Key message on future of electricity supply on island is not being communicated
At the end of May next year, the electricity market across the island of Ireland will undergo a major organisational change. The present system, usually described as a SEM (single electricity market) will begin to operate with dramatically changed requirements and convert to a new I-SEM (integrated single electricity market).
The change places very different organisational requirements on electricity generators, the operator of the transmission systems and also in the commercial motivation of electricity suppliers.
Design of the new arrangement has been under way for about five years and there has been a steep learning curve linked to a highly technical trail of paperwork, conferences and official co-operation between the Utility Regulators and government departments, north and south.
The arrival of the I-SEM can be commended. The new systems will be more efficient. It will bring the wholesale electricity market on this island into line with an EU initiative which should bring operational advantages from better inter-relationships with more co-ordinated Europe-wide systems.
The full introduction of the I-SEM will be an achievement. There are still operational details to test and refine, but the senior planners are showing signs of confidence. Of course, there will be unexpected problems but the senior regulatory staff have now committed to a firm launch date.
Alongside the complex planning for the change, one caveat should be made. The organisation of the changes is the responsibility of a special single market electricity committee and that SEMC has been slow to devise a communications strategy to link with the wider group of its stakeholders.
The SEMC has published many technical papers as the project has evolved but all too rarely has it made any effort to address the wider interest groups.
This deficiency has been registered several times with the Utility Regulator but to no immediate avail.
The performance of the I-SEM will be enhanced through a simple wholesale price mechanism enabling the System Operator in NI (SONI) to better schedule electricity capacity to meet variations in demand.
The current SEM schedules take electricity from generators on a formula which means that the cheapest generator creating electricity at a price to meet market demand sets a baseline price for the system.
The new I-SEM system adds to the operational flexibility of the electricity market by adding to the variables a 'day ahead' market, an 'intra-day' market and a balancing market.
This adds a more complex series of trading questions, particularly for generators. Alongside the daily trading features, there will be a radically respecified mechanism to buy in an adequate assurance of available capacity where generators bid within a time period to be available to play into the market place.
In a further elaboration of the scope for market changes, the I-SEM introduces forward markets in electricity contracts and the use of financial transmission rights which allow hedging of cross-border prices using interconnector facilities.
For electricity consumers, with specific demand conditions, there may be potential interest in the way in which the new I-SEM opens the door to a wider range of contract types and prices. To date there is little evidence of how quickly and to what extent new market opportunities will evolve. Electricity suppliers will now be reassessing their marketing options.
The success of the I-SEM still depends on the technical improvements in electricity supply across Ireland. The long delayed North-South interconnector is critically needed. The Moyle interconnector must be repaired to full capacity. Then, in due course, some clearer thinking on how to integrate adequately with the grid in Britain awaits consideration.
I-SEM is now nearly ready ahead of some remaining technical specifications. It now needs to be marketed and explained to a wider audience.