Curtailment of wind energy in the SEM

Dorit McCann discusses the options around curtailment of wind in the all-island market, a key issue for generators and investors.

Background

The discussion on curtailment of wind energy in the SEM was initiated by the SEM Committee in February 2008 (SEM/08/002) and initially resulted in the decision to apply a grand-fathering approach to curtailment issues (SEM/11/105). Many industry players believed that the initial SEM Committee decision of December 2011 was flawed as it had been taken without adequate consultation with stakeholders. In response to extensive industry concerns, the SEM Committee subsequently decided to withdraw its decision to treat curtailment in a tie-break situation on a firm access quantity basis. In April 2012, the SEM Committee issued a further consultation paper on the treatment of curtailment in tie-break situations which reiterated the duties of the SEM Committee and presented 4 options (SEM/12/0128).

Balancing Exercise

In its latest consultation paper, the SEM Committee refers to its primary duty and responsibilities under the Electricity Regulation (Amendment) (Single Electricity Market) Act 2007 and the Electricity (Single Wholesale Market) (Northern Ireland) Order 2007. The principal objective of the SEM Committee is to protect the interests of electricity consumers on the island of Ireland by promoting effective competition. In doing so, it must have regard to several factors, including (i) security of supply on the island; (ii) ability of generators to finance their activities; (iii) the need to avoid unfair discrimination between consumers and between generators; and (iv) promoting the use of energy from renewable energy sources.

However, the consultation paper does not explicitly refer to the RES Directive (Directive 2009/28/EC) which is directly applicable in Member States from 5 December 2010. The RES Directive requires Member States to ensure that system operators guarantee access or priority access to electricity produced from renewable energy, subject to maintaining the reliability and safety of the grid and based on transparent and non-discriminatory criteria. The RES Directive specifically states that “appropriate grid and market-related operational measures are taken in order to minimise the curtailment of electricity produced from renewable energy sources”. It goes on to state that, if curtailment of renewable energy sources is required to ensure security of supply, systems operators must propose corrective measures to prevent inappropriate curtailments.

The RES Directive thus appears to suggest that renewable generators should be given priority access and that, should this not be possible due to security of supply issues, corrective action must be taken to prevent such curtailment happening in the future. The RES Directive does not detail any specific corrective measures but it could be argued that this includes improvements to the system, further interconnection and/or compensation of curtailed renewable generators.

Grandfathering or pro-rata?

The SEM Committee’s most recent consultation paper proposes the following options for curtailment in tie-break situations:

Option 1: Grandfathering based on certain criteria, e.g. “last-on, first-off”, by reference to firm access quantity or Gate or another characteristic.

Option 2: Pro-rata, i.e. turning down wind generators by an equal percentage to ensure system security.

Option 3: Temporary pro-rata, i.e. pro-rata treatment up to the 40% all-island target and thereafter grandfathering.

Option 4: Pro-rata with wind generators taking the risk.

The consultation paper outlines the main advantages and disadvantages of each model by reference to the duties and functions of the SEM Committee and potential implementation issues. The SEM Committee does not propose a favoured position but it may be that Option 3 is seen as a compromise between the SEM Committee’s original position and the pro-rata approach favoured by many wind generators.

Comment

With the increasing penetration of wind energy on the island of Ireland, the curtailment of wind energy will remain a key issue for generators and investors. All eyes will be on the final decision from the SEM Committee which is expected imminently. It remains to be seen what, if any, effect the provisions of the RES Directive may have on the curtailment of wind generators going forward.

Dorit McCann
Head of EU, Competition and Regulation
T: +44(0)28 9034 8816
E: dorit.mccann@carson-mcdowell.com