SEM experience to date and the impacts for the futureSean McGoldrick, General Manager SEMO

SEM Overview

Mandatory Pool

All energy sold into and bought from the pool

Typically 48 Trading Periods (30 mins) per Trading Day

Separate physical energy trades are not permitted

Timeframes

Energy Payments

Meter

Data

Dispatch

Real Time

Indicative Running Schedule

16:00 D-1

Operating Time Frame (TSOs)

Bids

10:00 D-1

Gate closure

Indicative

Market Schedule

12:00 D-1Market Time

Frame (SEMO)

Uninstructed Imbalances

Constraint Payments

Ex-Post Unconstrained

Schedule (EPUS)

16.00 D+1, 17.00 D+4

Energy Payments

Meter

Data

Meter

Data

Dispatch

Real Time

Dispatch

Real Time

Indicative Running Schedule

16:00 D-1

Operating Time Frame (TSOs)

Bids

10:00 D-1

Gate closure

Indicative

Market Schedule

12:00 D-1Market Time

Frame (SEMO)

Uninstructed ImbalancesUninstructed Imbalances

Constraint PaymentsConstraint Payments

Ex-Post Unconstrained

Schedule (EPUS)

16.00 D+1, 17.00 D+4

Electricity Market High Level Overview

Initial Daily

Schedules, Prices and Settlement

MP

Met

erT

SO

SE

MO

Publish

Forecasts

Submit

Bid

Offers

Produce

Indicative

Schedule and Price

Collect

Real Time

Data

Follow

Control

Instructions

Run

System

Real Time

Invoice

Weekly

Position

Financially

Settle

Position

D-2 D-1 D D+1 D+4 Weekly

Review

Position

Provide final

Meter Data

Indicative

Schedules, Prices and Settlement

Provide available

Meter Data

Participants in the SEM

45 Participants have registered in SEM

31 Participants have registered Generator Units

10 Participants have registered Interconnector Units

Registered Capacity in the Market: 9856 MW

Predictable Price Maker:

8567 MW

Variable Price Maker: None

Predictable Price Taker:

346 MW (All Peat)

Variable Price Taker: 157 MW (All wind)

Autonomous: 786 MW 781 MW wind 5 MW of biomass landfill gas

generation

Some Participants

Airtricity Energy Supply NI Ltd GU + SU

Airtricity Ltd GU + SU

Arklow Energy Ltd GU

Aughinish Alumina Ltd GU + SU

Ballywater Wind Farms GU

Bord Gais Eireann SU

Bordnamona Energy Ltd GU

CHP Supply Ltd SU

Coolkeeragh ESB Ltd GU

ESB Customer Supply GU + SU

ESB Independent Energy NI GU + SU

ESB Independent Energy ROI SU

ESB Power Generation GU + SU

First Electric Ltd GU

Hibernian Wind Power Ltd GU

Highland Wind Energy GU

Huntstown Power Company Ltd GU

Interconnector Administrator SONI N/A

Mantlin Ltd GU

Mountain Lodge GU

Moyle Energy Holdings IU

Muinngnaminine Windfarms Ltd GU

NIE Power Procurement Business GU

NIE Supply SU

Premier Power Ltd GU

Quinn Energy Supply Ltd SU

Quinn Windfarms Ltd GU

Saorgus Energy Ltd GU

Sorne Wind Ltd GU

SSE (Ireland) Limited IU

Synergen Power GU

Tursillagh 2 Windfarms Ltd GU

Tynagh Energy Limited GU

Vayu Ltd SU

Viridian Energy Limited SU

Viridian Energy Supply Ltd GU + SU

Viridian Power Limited GU

Waterpower Engineering Ltd SU

Market Share Trend – Generators

- 100000

0

100000

200000

300000

400000

500000

600000

700000

50

51

52 1 2 3 4 5 6 7 8 9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

2007 2008

Airtricity Energy Supply NI Ltd Generation

Airtricity Ltd Generation

Arklow Energy Ltd

Aughinish Alumina Ltd

Ballywater Windfarms Ltd

Bord Gais I nterconnector

Coolkeeragh ESB Ltd. Generator

Edenderry Power Ltd.

