Electricity Market Plan Faces Delay Until 2018

01 December 2016

The State is set to miss an already delayed European Union target of reforming its wholesale energy market with the North next year, in a move aimed at increasing competition and potentially lowering prices.

Ireland has had a single electricity market since 2007. However, its design is not consistent with a European Union standard, outlined in 2009, that is aimed at driving cross-border energy trading across the bloc.

While the EU gave most member states until the end of 2014 to meet the new target, the Republic and the North were given a derogation and later implementation date of 2017 to comply.

The Commission for Energy Regulation in Dublin and Utility Regulator in Belfast proposed last week that the new market - the so-called integrated single energy market (I-Sem) - be delayed by seven months until May 2018.

A report commissioned by both regulators last month found that there were a number of "unacceptably high" risks with going live with I-Sem in October 2017, particularly around how prepared energy companies were for the market changes.

A key overhaul to be implemented under the new regime removes the current system where power generators receive payments for being ready to supply electricity to the grid when there are spikes in demand. This is known as a capacity payment mechanism.

Under the incoming system, known as a capacity remuneration mechanism, energy firms would have to actively bid through auctions to provide back-up supply, increasing competition between market players.

More Efficient Linkage

"I-Sem mainly allows for more efficient linkage between the island of Ireland energy market and that of our European neighbours," said Peter McLay, partner in our Construction team.

"At the moment, because prices aren't set in Ireland and Great Britain in the same way, it is difficult to export energy back and forth. I-Sem is basically about the island of Ireland catching up with the rest of Europe."

Mr McLay said the Brexit vote need not be an issue for the integrated market. 

“The market can work independently of European membership, even though it is put in place as a requirement of European energy law,” he said.

This article was originally published on The Irish Times on Thursday, 1 December 2016. The content of this article is provided for information purposes only and does not constitute legal or other advice.