5. ELECTRICITY AND RENEWABLES

The European Commission approved the CRM in November 2017. The first auction under the CRM took place in December 2017 for capacity for May 2018 to September 2019 (T-1 time frame), and the results were announced in January 2018. Out of 100 bids received, contracts were awarded to 93 for a total of 7 774 MW, with a clearing price of EUR 41 800/MW, which was well below the price cap of EUR 123 190/MW. The seven unsuccessful bids represented a total capacity of 1 230 MW. In addition, 619 MW of demand-side response, including 245 new demand-side units, were successful in the auction.

Some of the companies behind the seven unsuccessful bids are considering closing down the concerned coal and gas-fired units. In Ireland, 353 MW of capacity (owned by the ESB) has already notified intention to close, either because of unsuccessful bids or because the plants were approaching the end of life and had intended to close anyway (EirGrid, 2018a).

The CRM also includes provisions for a T-4 auction, an auction for delivery in four years’ time. The purpose of the T-4 auction is to allow for efficient entry and exit from the market. The first T-4 auction will take place in March 2019 for delivery in 2022/23 (SEMC, 2018b).

Networks

The European Commission certified EirGrid as the independent state-owned TSO for Ireland in 2013. EirGrid also holds the licence as market operator in Ireland. It is the owner of SONI, the licensed TSO and market operator in Northern Ireland. The SEMO is part of the EirGrid Group and operates the SEM on the island of Ireland. EirGrid is responsible for day-to-day operation, system planning and management of the all-Island transmission grid. It offers regulated third-party access to market participants for connection to and use of the transmission system. The CRU regulates those conditions.

The ESB owns the Irish transmission and distribution systems through its ring-fenced subsidiary ESBN. The ESBN holds the licence as transmission asset owner. This is in line with the government’s position in its 2015 White Paper that the country’s electricity networks are strategic national assets that will not be sold. The ESBN also owns the distribution system and holds the distribution system operator (DSO) licence. The ESB owns Northern Ireland Electricity, the Northern Ireland distribution and transmission network owner.

Wind power will constitute the main source of renewable electricity generation towards meeting Ireland’s 2020 target of 40%. This implies operating the electricity system on the island of Ireland with up to 75% of instantaneous demand from non-synchronous generation. Not many countries have reached such levels of non-synchronous renewable penetration, and a small isolated system that has no synchronous interconnection to other European systems adds to the technical challenges. The electricity system is already capable of accommodating up to 65% instantaneous demand from nonsynchronous generation. This is a remarkable achievement and is the outcome of substantial innovation and research undertaken by EirGrid.

EirGrid launched a comprehensive pioneering technical analysis in 2011, the Delivering a Secure Sustainable Electricity System (DS3) programme. This involves all stakeholders in the Irish electricity system, including policy makers, regulators, TSOs and

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5. ELECTRICITY AND RENEWABLES

DSOs, generators and key industry stakeholders, to deal with the challenges in the resilience of the power system in the integration of large shares of variable renewables. This challenge is compounded by the relative isolation of the Irish electricity system. The three key elements of the DS3 are: enhanced operational policies and grid/network code standards, network control centre tools and enhanced ancillary/system services (see Box 5.1).

Box 5.1 DS3 System Services

The strand of work focusing on enhanced ancillary services is called the DS3 System Services. Ancillary services typically include frequency control, and spinning and operating reserves to ensure that there is enough electricity flow to meet demand continuously. Generators have traditionally provided those services by using a limited set of proven technologies and receiving compensation through regulated prices. The value of the ancillary services provided in the all-island market was estimated at approximately EUR 60 million annually up to 2015. However, with the fast increase of intermittent generation, a different set of equipment and technologies is needed, and the mode and mechanism for remunerating ancillary services needs to be adapted.

The DS3 System Services is rolled out in phases. The first phase started on 1 October 2016 and ran until April 2018. It increased the number of services from seven to 11, provided by 107 units that were paid regulated tariffs. The budget for ancillary services is being gradually increased from EUR 75 million in 2016 to a maximum of EUR 235 million in 2020, when renewable electricity is expected to account for 40% of the total electricity generation. A transparent procurement process is held instead of bilateral contracts. The process is either based on regulated tariffs or a competitive mechanism, depending on the level of competition for each service. However, all contracts were based on regulated tariffs during the first phase while the SEMC examines options for the development of a competitive procurement process in the future.

The second phase of the DS3 System Services commenced in May 2018. The TSO executed a panel-based procurement process for new contracts for the 11 services; this was open to existing and new units who passed a qualification process. In addition, the TSO undertook a separate procurement process for three additional ancillary services in the second half of 2018, bringing the total number of services to 14. The procurement process will encompass all 14 services as of 2019, and will be continuously open for new participants to bid in their services. The DS3 System Services also includes an incentive mechanism for the TSO to reduce constraints on the network and enable increased integration of renewables.

At the DSO level, the ESBN is also working on smart grid technologies. It launched a pilot project on the Dingle peninsula in April 2018, in which the ESBN will deploy a range of technologies to understand how evolving technologies will interact with the electricity network of the future. A key component of the Dingle pilot project is the work with the local community in discovering what opportunities the future of energy can unlock for end customers. Under the project, smart devices on the network will help in monitoring and predicting the network events better, to ensure less outages and more resilience on the distribution network. Exploring the potential for enhanced energy efficiency measures among the local business community as part of the smart solution will also be pursued.

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