IBEC-CBI: European input

The IBEC-CBI Joint Business Council (JBC) Energy Stakeholders Group is an all-island forum funded through the European Union INTERREG IVA Programme for debating and representing the views of IBEC and CBI members engaged in the provision and consumption of energy (primarily electricity and gas) on all issues relating to the fostering and development of a sustainable, competitive and cost-effective energy market for Ireland at all-island, regional, and European Community level.

The SEM is a successful cost-reflective wholesale electricity market. It has encouraged new entrants, new investment and competition since its introduction in 2007. Several external policy developments will impact in the future development of our all-island Single Electricity Market (SEM). Some of the key developments include ongoing electricity market reform in the UK and the transition of EU member states’ electricity markets towards compliance with an emerging EU internal electricity market (IEM) by 2014.

The EU Third Energy Package was adopted in 2009 and provides a legislative framework for the establishment of an Agency for the Cooperation of Energy Regulators (ACER) and the transition of regional electricity markets to a European IEM, which is a strategic aim of the Commission. Following a public consultation, ACER published its Framework Guidelines on Capacity Allocation and Congestion Management (FG CACM) between zones in the EU electricity market on 29 July 2011. The objective of the guidelines is to facilitate enhanced electricity trade within the EU by 2014. The guidelines will be transposed into legally binding network codes through work by the European Transmission System Operators

(ENTSO-E) in 2012. The JBC Group participated in the ACER consultation process. While the implementation of the new IEM model across the EU is scheduled for the end of 2014, the island of Ireland has been granted a two-year derogation that permits transitional arrangements on the Island up to full compliance with the target model by the end of 2016.

The CACM target model reflects a predominant European market design of a bilateral self-commitment market with organised day ahead and intra-day trading. However, the SEM is a centralised pool market, determined by complex bids from generators; it also has an explicit capacity payment mechanism. The transition to compliance with the EU target model may mean a significant change to the current SEM. The nature and direction of that transition is under consideration by the regulators and system operators and will be the subject of a public consultation in early 2012.

ibec-2The evolution of the SEM towards the European target model for electricity is a priority project. The derogation must be used wisely to optimise flexibility and benefits, minimise regulatory uncertainty and ensure compliance at least cost. The JBC and its membership are actively engaged with the regulators on their SEM Market Integration Project.

It remains to be seen what overall impact the EU target model will have on the Irish electricity market. One point is certain – the transition to the EU target model will require meaningful engagement between all stakeholders in our electricity market.

If you are interested in finding out more about the JBC Energy Stakeholder Group or would like to participate in our workshop in early February which will explore the implications of UK electricity market reform and EU target model on the all-island energy market, please contact kirsty.mcmanus@cbi.org.uk or erik.odonovan@ibec.ie

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