Q3 2018 Supplier Obligation Levy Rate & 15 Month Forecast 9 April 2018 Daniel Minifie, Forecasting Analyst
Questions Please direct any questions during the webinar to: info@lowcarboncontracts.uk
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Contents 1. Understanding the Supplier Obligation 2. CFD Generation Capacity and Payments 3. Q3 2018 Supplier Obligation Levy Rate 4. Background and Assumptions 5. 15 Month Ahead Forecast 6. Operational Cost Levy
Understanding the Supplier Obligation Supplier Obligation is a compulsory levy on electricity suppliers to cover CFD payments to generators. It is paid by electricity suppliers in accordance with their market share of eligible gross demand. Below is a simplified formula for illustration purposes. The cost per MWh is given by: ππππππππ ππππππππππ ππππ = Ο π ππππππππππ π β (ππππππ ππππ π π β ππππππ ππππππππ π ππππ π π ) πππππ ππππππππ ππππππ where Ο π is the sum over all CFD generators i lowcarboncontracts.uk
Understanding the Supplier Obligation Supplier Obligation is split across three payment mechanisms: Interim Levy Rate (ILR) β’ Daily rate in Β£/MWh: specified a quarter in advance, but paid on a daily basis Total Reserve Amount (TRA) β’ Reserve amount to cover uncertainty in CFD; set at a level to ensure a 95% probability that LCCC will, during a given period, be able to meet all payments it might have to make under the CFDs β’ The CFD counterparty notifies the amount of each electricity supplierβs reserve payment for a quarterly obligation period before the 8th working day of the quarterly obligation period which immediately precedes that period; it is paid within the 5 th business day following the invoice i.e. within the 12 th business day of the quarterly obligation period to which it relates Reconciliation β’ Retrospective reconciliation based on metered data and actual price information lowcarboncontracts.uk
CFD Generation Capacity by Fuel Type lowcarboncontracts.uk
CFD Generation Payments by Fuel Type lowcarboncontracts.uk
Q3 2018 Supplier Obligation Levy Rate Supplier Obligation for the period from 01 July 2018 to 30 September 2018, to cover payments to CFD generators accrued in the period: Interim Levy Rate (ILR) β’ Set at Β£4.224 / MWh for the period β’ Up from Β£3.820 / MWh in Q2 2018 Total Reserve Amount (TRA) β’ Set at Β£31,981,875.00 for the period β’ Down from Β£32,136,453.29 in Q2 2018 lowcarboncontracts.uk
Forecast Assumptions: Generation Any significant change to our forecast and/or availability of actual settlement data may trigger an in-period adjustment to the TRA and ILR to meet payments. Forecasts are affected by changes to start dates or planned outages, or due to unplanned outages occurring. Unexpected levels of wind and solar radiation can also affect the generator payments. For illustration, our primary forecasting assumptions include: β’ Solar: Two CFD units are expected to generate in Q3 2018 β’ Biomass Conversion: Generation is expected from two CFD units β one commenced CFD generation at the end of Q4 2016 and another unit is expected to come online during Q2 2018 β’ Offshore Wind: Generation is expected from six CFD sites during the period; one of these is expected to come online in Q2 2018 β’ Onshore Wind: Generation is expected from one CFD site coming online during Q2 2018 β’ Advanced Conversion Technologies: Generation is expected from one CFD unit coming online during Q3 2018
Forecast Assumptions: Other Any significant change to our forecast and/or availability of actual settlement data may trigger an in- period adjustment to the TRA and ILR to meet payments. β’ Market price: The forecast BMRP for Summer 2018 used for the determination of the Q3 2018 ILR and TRA carries very little uncertainty. This is because at the point of determination most of the Summer 2018 baseload prices were already known. The impact of other variables such as IMRP, load factors or start dates will therefore have a larger impact on costs. β’ Electricity demand: The calculation of eligible demand assumes that 85% of 11.7 TWh of βEnergy Intensive Industriesβ demand will be exempt in 2018/19 as per the BEIS guidance at the time LCCC produced the forecast.
15 Month Forecast ILR with Low and High Case lowcarboncontracts.uk
15 Month Forecast TRA with Low and High Case lowcarboncontracts.uk
Further Assumptions Low and High Case Sensitivities Base case: β’ Commissioning dates as per expected date published in CFD register Low case: β’ Assumes generators commission 6 months after the Base case start date assumption β’ Simulates an increase in market prices of 15% High case: β’ Assumes generators commission 2 months prior to the Base case start date assumption β’ Simulates a drop in market prices of 13% lowcarboncontracts.uk
LCCC Transparency Tool - https://sofm.lowcarboncontracts.uk/ lowcarboncontracts.uk
Operational Cost Levy The Operational Cost Levy is a compulsory levy on electricity suppliers to cover the LCCCβs operational costs. It is paid by electricity suppliers in accordance with their market share of eligible gross demand. Below is a simplified formula for illustration purposes. The cost per MWh is given by: ππππππ πππππππππππ π πππ ππππ = πππππ ππππππππ ππππππ The Operational Cost Levy for the next three financial years has been approved. The levies are to be paid on a daily basis, and are set as follows: β’ 2018/19 (1 April 2018 β 31 March 2019) β set at Β£0.0570 / MWh (up from Β£0.0524 / MWh for 2017/18) β’ 2019/20 (1 April 2019 β 31 March 2020) β set at Β£0.0592 / MWh β’ 2020/21 (1 April 2020 β 31 March 2021) β set at Β£0.0614 / MWh lowcarboncontracts.uk
End Thank You! Save the date: LCCC ESC Supplier Event β early July 2018 (we will confirm date soon) Please direct any questions you have to: info@lowcarboncontracts.uk
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