Amber Thursday in I-SEM

While today may be black Friday, there were no early deals last night (26^th November) for those doing their last-minute buying across the evening peak in the balancing market. At 14:00 an amber system alert was issued for Northern Ireland due to a generation shortfall. The alert was issued with an effective time of 16:00. Across the imbalance settlement periods of 17:00 and 17:30, the imbalance price reached €691.57/MWh and €658.06/MWh. This is above the €500/MWh strike price which holders of capacity market contracts are exposed to. The last time the strike price was reached was January 24^th, 2019. The alert was lifted at 19:00.

Why did this happen?

Generation shortfalls in Northern Ireland are not a new phenomenon.  There have been seven amber alerts since the start of I-SEM, five of which have been due to generation shortfalls in the north with three of those occurring this month. The EirGrid and SONI winter outlook for 2020/21 sounded the alarm bells early, with a predicted all-island capacity margin of only 929MW. The margin has been declining over the past five years as a result of;

• increasing outage rates of ageing plant
• dispatchable generation being replaced in the market by renewables, and
• a strengthening demand.

This year, the traditional summer outage season for generators was also disrupted by COVID-19 with the unavailability of specialist maintenance crews to travel from overseas. This created a knock on impact of large generators having outages during the winter months. One such outage relates to a 250MW Ballylumford CCGT unit located in Antrim. The EriGrid/SONI outlook forecasted that in Northern Ireland, if an outage of one large generator coincided with a period of low renewable generation there is a risk of a system alert.

So with anti-cyclonic conditions across the island yesterday, low levels of wind output (approximately 300MW across the island), temperatures hitting the low single digits and the outage of the Ballylumford plant, it was no surprise that an amber system alert was issued to the market. The GB power system was also experiencing tight margins. With the interconnectors coupled, day-ahead prices reached €336.2/MWh (the second highest day-ahead price since I-SEM began) at 17:00 with I-SEM due to export to GB. The export position at 17:00 persisted through the market coupled intraday auctions. This left the North in a precarious position as the Moyle interconnector, with lower losses than EWIC, is the first of the Irish interconnectors to be scheduled in the Euphemia price coupling algorithm.

As demand was on its way to reaching its highest level so far for 2020 (6.45 GW), several System Operator to System Operator (SO-SO) trades were executed to buy back the power that was to be exported. These system operator trades happened once the market has closed and facilitate changes to interconnector schedules to facilitate increased renewable generation or in this case, for reasons of system security. The price of purchasing power from GB across the 17:00-17:30 period was €924.66/MWh. With the Net Imbalance Volume (NIV) short, mostly driven by shortness on the demand side, the Moyle interconnector was the most expensive unit in the ranked set and remained unflagged throughout this period. Due to the price averaging in the imbalance price calculation (see our previous Insight on how imbalance prices are calculated here)  the settlement prices were lower than this value. The next most expensive unit was a Coolkeeragh peaker at €501.58/MWh. The last strike price event in January 2019 which was also driven by system tightness in Northern Ireland (see our Insight on this event here) ) resulted in a peak balancing price of €3,744/MWh but was set by Ballylumford peaking units with simple incremental offer prices of greater than €5,000/MWh. This is the first time that the imbalance price has been set at such a level by an interconnector.

Outlook

Even with the planned return of the Ballylumford CCGT for the start of December, there is the ever-present risk of unplanned outages occurring during similar climatic conditions throughout the winter months. If support is not available from GB during these times, we will likely see more of these high price events.

The generation shortfalls in Northern Ireland do show the importance of the North-South interconnector. The project, which will have a capacity of 1,500MW, received ministerial consent to approve planning permission in Northern Ireland in September 2020 having previously received approval in Ireland in December 2016. The current expected date for commissioning is sometime in 2023, still some time away.

Volatility

November 2020 has again highlighted the volatility of the Irish Market. In this month alone we have seen 41 periods of negative prices in the day-ahead market as well as the second highest day-ahead price. The balancing market has seen prices as low as €-243/MWh and yesterday’s high of €691.57/MWh. From a power system point of view, the need to be able to withstand peaks and troughs in both generation and demand is evident and there is only going to be an increasing requirement for a more flexible energy system. Naturally, there is a need for new and innovative trading products required to support the assets that will deliver such a system as we transition to a net zero carbon world.

Please contact our Client Services team if you would like to explore the trading, forecasting and balancing services that ElectroRoute can offer to support you in mitigating the impact of, or indeed maximising the opportunity from, this volatility on your assets.