Brexit and I-SEM 30 Jun 2016

From what I can remember of my engineering studies the power flow equations have no provision to consider political or international associations. Voltages, along with network resistances and reactances, are capable of deciding between themselves where energy will flow. And so it is with flows over the border between Northern Ireland and Ireland. Given that nobody will suggest a disconnection of the two systems on this island then we are best off to think about the fundamentals, and not political associations, when we think about the optimum energy trading arrangements for the next 5-10 years.     

Brexit caught many people and markets by surprise and it looks like there will be a period of political and market uncertainty as the UK government search to give meaning to the stated will of the UK voters. For individuals in the power industry in Ireland and Northern Ireland the question will rightly be asked “what does Brexit mean for I-SEM?”. Looking at all the system and economic fundamentals, the answer should be that “the I-SEM will be implemented as planned”.

The small synchronous system on the Island of Ireland is beginning to struggle to accommodate the ever increasing levels of variable renewable generation being connected. Concerning, when you consider the solar industry is still stuck in the traps in Ireland. Increased embedded generation, demand response and, over the next number of years, smart meters all fundamentally demand the establishment of a “proper” market where assets and actors can forecast and trade ahead of time using the best information possible. The net results should be an orderly market where energy resources are optimised using the best information to the economic benefit of all system users and customers.

Resource sharing and optimisation between north and south goes beyond just the energy market. Sharing of capacity resources is also critical for the mutual economic and security benefit of both systems. A mantra Eirgrid are frequently reminded of as they endeavour to get the second North -South interconnector built before 2020.   

With the I-SEM project set to address fundamental economic and system requirements in the energy market, the capacity market and the system services market (DS3) for the common interests of both jurisdictions, there can be little fundamental reason to stall on I-SEM implementation. 

But often it not about fundamentals, sometimes it is about interests. There may be parties with strong interests in keeping the status quo. A stable, known SEM market is comfortable for many, but questions remain: is it too comfortable for some? The SEM capacity payment mechanism has proven incapable of providing exit signals to plant regardless of how much excess capacity the system has and how old and emitting the plants are. 

An industry colleague quipped with me recently that these plant reminded him of himself. Around 40 years old, over-paid and rarely runs anymore.  

It remains to be seen if the Brexit uncertainty will be exploited by any interest to maintain the status quo for just a little longer. 

In a recent pre-Brexit meeting the I-SEM Committee, comprised of the regulators in Northern Ireland and the Republic of Ireland along with independent experts, were swift to remind stakeholders again of the fundamental need for the new market and also that cross-border cooperation in the electricity markets already had a strong legislative footing in each jurisdiction. 

While a period of political uncertainty will ensue in the UK, the policy makers here would be best served to keep focused on the economic and system fundamentals and ensure that the I-SEM is delivered in 2017.