knowledge 15 July 2026 |

“CRM 2.0”: Consultation on Design Options for proposed amendment to SEM Capacity Remuneration Mechanism

Background

The CRM is designed to ensure that the demand for electricity is always met, by setting out the mechanism through which electricity capacity providers can sell qualified electricity generation capacity to the market.

The current CRM arrangements were the subject of State Aid applications by Ireland and Northern Ireland in 2017.  These applications were approved by the European Commission in 2018 and will remain in force until May 2028.  The CRM in its current form commenced operation in 2018, as part of the Integrated Single Electricity Market (I-SEM) project.

Since the existing CRM was developed, there has been significant revision to the broader relevant EU policy and legislative frameworks such as the introduction of the Climate, Energy and Environmental Aid Guidelines (“CEEAG”) and the Clean Industrial State Aid Framework (“CISAF”) (which apply to both Ireland and Northern Ireland for the purposes of the SEM).

What Stakeholders Need to Know

The SEMC consultation paper proposes the following key design elements for development and implementation in the CRM, for the next State aid approval period:

• Delivery timeframe: The SEMC proposes moving the main capacity auction to a T-5 basis as standard, retaining a T-1 top-up auction, and reserving 5–25% of the capacity requirement for procurement at T-1, while keeping the optimal timeframe for battery storage under review and potentially introducing an intermediate timeframe such as T-2.
• Enhanced availability incentives: The SEMC is considering a supplementary availability mechanism alongside the existing contract for differences (which is known at a policy level as the “Reliability Option”). This would target a broader band of system stress periods (around 1–5% of annual hours) with lower financial exposure than the Reliability Option, triggered either by an energy price threshold or a margin-based adequacy measure, and subject to a charging structure based on each unit's Capacity Payment Price with stop-loss limits.
• De-rating factors: The SEMC proposes developing a unit-specific Derating Factor methodology across all technology types to better reflect individual performance, particularly for non-fossil flexibility such as demand side units and storage, in line with CISAF principles.
• Cost recovery mechanism: The SEMC is examining options to increase the temporal granularity of capacity charge allocation, potentially through a staged transition from the current flat-rate charge (applied across 48% of hours) towards a narrower window of 1–5% of highest-price hours as required under CISAF, with an interim step of around 25% of hours reflecting current metering capabilities.  The SEMC is also considering whether charges should be differentiated across consumer categories.

In addition, the SEMC consultation paper frames the design elements listed below as longer-term, “future-proofing” considerations:

• Decarbonisation: The SEMC proposes making provision in the CRM 2.0 State Aid application for the future introduction of a "Green Scalar" mechanism, which would top up the Capacity Payment Price for eligible low-carbon units where the auction clearing price is lower than the Green Scalar multiplied by the unit's bid price, without affecting the clearing price or payments to other participants, subject to eligibility criteria based on near-zero emissions and a value-for-money test, and subject to periodic (e.g. annual) review before deployment.
• Flexibility integration: The SEMC has indicated that it does not intend to prescribe at this stage how flexibility and capacity procurement should be integrated, pending the outcome of Flexibility Needs Assessments due in Ireland and Northern Ireland in Q3 2026. However, it acknowledges that the CRM could in principle become the mechanism for satisfying system-level flexibility needs identified through those assessments.

According to the consultation paper, the SEMC proposals are designed with security of supply in mind, to facilitate the transition to a low-carbon electricity system on the island of Ireland while ensuring general compliance with State Aid requirements and maintaining cost-efficient provision of electricity within the SEM, as well as meeting wider decarbonisation objectives across the island of Ireland (which were recently the subject of a separate consultation to inform the design options for CRM 2.0 – responses made to that consultation can be viewed here).

Key Takeaways

The CRM is a major pillar of the revenue streams available in the SEM, particularly for dispatchable thermal generation.  The changes proposed by the SEMC in this consultation paper represent the most significant amendments to the CRM since its introduction as part of the I-SEM market redesign in 2018. 

The consultation remains open for responses up to close of business on 4 September 2026. Responses to the consultation should be submitted to both CRMsubmissions@cru.ie and crmsubmissions@uregni.gov.uk.

How can McCann FitzGerald LLP help?

McCann FitzGerald’s Infrastructure, Energy and Natural Resources team advises Irish and international clients on all transactional and regulatory aspects of the development, connection and operation of data centres and electricity generation assets.  If you have any queries in respect of this briefing or if you require advice or assistance prior to making a submission on this SEMC consultation, please contact any of the Key Contacts listed below.