1. Demand Side Units in the SEM
SEMO
September 2013
- Provide and understanding how how DSUs work in the SEM

2. Independent Demand Site
The SEM
DSU
Generators
SEM
Supply Companies
Generators bid into SEM and provide generation to the pool
Supply Companies purchase from pool (Suppliers)
Supply Customers purchase from supply companies, or directly from the pool if setup as Trading Site Supply Unit (TSSU)
Payments flow opposite direction
DSUs are classed as generators in the market, and bid in prices and quantities for demand reduction + availability
Supply Customers
Independent Demand Site

3. Determining Market Schedule & Price
Price = € 50/MWh
Out of Merit
Not Scheduled
?Dispatched?
In Merit
Scheduled
- ?Dispatched?
Determining Price
Bids for each trading period (1/2 hour period) ordered from least cost to highest cost
Price Takers (mainly wind) generally scheduled first as ‘no cost’
Demand determined which identifies the units (including DSUs) that are the most economically efficient to schedule : FROM A MARKET POINT OF VIEW
Note: this is an unconstrained solution with no account of transmission constraints, reserve requirements etc.
Bid price of marginal unit (ie. Unit that meets the last MW of demand) sets the price.
Units that are cheaper than the marginal unit are in merit and scheduled IN THE MARKET
Units that are more expensive than the marginal unit are out of merit and not scheduled IN THE MARKET
Whether the unit is actual dispatched in the “real world” is dependent on the SO requirements at the time ie system security and constraints
Price Takers
(Zero Price, mainly wind)
Demand 3
Copyright © EirGrid/SONI 2013

4. Scheduled vs Dispatched
Relates to Market only
The most economic dispatch
No system constraints considered
Dispatched
Relates to System Operation (SO)
SO provide a dispatch instruction in real time to the DSU
Accounts for system constraints and security of supply (reserve, transmission and trips)
Difference between scheduled and dispatched.
Important concept for later

5. DSUs in the SEM
Demand Side Units (DSU) must be registered in the Single Electricity Market (SEM)
The DSU will submit Commercial Offer and Technical Offer data on a daily basis
Payments for capacity, energy and constraints are processed through the SEM.

6. DSU Market Configurations
Third Party – Trading Site
Retail Supplier 1
Demand Reduction Capability
DSU
TSSU
Trading Site Supply Unit DR
Load
DSU can either be associated with the Demand Site directly, or as part of an separate TSSU where the demand site enters into an agreement to provide a demand reduction to the DSU who then provides this offering to the market (this arrangement is known as a aggregator DSU).
DSU (and associated TSSU where appropriate) must be registered in the SEM
Load SU
Retail Supplier 2

7. DSU Incentives in the SEM
Capacity Payments
- based on demand reduction availability
- not on whether actually called upon
Pot of ~ €500 million per year must be paid out
Payment per trading period varies based on ‘value’ of capacity
Looking at capacity payments (which are the main revenue stream)
Payments are given for each ½ hour of every day (assuming availability)
Payments vary significantly for a given trading period - from zero to EUR181.
Final capacity price based on ‘value’ of capacity ie. Margin, LOLP etc., although the total pot per month must remain the same
More examples of how capacity payment changes with trading period, month and trading day provide in the appendices – for 2012 values.

8. Capacity Payment Example
Availability Period
Demand Reduction Offered
Capacity Payments per Annum#1
9am to 7pm every day
1 MW
~€42,700
24 hours per day
~€62,400
Notes:
#1 – based on 2012 Capacity Payment Generator Price (CPGP) values which are a close approximation to Capacity Payments

