FEEDING RENEWABLE POLICY How the Energy Bill might affect green electricity suppliers and also renewable generators Holly Tomlinson Regulation and Compliance Analyst for Ecotricity 18 th January 2013
Contents 1. Introduction: Overview of Ecotricity 2. Overview of the Energy Bill 3. Contracts for Difference (CfDs) 4. Generators: Benefits & Impacts 5. Suppliers: Benefits & Impacts 6. Other elements of Electricity Market Reform 7. Conclusion
Introduction Ecotricity Independent Renewable Energy Supplier and Generator. Founded in 1997. 53 Wind Turbines & the UK s first large scale solar park. Currently around 70,000 electricity and gas customers. My Role Regulation and Compliance Analyst. Analyse new legislation and present company view.
Energy Bill Aims Security of supply Decarbonisation Minimise cost to consumers
The Energy Bill Bill 2012: Key Components Electricity Market Reform Office for Nuclear Regulation Government Pipe-line & Storage System Strategy Statement Offshore Transmission Nuclear decommissioning costs Supplier redress orders
Levy Calculation Replaces the Renewables Obligation. Contract between generator and CfD counterparty. Pays generators difference between strike price & market reference price. Funded by Levy on Suppliers. Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Generators payment to CfD Counterparty CfD Payment to Generators Market Price Strike Price
Contracts Contracts for for Difference Difference Source: http://www.decc.gov.uk/en/content/cms/meeting_energy/mar kets/electricity/electricity.aspx
CfDs & RO: & RO: Key Differences Contracts for Difference Funds paid on generation Value varies depending on power market Funds low carbon CfD cannot be separated from the power Granted at planning stage Lasts 15 years Linked to CPI Renewables Obligation Funds received indirectly after ROC sale Value varies depending on ROC market Only funds renewables ROC is an asset in itself Granted post construction Lasts 20 years Linked to RPI
Generators: B&I Benefits and Impacts Increased renewable generation? More certainty for investors & cheaper finance. New policy that financiers are not familiar with.
Generators: Generators: B&I Benefits and Impacts Developer Journey & Milestones Source: http://www.decc.gov.uk/en/content/cms/meeting_energy/markets/electricity/electricity.aspx
Generators: B&I Benefits and Impacts Competitively set strike prices. Levy control framework and potential suspension of scheme. Independents and Power Purchase Agreements.
Guarantee No Guarantee No guarantee of reference price Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Generators payment to CfD Counterparty Market Price PPA Variable CfD Payment to Generators Strike Price PPA Fixed
Government Response response to PPA Problem Provisions in the Bill enable Government to improve access for independents through: Obligation on suppliers to offer PPA terms. Off taker of last resort. Short Term PPA Auction Setting PPA Reference Price.
Suppliers: B&I Benefits and Impacts Additional cost that must be passed on to consumers. Variability makes hedging difficult. Need to put up collateral will tie up working capital. Funding nuclear as well as renewables. Cash-flow problems.
for Cash-flow problems for Suppliers Source: DECC Discussion Pack September 2012 (Pre-bill release)
Other Elements of EMR Capacity Market Potential for developments in demand side response and storage. Additional cost to suppliers. Emissions performance Standards EL = R x C x 7.446 (EL is emissions limit.) (R is statutory rate of CO2 in g/kwh.) (C is installed capacity in MW). (7.466 represents 85% of operating annual hours divided by 1000)
Conclusion Potential opportunities for generators. High risk to suppliers as currently stands. Much remains to be decided.
Questions? Any Questions?