Contracts for Difference and the Energy from Waste Industry. Gareth Simkins Intelligence Analyst

Transcription

1 Contracts for Difference and the Energy from Waste Industry Gareth Simkins Intelligence Analyst

2 Agenda The regime The winning projects What happens next

3 What are Contracts for Difference? A new subsidy regime for non-fossil power production (biogas, wind, solar, biomass, nuclear ) Replacing the Renewables Obligation Initial awards were made in April 2014 Acquired through competitive bidding Provides a set strike price for electricity

4 CFD Payments CFD Payments How do CfDs work? Strike price either set by auction or equals a pre-determined cap Reference price set by day-ahead GB price When price is low, payment is received When price is high, payment is made

5 Benefits Removes exposure to wholesale electricity market, stabilising revenue Robust contract, with arbitration procedure Provides certainty of income early in project development easier to secure funding Value of CfD protected against inflation, change of law, other risks CfD applies for 15 years Backstop PPA guaranteed energy buyer

6 Eligibility All applicants must meet certain criteria to demonstrate bona fides Prevents disruption from speculative projects Ensures efficient use of budget

7 Application requirements Applicants for CfDs must provide the delivery body (National Grid) with evidence the project: Is a qualifying technology (e.g. EfW+CHP or ACT) Is not receiving another subsidy, e.g. ROCs. Has secured planning permission Has grid connection deal (inc. private wire) Complies with standard terms & conditions

8 Appeals and withdrawals Applicants deemed ineligible may appeal to National Grid, then Ofgem, then High Court Withdrawals may be made during application or before submitting a sealed bid (where an allocation round is constrained). Later withdrawals will be penalised: Failure to sign/termination within year of signing prevents application site from participating in allocation rounds for 13 months

9 Allocations Once all applications in a round are submitted, National Grid evaluates them against the available overall and pot budgets (e.g. for onshore wind & solar; biomass conv.; others) If the budgets are sufficient, all projects receive the administrative strike price If insufficient, a sealed bid auction is triggered, either for all projects or those in one or more pots.

10 Administrative strike prices Max. strike price ( /MWh) 2015/ / / /19 Advanced Conv EfW (with CHP)

11 Administrative strike prices Max. strike price ( /MWh) 2015/ / / /19 Advanced Conv EfW (with CHP) Anaerobic Dig Landfill Gas Biomass + CHP Wave, Tidal Large PV, Hydro

12 Auctions Bidders submit the lowest price at which they can deliver their project (theoretically ) National Grid accepts cheapest bid first, until the budget is used up (in its delivery year) Projects are paid the price of the most expensive project accepted (in its delivery year) Multiple bids accepted, with varying delivery years, and capacities and prices.

13 Some advice from DECC Work out your costs in detail And then the return you need Submit a bid with that number if you win in the auction you will get at least the number you bid, and the highest price paid to any project in the same group and delivery year Submit additional bids with different delivery dates and for reduced capacity (if viable and affordable)

14 The winning EfW bids BH EnergyGap, The WandE Enviroparks Hirwaun Spencer Group, Energy Works Hull Gent Fairhead, Wren Power and Pulp Wheelabrator Technologies, Kemsley 3

15 and what they won Project, Output Type Strike price Online BH EnergyGap, 26MWe Energy Works Hull, 25MWe Enviroparks Hirwaun, 11MWe Gent Fairhead, 49.75MWe ACT /MWh 2018/19 ACT /MWh 2017/18 ACT /MWh 2017/18 EfW+CHP 80/MWh 2018/19 Kemsley 3, 45MWe EfW+CHP 80/MWh 2018/19

16 The losers There must have been some but they are commercially confidential

17 BH EnergyGap s The WandE

18 BH EnergyGap s The WandE 300,000t/yr commercial waste MRF 200,000t/yr gasification system First in the UK to use a fluidised bed gasification and melting furnace from Japan s Kobelco Eco-Solutions To export ~19MWe to the grid. Just requested minor design changes, currently surveying the site in Walsall, final stages of funding Construction due to commence early next year

19 Spencer Group s Energy Works Hull

20 Spencer Group s Energy Works Hull 150m project by UK engineers and owner the Spencer Group with US firm MWH Treatment. 200,000t/yr MRF producing SRF 152,000t/yr, 25MWe (net), fluid. bed gasifier 3MW, 40,000t/yr gas-to-grid biogas plant, wind turbines, solar panels, composter Secured planning permission without objections from local residents in 2011 Construction starting shortly

