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Consultation Paper
Reference: CRU/19/011 Date Published: 04/02/2019 Closing Date: 19/03/2019
An Coimisiún um Rialáil Fóntas
Commission for Regulation of Utilities
Dublin Security of Supply:
Locational Scarcity
Scalars for System
Services in the
Dublin Region
www.CRU.ie
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Executive Summary
The purpose of this paper is to consult with the public, and all relevant stakeholders, on the
CRU’s proposals to direct EirGrid to adjust the DS3 System Services Locational Scarcity
Scalar above one, for the appropriate System Services, for providers in the Dublin Region.
The CRU has included provision for €12.5m in D-TUoS for 2018/2019 to cover the costs of
increasing the level of payment for the relevant System Services in the Dublin Region.
In this paper the “Dublin Region” refers to the electrical area in and around Dublin and
therefore includes areas that may not be geographically located in Dublin but are considered
electrically inside Dublin. This area will be defined by EirGrid.
As noted in the CRU paper ‘Dublin Security of Supply: Measures to mitigate the risk of
disorderly exit’ (CRU/18/228), the CRU will consult on the introduction of locational scalars for
System Services to apply in the Dublin Region.
The CRU considers that there is a need for locational signals for the Dublin Region, to
incentivise generation which provides system support, both in terms of entry and exit, which
is important for the long-term security of supply in the region, in the context of unprecedented
levels of forecast demand growth. In this context, the CRU will adopt a pragmatic approach,
that is fit for purpose, and that can be implemented quickly to serve the purpose of increasing
the remuneration for services that most contribute to increasing security of supply in the
region.
The CRU is therefore proposing to direct EirGrid to adjust the DS3 System Services Locational
Scarcity Scalar for the Dublin Region and is seeking stakeholders’ views on its proposals.
The CRU’s proposals can be summarised as follows:
• The Locational Scarcity Scalars will be adjusted above one for all services providers in
the Dublin Region for the services TOR2, RRS, RRD, RM1, RM3 and SSRP. This will
only apply to the DS3 System Services Standard (Volume Uncapped) Contracts.
• €12.5m will be allocated on an annual basis to cover the costs of adjusting the DS3
System Services Locational Scarcity Scalars in the Dublin Region. This amount will be
reviewed annually.
• In the first year, the Locational Scarcity Scalars will be set for five years from their initial
adjustment, i.e. the period 2019 - 2024. In subsequent years, the Scalar values will be
set five years in advance on an annual basis. For instance, in 2020 the scalar values will
be set for the year 2025 and so on, one year at a time.
• The Locational Scarcity Scalars will be applied to payments for the relevant technologies
and System Services in line with the payment rules for the Temporal Scarcity Scalar as
set out in the DS3 System Services Market Ruleset.
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• Consideration should be given as to how revenues gained by a service provider from the
Locational Scarcity Scalars should be considered in terms of capacity payments in the
CRM and interactions with the calculation of the Unit Specific Price Cap (USPC).
Regarding potential interactions with the wider market, the CRU will continue to engage with
the SEM Committee in the development of its approach.
The CRU is requesting comments and feedback on its proposals by the 19th March 2019.
Comments/feedback on the questions proposed should be submitted by email to
The CRU’s proposals are outlined in detail in section 3 of this paper and the questions the
CRU invites responses to are summarised in section 4.
Unless marked confidential, all responses may be published on the CRU’s website.
Respondents may request that their response is kept confidential. The CRU shall respect this
request, subject to any obligations to disclose information. Respondents who wish to have
their responses remain confidential should clearly mark the document to that effect and include
the reasons for confidentiality.
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Public/ Customer Impact Statement
The Dublin Region has experienced demand growth in the last number of years and this
growth is expected to increase significantly over the next number of years, particularly with
the anticipated connection of large energy users such as data centres, as noted in EirGrid’s
All-Island Generation Capacity Statement 2018-20271. Coupled with this, the Dublin Region
has been identified as a Locational Capacity Constraint Area (i.e. a local area of the network
that is at greater risk of security of supply issues due to generator exit).
