policy that ports should be freestanding commercial ventures with no state funding has served its purpose, but the level of investment required to deliver on Ireland’s ORE ambitions means that a change to policy is required.
The Irish ports do not have the revenues or balance sheets to deliver projects of this scale and the level of risk associated with the future ORE revenues makes private investment challenging, in particular in the early stages of the project lifecycle.
Funding from the Connecting Europe Facility (CEF) will play a key role in the delivery of these projects, but it won’t bridge the funding gap on its own and it is by no means guaranteed. It would be reasonable to expect that once the projects reach a certain level of maturity, the risk profile will change, and these projects will be able to attract commercial funding from the market.
It is in the earlier stages of these projects that Government support and joined-up thinking is needed to get these projects underway. Whilst the investment required in the ports is sizeable, it is modest relative to the overall ORE and green economy investment that it will enable, and the ultimate long term economic opportunity for the State.
Planning
Until recently, Ports Policy needed only to align with demand from a trade perspective (i.e. RoRo, LoLo, Liquid Bulk, Dry Bulk, and Break Bulk), however it is crucial that the revised Ports Policy also aligns with energy policy.
For the ports to be taken seriously by investors, it is critical that a pipeline of ORE development can be seen in the region through clear and reliable plans, e.g., through the provision of Designated Maritime Area Plans (DMAPs) in all key development locations to enable Offshore Renewable Electricity Support Scheme (ORESS) auctions to take place.
As with all elements of planning, this process could be subject to delays by An Bord Pleanála for both the port and ORE developments. Therefore, increased marine planning capability and capacity will be needed over the next couple of years to manage the DMAP and ORESS process.
Any update to the Ports Policy should address the need to reduce delays by outlining clear pathways with streamlined processes for decision-making in the following areas:
- Planning and Consents
- Phase ORESS 2 auction process
- Increased Grid capacity and resilience plan (there will be key dates when the grid will need to be upgraded to receive ORE)
More efficient decision-making is needed which includes the need for flexibility in the application of the Code of Practice for the Governance of State Bodies.
Governance
More efficient decision-making is needed which includes the need for a commercial approach to be taken in the application of the Code of Practice for the Governance of State Bodies.
More flexibility on the range of acceptable investment structures would facilitate increased private investment into Irish ports, for example the establishment of SPVs for particular aspects of development (e.g., offshore hub) or approval of joint ventures with development partners or supply chain Operating Equipment Manufacturers (OEMs).
This flexibility needs to allow a range of funding structures including corporate debt and project finance structures from a variety of sources (e.g., domestic banks, international banks, infrastructure debt funds, other sources such as ISIF and EIB).
These ORE port development projects should not be seen as typical port infrastructure projects, but instead as ‘energy hubs’ which can provide great economic and socio-economic benefit to the region through the development of a green economy.
Conclusion
In summary, the consultation on the Ports Policy is a welcome signal from Government as the context in which the Irish ports are now operating is contrasting to that of 2013 when the last Ports Policy was developed.
It is critical that the Government supports Irish ports to ensure that they can deliver the required infrastructure to enable Ireland to meet its renewable energy climate targets.
Get in touch
Our Infrastructure team works with a wide range of clients in both the public and private sectors on various projects of differing size, scope and complexity.
By combining valuable insight with hands-on local experience, we can help address the challenges you face at any stage of the project life-cycle; from strategy and planning, to construction, operations and hand-back.
Contact our team below today for assistance on any aspect of your infrastructure project; we'd be delighted to hear from you.
Michele Connolly
Head of Corporate Finance and Head of Infrastructure
KPMG in Ireland
James Delahunt
Partner, Corporate Finance
KPMG in Ireland
Neil Collins
Managing Director
KPMG in Ireland
Kieran Collins
Associate Director
KPMG in Ireland
