Tuesday 17 September 2019

Energy bills to fall as backup supply costs drop by €200m

In the electricity market, generators are paid for the energy they produce, but they also receive a capacity payment for being available to produce during periods of high demand. Stock image
In the electricity market, generators are paid for the energy they produce, but they also receive a capacity payment for being available to produce during periods of high demand. Stock image

Paul Melia Environment Editor

The cost of supplying backup electricity to the market has fallen by more than €200m a year, EirGrid has said.

The national grid operator said payments to generators to provide power in periods of high demand between October 2019 and September 2020 will be €345m following the introduction of a new auction system.

This compares with an average annual spend prior to 2017 of €550m.

Domestic and commercial customer bills will fall because generators and suppliers pay a 'supplier capacity charge price' which covers the cost, and reductions will be passed on to customers, a spokesman said. "Customer bills will be cheaper because of this."

In the electricity market, generators are paid for the energy they produce, but they also receive a capacity payment for being available to produce during periods of high demand.

This acts like an insurance policy to ensure electricity continues to flow when needed.

But the new system, introduced last year, requires generators to bid into an auction process, with the lowest-priced stations winning contracts.

This means that some plants will not remain commercially viable, and EirGrid expects up to 2,000MW of power generation to be taken off the system by 2024 as a result - around 20pc of total capacity.

EirGrid said that 105 generating units qualified for the auction, with 95 successful.

"This is a competitive auction where efficient and low-cost capacity is most likely to be successful. Importantly, the auction also ensures that consumers only pay for generation that is actually required," said EirGrid market operations director Rodney Doyle.

Irish Independent

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