www.cornwall-insight.com
• Roc market developments o CP15 analysis & CP16 forecast o Banking o EIIs • CfD and FiT update o CfD auction analysis o FiT market developments • PPA market developments o Corporate PPAs o Offtaker PPAs • Cornwall Insight’s services for 2017 -18 • Refreshments in the Theatre Bar www.cornwall-insight.com 2
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• Capacity expected to reach more than 31GW by CP16 end • Despite being closed to new capacity, grace periods allow some projects to accredit until 31 March 2019 RO accredited capacity www.cornwall-insight.com 4
CP15 Rocs issued vs CP14 total • 86.0mn Rocs issued in CP15, a 5.0% fall on CP14 o Due to less favourable meteorological conditions and outages at large-scale biomass stations • Total CP15 Roc supply was 94.8mn with the inclusion of 8.8mn Rocs banked from CP14 • Outturn RO eligible demand estimated at 293.6TWh, creating an RO on suppliers of 100.6mn www.cornwall-insight.com 5
Remaining certificates on the register • The most Rocs banked in any Current Holder Organisation Name Total Statkraft Markets GmbH 1,165,975 undersupplied compliance SSE Energy Supply Ltd 1,061,059 period, and the second most in ScottishPower Energy Retail Ltd 500,000 any compliance period SmartestEnergy Ltd 496,055 Opus Energy (Corporate) Limited 273,184 DONG Naturgas 254,630 • Participants trying to capture Total Gas & Power UK 241,437 more value from there Rocs by Gazprom Marketing & Trading Ltd 151,908 banking Shell Energy Europe Limited 114,350 DONG Energy Salg & Service A/S 99,980 Hudson Energy 89,846 British Gas Trading Ltd 69,480 UPM Kymmene (UK) Ltd, UPM Shotton Paper 23,980 Opus Energy Ltd 23,064 RWE Generation UK PLC 21,459 Opus Energy Limited 17,401 Power NI Energy Ltd 16,668 Other 79,359 Total 4,699,835 Source: Ofgem Renewables & CHP Register www.cornwall-insight.com 6
• CP15 - An estimated 90.1mn Rocs presented for compliance brings maximum CP15 Roc values to £49.9/Roc, including a recycle of £5.1/Roc • CP16 - Supply forecast at 105.3mn Rocs. Maximum CP16 Roc values projected at £51.0/Roc, including a recycle of £5.5/Roc Traded Roc values – e-POWER auction Roc supply, obligation & recycle values Traded Roc values at a six year high www.cornwall-insight.com 7
• BEIS intends to bring in the RO exemption from 1 January 2018 subject to being in a position to publish a revised 2017-18 obligation level by 31 October 2017 • The current obligation for 2017-18 for GB is set at 0.409 Rocs/MWh, and BEIS estimates this will rise to 0.423 Rocs/MWh from 1 January 2018 o We estimate an annual weighted obligation of 0.413 Rocs/MWh • The draft legislation still needs Parliamentary approval o If the legislation has not come into force and BEIS have not published the revised 2017-18 obligation level by 31 October 2017, BEIS’s intention is that the exemption will come into effect from the start of the fourth month after the necessary approvals have been obtained and a revised renewables obligation is published • Consumer costs would uplift by approximately 3.6% on an annual basis www.cornwall-insight.com 8
• Ofgem confirmed it will allow Rocs to be awarded to power generated from renewables and used to charge co-located batteries o Ofgem announced its decision in a blog by its Head of Renewables, Luke Hargreaves on 13 September • Anesco became the first commercial solar farm operator in the country to retain accreditation under the RO for solar farms that supply storage batteries directly • Ofgem intends to “ publish bespoke guidance on key storage considerations under the RO and Feed-in Tariff schemes ” for storage later in the year www.cornwall-insight.com 9
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• On 11 September, BEIS published results of second CfD allocation round • 3.3GW of capacity across 11 projects offered contracts o Clearing prices ranging from £40.00/MWh to £74.75/MWh (2012 money) • 3.2GW awarded to offshore wind projects o Technology saw strike price of £74.75/MWh for delivery year of 2021-22 and £57.50/MWh for 2022-23 • Remaining capacity awarded to fuelled renewables o Cleared at £74.75/MWh for 2021-22 delivery and £40.00/MWh for 2022-23 www.cornwall-insight.com 11
