Shadow Heat Model Template User Guide

Transcription

1 Department of Business, Energy and Industrial Strategy Shadow Heat Model Template User Guide User Guide: version 1.0; Template: version 2.1 Robinson George (Commercial) 5/27/2016 0

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3 1. Contents 1. Shadow Heat Model Template Overview Purpose Protection Colour coding Input Checks Entering values into the template Inputting data into the template Project Name: Energy Generation: Technology types Technology Calibration System Losses Connection Charges Tariff Structure Fixed Charge Calculations Parasitic electricity forward curve Construction Costs General Opex Heat Demand Cooling Demand

4 1. Shadow Heat Model Template Overview 1.1. Purpose The Shadow Heat Model - Applicant's Template will be used to populate the HNIP Shadow Heat Model The HNIP Shadow Heat Model is used, for HNIP application appraisal purposes: to compare the forecast pre-corporation tax project cash flows calculated in the Applicant's submitted financial model; ensure consistency across applications of non-project specific assumptions (e.g. forward prices of natural gas); enable HNIP to evaluate the appropriateness of offtake pricing arrangements in the event of heat purchases being made; and enable HNIP to assess the appropriate level of support for each application made The data provided in Applicant s Template must reflect the same input costs, tariffs and demand assumptions as those within the financial model submitted. If the input assumptions are not consistent then this may cause delays and requests for further clarification from the HNIP assessment team Protection The Shadow Heat Model Template is a protected workbook. This is to ensure that the template structure is not amended. If applicants have software that enables them to bypass the workbook s protection, please ensure that no rows or columns are inserted and that no styles or formats are changed as doing so will cause delays that may result in the rejection of an application Colour coding Cells marked in a light green colour are cells that can be populated by the applicant. The workbook s structure and worksheets are protected, as such only these cells can be amended by the user Cells that have been hashed out reflect input cells that are not relevant based on the selections made by the user. For example, if the user has selected a technology type that relates to embedded generation, then inputs 3

5 relating to heat offtake arrangements would not apply. As such the template will show such input cells as hashed out: 1.4. Input Checks Each input row includes a check to seek to ensure that the applicant provides data in a format consistent with the requirements of the Shadow Heat Model: => Should the applicant wish to understand why an error is still persisting please select the cell that includes the check (column G) and an explanation will be provided, for example: Once all checks have been set to OK then the template is ready for submission: Becomes An applicant should only ever submit a version of the template that has been fully completed. Submission of an incomplete template will result in delays and possibly the rejection of the application The applicant may be required to provide additional information even if the template has been correctly completed. This would lilkely be related to the requirement of further clarification of assumptions made. 4

6 1.5. Entering values into the template The user should always enter VALUES either manually or pasted to avoid inadvertently amending cell validation rules or conditional formatting. 2. Inputting data into the template 2.1. Project Name: The user should provide an appropriate name that describes the project, for example, a geographical reference Energy Generation: Technology types The template allows for up to five different technologies within the energy centre (or connected to the network e.g. EfW, or a combination of the two e.g. EfW & Gas CHP). It is acknowledged that there may be multiple instances of a given technology procured over time as well as different capacities of individual assets of that technology type over the forecast life of the network. The methodology and worked example for incorporating this are explained in section The user is able to select technologies in this section as follows: 5

7 It will be noted that technologies such as fuel cells are absent in the list above. In order to map the technology into the template the applicant should apply the following mapping logic: 2.3. Technology Calibration For each of the 5 possible technologies selected in Section 2.2 there is a corresponding technology specification sheet within the Technology Calibration section of the template. These need only be populated for technologies that have been selected by the user (i.e. if there are only 3 technologies were selected in Section 2.2 then only specification sheets for the first three technologies need be completed by the user) For each technology that has been determined it is necessary to input that technology s technical attributes. The intention of these inputs is to enable the calculation of: The heat, cooling and electricity generated in kwh and over what period; and 6