The CRU has allocated an amount of revenue in D-TUoS (Demand Transmission Use of
System Tariffs charged to users of the transmission system) for 2018/2019 to cover the costs
of a range of measures to improve the immediate and longer-term security of supply of the
Dublin Region. A portion of this revenue will be allocated to cover the costs of adjusting the
System Services Locational Scarcity Scalars in the Dublin Region.
Providers of System Services are paid based on an individual tariff rate for each service. The
Locational Scarcity Scalars work as a multiplier by increasing the level of payment for the
provision of services in locations where they are more valuable. Increasing the level of
payment for DS3 System Services providers in the Dublin Region reduces the risk of generator
exit and increases the likelihood of generator entry which is important for system support and
should improve the longer-term security of supply in the region. This is particularly relevant in
the context of significant forecast demand growth and the relatively higher costs of generation
in the Dublin Region. The CRU has allocated €12.5m to cover the costs of increasing the
Locational Scarcity Scalars in the Dublin Region.
This paper sets out the CRU’s proposals to direct EirGrid to adjust the System Services
Locational Scarcity Scalar above one for a subset of System Services for providers in the
Dublin Region.
1 EirGrid’s All-Island Generation Capacity Statement 2018-2027: http://www.eirgridgroup.com/site-files/library/EirGrid/Generation_Capacity_Statement_2018.pdf
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Table of Contents
Table of Contents ...................................................................................................... 4
1. Introduction ........................................................................................................ 6
1.1 Commission for Regulation of Utilities .................................................................... 6
1.2 Background ............................................................................................................... 6
1.3 Purpose of this Paper ................................................................................................ 7
1.4 Legal Background ..................................................................................................... 7
1.5 Consultation Responses ........................................................................................... 7
1.6 Structure of this Paper .............................................................................................. 8
2. Objectives & Principles ..................................................................................... 9
3. CRU Proposals for the DS3 System Services Locational Scarcity Scalars 11
3.1 DS3 System Services .............................................................................................. 11
3.2 DS3 System Services Locational Scalars .............................................................. 11
3.3 CRU Proposals for the DS3 System Services Locational Scarcity Scalars ......... 12
4. Next Steps ........................................................................................................ 18
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Glossary of Terms and Abbreviations
Abbreviation or Term Definition or Meaning
CRU Commission for Regulation of Utilities
TSO Transmission System Operator – EirGrid
DS3 Delivering a Secure, Sustainable
Electricity System
CRM Capacity Remuneration Mechanism
Dublin Region
The electrical area in and around Dublin
that includes areas that may not be
geographically located in Dublin but are
considered electrically inside Dublin
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1. Introduction
1.1 Commission for Regulation of Utilities
The Commission for Regulation of Utilities (CRU) is Ireland’s independent energy and water
regulator. Our remit is to regulate water, energy and energy safety in the public interest.
Further information on the CRU’s role and relevant legislation can be found on the CRU’s
website at www.cru.ie.
1.2 Background
On the 18th December 2017, the CRU published an information paper titled ‘Regulatory
Approach to Maintaining Local Security of Supply in Electricity’ (CRU/17/346)2. This paper set
out the CRU’s objectives, principles and intended approach to maintaining local security of
supply in response to significant demand growth or a generator exiting the market. Specifically,
CRU/17/346 outlined how the CRU may intervene in order to maintain security of supply where
it considers that there is a risk to security of supply, on all or part of the system, due to
generator exit or anticipated demand growth.
Local security of supply issues can arise not only due to increases in demand in an area but
also due to reductions in generation capacity in a particular area. The Dublin Region has
experienced demand growth in the last number of years and this growth is expected to
increase at unprecedented levels over the next number of years, particularly with the
anticipated connection of large data centres. Data centres tend to have large demand loads
and relatively short construction lead times that can create challenges for network planning
and can lead to potential issues such as network constraints and delays to demand
connections etc. For instance, according to EirGrid’s All-Island Generation Capacity
Statement 2018-2027, there is currently around 400 MVA of demand capacity contracted to
data centres, with the potential for an additional 1400 MVA of demand to connect by 2023/24.
A significant proportion of this will materialise in the Dublin Region.
