7 Aula sobre Mercado de eletricidade Irlandês

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Electricity Market Economics
Kevin Davis
(c) KDavis CIT 2013 1
References
• CER Factsheet on the Single Electricity Market 
April 2011 (SEM Economics)
• www.cer.ie
• www.sem-o.com
• www.allislandproject.org
(c) KDavis CIT 2013 2
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© Kdavis CIT 2014 3
http://www.eaireland.com/electricity-in-ireland/electricity-in-ireland.351.html
1892 Ireland’s first electricity power station , Dublin (coal)
1927 Ireland’s first large scale HYDRO electricity power station 
(Ardnacrusha)
1955 The Electricity Supply Act began the process of rural 
electrification
1971 Oil-fired power station at Poolbeg, Dublin
1979 Coal-fired power station at Moneypoint, Co.Clare began 
(plans for a nuclear power station at Carnsore Pt, Co. Wexford 
are shelved ) Oil crisis 1973
1992 First commercial wind farm at Bellacorrick, Co. Mayo
Very little change in 100 years
Rapid change in 20 years
© Kdavis CIT 2014 4
http://www.eaireland.com/electricity-in-ireland/electricity-in-ireland.351.html
1996 EU legislation for liberalisation of the electricity and 
gas markets proposed. 
1998 Viridian Group purchases NIE plc
1999 Commission for Energy Regulation(CER) 
2003 NI Authority for Utility Regulation established 
2006 Eirgrid as the independent Transmission System 
Operator(TSO)
2007 Single Electricity Market(SEM)
2009 Full liberalisation of electricity and gas market
2009 NI TSO(SONI) purchased by Eirgrid
2010 ESB purchased NIE T&D from Viridian Group
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5
ESB Power 
Generation in 
Ireland
Source: CER Report for 
2008
Notes
Total Generation 
capacity in Ireland 
7774MW
Hydro capacity is limited 
by fuel reserves; e.g.
Turlough Hill 1600MWh 
(approx 5 hours)
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Generation licences issued by CER since 1999
Source: CER Report for 2008
© Kdavis CIT 2011
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7
Breakdown of Power Generation Capacity 
(by Generation Technology)
Source: 
CER 
Report 
for 
2008
© Kdavis CIT 2011
T1
R2R1
T3T2
R3
G1 G3G2
Tie lines
Circuit 
Breakers
consumers
Power
Plants
© KDavis CIT 2011 8
Generators
Suppliers
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© Kdavis CIT 2011 9
Company Name Licence Type Contact Details
Airticity Limited Green CHP
Generic
Airtricity H ouse,
Ravenscourt Office Park,
Sandyford,
Dublin 18, Contact: Mr Louis Fitzgerald
Tel: +353 (0)1 213 0400
Fax: +353 (0)1 213 0444
Web: www.airtricity.com
Bord Gais Energy Supply Eligible Green
Generic
Bord G áis Energy ,
PO Box 10943,
Dublin 1
Tel: 01 602 1212
Fax: 01 602 1462
Contact: Mr G erard H arnett
Tel: +353 (0)1 602 1212
Fax:+353 (0)1 602 1398
Web:http:/ / www.bordgaisenergy.ie
Energia ('Viridian Power & 
Energy Ltd')
CHP Generic Green
Generic
Viridian Energy Supply Ltd. t/ a Energia, 3rd Floor Mill H ouse, Ashtowngate, Navan Road, Dublin 15.
