EirGrid notes publication of EY Report on Performance of the SEM Capacity Remuneration Mechanism

26 August 2022

EirGrid notes the publication today of the EY report, Performance of the SEM Capacity Remuneration Mechanism as commissioned by CRU and published by the SEM Committee. In this report, EY assesses the design of the Capacity Remuneration Mechanism for any improvements that could be made in order to ensure sufficient procurement of capacity.

Being able to secure the appropriate portfolio of conventional generation technologies is critical to securing our electricity supply. It ensures that EirGrid can work to support social and economic growth of the country whilst the electricity sector is transformed in line with the Government’s Climate Action Plan and legislative targets. The Regulatory Authorities are responsible for the design, rules and parameters of the Capacity Remuneration Mechanism.  EirGrid operates the Capacity Remuneration Mechanism auctions on behalf of the Regulators.

EirGrid holds the view that the current Capacity Remuneration Mechanism is not fit for purpose. As of now, circa 650MW of capacity procured through the auction processes since 2018 has withdrawn and has failed to deliver capacity to the electricity grid. 

EirGrid has highlighted to the CRU the failure of the market mechanism to deliver and we have asked the regulator to urgently amend the mechanism to ensure security of supply. When very necessary changes failed to materialise, EirGrid established our own independent due diligence of market participants to at least attempt to establish if a risk-based view of the deliverability of their projects were viable before they proceeded to auction.

EirGrid did engage in the EY process initially, providing data and perspectives.  As it became apparent that there were fundamental aspects of the report with which we disagree, we wrote to the CRU to inform them that we would not engage further and that we would review the report upon publication.

EirGrid will now give the report careful consideration and respond in due course.

The future of the capacity markets is critical to the success of our country. If we cannot successfully procure and, more critically, deliver on the procurement of conventional generation we cannot support social and economic growth, ensure the security or our electricity supply or secure the very necessary transition to renewable energy in line with the Government’s Climate Action Plan.

EirGrid supports the independent review into security of supply initiated by the Government and led by Dermot McCarthy. In deference to this process, EirGrid has not published our own independent report into the need for market reform and we will not be commenting further on this matter until such time as this independent review is completed.