9. DSU Incentives in the SEM
Avoided market charges
- For Demand Sites associated with the DSU, when
demand reduction dispatched
- Avoids the following charges
System Marginal Price (SMP) ~ € 60/MWh #1
Capacity Charge ~ € 14.50/MWh #1
Imperfections Charge € 4.71/MWh #2
Variable MO Charge € 0.698/MWh #2
#1 Illustrative values only, based on approximate averages
#2 Based on 2012/2013 Regulatory Authorities approved tariffs
Incentives from Supplier point of view:
Demand Site can avail of charge reduction (Imperfections, VMOC, FMOC, & capacity charges which all relate to procurement of energy through the SEM)
SMP: but remember, still incur cost of generation to replace demand drawn from market
Capacity Charge: Paid by suppliers to cover capacity payments to generators
Imperfections Charge: covers Dispatch Balancing Costs, Make Whole Payments and Energy Imbalance Charges
Variable MO Charge: to cover costs of running the market
SMP, Cap Charge, Imperfections and VMOC are all defined as “avoided costs” in the later presentation slides.
Capacity Charges paid by Suppliers used to pay Capacity Payments to the DSU
Imperfections includes dispatch balancing costs i.e.. constraint charges, also energy imbalances etc.

10. Constraint Payments Ensures DSU is not disadvantaged when either:
Scheduled in the market but not dispatched, or
Dispatched by the SO, but not scheduled in Market
Similar mechanism to all other generators in the SEM
Should not be considered an incentive for participation, just made to ensure DSU is not disadvantaged
This should not be a driver for setting up the DSU, it is to compensate for where dispatch differs from the market schedule only.
This mechanism is the same for all generators in the SEM – with DSUs classed as generators too.
Eg. Not scheduled, but dispatched. Paid for cost of dispatch at bid price (not market price). No real gain to DSU for this, aside from ‘Avoided Charges’ from SEm

11. Summary of Incentives Net Revenues#1 Capacity Payment#2 ~€42,700
9am to 7pm every day
24hr per day
Capacity Payment#2
~€42,700
~€62,400
Avoided Charges#3
~€0
Constraints#4
Notes:
#1 – Net Revenues = Payments less cost of Demand Reduction (ie. Bid price)
#2 – Based on CPGP for 2012
#3 – Assumes not dispatched by SO due to typically higher bid price
#4 – Payments at bid price only

12. DSU Obligations in the SEM
Submission of Commercial and Technical Offer Data
- needed daily (bids, shutdown cost, forecast availability, forecast minimum output,
forecast, min stable generation, ramp rates and down times)
- conform to Bidding Code of Practice
Settlement
- Check and reconcile settlement with bids, demand reduction and availability
Invoice Payment
- DSUs invoiced separately
- Payments due to market for:
Fixed Market Operator Charge (€ 100 per year per MW capacity)
Resettlement
- 3 working day payment terms, otherwise default and possible suspension
Credit Cover and Management of Credit Cover
- minimum credit cover required ~ € 5000

13. Demand Site Supplier Unit Avoided Charges
Payments in the SEM
Scenario
Scheduled in Market
Dispatched by TSO A1  A2  A3 A4
DSU
Revenue
Demand Site Supplier Unit Avoided Charges 
Cap#1
Cap 
Cap #1
Most Likely Scenario
Scenarios are for DSU with no demand associated with TSSU
Most likely scenarios are: A1 and A3 – ie. Scheduled and Dispatched (cost effective), not schedule and not dispatched (not cost effective)
In the first two scenarios the DSU is scheduled in the market as it is in merit order (ie. cheap enough).
Scenario A1: (second most likely scenario)
First scenario it is also dispatched.
In this case DSU receives Cap payment, demand site supply unit avoids the costs (imperfections, capacity charges, MOC) for the demand reduction quantity
Scenario A2:
DSU receives cap payment, no avoided charges for demand site supplier unit as demand reduction not activated
Scenario 3 and 4 – not scheduled in market as not cheap enough.
Scenario A3: (most likely scenario)
Not scheduled and not dispatched
DSU gets capacity payment for availability only.
No avoided charges by Demand site supplier unit as no demand reduction
Scenario B4:
Not scheduled but dispatched for system reasons (security of supply etc)
DSU receives capacity payment
Demand site supplier unit has avoided costs (imperfections, capacity charges, MOC) for the demand reduction quantity
Notes:
#1–DSU will not receive capacity payments for Demand Reduction that is netted against TSSU for DSU Trading site

