Clients

The Integrated Single Electricity Market (I-SEM) is a new wholesale electricity market arrangement for Ireland and Northern Ireland that began in October 2018. The I-SEM includes new arrangements for capacity under the Capacity Remuneration Mechanism (CRM). ESP Consulting was engaged as sole advisers on the design and implementation of the CRM, which involved developing the design from high-level policy through to detailed design of the market rules. As part of this process, ESP Consulting helped draft a number of industry consultations and decisions, and facilitated industry workshops around those consultations. Topics covered include:

• The design of Reliability Options that are awarded to auction winners, including the option strike price, the option market reference price, the contract tenor and penalties for non-delivery;
• The definition of the criteria for eligibility and the necessary steps towards participant qualification;
• The development of methodologies for participation across borders that allow for involvement of capacity providers in GB and suitable interconnector de-rating;
• The design of all elements of the capacity auctions including auction parameters;
• Implementing a suite of measures to mitigate market power;
• Arrangements to manage transmission constraint and ensure an appropriate locational distribution of capacity;
• The development of suitable arrangements for capacity providers to trade Reliability Options in a secondary market;
• Interactions with the wider energy trading arrangements of I-SEM, including the development of an Administered Scarcity Price and measures to reduce the potential for market power abuse;
• Analysis of the proposed design against EU State aid guidelines; and
• The overall codification of all policy decisions in the form of the Capacity Market Code, and suitable governance arrangements and institutional appointments that manage the entire CRM process.

In addition to design and implementation, we also provide ongoing support to the operation of the CRM. Our activities include:

• Ad hoc policy reviews;
• Defining auction parameters ahead of specific auctions;
• Capacity Market Code modifications; and
• Assessment of applications for Unit Specific Price Caps and other Exception Applications related to specific auctions.

To date there have been 3 successful auctions, 2 transitional T-1 auctions and a T-4 auction. The T-4 auction resulted in the award of contracts for approximately 700MWs of new capacity, across a range of technologies including gas-fired generation, demand-side response, wind and battery storage.

Two major change programmes, the Integrated Single Electricity Market (I-SEM) and “Delivering a Secure Sustainable Electricity System” (DS3), took place concurrently in the Irish market. Alongside our role as centralised programme manager for both of these, ESP Consulting served as the I-SEM and DS3 Programme Design Authority for the two Irish energy Regulatory Authorities. The purpose of this piece of work was to provide design integrity assurance, with the scope including:

• Designing diagnostic tools to assess the completeness of the overall I-SEM and DS3 designs;
• Identifying and resolving any gaps or inconsistencies within the detailed design, particularly where there are interactions between the two programmes, and where new changes were introduced over the course of the programme;
• Providing assurance and advice on the overall deliverability of the design, including a review of testing; and
• Interfacing with industry to survey market developments and provide design assurance.

In order to prepare for a greater penetration of renewable generation in the Irish market, the incumbent TSOs set up a programme called “Delivering a Secure Sustainable Electricity System” (DS3) to ensure that the market and transmission network is able to accommodate these changes. In particular, this has impacts upon the needs for ancillary services and the way in which they are procured. ESP Consulting was engaged with the two Irish Regulatory Authorities in the development of associated policy design, with activities including:

• Modelling of the market need for ancillary services and review of the TSOs’ modelling in this area;
• Advising on procurement design models with investigation into competitive options that are auction-based, as well as identifying scenarios when a tariff-based approach may be required as an alternative;
• Analysing the delivery timeline to define if and when an interim period is required and implementing any subsequent changes to the procurement methodology; and
• Defining the criteria for eligibility and the necessary steps towards participant qualification.

We advised the two Irish energy Regulatory Authorities on the impacts that increased renewable generation in Ireland has on the operation of the power system. This included services required to keep the power system stable. Our advice focused on the commercial arrangements required to ensure these services (reserve, fast response etc.) are provided by generators and others. Our activities included:

• Review of analysis by the Transmission System Operators, Eirgrid and SONI, of the need for ancillary and system services;
• Advice on the market analysis required to value the ancillary and system services; and
• Advice on the strategy for procurement of ancillary and system services, consistent with the obligations of the two Regulatory Authorities and a desire to attract alternative (i.e. non-thermal-generation) service providers.

The development, implementation and subsequent operation of the Integrated Single Electricity Market (I-SEM) and DS3 programmes in the Irish market constituted significant new work for the Transmission System Operators (TSOs). That work included developing the design in further detail, as well as developing systems and process that administer and implement the new market arrangements. ESP Consulting was engaged with the two Irish energy Regulatory Authorities to provide ongoing assurance that the TSOs’ costs in relation to these two activities were reasonable and additional to those agreed in previous price controls. This work involved:

• An initial review that looked at the costs from a perspective of reasonableness and incrementality, the efficiency of procurement, and the level to which cost management is embedded in business controls; and
• Ongoing quarterly reviews of standardised TSO reports and cost submissions.

Two major change programmes, the Integrated Single Electricity Market (I-SEM) and “Delivering a Secure Sustainable Electricity System” (DS3), took place concurrently in the Irish market. ESP Consulting partnered with Neueda, a global IT consultancy, to perform the I-SEM and DS3 centralised Programme Management Function for the two Irish energy Regulatory Authorities. The activities this involved included:

• Developing and maintaining a hierarchical plan for the entire programme that is fully integrated with the plan of the Transmission System Operators (TSOs);
• Making continual assessment of resource availability and determining an optimal response;
• Regular and accurate progress reporting, with a standardised and agreed set of reports in conjunction with a baselined plan and facilitation of regular project board meetings;
• The implementation of procedures for risk and issue management, assumptions management, document management and change control;
• Taking measures to ensure quality control and quality assurance of any programme deliverable through a series of agreed, standardised reviews over its lifecycle; and
• Interfacing with industry to survey market developments and provide delivery assurance.