8 The cost of purchasing, maintaining, enhancing and operating the asset; The TRUE and FALSE values shown adjacent to the inputs are the call up settings from the Technology configuration within tab System. These values are linked to conditional formatting to guide the user as to which cells should be populated for the technology that has been selected in Section Useful Economic Life (UEL) refers to the number of years that the technology type selected is expected to operate within the project taking into account all enhancements and replacements made over the project life Fuel required to achieve output generation (at full capacity) gross basis refers to the weighted average required kw equivalent of fuel input into the technology at a single point in time to generate a given kw thermal and electrical (if CHP) output. Some financial models being assessed may present this on an annual kwh basis. It is important that this is rendered into pure kilowatt terms as average utilisation and availability rates are input separately (see Section ). The assumption should be made on a gross efficiency basis, i.e. excluding the latent energy within water vapour produced as part of the conversion process. Care should be taken to ascertain that the efficiency rate is on a gross basis as some boilers are quoted on a net basis which can on occasion overstate their actual operating efficiency Coefficient of performance gross basis (CoP) is the ratio for heat pumps and cooling assets between the quantity of heat supplied / heat extracted to the work required to achieve that end (i.e. kw of heat supplied / extracted divided by the kw electricity required). The assumption should be made on a gross efficiency basis, i.e. excluding the latent energy within any water vapour produced as part of the conversion process Heat output (per unit of technology) should be the weighted average heat output, expressed in kw thermal (kwth), generated by the technology when at full deployment capacity (i.e. when all units of that technology are operational) at a given point in time based on its typical operating performance Cooling output (per unit of technology) is the amount of cooling, expressed in kw coolths, generated by the technology when at full deployment capacity (i.e. when all units of that technology are operational) at a given point in time based on its typical operating performance Electrical output (per unit of technology) is the amount of electricity, expressed in kw electrical, generated by the technology when at full 7

9 deployment capacity (i.e. when all units of that technology are operational) at any given point in time based on its typical operating performance Heat offtake (per period) is the amount of heat, expressed in kwh, that is forecast to be supplied by the generator of heat (e.g. EfW, industrial waste heat, deep geothermal etc.). It should be noted that this is input by the user as a profile rather than single cell input Foregone electricity sales due to heat offtake is essentially an EfW facility s Z-Factor so for each kwh of heat entered in section how much electricity output has been curtailed, expressed in kwh and negative values Additional capex and opex (per period) incurred by counter-party are the additional costs that are incurred and paid for by the counter-party. If these costs are borne by the project (i.e. the heat network investors) then only enter a 0 value in this section. The costs that are borne by the project should be entered into Purchase/Construction cost profile (see Section ) for capex and repex relating to the technology, O&M Cost per year (see section ) and Life Cycle costs (see section ) for major overhauls of the asset REAL rate of return required by counter-party is the annual percentage discount rate that the counter-party would require to justify their investment in the additional costs incurred and any forecast loss of electricity income (see sections and ). The input value should be expressed as a real annual rate excluding a premium for inflation within the discount rate Negotiated heat offtake price is the /kwh price, expressed in 2015 real terms, that the heat supplied through the offtake agreement will be supplied at Electricity requirements allocated to the technology class are the parasitic electricity requirements of the energy centre and wider network that are allocated to that technology. This should exclude the electricity input requirements of the technology itself (i.e. where the input commodity of the technology is itself electricity e.g. heat pumps and chillers). Whether allocation is split between different technologies or allocated to a single technology is only relevant in the event that a technology produces electricity see the next section % of parasitic load taken from own generation (if CHP) is the percentage of the Electricity requirements allocated to the technology class (see section immediately above) that are met through onsite electricity generation. This is only relevant when the technology is able to 8

