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Regulation and renewables

Garrett-Blaney-2012 What is the role of the energy regulator in achieving renewable targets? This interesting question often arises in the debate on current and future renewable energy policy and hopefully this article can provide some answers.

To start, the level and type of renewable energy development is primarily a matter for government policy. The 2009 European Renewable Energy Directive sets specific targets for renewable energy for each member state but allows each national government to legislate for the specific mechanisms to deliver these targets. In the electricity sector in particular, the island of Ireland is very fortunate in having an abundance of renewable resources that can be harvested at relatively low capital costs, with onshore wind being the most successful area to date.

As energy regulator, the Commission for Energy Regulation (CER) supports government in assessing the effect of different policy options for achieving renewable targets in electricity and advises on the cost implications for consumers. The CER, through its membership of ACER (the pan European energy regulators organisation) have been active in promoting a harmonisation of renewable support mechanisms across Europe. This would allow those member states with the lowest cost renewable resources to deliver the maximum benefit to European customers.

In looking at our role in delivering renewable energy targets in the electricity sector, there are two distinctive areas: the electricity wholesale market and the electricity network.

Considering each of these in turn:

1. The electricity wholesale market, called the Single Electricity Market (SEM), is regulated on an all-island basis by a joint regulatory committee. Facilitation of renewables was a key consideration in the development of the SEM, where the market was designed to be technology neutral. The introduction of the SEM has reduced barriers to entry for generators of renewable energy; this has been an important factor in the current success of the renewables industry. While the SEM design will need to be revised to integrate into the emerging European single electricity market by 2016, the design will ensure that these new market arrangements also facilitate the achievement of renewable energy targets.

The success story of renewable electricity in Ireland has also brought new challenges; at times the system has reached operational limits to the level of wind that can be accommodated. Solutions to this challenge require innovative approaches by both system operators on the island and the new market design so that higher levels of renewable generation can be accommodated at a reasonable cost to customers. Smart meters, flexible demand, increased cross border trade and improved generation technologies all will need to play their part in delivering this innovation.

2. The island of Ireland has a congested transmission system that was built to serve very different generation and demand requirements. While the CER has approved significant investment in the electricity grid over the last ten years, much more is required. The transmission system operators have a challenge in building new lines to facilitate renewable generators and as regulator we need to incentivise them to deliver these lines in a timely and cost effective manner.

As regulator we are conscious of the need for regulatory certainty for investors, particularly in relation to future renewable energy policy, and we are actively engaging with government and our European counterparts to ensure that the energy customers on this island can benefit from our rich renewable resource endowment.

Garrett Blaney is a Commissioner at the Commission for Energy Regulation.