Developments in the Island Electricity Market
The Integrated Single Electricity Market (I-SEM) is the name given to the proposed re-design of the wholesale electricity market covering Northern Ireland and Ireland that will come into operation from May 2018. Since its creation in 2007, the current SEM has provided the island with a stable electricity market, which has been supportive of investment. However, certain of its key characteristics do not facilitate interconnector trading in the manner anticipated by the EU.
I-SEM is being driven by the need to comply with the single European electricity market Target Model rules, which aim to harmonise trading across borders, making full use of interconnection, and in turn reduce electricity prices across Europe. It is also expected that it will improve the economic efficiency of the existing market, eventually bringing a downward pressure on prices.
In 2013 the Government Departments in Northern Ireland (the Department of Enterprise, Trade and Investment) and Ireland (the Department of Communications, Energy and Natural Resources) tasked the SEM Committee (and the Regulatory Authorities in both jurisdictions) with developing a high level design compatible with the European Target Model.
The Commission for Regulation of Utilities, Water and Energy (CRU) is the Regulatory Authority in Ireland. The Utility Regulator (Northern Ireland Authority for Utility Regulation (NIAUR)) operates in Northern Ireland.
On 17 June 2015 the SEM Committee published its Final Decision Paper on the High Level Design of the new wholesale electricity market, I-SEM. Following this a series of decisions have been taken regarding the more detailed design of the new market. New software systems and processes are also being developed to facilitate its implementation. All stakeholders continue to be consulted on the process.
Full integration of intermittent generation (such as wind) is a major and urgent challenge for the Irish market – and one probably not witnessed on a scale anywhere else. Meeting this challenge requires ‘back-up’ supplies of electricity to be available on demand via dispatchable generation, storage technologies and/or demand-side response. The European market requires a working demand-side element for the Irish market to continue to function effectively.
EAI believes the electricity industry on the island-of-Ireland faces one of its biggest challenges to date in delivering compliance with the European Target Model through the I-SEM transformation. The challenge has been further complicated through the UK’s decision to withdraw from the EU.
The key concerns of the electricity industry relate to:
- The scale and complexity of I-SEM and the availability of resources to provide for delivery in the timescale envisaged (already extended from October 2017)
- The requirement for and nature of transitionary arrangements to reduce the risk of unforeseen market disruptions occurring leading to price discontinuities
- The cost of the systems needed for I-SEM implementation
- The increased risks for operators and investors including the risks associated with the reduced transparency levels in I-SEM, and
- The impact of BREXIT.