SEM Proposal to Remove Benefits for Sub-10MW Generation
The joint wholesale market for electricity in Ireland and Northern Ireland is called the Single Electricity Market (SEM). “De Minimis” generators are generators below 10MW which currently are not required to trade their electricity in the SEM market, but can contract outside the market, usually by entering into a power purchase agreement (PPA) with an energy supplier.
The SEM is currently being redesigned to accommodate EU requirements for integration of electricity markets, and will be known as the I-SEM. It is currently intended that the I-SEM will be operational from 30 September 2017. The SEM and the new I-SEM is governed by the SEM Committee, a joint body made up of the Irish Regulator, the CER, and the Northern Irish Regulator, NIAUR.
It has been perceived for some time that De Minimis generators bring certain added value to the market, due to the smaller scale benefits they bring to communities (they are often private individuals or SMEs) as well as the benefits they bring in terms of lessened pressure on the grid network versus industrial-scale generators.
Historically, this added value has been recognised by way of payments called “De Minimis Benefits”. These benefits payments are paid directly to supply companies who contract with de minimis generators, and are often shared with generators either through PPA payments, or an increased price per unit, versus the price offered to industrial-scale generators. It has been estimated that for the period July 2015 to June 2016, these De Minimis benefits had a value of approximately 1.5p/unit (kWh) depending on the arrangements with the supply company.
At a meeting on 11 July 2016, the I-SEM project team proposed the removal of certain De Minimis benefits in the new I-SEM Design.
The renewable associations in Ireland and Northern Ireland, along with a number of other Industry representatives, formed a working group to lobby the SEM Committee to have a consultation on the treatment of De Minimis benefits in the I-SEM. The group was successful, and the SEM Committee issued a consultation on 3 October 2016 entitled “Energy Trading Arrangements Basis for Supplier Charging”, SEM-16-060, which is available in full at the link below:
It has been estimated that approximately 930MW of connected De Minimis generation in Ireland and Northern Ireland would be impacted by the decision, including 18,000 domestic customers in Northern Ireland with roof-top solar.
Industry must respond to this consultation before 5pm next Monday the 14 November 2016, and responses can be emailed to Kenny Dane at Kenny.Dane@uregni.gov.uk.
Responses (in the form of a letter or email) should include:
• Background to your renewable project proposed future project;
• Impact of a decision to remove De Minimis benefits on your project (if known);
• List of reasons why it is important De Minimis Benefits are maintained; and
• State support for the detailed responses provided by your renewable association (if you are part of one).
If you are interested in discussing how this decision might impact your business, or would like a copy of a draft letter to send in response to the consultation, please contact Andrew Kirke of Tughans using the contact details below.
Associate Director – Contracts and Energy Department
Tel: +44 (0) 28 9055 3300