Brexit has led to reduced trading over Irish electricity interconnectors and increased the frequency of extreme prices .
With the end of the Brexit transition period, Great Britain left the internal energy market of the European Union (IEM). As part of the Northern Ireland protocol, though, the single electricity market (SEM) of the island of Ireland has remained intact.
Brexit has led to a decrease in the use of the SEM’s interconnectors with Britain however, with the average utilisation in January falling 150MW.
Phil Hewitt, director of EnAppSys, explained that before Brexit, two interconnectors coupled the SEM with the IEM, using a common day-ahead auction that ran at 11AM.
“This ensured that if prices were higher in the SEM than in GB, energy would flow from GB to the SEM to reduce prices for consumers in the SEM and vice versa.”
The decoupling due to Brexit meant that in January 2021, utilisation on interconnectors with Ireland fell to around 350MW compared with 500MW before Britain’s exit from the EU.
This lower level of usage led to an increase in the frequency of extreme prices due to liquidity decreasing, according to EnAppSys.
This was true in both markets, continued Hewitt, adding that “for the 11AM day-ahead auction, 11 of the 14 highest prices ever seen have occurred since Britain left the IEM with the peak value being €500/MWh equivalent to 50c per kWh unit”.
“Also, because there is less volume than capacity in the IDA1 and IDA2 intraday auctions, which now are the only auctions that determine the interconnector flows between GB and the SEM, this means that the interconnectors are utilised less. In turn, this means that the SEM needs access to more indigenous generation which may be more expensive than in GB. In addition, when it is windy in Ireland there is less opportunity to push this excess wind energy over the interconnector to GB.”
Cold weather and low winds caused particularly tumultuous power prices through the first month of 2021 in the IEM, with new records set both in the day ahead market and the imbalance price. This was further impacted by the decoupling from Single Day-Ahead Coupling (SDAC), which uses the EUphemia algorithm.
“It’s likely that the reduction in the ability to bring in cheaper power from GB or export cheaper power to GB will result in more extreme prices in the future,” finished Hewitt. “The current situation with lower-than-usual dispatch on the interconnectors will continue until SEM market participants increase their use of the IDA1 and IDA2 auctions. This also requires more participation on the GB side.”