The changes herald­ing new era for elec­tric­ity

Belfast Telegraph - Business Telegraph - - News - with John Simp­son @bel­tel_busi­ness

The elec­tric­ity mar­ket across the is­land of Ire­land will change its com­mer­cial sys­tems next Mon­day, Oc­to­ber 1. The all-is­land Sin­gle Elec­tric­ity Mar­ket that — with mi­nor stresses — has served elec­tric­ity users well will start to trade as an I-SEM: an In­te­grated Sin­gle Elec­tric­ity Mar­ket.

Cus­tomer charges will re­main as they are to­day but the re­la­tion­ships be­tween gen­er­a­tors, sup­pli­ers and the struc­ture of pay­ments be­tween them will go onto a more com­plex bid­ding and sup­ply struc­ture which gives bet­ter in­cen­tives to use ca­pac­ity more ef­fi­ciently.

In­ter-day mar­kets and day-ahead mar­kets are the new lan­guage, fol­low­ing EUwide pol­icy changes. Un­der­stand­ing the change-over is for the pro­fes­sion­als. In North­ern Ire­land the most con­spic­u­ous an­nounce­ment — awaited any day now — is the fate of the two large gen­er­a­tors at Kil­root.

The bid by AES to keep them oper­at­ing af­ter Oc­to­ber 1 was un­suc­cess­ful. AES has now sought reg­u­la­tory per­mis­sion to take them out of com­mis­sion. The longer term fu­ture of Kil­root Power Sta­tion is yet to be de­cided. Clar­ity is ex­pected in the next few days.

Jenny Pyper, Util­ity Reg­u­la­tor, ex­plains the ra­tio­nale: “We would not be in­tro­duc­ing I-SEM if it was not an op­por­tu­nity to in­tro­duce a more com­pet­i­tive mar­ket which will in­cen­tivise in­vest­ment in new gen­er­a­tors and a mar­ket which will make max­i­mum use of re­new­able sources.

“The new ‘ca­pac­ity re­mu­ner­a­tion mech­a­nism’ crys­tallises some of the ben­e­fits as con­sumers will only pay for those gen­era- tors (pro­duc­ing elec­tric­ity) which is needed to meet de­mand.

“There was a per­verse in­cen­tive in the old mar­ket where older gen­er­a­tors were in­cen­tivised, now we are only pay­ing for those that we need.”

Pend­ing the con­clu­sion of the ne­go­ti­a­tions, Jenny Pyper re­jects a claim that Kil­root is be­ing forced to close: “There is no re­quire­ment to close for the two large units at Kil­root. They have asked for dero­ga­tion from the grid code and we are work­ing through that process.

“The I-SEM is set up so that we can ask whether there are any sys­tem rea­sons why units should, or should not, close and are there any other rea­sons why they are needed on the sys­tem. We are cur­rently work­ing through a dero­ga­tion process to as­cer­tain whether any of the AES units are re­quired in the longer term man­age­ment of the sys­tem. We want to bring this process to a con­clu­sion within the next two weeks.”

Also hang­ing over the op­er­a­tion of the I-SEM is the out­come of the Brexit ne­go­ti­a­tions. I-SEM will be up and run­ning be­fore there is fi­nal clar­ity on Brexit. An agreed Brexit treaty might be ex­pected to specif­i­cally en­dorse the new elec­tric­ity ar­range­ments.

If there is no agreed Brexit treaty, then in that un­wel­come sit­u­a­tion, there would be un­cer­tainty.

“The fi­nal out­come of the Brexit deal will need to be fac­tored into op­er­a­tional de­ci­sions that gov­ern how I-SEM works. That is some­thing that we will take for­ward in co-op­er­a­tion with our part­ners, the Ir­ish Com­mis­sion for the Reg­u­la­tion of Util­i­ties.”

In a fur­ther ad­di­tion to the com­plex ques­tions on the devel­op­ment of the elec­tric­ity sec­tor, the reg­u­la­tor shows her frus­tra­tion be­cause of the de­lay in com­mis­sion­ing the now ap­proved (by the plan­ners) high ca­pac­ity cross-bor­der grid ex­ten­sion. “It re­quires a Min­is­te­rial de­ci­sion. I am con­cerned that we do not have the ben­e­fits, nor a firm timetable, for that key piece of in­fra­struc­ture which will bring ben­e­fits of about £10m each year in North­ern Ire­land.”

Jenny Pyper de­scribes her­self as a lonely reg­u­la­tor.

“My big­gest con­cern is the ab­sence of de­volved Govern­ment. Time is pass­ing with­out clear de­ci­sions on fu­ture in­vest­ment. Ev­ery­one is very fo­cused on the im­me­di­ate prob­lems like keep­ing the lights on and tar­iff in­creases. In the mean­time we do not have any def­i­nite new tar­gets for re­new­ables and in­vest­ment for the fu­ture. Ev­ery­thing is short-term and ex­pe­di­ent. While we live with un­cer­tainty, we are run­ning the risk that con­sumers will end up pay­ing more than they should.”

Not a happy sit­u­a­tion!

Util­ity Reg­u­la­tor, Jenny Pyper

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