Businesses that agree to cut or shut down electricity use during periods of high demand should receive more cash, a new report recommends.
National grid operator EirGrid has “demand-side” deals with organisations that use large amounts of electricity, but can cut or shut down their requirements as the need arises.
A report by professional services firm EY recommends that these businesses get “greater incentives” for cutting their electricity needs at key times to encourage them to participate in the energy market.
Demand-side units recruited in an auction run by EirGrid late last year receive €46,150 per year for each mega watt they contribute to the system by cutting or reducing electricity demand when required.
EY also says the current method of calculating demand-side payments, which relies on the companies, should be changed.
In addition, the firm criticises the fact that these businesses are not paid directly through the wholesale electricity market but through a different mechanism, which “disincentivises” them.
“This severely limits the value they are able to provide to the market,” says EY.
Energy industry supervisor, the Commission for the Regulation of Utilities, requested EY to review the system for attracting investment in new power plants.
While electricity companies, including State-owned ESB, pledged to build generators capable of producing up to 650mw of power over the past four years, none of this has materialised.
ESB blamed difficulties in getting planning permission and sourcing equipment for its inability to complete projects on time.
The report’s key recommendations include demanding that electricity companies have planning permission for power plants as a condition of bidding in auctions where contracts to build generators are awarded.
EY also argues they should get more time to build the plants and pay heavier penalties if they fail to deliver on time.
EirGrid said there were fundamental aspects of the report with which it disagreed. The grid operator noted last week that it had already asked the regulator to change the system for attracting investment in new power plants.
When those changes failed to materialise, EirGrid undertook its own review of the system.
However, it did initially engage with EY, providing data and perspectives. Once it became apparent that there were elements of the reports with which it disagreed, the company told EY it would not engage further.
“EirGrid will now give the report careful consideration and respond in due course,” the State company said.
EirGrid warned that if the Republic cannot procure and deliver new gas-fired generators, it would not be able to guarantee security of electricity supplies, support social and economic growth or meet Government climate targets.