The Electricity Supply Board (ESB). It doesn’t take too long venturing into the Irish energy sector before one encounters this company. Founded in 1927, the former monopoly provider was responsible for rural electrification in 1946. ESB group companies own the network and participate in generation and supply markets. In the mid-to-late noughties, much energy policy and regulatory effort were directed towards limiting their market share and creating the conditions amenable to competition in the sector.
The question that framed discussions on competition in Ireland was the value of increasing the number of competitors balanced against the potential requirement for scale to compete in energy. In effect what should be the position of the ESB? Given many recent announcements and articles, it seems likely that ESB will continue to have a substantial position in the Irish market for the foreseeable future. This month’s Energy Perspective considers their competitive position in supply and generation.
A big component of the EU’s 2007 Third Energy Package was the unbundling of energy supply and generation activities from networks, with the intent to minimise potential barriers to entry for new players. Many state champions and incumbent monopolies faced restructuring. The Irish settlement that emerged in relation to ESB could be summarised as follows.
- generation, supply and networks businesses are ring-fenced from each other and relations between them governed by a series of arrangements
- in wholesale trading and generation, they compete like any other player. However, SEM market power mitigation measures do treat them differently, for example, ESB is required to offer volumes for other players to bid on under Directed Contracts
- their generation and development assets can compete like any other participant for capacity under the Capacity Remuneration Mechanism (CRM) and have the same eligibility
requirements as other players under DS3. They can engage in renewable energy project development
- ESB Networks owns and operates the distribution system. They own the transmission network, but that, in turn, is independently operated by EirGrid and,
- having passed several competitive thresholds and rebranding under the Electric Ireland banner, they compete in retail markets for customers in a deregulated market.