Executive Summary

The Electricity Association of Ireland welcomes the chance to respond to this extremely important consultation on the design of the day-ahead system services (DASSA) market. EAI’s overarching comments on the consultation are set out below followed by responses to each consultation question.

EAI have previously requested for greater clarity on how the System Service Future Arrangements (fixed term contracts, layered procurement framework and Day-Ahead System Services Auctions (DASSA) will interact. EAI believes it is important that greater guidance on how these different procurement mechanisms interact is provided so that industry can provide the most effective feedback on the future arrangements. Additional to the interaction of the System Service Future Arrangements, in this consultation paper there is no clarity on the future of other services not procured through this auction but will have their tariffs reduced under DS3, to zero eventually. It is imperative that we understand the future of layered procurement and any new style of fixed term contracts as well as what the transition from DS3 to DASSA will look like.

There is no clear and defined outline of how each part of the design of this auction complies with EBGL. This is for the Regulators to define and confirm and has not been done to date. It is fundamentally difficult for the industry to comment on parts of the auction design where this is unclear.

This is a single-buyer model where the TSO is a directly regulated entity - therefore, there is a degree of market power issue with this framework due to it being procured by a sole buyer in all cases. However, the focus of the consultation is on market power amongst system service providers for mechanisms that have been defined in the SEMC high level design as designed for products that have sufficient degree of competition.

Volume insufficiency is an unquantified risk especially where, as per the recent DS3 tariff review consultation, tariffs are being reduced due to a volume oversupply in reserve products. Therefore, volume insufficiency and surplus cannot both be true and a mechanism to mitigate against volume insufficiency needs a clear and transparent impact assessment to assess its likelihood in the first place.

It is not the TSOs’ responsibility to define if capacity withholding is an allowable behaviour within the SEM. That is the Regulators’ responsibility and they have never confirmed that market participants are allowed to undertake volume withholding in this DASSA market. Therefore, it is unclear how this is a compliant behaviour in the DASSA. It is also not simply resolved via a new Bidding Code of Practice (BCOP) as this would create conflicts for units that operate in other markets as well as system services.

There is also no technology-specific understanding of the auction and how it will have different impacts on different technology types. A CCGT that can provide these services at the same time as energy versus a battery that currently may have no other market option but to offer reserves, would have very different trading behaviour and exposure.

In terms of the DASSA clearing options presented, opting for zonal pricing would introduce another layer of complexity on top of a number of coinciding major market changes, not least of which is Celtic EU Reintegration. The zonal pricing proposal does also not seem to align with the SEMC decision on the High-Level Design of SSFA which suggests that the auction should consider volume requirements for each zone, with no reference to application of divergent clearing prices.

From the consultation paper it would appear that all risk is placed upon the system service provider. For example:

There will be reduced DASSA payments if a service provider is subject to early TSO action.
The auction bids products allow for no interdependency,
Market participants cannot update DASSA offer prices,
The timing of the DASSA on top of the EUIDA1
A restrictive secondary trading platform.

EAI believes greater understanding of the risk being placed on the system service provider is needed and is open to further discussions with the TSOs to identify the concerns our members have with the current DASSA proposals. We also believe that many of the proposals fail to recognise that it is because of the under delivery of grid infrastructure that participants are offering their technical capability to support the grid, and that it is important that this contribution is recognised.

Until further clarity and detail is provided on the following items, still to go to further consultation as listed in the consultation paper, EAI reserves the right to be able to review the positions proposed in this response:

The number of products that will be procured within the auction (i.e. non-reserve products (including their categorisation) and defining high quality versus low quality products;
Information on how volumes will be calculated for daily auctions;
The delivery and operability of the central trading platform;
Incentives for offering availability for an implicit bundle of services;
Constraints and volume thresholds within the DASSA clearing optimisation;
The locational methodology for defining zones and associated constraints;
Availability performance scalar;
Event performance scalar;
The value of compensation payments;
How payments for bilateral trades between organisations will be made;
The FAM default price;
The design of Firm Access for system services;
Service availability requirements;
The introduction of forward markets or long-term contract design.

Finally, EAI wants to take the opportunity to raise concerns it has with the flexibility of the Phased Implementation Roadmap. EAI has always sought to work with the TSOs in identifying issues and potential solutions and will continue to do so to ensure the implementation of the System Service Future Arrangements is achieved. The EAI believes industry needs to be engaged with when the TSOs are identifying the issues rather than months later when a solution is put forward. Market participants have had no input into the proposed solution and are time-limited in responding to the TSOs. Bringing in industry at the problem identification stage rather than the solution stage would ensure market participants can contribute effectively to the designing and implementing of the SSFA so that it can work for them as well.

Additionally, considering the significant content in this paper, and the subsequent material in the industry workshop and publications, EAI felt the need to request an extension. However, since the allocation of the extension the TSOs have identified to the SSFA project panel that the Phased Implementation Roadmap has little or no flexibility to accommodate a two-week extension. Considering the significant content that needs to be discussed over the next two years, EAI are concerned that the Phased Implementation Roadmap does not have the necessary flexibility to deliver such a significant project.

Question 1: Do you have any comments on the services to be procured under the DASSA?

It is unclear how (and if) the other services will be transitioned into the DASSA and what framework these services will be procured through after the end of DS3 tariff arrangements. Yet, it appears that tariffs will be ceased for all services regardless of whether they are operating in the DASSA. There is no clarity on the Layered Procurement Framework (LPF) and what new types of fixed term contracts may replace the existing DS3 framework. As above, none of this has been the subject of a comprehensive justification to confirm the specific split of services across the various procurement mechanisms and the volumes to be provided within each mechanism. No link to specific EBGL compliance has been made either. Early and dynamic notification of services are needed well ahead of auction with frequent iterations, along with clear reporting on volumes secured and traded, so that trends can be seen over time.

SOEF Markets – Future Arrangements for System Services – DASSA Consultation Paper - Submissions

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