Regis tered in Dublin: No. 306035
Contact: Mr G ary Ryan
Tel: +353 (0)1 869 2001
Web: www.energia.ie
Electric Ireland Eligible Green CHP
Generic
ESB International,
Stephen Court,
18-21 St. Stephen's G reen,
Dublin 2
Contact: Mr Daragh Daly
Tel: +353 (0)1 862 8300
Fax: +353 (0)1 862 8350
Web: www.esbie.ie
Electric Ireland Public Electricity Supplier (PES)
ESB H ead Office,
27 Lower Fitzwilliam St,
Dublin 2,
Contact: Mr Tony Dunlea
Tel: +353 (0)1 676 5831
Vayu Limited (Eligible) Eligible
Generic
3rd Floor, Macken H ouse,
39-40A Mayor Street,
Dublin 1
Contact: Mr David G ascon
Tel: +353 (0)1 884 9400
Fax: +353 (0)1 876 1825 Web: http:/ / www.vayu.ie
Waterpower Engineering Limited Green
Generic
Carrigeen,
Banteer,
Co. Cork
Contact: Mr Dan Twomey
Tel: +353 (0)29 58177
PrePayPower Generic
34 Main Street, Blackrock, Co Dublin Web: http:/ / www.prepaypower.ie/
Endesa Ireland Generic
Endesa Ireland,
5th Floor,
3 G rand Canal Plaza,
Dublin 4
Contact: Brian Connolly
Tel: +353 (0) 1 522 8300
Fax: +353 (0) 1 522 8301
Email: brian.connolly@endesaireland.ie
Reference 1
Licensed 
Suppliers to 
Consumers
© Kdavis CIT 2011 10Reference 1
Suppliers 
share of the 
domestic 
market
2011
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© Kdavis CIT 2011 11Reference 1
© Kdavis CIT 2011 12
CER 2008 Report CER 2011 Report
Reference 1
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Organisations involved
• Commission for Energy Regulation (CER) 
www.cer.ie independent body responsible for 
regulating the natural gas and electricity markets 
in Ireland.
• Single Electricity Market Operator (SEMO) 
www.sem-o.com responsible for administering 
the market, including paying generators for their 
electricity generated and invoicing suppliers for 
the electricity they have bought in the Single 
Electricity Market (SEM)
(c) KDavis CIT 2013 13
Single Electricity Market (SEM)
Centralised and mandatory all-
island wholesale pool market
(c) KDavis CIT 2013 14
Two different business cycle 
time constants
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How is electricity traded in the SEM?
1. The trading starts the day before the electricity is needed 
(this trading day is called “D-1”).
2. The market splits a day into 48 half hour periods
3. The electricity generators submit their costs (to SEMO) to 
operate during each half hour period. 
4. All these bids must be submitted by 10am on D-1
5. The Transmission System Operator forecasts what the 
system demand is likely to be the following day (called 
“D” the actual generation day)
6. SEMO select the lowest bids in each period. The number 
of generators selected = the estimated system demand 
for that period plus a safety margin, the reserve. 
(generator failure or transmission line failure)
(c) KDavis CIT 2013 15
Lowest Bids 
received for 
this period ; 
not enough at 
this price to 
meet the 
expected 
demand
Bids for 
one half 
hour 
period
Next Lowest 
Bids ; but still 
not enough to 
meet the 
expected 
demand
Combined total of these 
bids is enough to meet 
the expected demand
(c) KDavis CIT 2013 16
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How is electricity traded in the SEM?
7. All the generation bids selected are classified as 
“in merit” (all the higher cost bids are “out of 
merit”)
8. The highest cost generator selected will 
effectively set the price for this period and all 
the lower bids will also get this price (called the 
System Marginal Price SMP) if their output is 
used
9. The actual generation day is “D” and in-merit 
generators are dispatched as needed. Regional 
restrictions may influence the dispatch order.
(c) KDavis CIT 2013 17
How is electricity traded in the SEM?
10.On day “D+1”, the SEMO provides the 
generators with the detailed energy produced 
the previous day and the SMP that applied for 
each period.
11.The generators and suppliers have a number of 
days to query this market data for day “D” and 
the final settlement is made on “D+4”
(c) KDavis CIT 2013 18
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Terminology Used
• Short-run marginal costs (SRMC)= term used to describe the 
half-hour bid from a generator. These costs are fuel related 
rather than capital investment payback. The makeup of these 
costs is (start-up costs)+(no-load costs)+(cost per each 
additional MWh output). The start-up and no-load costs are 
sometimes referred to as “uplift” and the remaining costs 
“shadow price”.
