SONI (System Operator for Northern Ireland) has published the provisional results of the annual capacity auction for the Single Electricity Market. The auction, which was first introduced last year, is a key element of the market, designed to deliver wholesale electricity at the least possible cost.
Of the 28 Northern Ireland generators who offered into the auction, 26 were successful. £78 million in capacity payments will be paid to these generators during the period October 2019 to the end of September 2020.
This year’s auction has secured just under 2,000 megawatts (MW) of capacity for Northern Ireland, an increase in approximately 300 MW. The additional capacity is required to ensure Northern Ireland has an amount of additional reserve.
The auction clearing price was £36,890 per MW per year (down from £38,105 last year). A small number of generators with offers greater than the clearing price were successful in order to satisfy specific requirements for Northern Ireland and Dublin.
Capacity payments are paid to generators to ensure they are available to meet the demand for electricity, especially at peak times. Successful bidders will be paid during the year for each MW of capacity they sold to the market in the auction.
Capacity payments are one revenue stream for generators under the upgraded all island wholesale electricity market arrangements. Generators are also paid for the energy they produce and for system services.
Robin McCormick, General Manager of SONI said:
“This is a competitive auction where efficient and low-cost capacity is most likely to be successful. This year’s auction has ensured that we have sufficient capacity to guarantee a secure electricity supply through until the end of September 2020. Importantly, the auction also ensures that consumers only pay for generation that is actually required.
“The auction is a rigorous, monitored process. We are confident that the generators who have been successful in this capacity auction will provide safe and secure generation at the lowest possible cost.”
The auction was designed by the electricity regulators in Northern Ireland and Ireland to ensure sufficient capacity is secured to meet demand across the island at all times.
The capacity required from the auction took into account peak demand, security of supply, as well as the reliability and performance of generators, and a range of demand forecasts and interconnection. It also took into account specific locational requirements for Northern Ireland and the Dublin area.
A total of 132 MW of new capacity was successful in the auction, mostly from Demand Side Units. These are large energy users who agree to reduce electricity use upon instruction. In return, they receive capacity payments for the demand reduction they make available.
Gas turbine generation makes up 59% of the capacity secured through the auction. Steam turbines represent 25%, Interconnectors and Demand Side Units are both 5%, and there is a small amount of pumped storage, hydro and wind power.
Mr. McCormick added: “We have worked with generators to prepare and help them to participate in the auction. I am pleased that the auction has delivered the capacity we need to secure Northern Ireland’s electricity for the next year at a competitive price.”
The full results are available here: Provisional Capacity Auction Results report
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