John Simpson: Northern Ireland Electricity market avoids Brexit trip wires
The all-island arrangements for the management of the supply, security and reliability of electricity will not become tangled in the Brexit negotiations. That working assumption has been adopted by both the Northern Ireland Utility Regulator and the Irish Commission for Energy Services. In turn that working arrangement has been endorsed at the level of national governments.
It will allow a sensible solution to what could be a damaging outcome if the electricity systems in Northern Ireland, also linking to the GB grid, had to unscramble the developing (but still unfinished) harmonisation with the Irish systems.
The official agencies have been busy outlining the steps in the next 12 months to radically overhaul the electricity arrangements to improve the operating results from a more elaborate single electricity market across the island.
For clarity, the emphasis is on the operation of wholesale transactions within a single electricity market. That broad scenario summarises the general thrust of the nearly finalised new wholesale marketing arrangements. Firm market trials have been timetabled to start on December 1.
Shortly, the decision makers behind the reformed single electricity market will begin to collect practical evidence to test the working arrangements, including the newly amended financial arrangements, to ensure that (as far as can be anticipated) when the system moves to real time and real market forces all parts of the electricity system have acceptable outcomes, including customers who continue to have secure efficient and reliable supplies.
As with all major alterations to a complex highly integrated supply system, there will inevitably be some unexpected problems and late in 2018 there will be moments of anxiety as real money is paid under the new mechanisms.
The new systems, described by the authorities as the I-SEM (integrated single electricity market), are more complex and ambitious than the existing SEM which has been functioning generally satisfactorily.
The regulators have built up to this change-over relying on their professional advisors that the new system, allowing day-ahead generator contracts and Inter-day options, will benefit all customers. In answers that may lack sufficient transparency for electricity users to gain full reassurance, the regulators are asking that customers and observers of the new market arrangements should accept that, to the best of their ability, the regulators have tested and proved the merits of the changes.
The merits of an all-island wholesale electricity market ought not to be in doubt.
However, it would be more reassuring if the regulators had a more transparent communications policy. All the main commercial organisations taking part in the new I-SEM (with one exception) seem to have accepted the new commercial arrangements. The one exception, registered in the Republic of Ireland, has questioned certain I-SEM licence modifications which, even if challenged successfully, should not delay the delivery of the I-SEM.
However, the absence of a well-informed public debate about the new arrangements is unfortunate. There are two sources of surprise in the publicly unchallenged evolution of new arrangements for electricity supplies on this island. One is the degree to which the regulators have introduced the new arrangements with minimal debate. Electricity users have become very reliant on top-down regulatory advice: is it that reliable? Second, there is a surprising lack of public comment from the main commercial electricity businesses. The main businesses have been trading remarkably profitably. If there is quiet acceptance of the change, what conclusion should electricity customers reach?