10 generate electricity. If the technology does not generate electricity simply enter 0% in at least one input cell Availability of technology per year (see worked example) is the means by which the applicant can reflect the deployment of different assets within that technology class over time. See Worked Example 2 provided within the template, sheet <Cover Sheet>, to demonstrate how this should be populated Weighted Average Annual Utilisation (see worked example) is highest weighted average utilisation rate of that technology in any given year once full deployment has been achieved. See Worked Example 1 provided within the template, sheet <Cover Sheet>, to demonstrate how this should be populated Fuel input cost commodity price assumption is the commodity price forward curve that is attributed to the fuel cost of that asset. In the case that Foregone electricity sales due to heat offtake has been input (see Section ) then this should be the electricity sales foreward curve anticipated by the counter-party Purchase / Construction cost profile is the cost of purchasing each instance of the technology including replacement costs over the life of the investment appraisal. These costs should be based in 2015 terms and expressed in O&M cost per period is the annual cost of operating and maintaining the technology. If this level of detail is not available and can only be provided on a total energy centre basis (i.e. all technologies combined) then a zero value should be entered in at least one input cell and the O&M relating to the energy centre (broken down as far as available) entered in the general O&M section see Section If the information is available then these costs should be based in 2015 terms and expressed in Life cycle cost per period are the major overall costs required to extend the life of the asset or ensure its continued operation. Life cycle costs are typically reflected in one of two ways depending on where the risk lies: Periodic payments made to a contractor charged with ensuring major asset overhauls are undertaken; or Infrequent payments made when the overhaul costs are incurred. The user should enter the lifecycle costs that the project anticipates it will pay for. Due consideration should be made for planned outages (i.e. 9

11 impacting asset generating availability see Section ) in periods where major asset overhauls are forecast Date Technology Starts to Operate is the date from which point the first unit of the technology will start to generate heat, cooling and electricity (as applicable) System Losses Weighted Av. System heat losses on primary network should reflect the weighted average heat losses across the primary distribution network (i.e. main network spine and connections to building heat exchanges) over time. Please refer to Worked Example 3 within the Shadow Heat Model Template, tab <Cover Sheet> Weighted Av. System Heat Losses on secondary network (excluding primary network losses) should reflect the weighted average heat losses across the secondary distribution network (e.g. building heat exchange to end customers) over time. Please refer to Worked Example 3 within the Shadow Heat Model Template, tab <Cover Sheet> Weighted Av. System Cooling Losses on primary network should be input in exactly the same way as Weighted Av. System heat losses on primary network (see Section 2.4.1) only for cooling supplied via a primary distribution cooling network Weighted Av. System Cooling Losses on secondary network (excluding primary network losses) should be input in exactly the same way as Weighted Av. System Heat Losses on secondary network (excluding primary network losses) (see Section 2.4.2) only for cooling supplied via a primary distribution cooling network Av. Transmission Losses Private Wire / Grid Connection is used by the Model to reflect system losses for electricity supplied via private wire in the event that the Model has been calibrated to include a private wire see Section Values should be entered as a negative percentage amount. 10

12 2.5. Connection Charges Developer s connection charge (per building connected) is the average real (2015) 000 charge that the developer (or landlord) is forecast to pay for each connection made in the next section. There may be a wide range of different charges for different types of connections. To derive the average simply divide the revenue forecast for connection charges in a given year by the number of connections entered in the next section # Buildings/dwellings connected for connection charge should reflect the number of actual connections made in each year. It is not a cumulative value and should only reflect the connections made in a given year Tariff Structure The template allows for a residential and commercial tariff for each of heat, cooling and electricity (if a private wire is present). Evidently each project may well have a substantially more diverse customer base, importantly each with different tariffs, than this assumption would allow. Worked Example 4 within the Shadow Heat Model Template, <Cover Sheet> provides an example of how a weighted average tariff can be derived to manage this Heat Fixed Annual Charge Residential is the real annual standing charge paid by residential customers for each unit on which charges are levied (e.g. /m2, /bedroom, /connection, /dwelling etc.). The applicant determines the unit for fixed charges in Fixed Charge Calculations see Section 2.7. This should be expressed in real (2015) /unit terms Cost of heat consumed residential is the real volume based charge paid by residential customers for each kwh of heat consumed. This should be expressed in real (2015) /kwh terms. 11

