ESB Annual Report 2012 - (Page 26)
26 ESB Annual Report 2012 - Energy for connecting you
ESB GENERATION AND
WHOLESALE MARKETS
ESB GENERATION AND WHOLESALE MARKETS (G&WM)
COMPRISES ESB’S GENERATION, TRADING AND ASSET
DEVELOPMENT ACTIVITIES.
INVESTMENT AND GROWTH
G&WM’s investment strategy is to build a
balanced low carbon generation portfolio of scale
in the All Islands market.
The generation and trading business manages,
operates and trades ESB’s electricity generation
portfolio in Ireland and abroad, subject to licence
obligations with respect to ring-fencing. This
portfolio includes 4.3 GW of generation in the
Single Electricity Market (SEM) and 0.4 GW
in Great Britain (GB). In addition, ESB has
50% joint ventures in Marchwood (GB) and
Amorebieta (Spain) with a cumulative capacity of
1.6 GW.
Asset development activities comprise identifying
and developing opportunities to enhance and
expand the generation portfolio to achieve ESB
growth targets. Our projects are managed from
development through construction to commercial
operations.
OPERATING ENVIRONMENT
Total SEM demand declined by almost 3% in
2012, the fourth consecutive year of demand
contraction. Continued high natural gas prices
and relatively competitive coal prices resulted in
increased coal plant running throughout 2012.
These factors also resulted in reduced gas fired
plant running and significantly reduced margins,
which constitute the majority of capacity on the
system. G&WM’s balanced portfolio, with a mix
of fuels including coal, gas, peat, wind and hydro,
has helped ESB to weather these market trends.
In 2012, ESB welcomed the decision by the
SEM Regulatory Authorities which provided for
the removal of ring-fences which historically
segregated ESB’s regulated and unregulated
generation portfolios. The licence changes
required to give effect to this decision are
expected in early 2013. This will allow ESB to
implement organisational and IT system changes
to realise the benefits of greater integration of its
generation businesses, which will result in costs
savings and improved risk management.
881
MW
THE SIZE OF THE CARRINGTON
POWER PLANT (GB) – ASIGNIFICANT
GENERATION INVESTMENT IN THE
REGIONAL ENERGY MARKET
The government announced in October 2012 that
ESB would be required to sell some non-strategic
generation assets to provide an extraordinary
dividend of up to €400 million by 2014. The
government reaffirmed its commitment that
ESB would remain a financially strong, vertically
integrated utility, that it would maintain its credit
rating, and that it would retain significant scale to
compete in the All Islands (SEM and GB) market
while continuing to move to an appropriate
market share in Ireland.
The implementation of this strategy was
advanced significantly in 2012 with the
successful financing of the Carrington power
plant near Manchester, GB. Construction
commenced on this 881 MW combined cycle
gas turbine project in late 2012 and it is
expected to reach commercial operations in early
2016. This project has been funded on a ringfenced
basis so that it does not displace any of
our investment in electricity infrastructure on the
island of Ireland.
ESB’s investment in a low carbon portfolio
continued with the construction of the Myndd
y Betwys wind farm (35 MW) in Wales and the
Carrickatane wind farm (21 MW) in Northern
Ireland. These assets are expected to be
operational in early 2013, and will bring ESB’s
operational wind portfolio to over 380 MW. In
total G&WM generated approximately 1.3 TWh
of electricity from renewable sources (wind and
hydro) during 2012 – enough to supply the
electricity requirement of around a quarter of a
million households.
Refurbishment of the hydro portfolio also
continued in 2012 with the upgrade of Erne
and Turlough Hill units. Major overhauls were
also successfully completed in 2012 at the
Moneypoint and Synergen power stations. These
two plants generated approximately one quarter
of the entire electricity requirement in the SEM
in 2012. As the generation cost of electricity
from these plants is amongst the lowest in the
SEM, their continued high availability benefits all
electricity customers.
STRATEGY AND RESPONDING TO
CHANGE
The planned evolution of the SEM over the next
five years will result in a fundamentally different
competitive environment, as ESB’s home market
expands, becoming the Regional Electricity
Table of Contents for the Digital Edition of ESB Annual Report 2012
ESB Annual Report 2012
Contents
Business Overview
Chairman’s Statement
Chief Executive Review
Our Strategy and Business Model
Operating and Financial Review
Operating Environment
Finance Review
Business Unit Sections: ESB Generation and Wholesale Markets
ESB Networks
NIE
Electric Ireland
Corporate Social Responsibility
Introduction from Executive Director, People and Sustainability
Sustainability Charter
Energy Usage 2012
ESB Innovation
Equality and Diversity
Our People
Our Community
Corporate Governance
Chairman’s Corporate Governance Statement
The Board
Executive Team
Board Members’ Report
Risk Management Report
Statement of Board Members’ Responsibilities
Independant auditor’s report to the stockholders of Electricity Supply Board (ESB)
Statement of Accounting Policies
Financial statements
Prompt Payments Act
ESB Annual Report 2012
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