Electricity Market Reform briefing summary - Regensw
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Electricity Market Reform briefing summary 5 March 2013 Regen SW ran a members’ briefing on Electricity Market Reform (EMR) with the Department for Energy and Climate Change (DECC) and Osborne Clarke on 5 March 2013. The purpose of the event was to provide an overview of EMR, to discuss some of the concerns voiced by the renewables industry and to give members an opportunity to ask questions of the experts. Overview of Electricity Market Reform and the transition from the Renewables Obligation Emma McGuire, from the office of renewable energy deployment in DECC, gave a presentation on EMR and the transition from the RO. Her presentation is available on our website here. Emma’s presentation covered: 1. Contract’s for Difference (CfDs), including the process for setting strike prices, the delivery structure, application process and timescales 2. Power purchase agreements (PPAs) and CfDs, as well as measures to support market liquidity 3. RO transition and timescales. A key concern raised by delegates was the allocation of CfDs. The detail of how the allocation rounds would work was still to be decided, but was likely to include rationing and auctions. The risk of not being allocated a CfD after some initial investment had taken place was raised. However, Emma pointed out that developers would be able to apply for a CfD well in advance of the target commissioning window, which should reduce the risk. The annual budget for CfDs was also raised. The Control framework for DECC levy-funded spending had been capped to £7.6 billion by 2020. An annual budget would be set each year, possibly by technology, and would gradually increase from £2.35 billion in 2012/13 to up to £7.6 billion in 2020. It would cover all low carbon technologies, including nuclear, CCS and RO grandfathering. However, it was questioned whether any nuclear or CCS would be commissioned by 2020. It was suggested that an annual budget for renewable energy CfDs would be useful. Emma emphasised the point that the level of uncertainty surrounding EMR should be seen as an opportunity by industry to influence the system and improve the proposals. In particular, there were opportunities to feed in to consultations on: Choice of Scheme details (between RO and CfD before 2017) in May 2013 Draft Delivery Plan and strike prices in July 2013 Fixed ROC (proposal to fix the price from 2027 through to the end of the RO payments in 2037) in 2014.
Electricity Market Reform and selling renewable power Alan John from Osborne Clarke gave a presentation on EMR and selling renewable power, which is available here. Alan provided: 1. A short history of renewable PPAs 2. An overview of the challenge renewable energy developers would face under the CfD system 3. The Green Power Auction Market as a solution to the problem. Alan highlighted the problem that generators would receive less than the reference price for power sales as a result of their PPA, due to the cost incurred by the PPA provider. This would not be taken into account when topping up the CfD and the generator would not, therefore, achieve the strike price. One solution to this problem would be the introduction of a Green Power Auction Market (GPAM), as proposed by David Handley of RES. The auction price would determine the market reference price, from which the CfD payment would then be made.
Electricity Market Reform briefing summary 5 March 2013 Regen SW ran a members’ briefing on Electricity Market Reform (EMR) with the Department for Energy and Climate Change (DECC) and Osborne Clarke on 5 March 2013. The purpose of the event was to provide an overview of EMR, to discuss some of the concerns voiced by the renewables industry and to give members an opportunity to ask questions of the experts. Overview of Electricity Market Reform and the transition from the Renewables Obligation Emma McGuire, from the office of renewable energy deployment in DECC, gave a presentation on EMR and the transition from the RO. Her presentation is available on our website here. Emma’s presentation covered: 1. Contract’s for Difference (CfDs), including the process for setting strike prices, the delivery structure, application process and timescales 2. Power purchase agreements (PPAs) and CfDs, as well as measures to support market liquidity 3. RO transition and timescales. A key concern raised by delegates was the allocation of CfDs. The detail of how the allocation rounds would work was still to be decided, but was likely to include rationing and auctions. The risk of not being allocated a CfD after some initial investment had taken place was raised. However, Emma pointed out that developers would be able to apply for a CfD well in advance of the target commissioning window, which should reduce the risk. The annual budget for CfDs was also raised. The Control framework for DECC levy-funded spending had been capped to £7.6 billion by 2020. An annual budget would be set each year, possibly by technology, and would gradually increase from £2.35 billion in 2012/13 to up to £7.6 billion in 2020. It would cover all low carbon technologies, including nuclear, CCS and RO grandfathering. However, it was questioned whether any nuclear or CCS would be commissioned by 2020. It was suggested that an annual budget for renewable energy CfDs would be useful. Emma emphasised the point that the level of uncertainty surrounding EMR should be seen as an opportunity by industry to influence the system and improve the proposals. In particular, there were opportunities to feed in to consultations on: Choice of Scheme details (between RO and CfD before 2017) in May 2013 Draft Delivery Plan and strike prices in July 2013 Fixed ROC (proposal to fix the price from 2027 through to the end of the RO payments in 2037) in 2014.
Electricity Market Reform and selling renewable power Alan John from Osborne Clarke gave a presentation on EMR and selling renewable power, which is available here. Alan provided: 1. A short history of renewable PPAs 2. An overview of the challenge renewable energy developers would face under the CfD system 3. The Green Power Auction Market as a solution to the problem. Alan highlighted the problem that generators would receive less than the reference price for power sales as a result of their PPA, due to the cost incurred by the PPA provider. This would not be taken into account when topping up the CfD and the generator would not, therefore, achieve the strike price. One solution to this problem would be the introduction of a Green Power Auction Market (GPAM), as proposed by David Handley of RES. The auction price would determine the market reference price, from which the CfD payment would then be made.
