SSE to Enter Irish Energy Market

                                                                                         

Scottish and Southern Energy's decision to enter the Irish gas and power markets is a judicious move given currently prevailing market dynamics and the recent emergence of the Irish Single Electricity Market. With its attractions as a market, other UK based players should give serious consideration to following SSE's lead. The Irish energy regulator the CER has awarded Scottish and Southern Energy (SSE) a license to sell gas and electricity in Ireland.
SSE's move into the Irish market represents a shrewd expansion of its retail strategy. The formation of the Irish Single Electricity Market (SEM), which came into existence on November 1, further enhances the already strong attractions of the Irish market. Under the terms of the SEM agreement, the Irish and Northern Irish power markets have effectively become one wholesale market.

SSE will be able to gain something of an early mover advantage. Although the Irish energy markets are now, at least theoretically, fully open, levels of competition remain low. Despite the existence of players such as Energia in the power sector and Vayu in the gas sector, ESB and Bord Gais maintain strong positions in their respective B2B markets, the end use sector SSE intends to target first. Competitive intensity in the B2C sector remains even lower.

The attractions of Ireland as part of an internationalization strategy are also boosted by the ongoing robustness of the Irish economy. This has brought with it a resultant increase in energy demand. Between 2005 and 2006, primary energy demand grew at a rate of nearly 3.5 - significantly above that seen in the EU as a whole and well above the levels of demand growth seen in SSE's UK market. Going forward this demand growth is likely to continue at an above average rate, albeit slightly lower than that seen in recent years.

This strong demand growth, combined with a notably higher degree of pro-liberalization regulatory policies compared with many other markets in the EU, mean that Ireland is an attractive market in future developmental terms. Ireland's geographical location and close proximity to the UK further add to the attractions of entry into the Irish market for SSE. Scope exists to supply power to its Irish customers from its UK generation facilities through the Interconnector. However, given that the company has applied for permission to build a generation facility in Northern Ireland, the option exists in the future to generate power more locally. Future gas customers won by SSE in Ireland and Northern Ireland can be supplied with gas from the UK, though the slowly expanding Irish upstream sector creates future potential to avoid transmission costs from the UK.

Whilst the structural attractions of energy into the Irish market highlight the potential for SSE, significant challenges lie ahead if it is to capitalize on the opportunity fully. Overcoming the entrenched positions of the two former incumbents will be a formidable challenge. However, cogent pricing and customer acquisitions strategies combined with strenuous consumer awareness campaigns in its target B2B market will bring rewards such that other players from the UK are likely to follow SSE's lead.

Velimir Lackovic
http://www.energetika.co.yu

About the author:
Velimir Lackovic runs internet portal "Energetika" ( http://www.energetika.co.yu )
dedicated to renewable energy sources,oil gas and energy efficiency. Velimir has
completed gratuadte studies in power systems engineering and
has industry experiance of over 20 years in this field.

Article Source: http://www.Free-Articles-Zone.com