As noted in a letter from EirGrid to the CRU on the 4th October 2018, EirGrid’s analysis shows
that the Dublin regional Level 2 Locational Capacity Constraint in the T-4 capacity auction for
2022/23, to be held in March 2019, has the potential to exceed the generation capacity
currently connected, or expected to be connected, in that region3.
2 Regulatory Approach to Maintaining Local Security of Supply in Electricity (CRU/17/346) https://www.cru.ie/wp-content/uploads/2017/12/CRU17346-Information-Paper-Regulatory-Approach-to-Maintaining-Local-Security-of-Supply.pdf 3 https://www.cru.ie/wp-content/uploads/2018/10/CRU18229c-EirGrid-letter-to-CRU-rLocational-Capacity-Constraint.pdf
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On the 5th October 2018, the CRU published an information paper titled ‘Dublin Security of
Supply: Measures to mitigate the risk of disorderly exit’ (CRU/18/228). This paper outlined a
range of measures that the CRU has decided to progress to address the Huntstown DMILC
risk and to ensure that the long-term security of supply of the Dublin Region will be protected.
One such measure is the use of locational signals via the System Services Locational Scarcity
Scalars to reduce the risk of generator exit and increase the likelihood of entry in the Dublin
Region.
As outlined in the CRU information paper ‘Electricity Transmission Network Allowed Revenues
2019 & Demand Transmission Use of System (D-TUoS) Tariffs 2018/2019’ (CRU/18/195)4,
the CRU has included an amount of revenue in D-TUoS to cover the costs of a number of
these measures to improve the immediate and longer-term security of supply of the Dublin
Region. This includes provision for the introduction of locational signals via the System
Services Locational Scarcity Scalars.
1.3 Purpose of this Paper
The purpose of this paper is to set out and consult on the CRU’s proposals to adjust the DS3
System Services Locational Scarcity Scalar payment level above one for the appropriate
System Services for providers in the Dublin Region.
1.4 Legal Background
Section 9 of the Electricity Regulation Act, 1999, as amended requires the CRU to have regard
to ensuring security of supply. In addition, Regulation 28 of SI 60 of 2005 puts additional
security of supply obligations on the CRU and the TSO, including the requirement that “The
Commission shall take such measures as it considers necessary to protect security of supply”.
1.5 Consultation Responses
The CRU is requesting comments and feedback on its proposals by the 19th March 2019.
Comments/feedback on the questions proposed should be submitted to [email protected]
Unless marked confidential, all responses may be published on the CRU’s website.
Respondents may request that their response is kept confidential. The CRU shall respect this
request, subject to any obligations to disclose information. Respondents who wish to have
their responses remain confidential should clearly mark the document to that effect and include
4 Electricity Transmission Network Allowed Revenues 2019 & Demand Transmission Use of System (D-TUoS) Tariffs 2018/2019 (CRU/18/195) https://www.cru.ie/wp-content/uploads/2018/08/CRU18195-Electricity-Transmission-Network-Allowed-Revenues-2019.pdf
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the reasons for confidentiality. Personal contact details will be removed from any published
responses, the names and organisations of respondents will not be removed.
Our privacy notice sets out how the CRU protects the privacy rights of individuals and can be
found here.
1.6 Structure of this Paper
Section 1 provides an overview of the background and relevant legislation. Section 2 sets
out the CRU’s objectives. Section 3 outlines the CRU’s proposals in relation to the DS3
System Services Locational Scarcity Scalars. Section 4 sets out the next steps.
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2. Objectives & Principles
2.1 Regulatory Approach to Maintaining Local Security of
Supply in Electricity (CRU/17/346)
CRU/17/346 set out the CRU’s objectives, principles and intended approach to maintaining
local security of supply in response to significant demand growth or a generator exiting the
market. The objectives that the CRU will seek to achieve in deciding on any intervention,
where it considers that there is a risk to security of supply, are:
1. To keep the lights on
2. To protect consumers from loss of supply and ensure the most cost effective long-
term solution
3. To allow efficient market exit by generators through a managed process that provides
sufficient time:
a. for the market to respond
b. for the TSO to update their planned transmission development
c. to address short-term or local security of supply issues
4. That generators are capable of financing their efficient activities during the exit period
As outlined in CRU/18/228, the CRU has decided to progress a range of measures to ensure
that the long-term security of supply of the Dublin Region will be protected. These measures
seek to collectively achieve the objectives set out above.
