The First 150 days of I-SEM; Part 1 – The Price Spike of January 24th
The First 150 days of I-SEM; Part 1
The Price Spike of January 24th
In ElectroRoute’s latest series of Insights, we plan to investigate more thoroughly how the first 150 days of I-SEM have unfolded, specifically touching on topics regarding pricing, market rules and general behaviour. Today, in the first of this series, we are fast forwarding to day 115 where we saw the highest price spike of the market so far. Here we investigate the events that caused the price spike and examine if there is a way to avoid this going forward.
With four months of trading under its belt, I-SEM witnessed an unsettling peak balancing price of €3,774/MWh at lunch time on Thursday, January 24th. This price, over double the next highest price of I-SEM, was caused by several coinciding events across the island of Ireland. In this Insight, we provide a high-level overview of these events which demonstrate the volatile nature of the I-SEM market. Early on the morning of Wednesday, January 23rd the first player in the price spike came into play; the Coolkeeragh 400MW power station in Derry declared an unplanned outage due to technical problems. The outage would last three days. With high wind forecast in ROI for January 24th, I-SEM ex-ante markets cleared at low prices, and of most relevance to this topic, they cleared lower than their corresponding prices in the GB BETTA market. This price difference resulted in the Moyle interconnector being scheduled to export upwards of 200MW to GB over the lunch and evening peak time brackets of the 24th. Maximising the efficient use of interconnectors was a key sell point of the new I-SEM market whereby interconnectors are scheduled between coupled markets based on the Euphemia algorithm. However, a key factor which led to this specific price spike was that of the two interconnectors available, Moyle and EWIC, Moyle was scheduled to export. The Moyle interconnector, connecting Northern Ireland to Scotland, was deemed the suitable choice due to the application of losses in the Euphemia algorithm and in turn trumped the second choice of EWIC which connects the Republic of Ireland to Wales. The above scheduling, however, did not consider the restrictions on the north south tie-line and acted on the assumption that the island of Ireland had unlimited transfer of power between the north and south. As lunch time on January 24th approached the Irish system was long and wind energy was plentiful on the south of the island, but the north was becoming heavily constrained. In the north demand was increasing, Coolkeeragh power station was out, wind energy was below forecast, and Moyle was exporting at its full capacity. Concurrently, the north south tie-line had reached its operational limits and was unable to flow any more power from the south to the north. The excess wind energy which was essentially being exported by Moyle in the north was trapped south of the tie-line leading to a long system in the south and a large system constraint in the north. As a result, an amber alert was raised by the System Operator. In order to meet the high constraint issues, the two Antrim-based Ballylumford plants were called on as fast-acting plants and hit at their simple offer incremental prices of €6,342/MWh and €5,637/MWh respectively. Initially, both plants were flagged as non-marginal, i.e. there were limitations on the units’ ability to alter generation output and in turn should not be used as part of the system-wide imbalance price calculation. However, as the RTD (Real-Time Dispatch) increased the plants from their LOL (Lower Operating Limit) they became marginal, while simultaneously the all-island system flipped to being short. As the most expensive unit which has not been flagged in a short system, the Ballylumford plant with a simple incremental offer of €5,637/MWh had its first impact on the balancing price. Over the next hour, as the unit moved between various operational limits and ramping constraints, its non-marginal flag came in and out of play. With all ROI units being flagged due to the MWR constraint (a constraint on the north-south tie line) and other NI units being non-marginally flagged, the Ballylumford unit set a number of 5-minute imbalance prices resulting in two imbalance settlement prices of €3,773/MWh and €1,909/MWh. In conclusion, the price spike on January 24th indicates a number of important discussion points. Firstly, it shows an obvious impact of the lack of capacity across the North South interconnector and clearly creates a limitation for the Transmission System Operator in operating the system safely. Secondly, we see that that the ability to trade in the market is subject to having a clear understanding of the system dynamics, as shown on this occasion by the regular movement of plants in and out of becoming marginal units which set the price for the rest of the market. While this example shows a particularly volatile day in I-SEM and does stand out as one for extra scrutiny, it is worth noting that I-SEM generally has proven to be a particularly volatile marketplace for all participants. As the days pass, it seems more likely that this volatility is not just a passing trend but rather a feature of the all-island energy market. Cognisant of this, we continue to constantly develop and update our service offering to provide market participants with an effective hedge against such volatility and to ensure budget certainty for a range of asset owners.
Please contact our Client Services team if you would like to explore the trading, forecasting and balancing services that ElectroRoute can offer to help you minimise the impacts of this volatility on your assets.