• Successful offshore wind projects o Triton Knoll (860MW) 2021-22 (delivery year of first phase) o Moray (950MW) 2022-23 (delivery year of first phase) o Hornsea (1.4GW) 2022-23 (delivery year of first phase) – All three projects will be commissioned in three phases with third phases expected to commission in 2024-25 Estimated prices and capacity by delivery year assuming phasing • Triton Knoll had clearing price uplifted to £74.75/MWh by fuelled technologies • Design of CfD auction implies that either Moray or Hornsea bid lower than £57.50/MWh and was uplifted to this by the other project’s bid www.cornwall-insight.com 12
• Successful fuelled technologies projects o Drakelow (ACT, 15MW) 2021-22 o Station Yard (ACT, 0.05MW) 2021-22 o Northacre (ACT, 25.5MW) 2021-22 o IPIF (ACT, 10.2MW) 2021-22 o BlackBridge (ACT, 5.56MW) 2021-22 o Redruth EfW (ACT, 8MW) 2022-23 o Grangemouth (Biomass with CHP, 85MW) 2021-22 o Rebellion (Biomass with CHP, 0.64MW) 2021-22 • Redruth’s bid of £40/MWh was not uplifted to £57.50/MWh as rules disallow uplifting of strike prices for fuelled renewables by offshore wind www.cornwall-insight.com 13
• 61% of £290mn budget allocated across four delivery years o Peak £176mn in 2023-24 – Estimated £0.59/MWh additional on consumer bill, around £1.82 on an annual bill, in 2012 money Budget, allocation and applications www.cornwall-insight.com 14
• Triton Knoll looks to be clear winner by bidding into 2021-22 o Must have had its clearing price uplifted by fuelled technologies • £57.50/MWh clearing price for Moray and Hornsea o Size and nature of investments means it is unlikely that these bids were speculative • Interesting to see if China Three Gorges takes 30% stake in Moray project o Assuming they haven’t already done so and the option remains open www.cornwall-insight.com 15
• Low offshore wind prices shouldn’t be surprising o European wind auctions and tenders clearing lower then estimated levelised costs for some time – Some German auctions cleared close to expected wholesale power price • Speculation that deeper waters, construction risks, higher transmission and connection costs could cause higher prices than in peer European markets • UK reaping benefits of acquired learning and greater efficiency in wider European offshore wind market o Mature supply line, larger turbines and valuable experience www.cornwall-insight.com 16
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FiT capacity – non-cumulative • 5.8GW currently accredited across >800,000 installations • New capacity has slowed significantly o 18MW accredited in July 2017, and 23MW in August 2017, the lowest for those respective FiT installations – non-cumulative months since 2010 o 1,567 accredited in July 2017, and 1,942 in August 2017, the fewest for those respective months on record www.cornwall-insight.com 18
• Total capacity being accredited under post-2015 tariff rates is falling significantly short of combined capacity caps FiT capacity forecast FiT deployment vs caps www.cornwall-insight.com 19
• Suppliers were invoiced on 8 September for FiT annual reconciliation (2016-17) o Total FiT costs came to £1.33bn , approximately 16% higher than the previous year o Outturn GB demand was 285.9TWh , 0.7% below the previous year o FiT scheme costs as applied to the consumer bill came to £4.80/MWh • 20.8mn Guarantees of Origins (GoOs), equivalent 20.8TWh, were presented for exemption o Well in excess of the 8.1mn cap • With outturn FiT costs for 2016-17 at £4.80/MWh, the maximum value of a GoO used for FiT exemption is estimated at £1.87 www.cornwall-insight.com 20
• The FiT export tariff has remained competitive with commercial PPAs o Export tariff is currently £50.3/MWh o Although, wholesale power prices have boosted recently • Reports suggest BEIS is committed to publishing a fresh review of the FiT scheme o The “UK is obliged by its EU State Aid notification to consult on the performance of the Feed- in Tariff Scheme every three years” • EII consultation response still being awaited for FiTs o EII exempt volumes are forecast as 10.0TWh for 2017-18, and 9.9TWh for 2018- 19 to 2026-27 www.cornwall-insight.com 21
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• Sleeved structure in the UK o Generator sells power directly to corporate and agrees fixed price for power (and Regos) o Licensed supplier sleeves the power – top up and spill o Licensed supplier registers meters and settlement o Back to back PPAs or triparty contract www.cornwall-insight.com 23
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