The Ireland (IRE) and Northern Ireland (NI) power system is a synchronous system of approximately 7,000 MW peak, with over 9,000 MW of installed conventional plant and almost 3,000 MW of wind.
There are currently two HVDC interconnectors to Great Britain totaling an import/export capacity from the island of up to 1,000 MW. The system is operated by the EirGrid group, which is the transmission system and market operator on the island. The market arrangements are jointly regulated by the Utility Regulator (NI) and the Commission for Energy Regulation (IRE).
In 2016 the power system is already dealing with pioneering levels of variable non-synchronous generation, including wind. This has resulted in real-time penetration levels of these technologies on occasion reaching 55% of the total synchronous area. In addition, the policy objectives will see these levels rise. The goal is for 40% of electricity consumption to come from renewable resources (mainly wind) by 2020. To efficiently accommodate this, real time levels up to 75% of the total synchronous area will have to be managed securely and reliably.
In conjunction with these targets there is a requirement on EU member states to play an active role in the single electricity market across Europe. Both of these drivers require significant market design change and implementation in the next three years. This note sets out some of the changes to achieve these contrasting objectives.
A new wholesale market will go live by the end of 2017. This is the Integrated Single Electricity Market (I-SEM), which will deliver increased levels of competition, put downward pressure on prices, encourage greater levels of transparency and comply with the Target Model set out in European network codes. These are legally binding guidelines approved by the EU that cover many aspects of trading and power system operation across all member states. They are an essential component of delivering on a single energy market.
The new I-SEM in Ireland and Northern Ireland is made up of a local energy market that facilitates cross-border trades with other markets across Europe as well as auctioned reliability options for capacity of plant. This design builds on the existing Single Electricity Market (SEM) but explicitly facilitates cross-border trading and introduces a more market-based capacity remuneration mechanism.
Under I-SEM, all parties, generators and demand side units, bid into a local market operator day-ahead which then submits these bids and offers to the Market Coupling Operator (MCO) at a European level. The MCO matches these bids and offers using the Euphemia algorithm to determine prices and net positions and then informs the local market operator which in turn informs all parties of the successful bids and offers.
Other features of the market design include a forwards market using financial transmission rights to hedge against the day-ahead price spread; an interim intraday market after day ahead and up to one hour before real time, enabling all parties to trade in a continuous local market and in a number of cross-border implicit auctions to GB; and a balancing market to settle any imbalances and share balancing energy with neighbouring markets.
The final market run determines the unit’s physical nomination and is central to market capacity remuneration, forwards/futures determination and dispatch position in real time. Following gate closure the Transmission System Operators (TSOs) are allowed to dispatch for security of supply reasons but these will all need to be “tagged and flagged” and ultimately validated against prudent system operational policy. The principles of operational policy will be consulted on and approved by the regulators.
For the capacity remuneration there will be annual auctions where all providers of adequacy, including generators, interconnectors and demand side, can bid in to get a “reliability” option.
This is in effect a Contract for Difference (CFD) with the TSOs acting as a central procurement agency where plant providing margin in tight operational times will be paid. At the time of writing, there is discussion on how to deal with longer-term auctions (CFD for up to four years); who would be eligible to bid for them; and how a range of new technologies might be considered. This is to ensure that sufficient capacity is made available to meet the regulatory approved reliability level of a loss of load probability of no more than eight hours a year.
In parallel to this, there is a broad programme to develop the necessary system performance, operating policy and control centre tools to reliably manage the power system at up to 75% of non-synchronous generation.
This “Delivering a Secure Sustainable Power System” (DS3) programme has 11 workstreams. These include concerns around rate of change of frequency, grid code, performance monitoring. and control centre modelling of dynamic events. However from a market perspective, DS3 System Services is most relevant.
From 1st October 2016 DS3 System Services go live with seven new services along with the existing seven ancillary services. These new system services are specifically designed to remunerate services that are complementary to the technical scarcities identified to meet the renewable targets in 2020.
They are based on the needs of the system to manage high-levels of non-synchronous generation. Some incentivise inertia, dynamic performance and the certainty of provision of ramping (not the actual energy) in multiple hour scales if required. These are in addition to the standard operating and replacement reserves.
Furthermore the cost of these services will be significantly greater than today’s annually allowed pot for ancillary services – €52 million in 2016, up to €237 million by 2020. Tariffs based on a consideration of the estimated value of the service are being used.
However, the regulators have expressed their preference for a competitive approach to the procurement of system services and have proposed the introduction of a multiple bid auction. This auction is still under discussion and will need coordination with the reliability option. It is currently not expected to be live until the end of 2018.
As part of the DS3 System Services revamp, there is a qualifier trial for new technology. This qualifier trial seeks to manage the development of appropriate operating and communication protocols with a range of new technologies at small scale. This will allow greater competition in the long run. But it also helps balances the need for EirGrid to prudently manage a transformation for needed services away from traditional technologies. DS3 System Services and the qualifier trials are a key enabler to successfully achieving these dual objectives of increased competition and maintaining resilience of the power system with the large scale deployment of new technologies.
Jonathan O’Sullivan
Manager, Innovation
EirGrid
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