13 Heat Fixed Annual Charge Commercial is the real annual standing charge paid by commercial customers for each unit on which charges are levied (e.g. /m2, /bedroom, /connection, /dwelling etc.). The applicant determines the unit for fixed charges in Fixed Charge Calculations see Section 2.7. This should be expressed in real (2015) /unit terms Cost of heat consumed commercial is the real volume based charge paid by commercial customers for each kwh of heat consumed. This should be expressed in real (2015) /kwh terms Cooling Fixed Annual Charge Residential is the real annual standing charge paid by residential customers for each unit on which charges are levied (e.g. /m2, /bedroom, /connection, /dwelling etc.). The applicant determines the unit for fixed charges in Fixed Charge Calculations see Section 2.7. This should be expressed in real (2015) /unit terms Cost of Cooling consumed residential is the real volume based charge paid by residential customers for each kwh of cooling consumed. This should be expressed in real (2015) /kwh terms Cooling Fixed Annual Charge Commercial is the real annual standing charge paid by commercial customers for each unit on which charges are levied (e.g. /m2, /bedroom, /connection, /dwelling etc.). The applicant determines the unit for fixed charges in Fixed Charge Calculations see Section 2.7. This should be expressed in real (2015) /unit terms Cost of Cooling consumed commercial is the real volume based charge paid by commercial customers for each kwh of cooling consumed. This should be expressed in real (2015) /kwh terms Is there a private wire? some heat networks may have a private wire for onsite supply of electricity to commercial and residential customers. If there is a private wire then the applicant should set this switch to TRUE. If there is not then the applicant should set this switch to FALSE. If the switch is set to TRUE then the sections below apply Private Wire: Electricity forward curve Residential is the forward curve used to price each kwh of electricity supplied to residential customers over time. The user should enter the assumed forward curve for electricity sales to residential customers. This should be expressed in real (2015) /kwh terms Private Wire: Electricity Fixed Annual Charge Residential is the real annual standing charge paid by residential customers for each unit on which charges are levied (e.g. /m2, /bedroom, /connection, /dwelling etc.). 12

14 The applicant determines the unit for fixed charges in Fixed Charge Calculations see Section 2.7. This should be expressed in real (2015) /unit terms Electricity forward curve Commercial is the forward curve used to price each kwh of electricity supplied to commercial customers over time. The user should enter the assumed forward curve for electricity sales to commercial customers. This should be expressed in real (2015) /kwh terms Electricity Fixed Annual Charge Commercial is the real annual standing charge paid by commercial customers for each unit on which charges are levied (e.g. /m2, /connection, /dwelling etc.). The applicant determines the unit for fixed charges in Fixed Charge Calculations see Section 2.7. This should be expressed in real (2015) /unit terms Fixed Charge Calculations On what basis are residential fixed charges calculated (e.g. per m2, per bedroom etc.):. The user should enter a unit based on which fixed charges are to be charged to residential customers. Examples entered might be: m2, bedroom, connection etc. Please see section on the residential / commercial customer distinction On what basis are commercial fixed charges calculated (e.g. per m2, per kw of capacity installed etc.):. The user should enter a unit based on which fixed charges are to be charged to residential customers. Examples entered might be: m2, kw, connection etc. Please see section on the residential / commercial customer distinction Profile of residential [unit] the applicant should enter the cumulative profile of the relevant profile of units on which fixed tariffs are to be charged. For example, if residential floor space, expressed in m2, is the method for deriving the fixed charge (i.e. an annual /m2 charge is levied on customers) and there is 10,000m2 of resential floor space in years 2-3 increasing to a total of 20,000 m2 for the rest of the project (i.e. 10,000m2 of new residential floor space completed in year 4) then the profile entered would be as follows: Year YR1 YR2 YR3 YR4 YR5 YRX m2 0 10,000 10,000 20,000 20,000 20,000 13