14. Example A1: One Trading Day - Scheduled and Dispatched
DSU Bid
Bid Price € /MWh
Demand Reduction Offered 1 MW
Available between 9am and 7pm
Market Prices*
SMP Averages (excluding 5pm to 7pm) € /MWh
SMP (5pm to 7pm) € /MWh
Capacity Payment Price (Average 9am to 7pm) € /MWh
Related Charges*
Capacity Charges Price (Average 5pm to 7pm) ~ € /MWh
Other Charges € /MWh
*based on 2012 Trading Period averages. See Appendix B for full details
Market Outcome
1 MW demand reduction:-Scheduled in market : 5pm to 7pm Dispatched by TSO : 5pm to 7pm for
DSU Capacity Payments (Paid by SEM) €
= Capacity Payment x DSU Reduction x duration
One advantage of DSU as opposed to WPDRS is that you can declare availability for any date or time (assuming you can comply), not just for the WPDRS season.
Also you are paid for availability more so than being called on.
Note: if you have a Retail Supply agreement for the demand site then the contract you have may be based on a different tariff and not pass through charges as defined here.
Assumptions:
DSU Available for 1MW from 9am to 7pm
Scheduled and Dispatched for 1MW from 5pm to 7pm
DSU is marginal unit (ie. Last to be schedule in merit order as highest cost)
Capacity Payment Prices based on 2012 Averages per Trading Period
Capacity Charge Prices based on 2012 Averages per Trading Period
SMP based on 2012 Averages per Trading Period (except for 5pm to 7pm period)
TSSU has no demand. Therefore, no netting occurs.
Market Operator and Imperfections Charge assumed to be €5.40/MWh
Prices used are for example purposes only, prices change significantly due to a number of factors include availability, demand, seasonality, capacity pot size etc.
Supplier Avoided Costs €
= Related Charges x Demand Reduction Offered x duration
Overall Savings (per Day) €
Assumptions:
DSU Trading Site Supply Unit has no demand, hence, no netting occurs
DSU is marginal unit (ie. Last to be scheduled in merit order as highest cost)

15. Example A3: One Trading Day - Not Scheduled and Not Dispatched
DSU Bid
Bid Price € 150/MWh
Demand Reduction Offered 1 MW
Available between 9am and 7pm
Market Prices*
SMP Averages (entire day) € /MWh
Capacity Payment Price (Average 9am to 7pm) € /MWh
Related Charges*
Capacity Charges Price (Average 5pm to 7pm) ~ € /MWh
Other Charges € /MWh
*based on 2012 Trading Period averages. See Appendix B for full details
Market Outcome
Not Scheduled
Not Dispatched
DSU Capacity Payments (Paid by SEM) €
= Capacity Payment x DSU Reduction x duration
One advantage of DSU is that can declare availability for any date or time (assuming you can comply)
Also you are paid for availability more so than being called on.
Assumptions:
DSU Available for 1MW from 9am to 7pm
Not Scheduled and Not Dispatched
Capacity Payment Prices based on 2012 Averages per Trading Period
Capacity Charge Prices based on 2012 Averages per Trading Period
SMP based on 2012 Averages per Trading Period
TSSU has no demand. Therefore, no netting occurs.
Market Operator and Imperfections Charge assumed to be €5.40/MWh
Prices used are for example purposes only, prices change significantly due to a number of factors include availability, demand, seasonality, capacity pot size etc.
Supplier Avoided Costs €
= Related Charges x Demand Reduction x duration
Overall Savings (per Day) €
Assumptions:
DSU Trading Site Supply Unit has no demand, hence, no netting occurs
DSU is marginal unit (ie. Last to be scheduled in merit order as highest cost)

