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Since the development of a single electricity market between Northern Ireland and the Republic in 2007, there have been moves afoot to create other common energy projects between the north and the south. Mark Thompson and David Flinn report

Energy has come to the forefront of economic and environmental attention globally, and Ireland north and south is no exception to this trend. The energy sector in Ireland has remained driven North by an all-island agenda and ern Ireland, in particular, has seen ongoing development in energy matters. Much emphasis has been on the development of renewables and achieving cost savings and efficiencies through the development of an all-island energy market.

Single energy market developments

The single electricity market (SEM) for the whole of Ireland, i.e. both Northern Ireland and the Republic of Ireland, became live in November 2007 and was the largest reconstruction of the industry in Northern Ireland since privatisation in the early 1990s. SEM introduced a pool arrangement for the whole of Ireland whereby generators producing more than 10MW of electricity must sell into a pool and those generators who bid at or above the system marginal price will be dispatched and paid by the market operator.

In addition to payments for energy provided, generators get capacity payments for making their generating capacity available. When a generator cannot deliver electricity due to system factors or problems, they can receive constraint payments.

Following the introduction of SEM, a challenge arose in the form of a judicial review application by Kilroot Power (one of the two base load power stations in Northern Ireland) to the cancellation of their generator unit agreements with Northern Ireland Electricity. The judicial review challenge to the decision of the Northern Ireland Authority for Utility Regulation (NIAUR) to cancel these contracts was on the basis that: there was inadequate consultation in relation to the cancellation of generator contracts; the decision to cancel was unreasonable; and SEM did not meet the criteria of the cancellation condition in the generator contracts in that it did not increase competition for the benefit of consumers in Northern Ireland.

The judicial review application was unsuccessful and judgment was given in favour of NIAUR. A different outcome would have impacted substantively on the rationale for and the introduction of SEM.

The increasing connection of wind generation capacity into the SEM has created new system operational challenges, which may in turn affect the SEM revenue model in a manner that conflicts with the economic principles underlying the design of the market.

As the availability of wind capacity is dependent upon meteorological conditions it is not always reliable. Large increases in the amount of wind generation capacity will have knock-on effects in the calculation of the SEM revenue streams, under the existing market rules, through a number of mechanisms including:

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