Electricity markets
An electricity market is a system where electricity is bought and sold. An electricity market allows generators, like wind farms, solar plants, gas stations to sell electricity to retailers, utilities, or even directly to large consumers, like industries or data centers. There are two types of electricity markets: vertically integrated markets and liberalized markets.
In a vertically integrated market (VIM) , a single company typically owns and operates the entire electricity system, from generating power to delivering it to consumers. Most state/provincial-owned utilities, and municipal utilities are common examples of vertically integrated entities. An example of such a utility is the Kenya Power & Lighting Company. One major disadvantage of a VIM is that it leads to a lack of competition, potentially resulting in higher prices and limited consumer choice.
Liberalized markets are characterized by the separation of different stages of the electricity supply chain, with multiple companies competing in generation, transmission, and distribution. Many European countries have implemented electricity market liberalization, with a focus on creating a competitive environment for energy suppliers. Liberalization can lead to lower prices, greater consumer choice, and increased investment in new technologies. On the flip side, liberalization can lead to challenges in balancing supply and demand, ensuring grid reliability, and managing transmission bottlenecks.
The Integrated Single Electricity Market (I-SEM) is the wholesale electricity market for Ireland and Northern Ireland. The wholesale electricity market is where electricity is bought and sold before being delivered to consumers. Its two main participants are generators and suppliers. It aims to deliver security of supply across the island, ensure a competitive process for setting prices, including the use of capacity auctions, ensure more efficient use of interconnectors, and maximise the use of renewable sources of electricity.
In liberalized markets, competition in the market means that there are many suppliers to choose from and customers are able to switch between them in order to get the best deals. The list below provides information on energy suppliers licensed by the Commission for Regulation of Utilities (CRU) to supply electricity and gas in the retail energy market in Ireland.
In some countries, it is possible to sell some electricity generated by private consumers to the grid. A feed-in-tariff is a policy mechanism used to encourage the generation of renewable energy by offering guaranteed payments or fixed prices to individuals or companies who produce energy from renewable sources (such as solar, wind, or biomass). In other words, the mechanism allows you to sell your unused solar energy back to the grid. These payments are typically made for a set period, such as 10 to 20 years, and are designed to help offset the initial cost of renewable energy systems, like solar panels or wind turbines. For example, a homeowner installs solar panels on their roof and generates excess electricity that they don’t use. The utility company agrees to buy the excess electricity at a fixed, higher-than-market rate for the next 15 years. This provides the homeowner with an income from selling the energy back to the grid. Utilities are required to buy renewable energy from independent producers (homeowners, businesses, etc.) at the agreed-upon price. When designed properly, FiTs can provide substantial financial benefits to solar customers.