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All-Island Energy Market Forum James Hutchinson Head of Electricity Markets Ofreg Drogheda 12 March 2004.

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Presentation on theme: "All-Island Energy Market Forum James Hutchinson Head of Electricity Markets Ofreg Drogheda 12 March 2004."— Presentation transcript:

1 All-Island Energy Market Forum James Hutchinson Head of Electricity Markets Ofreg Drogheda 12 March 2004

2 Content The NERA study The Northern Ireland approach to Further Market Opening under the EU Energy Directive The All-Island Wholesale Generation Market

3 The NERA study Part I

4 The NERA study Ofreg chairs a consultative panel - the IME Group Commissioned NERA economic consultants to conduct a study into: –(A): How to interface most effectively with MAE? –(B): What are the costs and benefits to NI electricity customers of joining MAE ?

5 NERA Part A Published Jan 04 - Ofreg website, with CER response Outlined the features of MAE Proposed recommendations for efficient interface with MAE on the assumption that NI would trade with, and not join, MAE Studied similar markets and interfaces for reference

6 NERA Part B Currently under way Aims to assess the cost/benefit to the NI customer of integrating fully with MAE Modelling work being completed at present, expect report to be delivered to IME Group in draft form by end March.

7 Process : Interface CER is in the process of determining final market rules Interface arrangements discussed in MAE consultative groups Ofreg and NI participants involved in the process CER/Ofreg will opt for an interface arrangement which best suits the needs of both markets

8 Further Market Opening in Northern Ireland, 2004-2007 Part II

9 Background Market must open to non-domestic customers in 2004 and fully by 2007 2004 : Phased market opening Market Structure largely unchanged –bilateral contracts, half-hour on-line meters –modification to Top-up arrangements - introduction of a secondary top-up with a 15% tolerance band around nomination

10 Wholesale Electricity Pricing Market opening takes place in the context of rising wholesale costs - coal, carbon etc NI legacy contracts from privatisation - cost recovery would take place over a smaller customer base were market opening to proceed as it had up to 2001. EU Directive required a movement of certain costs from the BST to the PSO levy

11 BST, PSO and SSS Three charges to reflect the differing types of cost which originally made up the wholesale price under the NI single buyer structure New arrangements reflect the move to a Long-Run Marginal Cost BST, with system charges and PSO levies as appropriate

12 Implementation April 2004 : eligibility threshold reduced from 0.79 GWh to 0.5 GWh, equates to 1,000 eligible customers Soft Start approach whereby systems will be procured and tested to facilitate full customer participation by January 2005, equates to 60,000 potential customers Steering Group of IME overseeing the process

13 The All-Island Wholesale Generation Market Part III

14 Interconnector Energy Transfers Data on interconnector transfers and ATC

15 Future Developments Emissions Trading2005 M A E2006 ROI/Wales Interconnector

16 Post MAE Northern Ireland will sell/buy from MAE market Economically efficient trade limited by system constraints (330 MW NS, 0 MW SN) -Option of full incorporation in MAE -Good Neighbour trading has benefits

17 Good Neighbour Trading recognises the physical limits pushes towards joint transmission planning transparent sharing of security costs reduces price of electricity in ROI and NI provides additional safety net for transitional period

18 All Ireland Electricity Market: Conclusion Cross border trade and price convergence Physical constraints limit integration Need to deal together with hardware issue; managing gas supplies, interconnectors, emissions reductions, security of supply

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