With the anticipated connection of large data centres, demand in the Dublin Region is
expected to increase significantly over the next number of years. Coupled with this, the Dublin
Region has been identified by EirGrid as a Locational Capacity Constraint area which puts it
at greater risk of security of supply issues in the case of generator exit in the region.
While a number of transmission infrastructure developments are planned for the Dublin
Region, these will take time to build. As per CRU/18/228, in addition to transmission
infrastructure developments, the CRU has decided to progress measures to send appropriate
locational signals to large demand and generation. In simple terms, this can involve generation
locating in an area electrically close to existing demand. In relation to the measure to adjust
the System Services Locational Scalars for the Dublin Region, the CRU considers that this is
consistent with, and relevant to, the first two objectives, i.e. to keep the lights on and to protect
consumers from loss of supply and ensure the most cost-effective long-term solution.
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2.2 Approach to System Services Locational Scarcity
Scalars
The objective of adjusting the System Services Locational Scarcity Scalars is to incentivise
generation which provides system support in the Dublin Region, both in terms of entry and
exit, which is important for the long-term security of supply in the region, in the context of
unprecedented levels of forecast demand growth.
In seeking to meet this objective, the CRU will have regard to the following principles:
1. To increase the remuneration for services that most contribute to increasing security
of supply in the Dublin Region
2. To send appropriate long-term market signals to market participants to promote
efficient locational decisions for new and existing generation which can provide system
support
3. To adopt an approach that can be implemented quickly, that is pragmatic and fit for
purpose and in a manner that delivers reasonable certainty for market participants
As noted in CRU/18/228 further development to the approach for Locational Scarcity Scalars
may be required in the long-term in order to apply a locational methodology across regions on
an enduring basis. However, the CRU will endeavour to structure the approach for adjusting
the Locational Scarcity Scalars for the Dublin Region in a manner that delivers appropriate
long-term signals and reasonable certainty for market participants. As indicated, this is one of
a range of measures to ensure that the long-term security of supply of the Dublin Region will
be protected.
Regarding potential interactions with the wider market, the CRU will continue to engage with
the SEM Committee in the development of its approach.
Question 1: Do you have any views on the CRU’s objectives and principles in relation
to introducing locational signals to Dublin via the DS3 System Services Locational
Scarcity Scalars?
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3. CRU Proposals for the DS3 System Services Locational Scarcity Scalars
3.1 DS3 System Services
DS3 stands for Delivering a Secure, Sustainable Electricity System. The aim of the DS3
programme is to meet the challenges of operating the electricity system in a secure manner
while achieving the 2020 renewable electricity targets. With increasing amounts of variable
renewable generation there is a need to ensure that the power system can be operated
securely and sustainably. Through the successful completion of the DS3 Programme the
operational limit on non-synchronous generation may be increased to 75%.
System Services is a key work stream within the DS3 Programme, these are services that are
paid to providers that supply valuable services to the system to help maintain the stability and
security of the power system. The System Services work stream will improve the technical
capability of the generation fleet and the system more generally by incentivising generation
valuable to the system and by interacting with the energy trading and capacity markets in order
to deliver value to consumers and a secure, sustainable power system. The resulting improved
performance from generators will allow greater use of zero-marginal cost generation, such as
wind, by reducing the amount of time wind farms must be curtailed, or turned down, resulting
in lower energy prices for consumers in addition to facilitating Ireland meeting its 2020
renewable targets.
3.2 System Services Locational Scarcity Scalars
In December 2014, the SEM Committee published a decision paper on the high-level design
for the procurement of DS3 System Services (SEM-14-108)5. Since the high-level design was
published, the Transmission System Operators (TSOs) and the Regulatory Authorities have
worked to implement many aspects of this design, including the successful development and
implementation of the DS3 System Services Regulated Arrangements (SEM-17-080)6 which
went live in May 2018.
