Editor’s Pick | Clean Energy Package: what does it really mean?
24 March 2020
This article was originally published on 10 March 2020 in Energy Spectrum Issue 61.
The Capacity Market Code removes or restricts payments to fossil fuel generators and allows cross border participation in Capacity markets, arising from the Clean Energy Package (CEP). We look at some of the other potential changes in the way EirGrid and SONI operate our energy system arising from the implementation of the Clean Energy Package.
The EU’s Clean Energy Package is a series of eight legislative acts adopted by the European Parliament and European Council in 2018 and 2019 to fulfil the EU’s Paris Agreement commitments. The purpose of the CEP is to enable the EU to transition to cleaner energy and facilitate a 40% reduction in greenhouse gas emissions by 2030 compared to a 1990 baseline. The main areas of focus of the Clean Energy package are:
- Energy efficiency.
- Renewable energy.
- Consumer protection and affordability.
A high-level exercise has recently been conducted by the Regulatory Authorities (RAs) in Ireland and Northern Ireland to identify the areas of the Regulation which may require action by the SEM Committee. The RAs identified six key areas which will require action by the SEM Committee in 2020.
- Balancing responsibility.
- Priority dispatch.
- Market parameters.
- Capacity Remuneration Mechanism.
- Regional Coordination Centers.
As stated above, the Capacity market code modification has been proposed and is currently out for public consultation. With this in mind, we look at two of the other developments that may be on the short-term horizon, balancing responsibility and priority dispatch.
Balancing responsibility is in line to change this year with the SEM committee stating they will look to put their approach to public consultation by the end of Q120. The current SEM framework sets out the de minimis threshold for participation in the BM to be a Maximum Export Capacity of 10MW, defining the current minimum capacity for Balance Responsibility. The CEP updates this requirement, so that all market participants are to be responsible for any imbalances they cause in the market, including the previously exempt de minimis generation. A modification to the Trading and Settlement Code (TSC) will likely be required, to accommodate a reduction in the de minimis threshold for balance responsibility.
Priority dispatch is also under review by the SEM committee with their proposal due for public consultation in Q120. Under the current SEM framework, all renewable generation and peat is subject to priority dispatch, including provisions for Hybrid plants and High Efficiency CHP/Biomass/Hydro plants. The change in regulation will update the rules surrounding priority dispatch, effectively removing it for new renewable generators, to facilitate a non-discriminatory, transparent and market-based system. Revisions to the TSO licenses may be needed in order to adopt this requirement as well as a modification to the TSC.
The Clean Energy Package legislation is designed to facilitate an EU wide transition towards cleaner energy. The implementation of these changes will alter the future of energy markets across Europe. Making de minimis generators balance responsible will result in a change in the scale and management of future intermittent generator development.
Furthermore, removing priority dispatch for generators will result in a markets-based solution to which generators will get on the system. Any renewable generators receiving subsidies that were energised before July 2019 are not subject to the new rules, keeping the status quo.
If you have enjoyed reading this article and are interested in the latest developments from the Irish energy market, please contact Richard Wetherall on 01603 604400 for a free month’s trial.
The Energy Spectrum Ireland (ESI) service captures key developments across the energy sector and offers a timely, insight-driven overview of the need-to-know news and changes in the industry. The service comprises of two publications: Energy Spectrum Ireland, published monthly, and Ireland Energy Weekly Bulletin.