ESB AER

ESB I ndependent Energy NI I nterconnector

ESB PGEN

First Electric Ltd

Hibernian Wind Power Ltd

Huntstown Power Company Ltd

Knockawarriga Windfarms Limited

Mantlin Limited

Mountain Lodge Limited

Muingnaminnane Windfarm Limited

NI E Energy (PPB)

NI E Energy (Supply) Generation

Premier Power Limited

Snugborough Windfarm RoI Limited

Sorne Wind Limited

SSE (I reland) Ltd.

Synergen

Tursillagh 2 Ltd

Tursillagh Windfarms Ltd

Tynagh Energy Limited

Viridian Energy Limited

Viridian Energy Supply Ltd

Market Share Trend – Suppliers

0

50000

100000

150000

200000

250000

300000

350000

45

46

47

48

49

50

51

52 1 2 3 4 5 6 7 8 9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

29

30

31

32

33

34

35

2007 2008

Airtricity Energy Supply NI Limited

Airtricity Ltd Supply

Aughinish Alumina Ltd

Bord Gais NI

Bord Gais ROI

CHP Supply Ltd.

Dan Twomey Waterpower Engineering Ltd.

ESB CUSTOMER SUPPLY _PES

ESB Customer Supply ASU

ESB I ndependent Energy NI Supply

ESB I ndependent Energy ROI Supply

ESB PGEN Supply

NI E Energy (Supply)

Quinn Supply Limited

Quinn Windfarm Limited

Viridian Energy Limited

Viridian Energy Supply Ltd

SEM Financial

CashflowGenerator Unit in SEM

Energy Payments:

- Paid System Marginal Price (SMP) for energy scheduled by the market in each half hour

- Settled on a weekly basis

Capacity payments:

- Paid for available capacity in each half hour

- Settled on a monthly basis

Other payments

- Constraint payments (+/-) If TSO dispatch differs from market schedule

- Uninstructed imbalances (+/-) If metered generation doesn’t correspond to dispatched output

- Make Whole Payments (+) If costs incurred are not recovered through other market payments

- All settled on a weekly basis

Other charges

- Currency Charges (Weekly & Monthly)

- Market Operator charges (Weekly – variable, Monthly – fixed)

- Unsecured Bad Debt charges

- Generator Under test charges

CashflowSupplier Unit in SEM

Energy Charges:

- Pay System Marginal Price (SMP) for energy consumed (MWh) in each half hour

- Settled on a weekly basis

Capacity Charges:

- Charge based on consumption of energy (MWh) in each half hour

- Used to pay Generator Units for capacity

- Settled on a monthly basis

Other charges:

- Imperfections charges: Charge per MWh of energy consumed

- Currency Charges

- Market Operator charges

System Marginal Price by Trading PeriodJanuary 2008 to August 2008

0

100

200

300

400

500

600

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 29 30 31 32 33 34 35 36 37 38 39 40 41 42 43 44 45 46 47 48

Trading Period

€/M

Wh

Mean + 1σ Mean - 1σ Max SMP Mean SMP Min SMP

Tightly Banded!

Financial Summary

SEMO will process Energy Payments of approximately €4/£3 Billion annually

A further €600/£461 Million in Capacity Payments annually

The market remains fully collateralised

It holds collateral, in the form of Letters of Credit and Cash deposits, from supply companies of approximately €320/£246 Million

It prices the market and processes payments in two currencies (Euro and Sterling)

To date SEMO has processed over €800/£615 Million in payments

- 800 Million in, 800 Million out, with 1 day turnaround between

SEMO’s annual operating cost, including depreciation, is €25/£19.2 Million

SEM IT

IT Systems

The SEMO IT systems provide a modern, open, e-business, n-tier platform architecture to provide maximum scalability, availability, resilience, performance, reliability and stability to enable mission critical operations for the SEM

The key components of the solution are:

-  Market Interface System provides the interfaces for information exchange with the SEM systems – i.e. interaction with Market Participants, Meter Data Providers, and System Operators

-  Market Applications System that provides the scheduling and pricing mechanisms

-  Market Settlement System that provides the meter data management, settlement, and billing and invoicing functions

-  Finance System that provides financial processing capabilities including credit management and electronic funds transfer

IT Systems

The SEMO corporate and market systems consist of approximately 120 servers across two sites (Belfast & Dublin). 