21 Enviroparks Hirwaun, Aberdare

22 Enviroparks Hirwaun, Aberdare Only project currently under construction. Phase 1 (MRF) underway, to open in March Phase 2 construction (gasifier) to commence in April 2016, online in 2018 Phase 3 (anaerobic digester) to open in 2016

23 Enviroparks Hirwaun, Aberdare Highly complex! Handling 250,000t/yr of waste in total Some to enter a water and steam-based MRF Wastewater from MRF to anaerobic digester Cellulose from MRF will be pyrolysed Biomax unit to separate organic wastes into oil, solids and effluent

24 Enviroparks Hirwaun, Aberdare Waste fibre from Biomax unit and nonrecyclable waste from MRF to be gasified Two-stage plasma gasification, using a plasma torch to clean the syngas The oil, biogas and syngas produced by the various processes will fuel a series of engines Entire complex to export 20MWe CfD applies to only 11MWe, from syngas

25 Gent Fairhead, Wren Power and Pulp

26 Gent Fairhead, Wren Power and Pulp At Rivenhill Airfield, an old RAF base near Braintree, Essex. Confusing array of names over the years: Wren Power and Pulp Woodhouse Recycling and Renewables Evolution of the Recycling and Composting Facility Recycling and Composting Facility

27 Gent Fairhead, Wren Power and Pulp Both complex and very large-scale Handling 850,000t/yr of waste in total: 100,000t/yr MRF 250,000t/yr MBT 85,000t/yr biogas plant, 2-3MWe. 360,000t/yr of waste paper for pulping Some RDF

28 Gent Fairhead, Wren Power and Pulp Grate furnace burning ~360,000t/yr of RDF from the MBT and MRF, paper sludge and imported RDF Generating 49.75MWe (gross). Exporting only 21MWe to grid due to heavy on-site consumption Heat will be supplied to the pulping unit

29 Gent Fairhead, Wren Power and Pulp Secured planning permission following public inquiry in March 2010 Restrictions on catchment area for imported RDF and paper and card for pulping lifted in April Deadline for starting construction moved from March 2015 to March 2017 last October

30 Wheelabrator Technologies Kemsley 3

31 Wheelabractor Technologies Kemsley 3 The most straightforward winning project To supply steam to the DS Smith paper mill in Sittingbourne, Kent alongside 45MWe. Burning 550,000t/yr of ready-made RDF Planning permission granted in March 2012

32 Observations Non-ACT plants must supply both electricity and heat. Winning projects (Wren, Kemsley 3) are connected to a bankable user: pulp/paper units But Kemsley 3 is anomalous: The only project by an established EfW firm Receiving RDF from elsewhere, not producing it on site Simple design, dedicated to EfW

33 Aside from Kemsley 3 Winning projects: Produce RDF on site, reducing costs Feature novel technologies, e.g. Plasma gasification, Biomax, Kobelco furnace Include non-efw technologies: MRFs, MBTs, in-vessel composting Wind turbines, solar panels Waste paper pulping

34 The next round No guarantee that there will be a next round No confirmation of timing, budgets, etc. Indicative plan issued pre-election says: Formal notice in early October Applications to open mid-oct. and close early Nov. Auctions in mid-winter Announcement of winners due Jan-March But DECC has indicated possible delay

35 Who might apply? Plenty with planning permission: Bombardier s aerospace project Belfast (ACT) Grundon s Circular Technology Park, Arundel (ACT) DRENL s Corby Recycling and Energy Facility (ACT) APP s Tyseley project, Birmingham (ACT) JG Pears CHP plant, Newark (EfW+CHP) SSE s Slough multifuel rebuild (EfW+CHP) Peel Environmental s Glasgow project (EfW+CHP)

36 Who might apply? And plenty without it (so far) NLWA s North London Heat and Power (EfW+CHP) Northacre Renewable Energy, Wiltshire (ACT) Pilkington s St Helens glass factory (ACT) Simec s pyrolysis project in Uskmouth (ACT) W H Malcolm s project in Glasgow (ACT) Barr Killoch Energy Recovery Park, near Ayr (ACT) Solena Fuels GreenSky London (ACT) producing 120,000t/yr of jetfuel plus 40MWe

37 Questions? Gareth Simkins Intelligence Analyst