Mr. Paul Blount:

The charging regimes in place at the moment and the uncertainty in the revenue streams that come from the spot market increases the cost of capital because it is increasing the risk. The total amount of revenue you would need to forecast in the spot market needs to be a lot higher than the revenue you would need if you had certainty on that revenue. As a result of some inappropriate charging, combined with that uncertainty, there is a reasonably substantial gap but the gap gets much smaller if the revenue certainty is there. If this auction is designed appropriately, then with an appropriate design you could be confident you were getting consumer value and that it would be the cheapest way to decarbonise the power system.

Yes, the design is complex but if you want to simplify it for the purposes of the committee, what we are advocating is if you could develop an integrated network and market model.

For this, the committee does not necessarily have to understand all of the fine details of the DC load flows and the different aspects of that. The principle is that you have a model that is capable of examining technologies and their technical capabilities at different nodes on the system and effectively translating that into a net marginal abatement cost of carbon. You can use such a model to rank the bidders based on how effectively they decarbonise. You do not have to have a deep understanding of exactly how that model works but I agree that it is not a trivial exercise.

There are countries around the world trying to do this type of thing, some better than others, and none of them are doing it as well as they could be. We have the skills in this country, with some of the best people in EirGrid, to be able to develop these kinds of tools but it will take a little bit of time. There is a good degree of sophistication to doing it very well but if you do it well, the prize is enormous. There are huge savings to be made as we attempt to deliver a decarbonised system if we can get that right. It is worth the investment of time, resources and expertise on the transmission system operator side and with other key stakeholders to try to build that tool that is able to make those determinations efficiently.