The high-level design paper directed that scarcity scalars should be applied to the provision
of System Services to create marginal incentives for providers to make themselves available
during periods or in locations of scarcity, therefore enhancing the performance of the system
5 DS3 System Services High Level Design Decision Paper (SEM-14-108) https://www.semcommittee.com/publication/sem-14-108-ds3-system-services-decision-paper 6 DS3 System Services Tariffs and Scalars Decision Paper (SEM-17-080) https://www.semcommittee.com/news-centre/ds3-system-services-tariffs-and-scalars-sem-committee-decision
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where it is most needed. These scalars multiply payments of the tariff rates for the relevant
services at different SNSP levels and, potentially, for different locations.
The System Services contracts under the Regulated Arrangements contain a Locational
Scarcity Scalar whose value is currently set at one. Where a need has been identified in a
given location(s), the Regulatory Authorities may direct the relevant TSO to adjust the scalar
value above one for the appropriate System Services for all providers in that location(s). The
purpose of adjusting the Locational Scarcity Scalar above one is to incentivise availability of
system services by increasing the level of payment to those service providers in locations
where a need has been identified.
3.3 CRU Proposals for the System Services
Locational Scarcity Scalars
3.3.1 Introduction
The CRU is proposing to direct EirGrid to adjust the System Services Locational Scarcity
Scalar above one for the appropriate System Services for all providers in the Dublin region.
This section sets out the CRU’s proposals in detail and in summary are set out below:
• The Locational Scarcity Scalars will be adjusted above one for all services providers in
the Dublin Region for the services TOR2, RRS, RRD, RM1, RM3 and SSRP. This will
only apply to the DS3 System Services Standard (Volume Uncapped) Contracts.
• €12.5m will be allocated on an annual basis to cover the costs of adjusting the DS3
System Services Locational Scarcity Scalars in the Dublin Region
• In the first year, the Locational Scarcity Scalars will be set for five years from their initial
adjustment, i.e. the period 2019 - 2024. In subsequent years, the Scalar values will be
set five years in advance on an annual basis. For instance, in 2020 the scalar values will
be set for the year 2025 and so on, one year at a time.
• The Locational Scarcity Scalars will be applied to payments for the relevant technologies
and System Services in line with the payment rules for the Temporal Scarcity Scalar as
set out in the DS3 System Services Market Ruleset.
• Consideration should be given as to how revenues gained by a service provider from the
Locational Scarcity Scalars should be considered in terms of capacity payments in the
CRM and interactions with the calculation of the Unit Specific Price Cap (USPC).
3.3.2 Amount Allocated to cover the costs of adjusting the
System Services Locational Scarcity Scalars
As noted, the CRU has included an amount of revenue in D-TUoS for 2018/2019 to cover the
costs of a number of measures to improve the immediate and longer-term security of supply
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of the Dublin Region. Of this amount, the CRU has allocated €12.5m to cover the costs of
adjusting the System Services Locational Scarcity Scalars in the Dublin Region.
The CRU has engaged with EirGrid in determining the appropriate amount to allocate towards
the adjustment of the Locational Scarcity Scalars and in so doing, has taken a range of
considerations into account:
• Consideration has been given to the alternative option of the development of the
electricity network itself. Under the current regulatory framework, annual tariffs of
€12.5m would support transmission investment of the order of €150m. Whilst not
inconsiderable, this would be expected to be considerably less than the cost of
developing large scale cross country electricity infrastructure to support the Dublin
Region, recognising in addition the time it would take for this to be delivered. This is
even after the current locational differentials which exist within the all island Generator
TUoS framework. For the avoidance of doubt, the CRU does not see the adjustment
of the Locational Scalars as a replacement for the development of transmission
network to support the Dublin Region and indeed, measures for the advancement of
that network, by EirGrid, are further detailed in CRU/18/228.
• A second consideration relates to the value that a secure Dublin power system
delivers. The Value of Lost Load (VOLL) is used to express the value attached by
consumers to uninterrupted electricity supply. It may also be expressed as ‘an
estimation in €/MWh, of the maximum electricity price that customers are willing to pay
to avoid an outage’7. The SEM Committee, in the decision paper on Trading and
Settlement Code Policy Parameters for 2018 (SEM-17-071)8, determined that the
VOLL for 2018 was €11,128.26/MWh. The proposed €12.5m locational signal cost is
therefore the equivalent of a lost load of c. 1,123 MWh, or the loss of supply for
c.100MW of load for 11 hours per year. Insofar as the adjustment of the Locational
Scalars were to both attract new generation to locate within the greater Dublin Region,
and help ensure existing generation remains, the value of this, measured in terms of
VOLL, would be expected to exceed the €12.5m cost (particularly in the context of
increasing demand in Dublin).
