Dual currency system facilitates all-island electricity market

9 Sep 2010

A rapid electronic payments system provided by National Irish Bank (NIB) that ensures suppliers are paid on time as part of a stock-market style online trading system is at the heart of the SEMO (single electricity market operator) system that manages Ireland’s single electricity market.

The project to establish SEMO involved more than 44,000 days of effort in 86 separate work streams by 290 people. Following a competitive tender process, the banking contract was awarded to NIB, whose technology underpins the entire system.

Using NIB’s Business eBanking SEMO now has instant online access to the financial settlement systems required to support the electricity market on an all-island basis. It also has real-time access to all bank accounts in both NIB and Northern Bank, providing accurate reporting of incoming and outgoing payments, which is vital for the operation of the market.

Michael Behan, financial controller at SEMO, points out that the time-sensitive nature of the payments is critical to the electricity market across the island of Ireland. The system manages more than 50 bank accounts between SEMO itself, market and collateral accounts. Close to 15,000 separate bank transactions are made through SEMO every year.

“The value of the market for the financial year end September 2009 was €2.7bn. Approximately one-third of the value of the market is processed through the Business eBanking service, the balance is settled via settlement reallocation agreements,” says Behan.

Electricity operators who use trading system

The trading system is used by electricity operators like ESB, Viridian, Endesa, Bord Gáis, Airtricity and various other players North and South, he says.

“It functions like a stock market. The key to the system is making sure that prices are properly calculated and everyone is playing fairly.”

Behan says that enabling an all-island trading system is the key to the arrival of new entrants to the market and the system has just passed 1,000 days of settlements.

At the heart of the trading system is a bespoke system built by ABB. “It’s a central market system similar to those used in other energy markets built around the world. It’s a system that is heavily audited and managed by SEMO.”

On the horizon, Behan explains, is a new facility to cater for intra-day trading, which will allow for further connection and regional integration across Europe. The key, he says, is to create a trading environment whereby energy generated in Ireland can be exported overseas or vice versa.

“At the moment we have an interconnector between Northern Ireland and Scotland and a Dublin to Wales (East-West) interconnector is being built by EirGrid which will come onstream in 2012 and will allow trade between Ireland and the UK. Traders are anticipating that new market. This will be an important new step because it will facilitate the market for renewables that is being developed here.

“Things are likely to get even more exciting with the onset of smart metering in homes, which will facilitate homes trading excess electricity back to electricity suppliers.”

Returning to the way the SEMO system works, Behan explains that a central market system issues invoices electronically and, using NIB’s eBanking, instantaneous payments can be made for the various generators.

“Quick payment is vital because the generators need to get paid in time to buy their fuel.

“One of the challenges is to facilitate renewable energy providers and gear up for greater regional generation, especially with the 2012 launch of the East-West Interconnector,” Behan adds.

John Kennedy is a journalist who served as editor of Silicon Republic for 17 years