United Kingdom

United Kingdom

Northern Ireland clears barrier -- Regulator steps in with imbalance solution

New rules to expand the market for electricity from wind in Northern Ireland are coming into force this month. By absolving electricity retailers from having to balance wind generated output with customer demand on a half-hourly basis, energy regulator Douglas McIldoon expects to remove a major barrier from what he says is the most developed renewable technology -- and the main source of renewable electricity in Northern Ireland.

"There is a lot of wind power waiting in the wings and it could be developed quickly, giving confidence to the market as well as assisting the overall supply balance at a time when, in both parts of Ireland, it is tighter than perhaps it should be," he says. "Discrimination in favour of renewable energy is now accepted both by the European Union and its member states. These new rules give immediate and least-cost effect to this principle."

New renewable generators -- and in particular wind generators -- are discouraged by the "unmanageable risks" under the existing top-up-and-spill trading framework in Northern Ireland for dealing with electricity imbalance, he says. As the Republic of Ireland's and Northern Ireland's electricity markets move towards full market opening and closer compatibility, prices in the north for top-up-and-spill will have to be more akin to those in the Republic. Here the gap in price between covering a shortfall (top-up) and offloading excess power (spill) is narrower, enabling green electricity sales to grow rapidly, he adds.

Annual consolidation

The main difficulty for wind generators is balancing the economic value of what they put into the system with what their customers consume. This is because wind output is not predictable and customer demand tends to peak when electricity is most valuable. "I believe that the problem can be overcome by requiring renewable suppliers to procure over the course of a year 120% of the amount required by their customers with the risk of both gains and losses on this being borne by the customer body as a whole," says McIldoon. Effectively this allows retailers (suppliers) to consolidate a whole year of wind output in their trading accounts. "Consequently, wind generators would not be required to pay for top up when their customers' requirements exceed the wind farms' production." If they prefer, however, wind generators and suppliers will be free to remain within the existing system of top-up-and-spill.

In a further change to the rules, designed to help small-scale wind producers, McIldoon proposes allowing them to sell any output excess to the amount they bid into the market at a price to be set by the Office for the Regulation of Electricity and Gas (Ofreg). For the 2002/2003 period, NIE will be required to buy spill power from small wind producers at a fixed £0.03/kWh.

The regulator's proposals follow the findings of the Trading in Renewables Implementation Group he set up in 2001 to identify problems preventing renewables trading. This brought together existing and prospective renewable players and Ofreg. McIldoon points out that despite opening the market for renewables in 1998 in Northern Ireland, no new suppliers have emerged to compete with Northern Ireland Electricity (NIE), which markets renewables under its Eco-energy tariff. It is one of the most successful green tariffs in the UK, but still represents a mere 0.5% of total electricity sales in the province.

So far, Airtricity is the only independent retailer ready to take advantage of the new arrangements. The Irish green electricity supply company has established an office in Belfast and is poised to enter the Northern Ireland market with the aim of playing a "very significant role." Declan Flanagan from the Dublin-based company -- which has just re-branded its name from Eirtricity -- applauds the regulator's objective of kick-starting the market for green power, which up until now has been the exclusive preserve of NIE.

"The proposal is very innovative in that it allows suppliers to trade outside of top-up-and-spill, but it comes at a significant cost and we will have to see how it works in practice," he says. "Overall, Northern Ireland is getting really serious about renewables. We hope to get a supply business up and running in the very near future once these changes to the regime are in place." He explains that the company also has two wind projects in planning in Ulster, with further projects in the pipeline.

Mike Harper from B9 Energy -- Northern Ireland's leading wind generator -- gives the proposals a qualified welcome. "It is great that the regulator is looking at the problems and it is great that he is trying to address them. But in terms of the detail, I need to see how it is going to be implemented and how it is going to work in the longer term to see whether it will make a difference." His chief concern is whether the £0.03/kWh spill price will apply to all wind generators, large and small, how long it will apply and at what level. The document is too vague to give confidence to prospective wind generators, he says.

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