While demand side measures are acknowledged to represent potentially significant tools in the efficient development of Ireland’s electricity system, the regulatory authorities responsible for the oversight and development of the Single Electricity Market have taken a realistic view in their recent consultation on the market’s “Demand Side Vision for 2020”.
Those interested in the future of electricity markets and systems have often pointed to “demand side” measures as representing potentially significant tools in the management of (among other things) electricity consumption patterns, peak demand profiles and security of electricity supply. Demand side measures can, for this purpose, be defined generally as mechanisms that provide direct financial incentives to consumers of electricity, with a view to inducing such consumers to change the way in which they consume electricity. In the promotion of security of electricity supply (which is determined largely by the comparison between peak electricity demand and installed generating capacity), demand side measures that can reduce peak electricity demand are seen as a low-cost alternative to the construction of new generating capacity.
It should be noted that on the island of Ireland, the Single Electricity Market (“SEM”) regulates the interaction between generators of wholesale electricity, on the one hand, and the supply companies that purchase wholesale electricity, on the other hand. Although a stated objective of the SEM Trading & Settlement Code is “to promote the short-term and long-term interests of consumers of electricity on the island of Ireland with respect to price, quality, reliability, and security of supply of electricity”, such consumers are not parties to the Code, and have no direct role in its development.
Demand side management schemes are not new – for example, the Powersave and Winter Peak Demand Reduction Schemes have been in place in the Republic of Ireland for some time. However, these schemes do not interface directly with the SEM.
Notwithstanding the lack of consumer participation in the SEM, the regulatory authorities charged with the oversight and development of the SEM (i.e. the Commission for Energy Regulation (“CER”) and the Northern Ireland Authority for Utility Regulation) published, on 17 August 2010, a consultation paper entitled “Single Electricity Market - Demand Side Vision for 2020”. The principal purpose of the Consultation Paper is to elicit responses from industry stakeholders.
The Consultation Paper discusses the potential development of a “Demand Side Vision for 2020”, which would be an initiative to create a strategic demand side response programme for the island of Ireland. However, it is notable that once one delves behind the aspirations of the respective regulatory authorities, the Consultation Paper sheds a somewhat negative light on the topic, indicating that a lot of effort will be required in achieving the goals of the Demand Side Vision and in particular that the development of the Demand Side Vision will depend heavily on the input of all relevant stakeholders, many of whom might be expected to have difficulty in financing the necessary initiatives.
Commentary on international experience and best practice in demand side management schemes features in the Consultation Paper, with an emphasis on the view that in general, the technical or theoretical potential for demand side adjustment tends to be significantly higher than that which can be realised. In particular, it is noted that small and medium-sized enterprises can be particularly difficult to engage, and that maintaining consumers’ interest can be difficult (particularly a scheme lacks a consumer-friendly interactive element, or any meaningful comparison with past performance or the performance of peers). Whilst “time-of-use” tariffs and “critical peak pricing” schemes can significantly reduce peak demand, where day-ahead notification is provided and considerable financial savings for consumers is offered, it is noted that most of the demand reduction in peak periods is shifted rather than removed.
In view of these and other constraints, the demand side measures which are considered to be “high value” are:
- energy efficiency measures;
- the use of smart meters (particularly those featuring advanced in-home displays, and supporting dynamic time-of-use tariffs);
- industrial/commercial demand side response (i.e. initiatives to encourage more participation from loads in industrial and commercial sectors). The implementation of these measures will initially involve a review of the SEM Trading and Settlement Code and Grid Code to identify barriers to the participation of industrial/commercial demand, and the creation of visible or day-ahead price and schedule for the SEM.