• A third consideration recognises that the cost of new generation development within
urban areas, and the Dublin Region in particular, could be expected to be greater than
on greenfield sites outside of urban conurbations. The SEM Committee Decision Paper
on the CRM T-4 Capacity Auction for 2022/23, Best New Entrant Cost of New Entrant
(SEM-18-156)9, and accompanying Poyry report, included a site procurement cost of
7 Article 2(2)(h) of the Proposal for a Regulation of the European Parliament and of the Council on the internal market for electricity (recast), 30.11.2016, COM(2016) 861 final 2016/0379 (COD) 8 Trading and Settlement Code Policy Parameters for 2018 (SEM-17-071) https://www.semcommittee.com/sites/semcommittee.com/files/media-files/SEM-17-071%20TSC%20Policy%20Parameters%202018%20Decision%20%20Paper.pdf 9 CRM T-4 Capacity Auction for 2022/23, Best New Entrant Cost of New Entrant (SEM-18-156) https://www.semcommittee.com/publications/sem-18-156-publication-crm-t-4-cy202223-best-new-entrant-decision-paper
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€150k per acre in Ireland. It is recognised that this is by necessity an average site
value and is not intended to reflect specific areas such as the Dublin Region where
costs would potentially be higher. In addition, both the construction cost and ongoing
operation of plant in the Dublin Region may be affected by the higher density of
population, and other input costs such as labour costs may be somewhat higher also.
The proposed €12.5m Locational Scalar provision recognises this, in particular in
relation to new build generation proposals and would equate to c.€600k per 100 MW
of Dublin generation based on existing capacity.
Overall, therefore, taking into account each of the considerations above, the CRU views an
initial provision of €12.5m for the adjustment of the Locational Scarcity Scalars as appropriate
at this time. This figure will be reviewed on an annual basis. The actual cost of the additional
scalar payment will ultimately depend on the optimum scalar proposed by EirGrid (and
approved by the CRU), following consultation, and the level of relevant services provided by
the generators electrically inside the Dublin Region. Any difference between the €12.5m ex
ante allowable revenue and the actual costs expended will be trued up under the established
k-factor mechanism, hence ensuring only efficient expenditure is eventually allowed and
recovered.
The CRU notes that the additional costs associated with adjusting the Locational Scarcity
Scalar for providers in the Dublin Region will be recovered on a jurisdictional basis (i.e they
will be recovered by EirGrid from D-TUoS). Therefore, additional payments for the locational
elements of these services will not contribute to the annual all-island expenditure cap of €235m
for DS3 System Services set by the SEM Committee.
Question 2: Do you have any comments on the CRU’s determination of the amount to
allocate to cover the costs of adjusting the System Services Locational Scarcity Scalars
in the Dublin Region?
3.3.3 Relevant Services
The table below sets out the DS3 System Services and the tariff rates for each service.
Service Name Unit of
Payment
Final Rate
€
Synchronous Inertial Response (SIR) MWs2h 0.0050
Primary Operating Reserve (POR) MWh 3.24
Secondary Operating Reserve (SOR) MWh 1.96
Tertiary Operating Reserve (TOR1) MWh 1.55
Tertiary Operating Reserve (TOR2) MWh 1.24
Replacement Reserve – Synchronised (RRS) MWh 0.25
Replacement Reserve – Desynchronised (RRD) MWh 0.56
Ramping Margin 1 (RM1) MWh 0.12
Ramping Margin 3 (RM3) MWh 0.18
Ramping Margin 8 (RM8) MWh 0.16
Steady State Reactive Power (SSRP) MVArh 0.23
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Fast Frequency Response (FFR) MWh 2.16
Fast Post Fault Active Power Recovery (FPFAPR) MWh 0.15
Dynamic Reactive Response (DRR) MWh 0.04
The CRU has engaged with EirGrid in relation to the appropriate services to which the
Locational Scarcity Scalars should be adjusted.
