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niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
A Sustainable Energy FutureA Sustainable Energy Future
Structuring the Energy Market
Douglas McIldoon
Chairman NIAER Chief Executive OFREG
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Shaping the DebateShaping the Debate
The liberalisers
The environmentalists
The traditionalists
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
The LiberalisersThe Liberalisers
Competitive markets
Driving down costs
A competitive economy
The environment? Not our problem
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
The EnvironmentalistsThe Environmentalists
Reducing C02 is paramount
Regulation is how to do it
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Environmentalists and Environmentalists and Liberalisers set the agendaLiberalisers set the agenda
Different languages
Different value systems
Different policy objectives
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Today: Policy ConfusionToday: Policy Confusion
Tomorrow: Is policy coherence possible?
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Can Markets deliver sustainabilityCan Markets deliver sustainability??
Market design
Market failure
Pre-market design intervention
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Convergence of Liberalisation and Convergence of Liberalisation and EnvironmentalismEnvironmentalism
UK White Paper
EU Emissions Trading Region
Renewable Obligation
Will they work in a small market?
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Average real price per unit for a Domestic customer
70
75
80
85
90
95
100
105
Year
Inde
x
Index of prices
Let’s look at NI
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Change Drivers in Northern IrelandChange Drivers in Northern Ireland
New technology
Regulation
Lowering the cost of capital
Competition
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Northern Ireland C0Northern Ireland C022 Emissions Emissions
A story with:
• A Beginning
• A Middle
• An End
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
3.4
3.5
3.6
3.7
3.8
3.9
4
4.1
4.2
4.3
1993 1994 1995 1996 1997 1998 1999 2000 2001
NI CO2 Emissions as % of UK Total - Power Sector
NI CO2 Emissions as % of UK Total
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
0.00
200.00
400.00
600.00
800.00
1000.00
1200.00
ton
nes
/un
it s
ales
1993 1994 1995 1996 1997 1998 1999 2000 2001 2010
NI CO2 Emissions / GWh
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Environmental Change DriversEnvironmental Change Drivers
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
0
50
100
150
200
250
300
000'
s to
nn
es
1997/98 1998/99 1999/00 2000/01 2001/02 2002/03
Carbon Savings - Energy Efficiency Levy
Carbon Savings Annual Carbon Savings Cumulative
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Renewables Growth as % of Total Consumption
0
1
2
3
4
5
6
99/00 00/01 01/02 02/03 03/04 04/05
% T
ota
l C
on
sum
pti
on
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Delivering SustainabilityDelivering Sustainability
Technology:
• CCGTs
• Domestic CHP
• Energy efficient appliances
• Time of day metering
• Renewables
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Delivering SustainabilityDelivering Sustainability
Incentive Regulation:
• NIE’s T&D price control
• NIE’s Supply price control
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Delivering SustainabilityDelivering Sustainability
Cost of Capital:
• Measures reducing cost of new investment
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
Delivering SustainabilityDelivering Sustainability
Competition:
• Emissions Trading
• Renewable Certificates
niaerNORTHERN IRELAND AUTHORITY
for ENERGY REGULATION
ConclusionConclusion
Environmental objectives are determined outside the market
Should be delivered at least cost to customers
Incentive Regulation and New Technology have hitherto delivered more than
competition in Northern Ireland
