Wholesale Market Policy & Reform

ESP Consulting has extensive experience working with governments and regulators in areas of market and industry reform, including policy design as well as programme and project management. Since the launch of ESP Consulting, most of our work in this area has been focussed on the United Kingdom and the SEM/I-SEM market region comprising both the Republic of Ireland and Northern Ireland. However, our senior practitioners bring extensive further experience from previous employments with leading consultancies and industry participants covering a wide range of Europe markets as well as further afield (Australia, Brazil, South Africa and several Asian countries).

Our experience in this area includes:

• Programme management and analysis of interaction of all design elements of new designs, including for I-SEM and DS3 in Ireland;
• Analysis and design of vertical and horizontal separation of generation, transmission, distribution and retail to facilitate wholesale and retail competition;
• Development of contractual arrangements to support wholesale market reform including EMR in the UK; and
• Advice on the restructuring of monopoly distribution businesses either to realise efficiency gains through consolidation or to support divestment.

Our senior staff have, on several occasions, advised governments and regulators on the design and implementation of new markets. For example, over the past four years we have been continuously engaged on the design and implementation of the new power market spanning the Republic of Ireland and Northern Ireland. Our experience includes:

• Design and implementation of Capacity Mechanisms;
• Design of wholesale markets (both gross and net pool designs) on behalf of governments, regulators and market participants to improve contestability and liquidity;
• Development and drafting of detailed market rules and other supporting legal agreements (e.g. settlement agreements and licences);
• Development of trading arrangements for both merchant and regulated interconnections;
• Competition assessment including tailoring of standard techniques to ensure they are appropriate to assessing competition in complex gas and power markets often with limited depth and liquidity; and
• Review and recommendations on UK wholesale market liquidity on behalf of Ofgem.

Our staff bring particluar expertise in the area of design of vested contracts, from both our work as part of ESP Consulting and previous employments. This experience includes:

• Support on the development and implementation of vested (directed) power and fuel contracts, often put in place to support restructuring and/or privatisation (the Irish SEM market being such an example);
• Design of contract form (e.g. forwards/futures, one or two way CfDs, PPAs), pricing, and volume to support objectives such as mitigation of market power by dominant generators, as well as tariff and financeability, environmental policy, social policy and privatisation objectives; and
• Support to market participants in assessment of vested/directed arrangements and response to Regulatory Authorities.