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Deloitte
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Participants within Irish market must prepare now to mitigate risk 

The Irish electricity market faces unique factors that could lead to a potentially volatile situation developing, according to Ciara Ryan, Energy, Infrastructure and Utilities Specialist with Deloitte. Participants within the Irish market must now start to prepare for these risks as the new Single Energy Market (SEM) will come into effect on November 1, 2007.

Speaking at the Energy Ireland Conference 2007, which takes place at the Burlington Hotel today, Ciara Ryan said that electricity is a notably volatile commodity – generic factors such as inelastic demand, non-storability and transportation constraints dictate that this is so. However there are a number of Irish-specific factors such as limited interconnection, poor availability of certain stations and an increasing level of non-dispatchable plant which could exacerbate volatility further.

Participants within the Irish market need to urgently prepare, not only to comply with the deadlines that regulatory authorities have implemented, but to develop skills and infrastructure around improving their commercial approach to levels of market risk.

Ciara Ryan commented: “The Irish electricity market retains particular features that lend it the potential to be volatile. In addition there is also a probability that the market will remain relatively illiquid making it hard for some players to adequately hedge their exposures. Although timelines are very tight for all participants to be compliant with SEM deadlines, they should not ignore the need to prepare commercially for new aspects of risk management. By explicitly considering market scenarios, participants can focus on developing medium and short term risk mitigating tactics, avoiding problems that could ultimately affect bottom lines.”

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