The CRU is proposing that the Locational Scarcity Scalars will be adjusted above one for all
services providers in the Dublin Region for the following services:
• TOR2, RRS, RRD, RM1, RM3 and SSRP
These six services, combined, incentivise the capability to deliver energy over five minutes to
eight hours. TOR2 requires energy provision within five minutes of an event and, in
combination with RRS, RRD, RM1 and RM3 respectively, ensures a margin for sustained
energy provision for a duration of up to 8 hours after an event. SSRP requires the provision of
steady-state reactive power which may alleviate congestion issues as a result of potential
voltage collapse.
As a result, the CRU considers that these services may help provide the necessary supports
from across the generation portfolio which are appropriate in the context of the operation of
the Dublin network and most contribute to increasing security of supply in the Dublin Region.
Moreover, these services recognise that, in relation to any new generation which may locate
within the Dublin Region, that there is a requirement, and benefit, in both baseload and
peaking generation, but particularly generation sources which contribute to ongoing voltage
stability in the context of growing demand and the scale of network reinforcement and
refurbishment planned for the Dublin Region in the coming period.
Question 3: Do you have any comments on the CRU’s proposals to adjust the
Locational Scarcity Scalars for the above services? Are there other considerations the
CRU should take into account in determining the appropriate services?
3.3.4 Long-term Signals
The CRU is proposing that, in the first year, the Locational Scarcity Scalars will be set for five
years from their initial adjustment, i.e. the period 2019 - 2024. In subsequent years, the Scalar
values will be set five years in advance on an annual basis, for instance, in 2020 the scalar
values will be set for the year 2025 and in 2021 the scalar values will be set for the year 2026
and so on, one year at a time. In this way market participants will have an ongoing view on
what the scalar values will be five years ahead. Considering the anticipated demand growth
in the Dublin Region, and the locational capacity constraints that have been identified by
EirGrid for that region, the CRU considers it appropriate to introduce a longer-term locational
signal in order to provide reasonable investment certainty for market participants and to
incentivise generation which can provide system support in the region. The CRU considers
that this proposal would provide reasonable certainty and a long-term investment signal to
providers in line with the principles set out in section 2.2.
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The CRU notes that any over or under-expenditure incurred in one year may be accounted for
in the scalar values for the subsequent year. The intention of these proposals is to provide
price certainty and a fixed long-term signal thus, the scalar values should be adjusted as little
as possible, however, subject to CRU approval, EirGrid would have the right to adjust the
Locational Scarcity Scalar values if there is significant over-expenditure in a particular tariff
year.
The CRU may also direct EirGrid to adjust the Locational Scarcity Scalar value back to one
where it considers that the appropriate security of supply measures have been implemented
and there is no longer a need for a locational signal. However, it is the CRU’s intention that
this would be set five years in advance of the relevant tariff year so that provider’s will still
have a view of the scalar values five years ahead. For example, in 2022 the scalar values may
be set to one for the year 2027 while the relevant scalar values which have already been set
for the interim years will still hold.
Question 4: Do you have any views on the CRU’s proposal to set the Locational Scarcity
Scalar values for a five-year period on an initial basis and then five years in advance on
an annual basis in subsequent years?
3.3.5 Payment Basis
Payment for System Services providers, for each trading period, is a function of the tariff rate,
the relevant scalars (product, performance and scarcity) and the provider’s availability for that
service. A unit’s market position or its physical dispatch position is used to determine the
provider’s available volume for a trading period.
The SEM Committee Decision Paper on the DS3 System Services Market Ruleset10
(SEM/18/032) was published on the 8th June 2018. This Ruleset sets out the rules that will be
used for settlement with respect to a unit’s market position for providers of System Services.
The CRU proposes that the Locational Scarcity Scalars will be applied to payments for the
relevant technologies and System Services in line with the payment rules for the Temporal
Scarcity Scalar as set out in the DS3 System Services Market Ruleset. For clarity, for those
relevant units and services that are remunerated based on their market position, the Locational
Scarcity Scalar will only apply to the market position of these providers. For all other relevant
technologies and System Services, the Locational Scarcity Scalars will only apply to payments
associated with the physical dispatch position of providers.
