Mid-way through 2018, the energy markets in Northern Ireland and the Republic of Ireland will join to become the “Integrated Single Electricity Market” (I-SEM).
It is a brand new arrangement which aims to take advantage of European transmission assets and make delivery of energy quicker, easier and more reliable. The results of this are expected to create greater levels of transparency and drive the non-commodity parts of the price of energy down.
The new I-SEM arrangements far exceed the simple transmission of energy and also include systems, policies and procedures.
This will change the levels of electricity generation required in the countries and is anticipated to result in some closures of existing power plants.
Will Brexit affect the I-SEM?
The SEM committee in Ireland decided post-referendum that there are significant economic benefits to continue with I-SEM, which will exist independently of EU law or policy.
Who runs it?
The SEM Committee will govern the new system with a mission of protecting the interests of consumers of electricity. They’ll do this by managing the purchasing and sale of electricity through the I-SEM, along with licensing.
The Transmission System Operator (TSO), IE the company responsible for the physical delivery of electricity, is EirGrid in Republic of Ireland and SONI in Northern Ireland, who will work together to maximise efficiency in the market.
What does this mean for my business?
The change is certainly significant if your business works in the energy sector in Ireland or Northern Ireland. Changes to the market, licenses and regulations are significant with this sort of fundamental shift. For example, I-SEM will split the previously singular market into three (intraday, day-to-day and day ahead), which will lead to extra challenges when purchasing wholesale for suppliers, who will have to trade energy more frequently and in all hours of the day.
Elsewhere, the main headline is that the state believes the changes will save consumers and businesses €200 million a year. Previously Eirgrid and SONI paid about €55,000 for each mega watt (MW) of electricity that each power plant in Ireland and Northern Ireland could generate. Under the new system, they will pay €41,800 a MW, meaning this reduction should, in theory, make its way through to businesses and consumers in time.
Ultimately, this amounts to 2018 being a year of opportunity for your business to reduce the money it pays for electricity. It is a good time to negotiate a new contract.
Due to the expectation that I-SEM will create a downward trend in energy costs, LEU (Large Energy Users) and I&C (Industrial and Corporate) consumers who currently purchase their energy on a flexible contract will have the opportunity to take advantage of the expected decrease later in the year, resulting in a reduced energy spend.
Whilst the dawn of I-SEM is being talked up by many, it should actually be relatively simple to navigate for the vast majority of businesses, especially with a helping hand from an expert. Give us a call if you’d like some guidance on setting your strategy for the rest of the year.
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