Generator Financial Performance in the Single Electricity Market report published

20 December 2016

The Regulatory Authorities, together the Utility Regulator (UR) in Northern Ireland (NI) and the Commission for Energy Regulation (CER) in the Republic of Ireland (ROI), today publish a report on the financial performance of generators in the wholesale electricity market on the island of Ireland.

The latest in the series of reports identifies:

  • Profitability margins in the SEM have remained relatively stable over the past number of years, suggesting a degree of earnings certainty and therefore lower investment costs for prospective new generation.
  • Gas and coal generated over 70% of the electricity produced in the SEM, in line with expectation as these plants have the highest share of installed capacity, and operate at the highest thermal efficiencies. The profit margins for these generators were amongst the lowest of all technology types.
  • Hydro, pumped storage, distillate and oil generators earn the highest net profits, but represent only 6% of SEM revenues. In the case of hydro and pumped storage, these plants are fully depreciated and now carry little residual financing costs, while distillate and oil plants operate during periods of very high demand for electricity, and draw their revenues predominantly from the Capacity Payments Mechanism.
  • The spark spreads (the difference between the revenue received by a generator for electricity produced and the cost of the natural gas needed to produce that electricity) are now similar to the GB market. This is encouraging because the goal of market reforms currently being implemented is to better harmonise prices for consumers in neighbouring, interconnected regions.