Market Structure
Overview of the Electricity Markets Structure in the Republic of Ireland (ROI) and Northern Ireland (NI)
The electricity market in both ROI and NI can be categorised into four key segments: generation, transmission, distribution and supply. In ROI and NI, electricity generation and supply operate under full competition, while electricity transmission and distribution are subject to regulatory oversight as monopolies, with the respective regulatory authorities determining the permissible revenue for each price review period.
Energy policies are formulated by the Minister for the Environment, Climate, and Communications in ROI and the Department for the Economy in NI. These policies and the regulatory framework are influenced by European Union (EU) legislation. In ROI, the Commission for Regulation of Utilities (CRU) serves as the independent regulator for the energy market, while in NI, the Utility Regulator (UR) holds the role for overseeing the energy market.
The electricity transmission system comprises a high-voltage network designed for transporting large-scale electricity supplies at voltages of 110kV or higher. The electricity distribution system is responsible for delivering electricity to individual customers at voltages of 110kV or lower. In ROI, the transmission and distribution system network is owned by ESB, with EirGrid managing the transmission system network and ESB operating the electricity distribution system network. In NI, NIE Networks, which is owned by ESB, owns the electricity transmission and distribution system network, and oversees the electricity distribution system network. The System Operator for Northern Ireland (SONI) manages the transmission system network in NI.
The Integrated Single Electricity Market (I-SEM) functions as the wholesale electricity market covering both ROI and NI. Within the I-SEM market structure, there are various competitive markets, including the Day-Ahead, Intraday, and Balancing Markets (BM), as well as a competitive capacity remuneration mechanism. These arrangements are aligned with EU harmonised regulations for cross-border energy trading throughout Europe and adhere to EU State Aid Guidelines governing capacity remuneration.
The capacity remuneration mechanism in I-SEM involves an auction where power generators compete for capacity contracts. Additionally, it imposes reliability penalties on contract holders if they fail to deliver capacity when called upon. Generators primarily compete for Reliability Options on a four-year ahead basis (T-4), with additional adjustment auctions taking place on a one-year (T-1), two-year (T-2), and three-year (T-3) ahead basis as required.
The Irish Government has in place a Renewable Electricity Support Scheme (RESS) and an Offshore Renewable Electricity Support Scheme (ORESS) with the aim of achieving 80% renewable electricity by 2030 (similar targets have also been announced in the Climate Change Act for NI). Successful participants in the various RESS auctions will secure 15-year contracts.
The I-SEM generation capacity is approximately 16 GW and is connected to the system on an all-island basis. The capacity connected to the system includes a mix of older generation plants alongside modern gas fired Combined Cycle and Open Cycle Gas Turbine (CCGT/OCGT) plants and renewable energy sources such as hydro, wind and solar power. These stations generate electricity from fuels such as gas, coal and oil as well as indigenous resources including hydro, wind, solar and biomass. I-SEM has c.6 GW of wind installed, with plans to expand on both this and solar power as part of the aim to have up to 80% of electricity generation from renewable sources by 2030. Wind contributed approximately 36% of generation in 2023 (33% in 2022)1.
2023 also saw c.73% availability of baseload thermal generation in I-SEM. Gas was the primary fuel in the market, with coal generation dropping off due to reduced gas prices and significant interconnector imports.
For geographical reasons, the electricity transmission systems on the island of Ireland are isolated compared to systems in mainland Europe and Great Britain (GB). The Moyle Interconnector links the electricity grids of NI and Scotland. The East-West Interconnector (EWIC) links the electricity transmission system in ROI to the electricity transmission system in Wales. The total interconnection capacity with GB is approximately 1,000 MW. The Greenlink Interconnector, with a capacity of 500 MW, between Ireland and Wales is proposed to come online in 2024, while the Celtic Interconnector between Ireland and France with a capacity of 700 MW is due to be in operation by 2026.
In 2023, SEM was a net importer of electricity from GB as prices in GB were lower than SEM on average.
Overview of the Electricity Markets Structure in Great Britain (GB)
In GB, electricity generation and supply are open to full competition. Electricity transmission and distribution are regulated monopolies in GB, with the Office of Gas and Electricity Markets (OFGEM) determining the allowed revenue for the price review period. Energy policies are set by the Secretary of State for Business, Energy and Industrial Strategy (BEIS). OFGEM is the regulator of the energy market in GB.
BETTA is the wholesale electricity market operating in GB. Unlike I-SEM, trading can take place between generators and suppliers either bilaterally or through exchanges, and both physical and financial contracts can be struck to manage price volatility, for time scales ranging from several years ahead to intra-day trading markets. National Grid, acting as the Electricity System Operator (ESO), is responsible for balancing supply and demand in real time, by utilising the BM and other system services. BETTA operates a capacity remuneration scheme, where generators are awarded capacity contracts based on the outcome of an auction, that enable them to receive payments for the provision of generation capacity while also incurring penalties for non-delivery during scarcity events.
The main support mechanism for low-carbon technologies is through CfDs; awarded through competitive auctions (Allocation Rounds (AR)). The fifth round of allocation (AR5) results were announced in October 2023 with a total of 3.7 GW awarded. Solar received the largest capacity with 1.9 GW and a strike price of £47/MWh and onshore wind received almost 1.5 GW (strike price of £52.29/MWh). In contrast to 2022's AR4 where offshore capacity dominated the auction, no offshore bids were entered for 2023's AR5 due to the lower strike price. With the AR6 process already underway for 2024, the strike price for offshore (fixed bottom) will see a 55% increase, rising to £76/MWh.
In GB, the transmission network is owned by Scottish Hydro Electricity Transmission Limited (SHETL), Scottish Power Transmission (SPT) and National Grid Electricity Transmission (NGET). However, the entire transmission network is operated by one national electricity transmission system operator, the ESO. At distribution network level, the network is owned and operated by a number of regional distribution companies.
In addition to interconnection with Ireland, GB is interconnected with France, Belgium, the Netherlands, Norway and Denmark with the total GB import/export capacity at approximately 8,400 MW. Despite Brexit, a number of new interconnector projects are being planned, including further interconnections with France, Ireland and Norway, as well as new interconnections with Germany. The 1.4 GW Viking Interconnector completed testing in September 2023 and came into commercial operation at the end of December 2023 offering an initial capacity of 800 MW. Both National Grid and Energinet are working towards full capacity operation by the end of 2024.
Wind share of generation is defined as total wind generation as a percentage of positive metered generation and an estimated 2 TWhrs embedded generation.