CBI Northern Ireland Annual Energy Forum - Douglas McIldoon

1. CBI ENERGY CONFERENCE 28 January 2009 Douglas McIldoon

6. A little bit of history! Remember our long term generation contracts?

7. Out turn availability payments capacity and generated units in the period 1992/93 to 1997/98 RPI (Oct) Actual Availability Payments £m (nominal) Capacity MW Units Sent Out GWh Pence per Kw/hr 1992/93 139.9 136.8 2243 6830 2.00 1993/94 141.8 145.2 2243 7058 2.06 1994/95 145.2 143.6 2243 7182 2.00 1995/96 149.8 150.8 2243 7370 2.05 1996/97 153.8 141.0 2123 7567 1.86 1997/98 159.3 142.6 2123 7683 1.86

8. In 1997/98 the cost of generation net of fuel was 1.86p per kilowatt hour. If NI generators had been sold at GB prices it would have been less than 1p. The inflation factor since then is 1.324. This year we look like paying in the region of 1.4 billion Euros for 41,000 gigawatt hours. That is 3.4 Euro cents. Therefore on the overpriced privatisation formula we would be paying 2.46p today. On a fair cost basis we should be paying at most 2p.

12. Why it is inefficient! ‘ b’ infra-marginal rent ‘ a’ Fuel price The reward to each generator is the sum of its ‘b’s SMP Time of Day

15. Should we be in SEM? There is a case for being in SEM; But the worst of all is - being in SEM and taking no policy responsibility for it! There is a case for not being in SEM;

16. The case for SEM It is the first step in constructing an energy market which best matches our needs and our potential. Our island is a 21 st renewable energy “Gulf State” – we should bless our good fortune. “ We will harness the sun and the winds and the soil to fuel our cars and run our factories.” President Obama: 20 January 2009 The potential to protect ourselves from volatile fossil fuel markets and rising cost of carbon.

17. Generation needs should be identified; Reforming SEM The “carbon premium” paid to renewables should be reinvested in the system. Grid based generation planning should be informed by energy efficiency, demand management and on site generation; Low carbon/renewable generation should be fostered with tailored contracts; Generation which has been fully written down should be given retaining contracts; Generation should be procured by competitive contracts;