• System Marginal Price (SMP) = the final price given to each 
successful (in-merit) generator for a particular half-hour 
period. All generators get the same price irrespective of their 
initial bid (SRMC)
• Infra-marginal Rent = SMP – SRMC (profit earned by 
generators that are in-merit.
(c) KDavis CIT 2013 19Terminology Used
• Constrained on = payment made to generators for each 
MWh produced over their scheduled output. This payment is 
their original bid price.
• Constrained off= payment made to generators that were 
scheduled to run but could not due to network fault. This 
payment = SMP – their Bid Price =infra-marginal rent
Note:
“Constrained off” does not include periods where forecasted 
demand did not materialise. It has to be a network constraint 
that is restricting the generator from supplying their output e.g. 
a regional capacity line constraint that prevents all the low cost 
generators in Cork supplying their output to Dublin
(c) KDavis CIT 2013 20
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System Marginal Price
Short Run Marginal Cost
(c) KDavis CIT 2013 22
Analysis showing the trend of the SMP for electricity 
following the trading price for gas on international 
markets
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The uplift is set by the start-up cost of the new generators 
starting up. 
A peaking plant that has a high start-up cost might only be 
operating for one period per day. When the final SMP is derived 
all the plants start-up costs must be covered in this period; 
however all the other generator receive the SMP even though 
they might have no start-up costs in this period
(c) KDavis CIT 2013 28
Example
A Generator bids €45/MWh for each period. The 
following is the status of this generator during three 
sample periods 
Period Bid (SRMC)
/MWh
SMP
/MWh
Status Payment
received
1 €45 €40 Out of merit Capacity only
2 €45 €45 In Merit Capacity+SMP
3 €45 €50 In Merit Capacity+SMP
Example
A Generator continues to get the uplift even though it 
was running in the previous period
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(c) KDavis CIT 2013 29
Period Bid (SRMC)
/MWh
SMP
/MWh
Status Payment
received
1 €45 €40 Out of merit Capacity only
2 €45 €45 In Merit Capacity+SMP
3 €45 €50 In Merit Capacity+SMP
If during period 3 demand does not reach forecasted 
levels and this Generator is “constrained off” then the 
payment it receives is capacity payment +
For MWh outputted = SMP
For MWH not outputted = SMP-bid =Infra-marginal rent 
If the Generator is not “constrained off” but the demand 
is too low for bid output, it gets paid nothing except a 
capacity payment.
(c) KDavis CIT 2013 30
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(c) KDavis CIT 2013 31
A few additional notes
• Having an “in-merit” bid does not guarantee a 
generator an income the following day . The 
generator must be dispatched to receive a payment
• Wind Turbines are known as “Price Takers”. They do 
not bid into the pool but they are paid the 
calculated SMP for the given period. Hydropower 
stations are also “Price Takers”.
• The “Capacity payment” is based on the rated MW 
output of your generator
• The SMP can only be calculated after the generation 
day as the “start-up” costs for a generator are 
spread over their operating periods.
(c) KDavis CIT 2013 32
A few additional notes
• A generator that is dispatched but only produces a 
low output due to weak demand will be considered 
as “Reserve” and will also be considered 
“constrained off”, resulting in it getting the SMP for 
every MWh provided and (SMP – bid) for all of 
other scheduled MWh output.
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European Electricity Markets
Bilateral trade between Generators and Suppliers
Exchange only used for balancing purposes
BETTA (British Electricity Trading Transmission 
Arrangements) in force since 2005
See www.ofgem.gov.uk
More details in next lecture……
(c) KDavis CIT 2013 33
Revision Questions
1. Explain the following terms used in the Irish 
electricity market
– Short run marginal costs
– Single market price
– In Merit \ Out of Merit \Marginal Plant
– Constraint payment
2. Compare the economic structure of the Irish 
electricity market as it applies to renewable and 
non-renewable large scale pool power suppliers.
(c) KDavis CIT 2013 34