In an eagerly-awaited paper released earlier this month, the Commission for Energy Regulation (Ireland) and the Utility Regulator (Northern Ireland), who together regulate the Single Electricity Market (SEM) (the wholesale market for electricity generated and consumed on the island of Ireland), took a step closer to settling a key regulatory issue that is affecting the development of wind generation on the island.
This issue concerns how to dispatch and remunerate renewable generators in situations where more renewable energy is available than is required to meet total system demand for electricity.
Curtailment or constraint?
"Curtailment" is the label that has been adopted by the Irish regulators to describe the output reduction direction which will need to be given by the system operators in such a situation. An overlapping concept, known as "constraint", already forms part of the SEM trading rules, but applies to the distinct situation in which a generator (including a renewable generator) is directed to reduce its output because of the local limitations of the transmission network.
Curtailment is not currently recognised separately under the SEM trading rules, but a renewable generator that participates in the SEM, has firm (or partially firm) grid access and is subject to curtailment will effectively be compensated for this curtailment through the constraint payments mechanism under the SEM.
Policy context: the rush to wind
The management of curtailment has received increasing industry attention over recent years due to a number of competing pressures:
On the one hand, the governments of both Ireland and Northern Ireland have set aggressive targets for the consumption of energy generated from renewable sources (both Ireland and Northern Ireland are targeting 40% by 2020). Renewable support schemes on both sides of the border have contributed to a rush of connection applications by renewable generators. Approximately 1,200MW of wind generation was connected to the all-island system at the time of SEM "go-live" in 2007, approximately 2,100MW is currently connected, and it is estimated that 5,100MW will need to be connected in order to meet the 40% targets. On the other hand, the electricity transmission and distribution systems of both jurisdictions must carry out costly and protracted reinforcement works in order to accommodate the queue of renewable projects that are currently awaiting connection. The regulators are sensitive to...