16. Registering a DSU#1 in the SEM ( 1 of 3)
Two parts:
Party registration; and
Unit registration
Party Registration requirements include:
Accession Deeds x2
Completed Application Form
Accession Fee €
Party registration may only be needed if not already a Party in the SEM and want to become DSU
Party and Unit Applications are separate (but can be concurrent)
To Register for Accession to the Market as a Party to The Trading and Settlement Code and the framework agreement the following must be submitted:
Two copies of the Accession Deed signed by two company directors or a company director and a company secretary. Please note if party based in ROI a company stamp or seal is also required
A completed application form - All application details should be compliant with your Licence
Accession Fee – current fee details available at
SEMO Customer Service will notify you of your Party Registration Status and on completion you will be sent a certified copy of your executed Accession Deed
#1 – Details are relevant for registering a DSU in the SEM. Demand reduction being contracted to an Aggregator DSU does not require any interaction with the SEM, only with the Aggregator

17. Registering a DSU in the SEM (2 of 3)
Unit Registration requirements include:
Registering Party must hold an electricity supply licence
Completed Participation Notice
Participation Fee €
Evidence of SO agreements
Connection Agreement extracts
Proof of TUoS
Forecast for Credit Cover
Bank Account Details
Unit Registration Data including Technical Offer Data
Again only need if want to setup an individual DSU yourself.
In order for a party to participate in the Pool in respect of any unit, a party must register that unit in accordance with the T&SC.
In order to complete unit registration a completed registration pack must be submitted consisting of
A Completed Participation Notice
Participation Fee - current fee details available at
Unit Registration Spreadsheet – This is unique to the unit type, select the relevant spreadsheet only, either Interconnector, Generator or Supplier
Finance Spreadsheet – For Banking and VAT details
Collateral Spreadsheet – This is an estimate of the Market Participants forecast demand for the initial exposure period. To enable credit cover calculations to be performed
Note: There is currently an outstanding issue with the granting of supply licences for DSUs in Northern Island, this is being worked through by the NIAUR.

18. Registering a DSU in the SEM (3 of 3)
Application must be submitted at least 60 working days in advance of proposed effective date
Technical testing is required to interface to Market System
Credit Cover must be in place 5 work days before effective date.
A final meeting will take place with SEMO, MDP , SO and Participant to make sure all registration requirements are in place and to agree a Final Effective Date.
Commencement Notice issued only once registration requirements complete
No Payments for units prior to Commencement Date
Start early – the process can take up to 60 days or more due to need to align setup for Meter Data Providers, System Operators, SEMO
SEMO Customer Services manages all applicants through the process.
SEMO liaises with the appropriate System Operators and Meter Data Providers. When an effective date has been agreed with all parties, SEMO will issue a Commencement Notice. From that date onwards the unit registered can trade in the market.
Each of the steps in the registration process are interactive and dependant on the actions of the two parties to the registration process:
The Market Operator and the Applicant
Credit Cover based on example of TSSU, DSU and Netting Gen Unit = ~1k + 5k + 1k =€7k. This is not a charge but collateral held against payments

19. Contact Details SEMO may be contacted on: markethelpdesk@sem-o.com
Phone NI:
ROI:

20. Document Disclaimer
Every care and precaution is taken to ensure the accuracy of the information provided herein but such information is provided without warranties express, implied or otherwise howsoever arising and EirGrid plc and SONI Limited to the fullest extent permitted by law shall not be liable for any inaccuracies, errors, omissions or misleading information contained herein.

21. Appendix A – Capacity Prices
Further examples of how capacity payments differ per day, season and trading period.

22. Appendix B
Example A1: One Trading Day
Scheduled and Dispatched

23. Example A1: One Trading Day - Scheduled and Dispatched

24. Example A3: One Trading Day Not Scheduled & Not Dispatched
Appendix C
Example A3: One Trading Day Not Scheduled & Not Dispatched

25. Example A3: One Trading Day - Not Scheduled & Not Dispatched