Report on the Committee’s Review into Electricity Policy Part 1: Security of Electricity Supply

review-into-electricity-policy--part-1.pdf (30.93 mb)

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Executive Summary

Background and Purpose of the Review

The System Operator for Northern Ireland (SONI) tracks the electricity capacity that is available to Northern Ireland, through generation and interconnection, to ensure there will be sufficient generation to meet future demand.

SONI published its latest statement in January 2013. The statement demonstrates that the current generation surplus margin of 600 Mega Watt (MW) will reduce to 200MW from 31st December 2015. This is not considered sufficient margin to ensure security of supply in the event of a prolonged outage of a large generating plant. It reported that unless steps are taken to address the problem, Northern Ireland’s security of supply would be at risk from the start of 2016 and in deficit from 2021. Further detail on this is provided in an Assembly Research Paper on the issue at Appendix 4 (see pdf).The problem arises because:

From 2016 the EU (European Union) Industrial Emissions Directive (IED) will result in the closure of three units at Ballylumford B station;

From 2021 Kilroot power station will be on reduced capacity due to restrictions on emissions from coal;

There is a fault on the Moyle Interconnector resulting in reduced capacity and reliability problems;

The North-South Interconnector, which was estimated in the Strategic Energy Framework (SEF) to be completed by 2014, has been delayed and will not be completed until 2018 at the earliest.

The Committee agreed to conduct a review of the evidence in order to determine the extent of the problem and what scope there may be to resolve the situation without unduly impacting on electricity consumers.

Summary of Findings

It is clear from the evidence that there is going to be a reduced surplus margin in electricity supply from the end of 2015 due to the closure of Ballylumford B station.

It is currently unknown what margin would be sufficient to maintain security of supply or what costs would be considered reasonable to mitigate any risk. It is difficult to calculate cost without understanding what level of margin would be sufficient.

The interim solutions brought forward relate to the temporary fix on the Moyle Interconnector, seeking derogation from the EU Industrial Emissions Directive for Ballylumford B station, finding additional new generation capacity or upgrading Ballylumford B station to make it compliant. However:

• The Moyle Interconnector interim fix is not considered reliable enough to mitigate any risk;
• Because Ballylumford B is already in a derogation position, further derogation is not possible;
• New conventional generation would add costs to consumers and there is no new conventional generation currently planned for Northern Ireland; and
• There would be significant cost associated with upgrading Ballylumford B station to make it compliant with the IED. The owners, AES, would probably seek some form of capacity payment to undertake this work. In addition, a decision needs to be made quickly as some components may be required which can take up to 18 months to source.

Another possibility which came to the Committee was the concept of aggregation of units and demand-side management. Aggregation of units is a concept whereby large energy users, which have significant standby generation capacity, are permitted to pool resources and bid into the electricity market. Demand-side management is where large energy users receive an incentive to shed load at times of peak demand in order to alleviate pressure on supply. There is, however, a lack of clarity around the legislation and mechanisms for any initiative in this area. The Utility Regulator has informed the Committee that the aggregation of units is likely to be around 100MW to 200MW and not enough to bridge the gap to ensure security of supply.

The Committee also considered the possibility of utilising two existing cross-border standby connections at Enniskillen and Letterkenny to import electricity during times of peak demand. These have each a capacity of up to 125MW and are currently used to provide back-up when there are faults.

The North-South Interconnector, though not relevant to the interim solution, is required to ensure security of supply post 2021. No alternatives are currently under consideration. Northern Ireland Electricity (NIE) informed the Committee that there is currently no mechanism for providing community benefits to those communities on which the Interconnector will impact.

Summary of Committee Position

Despite the fact that this issue has been know about for a considerable period of time, the Department of Enterprise, Trade & Investment (DETI), SONI and the Utility Regulator have not yet determined what constitutes sufficient supply margin in order to mitigate any risk to security of supply. In the absence of this figure, it is not possible to calculate the scale of requirements or the cost of any potential solution.

The Moyle Interconnector interim repair is still considered a high-risk fix which will not contribute to the security of supply issue. However, there is no indication that the level of risk has been quantified.

There seems to be confusion about whether aggregation of units and demand-side management have been included in SONI’s calculations on surplus margin. There also seems to be little understanding of what contribution can be made by any initiative in this area.

There is currently no new conventional generation planned for Northern Ireland. Any new generation which would constitute a high-cost, long-term solution to a short-term problem could not be supported by the Committee.

AES has yet to determine if modifications will be needed to certain components in Ballylumford B station to make it compliant with the IED. As these take up to 18 months to make, this information needs to be known in order to determine the urgency attached to making a decision which includes Ballylumford B station.

Any solution which includes Ballylumford B station may be a high-cost, long-term solution to a short-term problem. The cost of any upgrade has yet to be determined by AES. The Company should be able to answer these questions by the end of 2013 and at this stage any decisions then need to be taken by the DETI, SONI and the Utility Regulator. The Committee would be reluctant to support any proposal which results in a significant increase in consumers’ bills.

In relation to the next security of supply issue in 2021, the North-South Interconnector is the only solution under consideration. A solution, either way, will be required soon in order to either get the Interconnector built in time or to enable other sources of generation to be considered which mitigate the risk.

NIE has not considered any provision for community benefits to those communities on which the Interconnector will impact, should the North-South Interconnector be built.

Summary of Recommendations

Key Recommendations to Ensure Security of Supply Beyond 2015

In order to make a decision on how to address the security of supply issue, the Department, SONI and the Utility Regulator must urgently undertake work to establish:

i. A full understanding of the estimated level of surplus margin required to ensure security of supply;

ii. A full understanding of the level of risk that would be posed by the interim repair to the Moyle Interconnector; and

iii. An understanding of the level of additional capacity and reduced demand that can be temporarily achieved through aggregation of units and demand-side management, coupled with the utilisation of the two existing cross-border standby connections (it may be that this solution coupled with the interim repair to the Moyle Interconnector is sufficient to diminish the risk to an acceptable level).

The information gained from the implementation of recommendations i to iii will provide the required information to determine the level of any remaining gap in the required surplus margin. This will enable DETI, the Utility Regulator and SONI to:

iv. Determine the statistical probability of an electricity outage and the extent and duration of any outage; and

v. Undertake a consumer focussed cost/benefit analysis of the options to either commission new generation, support an upgrade of one or more units at Ballylumford B station or accept the risk and do nothing.

Key Recommendations to Ensure Security of Supply Beyond 2020

The North-South Interconnector is considered a key infrastructure project to ensure Northern Ireland’s long-term security of supply. Given the delays in securing a planning decision for this application, as time moves on, it becomes increasingly unlikely that an alternative could be developed and planning secured before Northern Ireland moves into a supply deficit in 2021.

vi. The Planning Appeals Commission must set an early date to reconvene the Inquiry into the planning application for the North-South Interconnector so that a decision can be made.

There has been no consideration given to providing community benefits to those affected by the North-South Interconnector in the event that planning is approved. The visual impact alone could be considered to be at least as significant as the impact of a large-scale wind farm on a community.

In the event that planning permission for the current application is granted, NIE should explore opportunities for providing community benefits to those host communities affected by the North-South Interconnector. It may be appropriate for NIE to engage with DETI and the System Operator to consider how this can best be achieved.

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Annex

20140424 NIRIG briefing to ETI Committee regarding Grid Connection.pdf