I-SEM Delay, Changing PPA Provider & I-SEM Balancing Product (Part 1)

  I-SEM delays… We’ve been here before, haven’t we? Maybe this time it’s different though! In this 2-part series Brian Kennedy, Trading Services Development Manager at ElectroRoute, focuses on opportunities for generators as a result of the delay. Brian gives an overview of how a generator can use the I-SEM delay to their advantage and to provide further clarity on the products that ElectroRoute offers to manage risk on behalf of its portfolio of clients. Last week, the SEM Committee announced that the Go-Live date for I-SEM would be pushed back to 1st October 2018 to allow further time for central systems implementation and testing (read more here.  We’ve had delays before, but this we hope, is a minor and final blip in the roadmap before the new electricity market begins in earnest. Here at ElectroRoute HQ, we’re continuing our I-SEM programme despite the delay and we continue to aim to have our systems prepared and ready to go for May 23rd in any case. A delay isn’t a cause to take the foot off the gas. Equally our Client Services team are pushing hard to close out I-SEM Supplier Lite contracts and PPAs as soon as possible with a renewed push now underway to originate new business to add to the 1 gigawatt of assets we will be trading in I-SEM. The holidays, for us at least, can wait! In fact, the revised date Go-Live actually supports the industry in more ways than one. Sure, trading entities and utilities now have further time to prepare; but a second, less obvious impact has become apparent – the 1st October date now affords operational generators time to seek commercially suitable offtake arrangement with new suppliers. Specifically, for operational REFIT generators, you may recall that the Commission for Regulation of Utilities (CRU) published a Notification to Suppliers regarding the 18/19 PSO Levy back in March 2018. Significantly, in this document, the CRU included information on the process allowing generators switch suppliers owing to the I-SEM market change. It has been recognised for quite some time that many generators are motivated to find alternative offtakers at a market change point. Generators now have until 17th August 2018 to change suppliers – options include moving to a new PPA provider or switching to a Supplier Lite model. But how does the I-SEM delay make any helpful difference here for REFIT switchers? REFIT projects can only change supplier on 1st October, at the start of the PSO year. The original Go-Live date posed an issue for generators as they effectively needed to arrange two agreements if they were to change PPA providers, those being;

• 23rd May – 30th September: Transitional I-SEM agreement with current PPA provider
• 1st October onwards: Enduring I-SEM agreement with new PPA provider

    The cost and effort in arranging two deals was proving an issue for generators given I-SEM was due to begin mid-way through a PSO year. Now however, a clean start with a new Supplier is possible on the 1st October with no transitional arrangement. This has dramatically lowered the barrier for seeking more commercially suitable conditions. We have been working with generators who wish to transfer their route to market to ElectroRoute’s. Our innovative balancing products are competitive and importantly are intended to achieve a number of aspects for a generator;

• To be cost competitive
• To provide a secure method of transferring balancing risk to ElectroRoute
• To provide price certainty to our clients
• To ensure no revenue leakage such as loss of constraint payments by virtue of not participating in the Day Ahead market.

As we continue to engage with interested parties, we recognise that much confusion surrounds the varying products that are being offered in the market at present. In the next of this two-part series, we will focus on the products that ElectroRoute has developed to support our clients and why we are focused on physical products rather than financial structures. If you would like to discuss your PPA / Supplier Lite options ahead of I-SEM, please get in touch with our Client Services team.