1. Market Integration Project

2. Background –Single Electricity Market Organisation –EU Internal Energy Market –Context for Market Design Market Integration Project –Project Timetable –Main Risks –Options under consideration Option Detail Engagement Next Steps 2 Agenda

3. Single Electricity Market Organisation 3

4. Current SEMC Members Bill Emery (UR) David Newbery (Independent) Dermot Nolan (CER) Garrett Blaney (CER) Odd Håkon Hoelsæter (Independent) Paul McGowan (CER) Jenny Pyper (UR) http://www.allislandproject.org/ 4

5. EU Internal Energy Market EU energy policy aims – Improve competitiveness to reduce prices to consumers Maintain security of supply Sustainable Vision of decarbonising Europe 5

6. EU Internal Energy Market –Third Energy Package (IME3). –Target Model for cross-border trading rules. –This requirement is legally binding and is therefore the responsibility of the national states. –(DETI) and (DCENR) respectively have charged the SEM Committee (SEMC) with responsibility for developing trading arrangements that will be compliant with the Target Model. 6

7. Context for Market Design SEM Target Model

8. Context for Market Design –Size of the Irish electricity market –Physical Constraints ◦Limited DC interconnection ◦2 nd North / South Interconnector ◦Donegal ◦Cork –Market power ◦ESB generation portfolio all island (50%) ◦AES in NI (70%) –Renewable energy 40% target (NI Executive and RoI target) 8

9. Context for Market Design 9 Peak demand of selected European markets in 2012

10. Context for Market Design 10 Generation capacity by owner

11. Context for Market Design 11 Target Model Compatible + Target Model Compatible - Suitable to ROI/NI + Suitable to ROI/NI - SEM

12. 12 Context for Market Design

13. Project Timeline Started 2010 Intra day trading introduced 2011 Consideration Day Ahead Market trading Delivery date of 2014 Derogation of implementation to 2016 for SEM May 2013 Next Steps Paper February 2014: Consultation Paper 2 months on 4 options 13

14. Project Governance 14

15. Project Timeline May 2014 Proposed Decision Consultation CBA of Proposed Decision August 2014: Final Decision High Level Design Future work areas –Legislative change –Consultation Detailed Design –Systems development / regulatory framework 15

16. Options Under Consideration 1.Adapted Decentralised Market –Emphasis on allowing market participants greater choice over the markets and timeframes in which they trade energy in order to manage their risk. 2.Mandatory Ex-post pool for net volumes –Some choice for market participants around their trading times, but ultimately relies on a robust centralised approach to the determination of dispatch and ex-post prices and volumes 3.Mandatory Centralised Market –emphasises the importance of the Day Ahead Market as the main market for physical trading of energy between market participants. Balance takes place in day. 4.Gross Pool – Net Settlement Market –Centralised approach to the determination of dispatch and ex-post prices and volumes. It is open for market participants to carry out voluntary financial trading in other timeframes. Closest to current market. 16

17. Project Main Risks Infringement of member state (non compliance 2016) Market not fully effective leading to increased prices for customers Issues- –EU Codes and guidance not finalised (state aid concerns) –Effective stakeholder engagement –Market Design agreement required by both Departments / Ras –Legislative change requirements –Resource constraints Industry, TSOs and Departments –Very compressed timescales for delivery 17

18. Questions? 18

19. Option Detail

20. Option 1

21. Option 2

22. Option 3

23. Option 4

24. Questions? 24

25. Stakeholder Engagement

26. Engagement Main Stakeholder Groups –Market Participants –SEM Committee –Departments –Regulators –EU organizations (ACER/EC). Open Stakeholder forums –October 2013 –February 2014 (19 th Provisional Date) High Level Design Group (Industry Experts Group) – Monthly Meetings since October 2013 26

27. Questions? 27

28. Next Steps

29. Project Timeline February 2014 Consultation 4 options 19 th February Stakeholder Workshop May 2014 Proposed Decision Consultation –Cost benefit Analysis Included August 2014: Final Decision High Level Design Future work areas –Detailed Market Design (Inter Alia: CRM, treatment of losses, Market Power Mitigation Measures) –Legislative change –Consultation Detailed Design –Systems development / regulatory framework 29

30. Questions? 30