Creating a Single Electricity Market Across Borders: Pitfalls, Constraints, and Opportunities Paul K Gorecki Economic Social Research Institute Trinity College Dublin Energy Policy Constitutional Change Scottish Constitutional Futures
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Presentation Transcript
01
Creating a Single Electricity Market Across Borders: Pitfalls, Constraints, and Opportunities Paul K Gorecki
Economic & Social Research Institute & Trinity College Dublin
Energy Policy & Constitutional Change
Scottish Constitutional Futures Forum
18 January 2013.<br>
02
Structure of Presentation What is the SEM?
What is the legal basis for the SEM?
What is the SEM governance structure?
SEM success or failure?
Why has the SEM been a success?
Constraints/challenges: asymmetric shocks and EU policy<br>
03
What is the SEM? Northern Ireland and Ireland
Wholesale electricity market
Live 1 November 2007
Market rules in Trading and Settlement Code
Mandatory pool (>10MW bid into pool)
Bid price SRMC = fuel + carbon
Generators in merit order (supply schedule)
Demand = supply is SMP
Price set ex post 4 days after dispatch<br>
04
Wholesale Electricity Price Determination in SEM<br>
05
What is the legal basis of the SEM? UK -Ireland MOU, “Single Electricity Market (SEM) Arrangements”, December 2006.
Objective: “the creation of a single, competitive, sustainable and reliable” wholesale electricity market
“The paramount importance of ensuring that the SEM is as competitive as possible … with regard to market power.”
Irish & UK legislation
Electricity Regulation (Amendment) (Single Electricity Market) Act 2007
The Electricity (Single Wholesale Market) (Northern Ireland) Order 2007<br>
06
What is the SEM governance structure? SEM Committee
Functions
SEM Decision making body
Governs operation of SEM (e.g. how to mitigate market power, complying with EU Target Model etc)
Organisation
Independent
Composition: 3 members Commission for Energy Regulation; 3 members The Utility Regulator, 1 independent member.
http://www.allislandproject.org/<br>
07
SEM: Success or Failure? Objective: “the creation of a single, competitive, sustainable and reliable” wholesale market
Mitigating market power: mandatory pool, bid price SRMC, price based on merit order. Dominant firm divested generation capacity.
Facilitating Entry: regulatory credibility; market access; finding customers & pricing structure
Ensuring adequate generation capacity: Capacity Payments Mechanism linked to availability.
Result: General consensus that worked well.<br>
08
Why has the SEM been a success? 1. Mutually beneficial to Ireland & NI
Smaller reserve
Pooling of expertise
More efficient dispatch & improved availability incentives
Greater competition
2. Sound Analysis/Well Researched
“A Cost-Benefit Study of the Single Electricity Market”, NERA Consulting, November 2006.
Cost of SEM, €256.4 million in 2006 prices<br>
09
Why has the SEM been a success? 3. Credible Regulatory/Governance Regime
Legislative underpinning
Independent, transparent & accountable regulation
Reduces regulatory risk = lower financing costs
4. Consistent with EU Energy Policy
Second and Third Energy Packages
Promoting internal market in electricity
5. All-Island Political Settlement
Good Friday Agreement (1998)
North-South Bodies under North South Ministerial Council
St Andrews Agreement (2006)<br>
10
Asymmetric Shocks and EU Policy Asymmetric shocks
Affect Ireland or Northern Ireland only
Smaller partner accommodate larger partner
E.g. Carbon Floor price in UK
EU Policy
SEM and consistent with EU energy policy, but
Target Model and SEM
Central Dispatch vs. Self Dispatch
Mandatory Pool vs. Voluntary Bilateral Contracts
Limited intraday trading vs. continuous intraday trading<br>
11
Legal Documents: References UK -Ireland MOU, “Single Electricity Market (SEM) Arrangements”, December 2006.
http://www.official-documents.gov.uk/document/cm70/7002/7002.pdf
Electricity Regulation (Amendment) (Single Electricity Market) Act 2007
http://www.irishstatutebook.ie/2007/en/act/pub/0005/sec0003.html
The Electricity (Single Wholesale Market) (Northern Ireland) Order 2007
http://www.legislation.gov.uk/nisi/2007/913/pdfs/uksi_20070913_en.pdf<br>
