All-Ireland electricity market sparks negative pricing

The new all-Ireland electricity market that came into effect last October has led to increased volatility in prices in the wholesale market, and a number of occasions when power companies were forced to pay commercial customers to accept their excess energy, according to Dublin-based energy trading company.

Under the Integrated Single Electricity Market (I-SEM), designed to boost efficiency and align Irish energy costs more closely with those in Europe, all generators, including wind companies, are required to price and sell their electricity output 12 to 36 hours ahead of actual delivery.

However, wind companies are often unable to accurately forecast their output up to 36 hours in advance.

"[When] wind output is very high we begin to see more circumstances whereby conventional power plants begin to offer their output for a negative price in an effort to avoid switching the unit off and having to go through a maintenance intensive operation to restart the facility when they are required ,as wind reduces," said Ronan Doherty, chief executive of ElectroRoute, a Dublin-headquartered energy trading company.

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Mr Doherty said that there have been 556 half-hour periods of negative pricing between October and mid-April in a market for power that has not been traded in advance. This is known as the balancing market.

Smart meters

While big companies can take advantage of power market fluctuations and secure negatively-priced energy, this is not currently an option for households. Still, Mr Doherty said that advent of smart meters, which will give consumers greater control over energy use, may in time provide an opportunity for households to benefit from periods of negative pricing in the balancing market.

Every domestic electricity meter in Ireland is set to be replaced by a smart meter by the end of 2020, according to ESB Networks.

While negative pricing is a common feature of the European energy market, it is a new phenomenon in Ireland.