'Let's not waste opportunities which 2018 will present to the energy sector in the province'
This year is set to be a year of considerable change for the Northern Ireland energy industry, with big decisions required at both policy and project level.
Hopefully a decision on building the North-South Interconnector will be announced. Progress on obtaining consent has been slow and has highlighted the need for a better mechanism around the development of large infrastructure projects.
The commencement date for the long-heralded integrated single electricity market (I-SEM) will be upon us on May 23. The new framework, designed to integrate Ireland with European markets, aims to maintain a downward pressure on prices for consumers as well as enhancing security of supply.
However, compared to the incumbent arrangements I-SEM is a more active market with greater opportunity and risk due to being able to trade power in different time periods. This is particularly acute for wind-based generators, who will become balance responsible, ie forecast of their projected output will have to be matched with supply.
As the market becomes more complex, specialist expertise will be required for active trading and position management due to multiple markets and balance responsibility. This new environment may lead to some M&A activity, resulting in a more consolidated market.
In recent weeks the debate over phraseology such as close regulatory alignment or no regulatory divergence has loomed large. The direction of travel now set by Phase I of the negotiations is towards a softer Brexit. However, most energy observers recognised that we always needed some form of accommodation, indeed it was identified as a key head within the NI Executive letter to the Prime Minister in June 2016.
The investment in the infrastructure that has delivered these integrated networks makes it a practical non-starter to divest ourselves from the European system. If Brexit saw us moving away from this pan-continental network, we couldn't benefit from those efficiencies and costs would rise.
In 2018 we will also see further progress with the expansion of our natural gas network in the east Down corridor and west of the province. Natural gas has been one of Northern Ireland's most important economic developments over the last two decades, giving businesses and consumers greater choice in terms of price and security of supply.
In renewables, we are likely to hit our long-heralded target of 40% of electricity generation two years ahead of schedule. However the current development support mechanism (ROCs) is closing with no sign of a replacement, be it standalone, partnering with Republic's REFIT successor regime, or Great Britain's CfDs.
Energy is an area where investment operates on a long lead time, and businesses need clarity on policymakers' direction of travel. Flagship strategies require considerable consultation and debate between government, energy stakeholders, business and consumer representatives. It is an excellent opportunity to set a new blueprint for energy in Northern Ireland, but the work in drawing it up needs to start now.
Whatever the circumstances in Stormont, we should not lose the opportunity of 2018.
- Richard Murphy is energy partner at Belfast-based law firm Pinsent Masons