Electricity market

How does the electricity market work in Ireland?

The Single Electricity Market Operator (SEMO) was established in 2007 and operates an all-island electricity market for Ireland. All electricity is centrally traded through a pool system where licensed generators sell their electricity to a licensed supplier who sells it onto the pool, and receives a single market price (SMP). Alternatively licensed generators can trade directly into the pool themselves.

Every generator is given a daily dispatch schedule (power to be exported to the grid). In some cases this will be below their maximum export capacity and at other times the generators may be required to decrease/increase generation at a moment’s notice to match demand. Thus generators receive a payment for the electricity they sell and a capacity payment for their availability to generate above their scheduled dispatch.

Who sets the price?

The electricity market prices are set by the Single Market Operator (SEMO). Prices are published on half-hourly basis and are calculated after the event. The price is a single market price for electricity and is based mainly on the cost of the energy used for that period.

In periods of low demand, prices will be lower as the most efficient and low cost generation plants on the system are dispatched (told to generate by the grid operator). As electricity demand increases, the amount of generators exporting to the grid needs to be increased. This is done incrementally, by continuously dispatching the next least expensive generator to the system. In this way the cost of generation is kept to a minimum.