The CRU considers that this approach providers greater revenue certainty to providers,
consistent with the SEM Committee’s Market Ruleset Decision, as the intention of paying the
higher remuneration based on a unit’s market position is that providers will determine in each
trading period whether to provide system services, and how much of each service, and that
10 SEMC Decision on the DS3 System Services Market Ruleset https://www.semcommittee.com/sites/semc/files/media-files/SEM-18-032%20SEMC%20Decision%20Paper%20on%20DS3%20System%20Services%20Market%20Ruleset.pdf
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they should not be disadvantaged by a TSO action. The CRU may review this approach in
subsequent years.
Question 5: Do you agree with the CRU’s proposals in relation to the payment basis for
the System Services Locational Scarcity Scalars?
3.3.6 Interactions with the Capacity Remuneration
Mechanism
As the intention of these proposals is to introduce a locational signal into the Dublin region,
the CRU views it as appropriate that consideration should be given as to how revenues gained
by a service provider from the Locational Scarcity Scalars should be considered in terms of
capacity payments in the CRM and interactions with the calculation of the Unit Specific Price
Cap (USPC).
The CRU notes that USPC calculations are a SEM Committee matter and therefore outside
the scope of this paper. Any revision or adjustment regarding the calculation of the USPC is a
SEM Committee decision. Nevertheless, the CRU welcomes views from respondents as to
how additional revenues from Locational Scarcity Scalars should be considered in relation to
CRM payments, and the calculation of a unit’s Unit Specific Price Cap (USPC), in order to
assist the SEM Committee in its considerations.
Question 6: Do you have any views on how additional revenues received by providers
from the application of the Locational Scarcity Scalars should be considered in relation
to the CRM and the calculations of a unit’s Unit Specific Price Cap (USPC)?
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4. Next Steps
The CRU welcomes comments and feedback on the proposals set out in this paper:
The CRU would request that respondents provide an opening statement with an overview of
their response in relation to the CRU’s proposals.
The questions the CRU invites responses to are as follows:
Question 1: Do you have any views on the CRU’s objectives and principles in relation
to introducing locational signals to Dublin via the System Services Locational
Scarcity Scalars?
Question 2: Do you have any general comments on the CRU’s proposals, including the
CRU’s objectives, to adjust the Locational Scarcity Scalars above one for providers in
the Dublin Region? Are there any other specific considerations or conditions that the
CRU should take into account in its proposals?
Question 3: Do you have any comments on the CRU’s proposals to adjust the
Locational Scarcity Scalars for the above services? Are there other considerations the
CRU should take into account in determining the appropriate services?
Question 4: Do you have any views on the CRU’s proposal to set the Locational Scarcity
Scalar values for a five-year period on an ongoing annual basis?
Question 5: Do you agree with the CRU’s proposals in relation to the payment basis for
the System Services Locational Scarcity Scalars?
Question 6: Do you have any views on how additional revenues received by providers
from the application of the Locational Scarcity Scalars should be considered in relation
to the CRM and the calculations of a unit’s Unit Specific Price Cap (USPC)?
Question 7: Do you have any further comments or are there any other considerations
the CRU should take into account in its proposals?
As set out in section 1.5, the deadline for submitting responses to the CRU is the 19th March
2019. Responses to this consultation should be sent via email to [email protected]
The CRU is also open to holding bi-lateral meetings with interested parties during the
consultation period. Requests for meetings should be sent via email to [email protected]
The CRU will consider all submissions received prior to making its decision. If it is the case
that the CRU decides to proceed with its proposals, then it will direct EirGrid to explore options
for adjusting the Locational Scarcity Scalars in line with the conditions set out in section 3. The
scalar values, as proposed by EirGrid, will be subject to CRU approval. The CRU will work
with EirGrid and aims to implement the proposed changes in Q2 2019.
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In the longer-term, as stated in CRU/18/288, the CRU will work with EirGrid to develop a
methodology to define constrained regions and means for adjusting the Locational Scarcity
Scalars on an enduring basis. The CRU will also engage with EirGrid on the development of
potential methods for dealing with network congestion issues as they arise, which may involve
System Services.
