Sparking energy debate
Published 12/12/2010 | 05:00
Sir -- In last week's Sunday Independent Eddie Hobbs criticised Ireland's electricity market. The Commission for Energy Regulation (CER), Ireland's national energy regulator, would like to respond.
Firstly, electricity is different to most products. This is because the generation of electricity, and customer demand for it, have to be perfectly balanced second-by-second. Otherwise there would be blackouts, putting consumers and the economy at risk.
Generators are paid the electricity System Marginal Price (SMP). Importantly however, the SMP only reflects the system's marginal running cost, which is primarily the cost of fuel. The extra money earned by efficient generators through this system is needed to cover the expensive capital costs involved in building and operating a modern power plant. Other costs such as spinning reserve are also standard in any electricity system and need to be paid for to prevent ongoing customer blackouts. This type of electricity market is widely used in other countries.