There are also a large number of applications, backup devices, storage devices, communications equipment and other peripheral equipment.

The systems are fully redundant across two separate locations connected by 2 high speed dedicated links.

The systems can be run entirely at either location or a mix of both locations.

The main systems were delivered by 3 independent vendors with in excess of 30 smaller vendors supplying hardware, software and other systems.

IT Capabilities

SEMO Website

SEM Future

Development potential

Financial Market

- Physical trading remains the same

- Players CFDs outside pool

- Currently, there are Directed Contracts and Non-Directed Contracts

- Greater liquidity required

SEM lightly interconnected to BETTA

Moyle HVDC 500MW Import 80MW Export…technically capable of 500MW export

Future interconnectors planned

- Regulated: EirGrid 2012

- Merchant: Imera 2011

- Both aim to be commissioned by 2012

Explicit Auctions

- Moyle and EirGrid short and medium term

- Imera long term

Expansion/Integration:Options

A. Unified Pan-European solution: employing a centrally legislated and harmonised approach. Significant change from the present approaches.

B. Horizontal Integration: Market regions progressively merge, developing and sharing more efficient coupling mechanisms and leading to fewer, larger market regions.

C. ‘Dome’ Coupling: where a central entity or function is created to determine efficient flows between the coupled market regions (that each utilise their own mechanisms to resolve inter-regional flows and market prices).

7 Regions

- France, UK, Ireland

- SEM has linked NI and ROI

- Integration with UK and France?

SEM/BETTA Comparison

SEM BETTA

Gross Mandatory Pool

-For energy; capacity payments mechanism

-Anticipated development of CFDs, etc.

Bilateral Market

-With central balancing mechanism and settlement for imbalances

Gate Closure: Day ahead Gate Closure: One hour ahead

Central Dispatch – Merit Order Self-Dispatch

Explicit Capacity Payment Mechanism

No Capacity Payment Mechanism

Ex-Post System Marginal Price (for every half hour)

Separate System Buy Price (paid by

participants who are “short”) and System Sell Price (paid by those who are “long”) for each half hour

SEM/BETTA Comparison cont.

SEM BETTA

No central notification of bilateral contracts

Bilateral volume contracts for each half hour notified up to 1 hour ahead

Dual currencies - €/£

Currency exchange costs socialised

Single currency - £

Settlement and Invoicing

-Weekly billing periods

-Payment due 10 days after invoice

-Capacity settled on monthly basis

Settlement and Invoicing

-Each settlement day

-Payment due 29 days after invoice

Credit Policy: aims for full collateral cover of known and forecast liabilities

Credit Policy: aims for full collateral cover of known and assessed liabilities

SEM/BETTA Comparison cont.

SEM BETTA

GOVERNANCE

SEM Committee (Regulatory Authorities and two independent members)

Independent Panel: key role in decision making and proposals to regulator

Rules in published code (TSC) Rules in published code (BSC); overseen by Independent Panel

Market Operator (SEMO)

-Joint venture between two system operators

Market Operator (ELEXON)

-Independent subsidiary of system operator

-Managed by Independent Board

Change Process

-Defined in TSC; final authority on modification proposals lies with the Regulatory Authorities

Change Process

-Defined in BSC; final authority on modification proposals lies with regulator

OPERATIONAL

SEMO uses agents to develop systems, but operates them itself

ELEXON makes use of agents that develop and operate systems

Future of SEM

Greater Coupling with BETTA

- Facilitates larger/faster penetration of renewable energy in both markets

Integration and creation of an All Islands/Regional Market

Return to a Bilateral Market?

- Market share of incumbents reduced

- Less transparent

- Greater Competition in retail and wholesale markets?

- Both Generation and Supply arms in energy companies

Extension of Gross Mandatory Pool?

- Significantly increased collateral requirement

Summary

SEM Experience to Date

The market has been launched on time and within budget

The Market has operated successfully in its first 11 months

A number of major software releases have been successfully put into production without interfering with the market schedule

13 new participants have joined the SEM since market launch

Market Development continues (Over 150 Modifications considered since market launch, single design authority, redesigned website, market system development plan in place)

Further Details

Thank You

Questions Welcome

For further details on the Single Electricity Market please see:

www.sem-o.com