15 Profile of commercial [unit] as with residential only for commercial customers. Please see section on the residential / commercial customer distinction Parasitic electricity forward curve Electricity purchase price (for parastic energy centre needs) is the applicant s forward curve for electricity purchases for the needs of the energy centre. If energy generating technology that uses electricity as its input commodity price (see Section ) is included within the template then this profile will most likely be the same (but may not be). If it has not been modelled then the applicant will need to provide the anticipated purchase price for electricity. In either case the forward curve should be expressed in real (2015) /kwh terms Construction Costs The applicant may enter up to 50 different construction cost line items, other than those already included as part of the technology costs inputs (see Section ). The user must enter a description of the construction cost (e.g. Energy centre foundation, Phase 1 trenching works, pumps, leak detection equipment, pipework etc.) Each cost must be allocated to the asset class that best fits the cost type. The applicant is required to select from the drop down one of the following: Energy Centre; Pipe Network; or Retail Retail refers to assets that enable the sale of heat, cooling and onsite electricity (e.g.metering equipment) The Useful Economic Life (UEL) of the asset must be entered by the user and reflects the number of years that the asset entered will operate. The starting point of operation (for depreciation purposes) is assumed to be the first period from which no further spend is made. As such should the asset be replaced or enhanced at a future date then those costs should be reflected in separate rows. Care should be taken that a UEL is not 14

16 calculated that extends beyond the project s appraisal period. For example, if an existing asset was enhanced in year 30 and the project appraisal is only for 40 years then a UEL of greater than 10 years, whilst permissible, may be inappropriate The user should enter the profile of capital costs as positive real (2015) 000 values General Opex The applicant may enter up to 25 different opex lines. These should include all of the project s operations, maintenance and administration costs. However, these should exclude: Fuel costs (as these are derived through commodity price assumptions, plant efficiency and utilisation/availability assumptions); Electricity costs (as these are derived through the combination of commodity price assumptions, plant efficiency and utilisation/availability assumptions as well as parasitic system requirements); Corporation tax (as the assessment is being made on a pre-corporation tax basis); Lease charges such as land, building and equipment should be included but finance charges relating to loan repayments and interest should be excluded (as we will be assessing on a pre-financing basis) The user must enter a description of the operating cost (e.g. Network maintenance costs, staff costs, billing, repairs, business rates etc.) Each cost must be allocated to the asset class that best fits the cost type. The applicant is required to select from the drop down one of the following: Energy Centre; Pipe Network; or Retail Retail refers to expenditure that enables the sale of heat, cooling and onsite electricity (e.g.invoicing, customer relations etc.) The user should enter the profile of capital costs as negative real (2015) 000 values. 15

17 2.11. Heat Demand The template allows for up to 25 different heat customer clusters. The applicant should enter a description of the customer (e.g. university campus, Residential Block 1 etc.) Each heat customer cluster must be allocated as a customer type of either: Residential; or Commercial See Section on methods to manage this simplification Each customer cluster must be allocated the point of its consumption i.e. whether the customer is metered for heat with a primary network connection (see Section 2.4.1) or with a secondary network connection (see Section 2.4.2) The demand profile for each customer should be entered as positive kwh values. If a bad debt assumption has been assumed then the applicant should apply that assumption to the demand profile entered for the customer (e.g. if a 1% bad debt assumption was made then each demand profile entered should be reduced by 1%). If such an adjustment has been made please make this clear within the customer description e.g. University campus less 1% bad debt Cooling Demand The template allows for up to 25 different cooling customer clusters. The applicant should enter a description of the customer (e.g. university campus, Residential Block 1 etc.) Each cooling customer cluster must be allocated as a customer type of either: Residential; or Commercial See Section on methods to manage this simplification. 16

18 Each customer cluster must be allocated the point of its consumption i.e. whether the customer is metered for heat with a primary network connection (see Section 2.4.1) or with a secondary network connection (see Section 2.4.2) The demand profile for each customer should be entered as positive kwh values. If a bad debt assumption has been assumed then the applicant should apply that assumption to the demand profile entered for the customer (e.g. if a 1% bad debt assumption was made then each demand profile entered should be reduced by 1%). If such an adjustment has been made please make this clear within the customer description e.g. University campus less 1% bad debt. 17

19 HNIP EfW UEL CoP kw kwh DBEIS Heat Network Investment Project Energy from Waste Useful Economic Life Coefficient of Performance Kilowatt Kilowatt Hour Department for Business, Energy and Industrial Strategy 18