REFIT In I-SEM Decision Update

Author:Mr Garret Farrelly and Owen Collins
Profession:Matheson
 
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The Department of Communications, Climate Action and Environment (the "Department") has published its final decision on the interaction between existing renewable energy support schemes (ie, the AER and REFIT schemes) and the upcoming revised wholesale electricity market, I-SEM. Click here to view the decision.

Background

The Renewable Energy Feed-in Tariff ("REFIT") schemes have helped to drive significant renewable generation development in Ireland.

REFIT (through a power purchase agreement ("PPA") with an offtaker) provides renewable energy generators with price certainty in the form of a floor price tariff, which is key to underpinning financing for the generators. This tariff is calculated using a 'reference price'. For example, in 2017, the reference price was €69.72/MWh for wind developments above 5MW.

Where a generator's total market revenue is less than the revenue under the REFIT PPA, the difference is funded by the Public Service Obligation (PSO) levy (the PSO 'pot' is funded by electricity consumers through a levy on their electricity bills).

The Irish electricity market will soon undergo a major structural change in the transition from the current Single Electricity Market ("SEM") to I-SEM, currently expected to 'go-live' on 1 October 2018.

I-SEM will change how energy is traded and generation capacity is remunerated in Ireland. Under I-SEM, total energy payments to wind farms will be made up of a combination of revenues across a number of market windows (instead of a single market window as is the case currently under SEM).

One key feature of I-SEM is that generators are required to be 'balance responsible' (ie, that they bear financial responsibility for their imbalances in the new Balancing Market in I-SEM). The Department's decision looks to reconcile balance responsibility with the price certainty originally afforded by REFIT.

REFIT in I-SEM

The Department's final decision is largely in line with the Department's Proposed Decision (published in November 2017).

The key parts of the decision can summarised as follows:

Wind Generation (above 5MW): The market revenue calculation under REFIT will be based on the lower of (i) a blend of 80% of the Day Ahead Market Price and 20% of the Balancing Market Price and (ii) the Day Ahead Market Price. Wind Generation (below 5MW): The market revenue calculation under REFIT will be based on the lower of (i) a blend of 70% of the Day Ahead Market Price and 30% of the Balancing Market...

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