Kilroot power station makes bid for its survival
On April 4, SONI and Eirgrid, the two transmission system operators for the all-Ireland SEM (single electricity market), published the provisional results of the first T-4 Capacity Auction for the supply of electricity for the period beginning 2022-23. The provisional results are now for consideration and possible endorsement by the all-Ireland SEMC (single electricity market committee).
The SEMC is established with representatives of the electricity regulators, north and south, together with two independent external members. It acts as a professionally competent body which, through the regulatory institutions, issues decision papers usually in the technical language of the electricity generators and suppliers.
The public, as consumers of energy, have a strong interest in this announcement about possible sources of electricity in (and for) Northern Ireland in the medium term from 2022. What are the implications for sources of supply? What are the implications for carbon emissions? What are the assumptions on inter-connection north-south and through the Moyle interconnector to Scotland? Is the result of the capacity auction an indication of dearer or cheaper wholesale prices? What relationship is there between decisions on capacity provision and the pending review of Government policy?
These questions pose issues which are more extensive than the simple quantitative results of a capacity auction. They merit a review on an all-island basis as well as within the remit of the devolved local administration.
The provisional results of the capacity auction are notable for a number of reasons.
Because of transmission constraints, the electricity grid in Northern Ireland will still be planned with location constraints. The interconnection of the grid with Scotland (the Moyle Interconnector) and the rest of Ireland (cross-border capacity) will still not be capable of allowing adequate (at peak times) inward electricity flows to supplement a possibly inadequate local generation capacity.
Kilroot power station is expected to get new contracts even though the impending emissions limits on the older plants at Kilroot are a cause for long-term concern. A misdirected tentative conclusion in 2017-18 suggested that the older, large units should not be contracted to supply power, although it was later reversed.
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Kilroot has currently a contract from 2018-19 and has now quoted acceptable wholesale prices to be awarded contracts for the period from 2022.
The expected incentive effect offered by the T-4 contracts has not led to significant new competitive winning bids for electricity-generating capacity to be available in Northern Ireland.
There were bids to offer 461mw of new capacity which are expected to be unsuccessful. This includes bids by Evermore Energy which has launched plans to build a new 410mw capacity plant in Belfast, and Coolkeeragh, which has plans for an additional 48mw.
A feature of the auction has been a much higher rate of success for contracts from new providers south of the border.
NI-based offers were successful for contracts only amounting to 14mw. New plants south of the border may win capacity contracts for 696mw.
That commercial difference makes the imbalance in supply and demand, north and south, slightly worse until the all-island grid is improved.
The auction created a clearing price in Northern Ireland of £43,030 per mw per annum. This is nearly 6% higher than the clearing price in T-1 in 2018.
The forward clearing price is understood to be set in cash terms, with no provision for any inflation adjustment.
This may prove to be an outcome that places a strain on the willingness of the generators to stand by contracts that, if inflation in generation costs exceeds 2% pa, may become loss-making.
Although the auction has recommended a clearing price in both sterling and euro, there seems to be no adjustment arrangement if the sterling-euro relationship appreciates or depreciates.
The SEMC is overseeing a shift to a more modern electricity contacting system. It is an important development for all electricity consumers. Although there are teething problems, they are all fixable.