We are pleased to present our latest I-SEM policy update report on the DS3 System Services Tariff Rate Review.
In September 2020, EirGrid published an expenditure note outlining concerns of a future potential breach in the DS3 regulated arrangements budget of €235 million if further fast-acting technologies are procured. Under the latest DS3 System Services Gate 4, 129 MW of fast-acting technologies were procured, with this expected to increase further following Gate 4B and Gate 5 procurement rounds.
On 28th May, in response to this, EirGrid and SONI published a consultation document on DS3 System Service Tariff Rate Review in which they proposed three options for tariff rate reductions.
Our latest Ireland policy update report explores the current DS3 regulated arrangements, analysing the proposed options for tariff rate reductions and assessing the impact this will have on battery business models in I-SEM.
Key insights include:
- EirGrid proposed three options for rate reductions: to reduce tariffs for the fast five services for all providers; cease procurement for fast-acting services from Gate 5; or, reduce tariffs and temporal scarcity scalars for all System Service Providers
- With no fast-acting DS3 services procured from Gate 5 onwards, batteries commissioned in 2022 see project IRRs of 12%
- Decreasing TSS scalars by 50% leads to average gross margins of €157/kW/year between 2021-2025, 23% below Aurora Central
- Removal of TSS scalars de-incentivises flexible assets and decreases annual gross margins by, on average, €84/kW until 2025
- A 30% tariff reduction in 2022 leads to a project IRR of 32%, relative to 47% in Aurora Central
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