www.cornwall-insight.com Ben Hall, James Brabben & Tim Dixon HELPING YOU MAKE SENSE OF THE HELPING YOU MAKE SENSE OF THE www.cornwall-insight.com ENERGY AND WATER SECTORS ENERGY AND WATER SECTORS 1
• Roc market developments o CP16 and CP17 analysis o Drax conversion o Energy Intensive Industry exemptions • FiT and CfD update o FiT export tariff pricing o FiT exemptions/ GoOs o CfD and budget issues • Future routes to market and PPAs o Private wire and co-location o Value drivers • Renewables services in 2018-19 www.cornwall-insight.com 3 HELPING YOU MAKE SENSE OF THE HELPING YOU MAKE SENSE OF THE www.cornwall-insight.com ENERGY AND WATER SECTORS ENERGY AND WATER SECTORS 2
• Despite being closed to new capacity, grace periods allow some projects to accredit until 31 March 2019 • We project capacity to rise to 31.6GW through grace periods by the end of CP17 RO accredited capacity 35,000 30,000 25,000 Installed capacity (MW) 20,000 15,000 10,000 5,000 0 2017-18 2018-19 2019-20 2020-21 2021-22 2022-23 2023-24 2024-25 2025-26 2026-27 CP16 CP17 CP18 CP19 CP20 CP21 CP22 CP23 CP24 CP25 Onshore wind Offshore wind PV Fuelled Hydro Landfill gas Wave/tidal www.cornwall-insight.com 5 CP15 Rocs issued, obligation & recycle • 86.2mn Rocs issued in CP15, ~5.0% fall on CP14 140 6 Fuelled • Total CP15 Roc supply was 95.2mn Hydro 120 5 with the inclusion of 8.8mn Rocs Landfill gas 100 banked from CP14 4 Recycle (£/Roc) mn Rocs Offshore wind 80 • 3 Outturn RO on suppliers of Onshore wind 60 100.7mn 2 Solar PV 40 • 90.2mn presented by suppliers, Rocs banked from previous 1 20 CP 89.5% compliance UK obligation 0 0 • Recycle 5.0mn Rocs banked into CP16 www.cornwall-insight.com 6 3
• CP16 - Supply forecast at 105.3mn Rocs. Maximum CP16 Roc values projected at £50.5/Roc, including a recycle of £4.9/Roc • CP17 - Supply forecast at 116.0mn Rocs. Maximum CP16 Roc values projected at £52.3/Roc, including a recycle of £5.1/Roc. CP17 buy-out confirmed at £47.22 Traded Roc values – e-POWER auction Roc supply, obligation & recycle values £53.0 140 5.2 120 5.1 Traded Roc values £51.0 remain at six year highs Recycle (£/Roc) 100 5.0 £49.0 80 4.9 mn Rocs £47.0 60 4.8 40 4.7 £45.0 20 4.6 £43.0 0 4.5 £41.0 £39.0 Fuelled Hydro Landfill gas Offshore wind Onshore wind Solar PV Rocs banked from previous CP UK obligation www.cornwall-insight.com 7 • Buy-out price for 2018-19 confirmed on 12 February o Ofgem confirmed the new buy-out price at £47.22/Roc, representing a £1.64 increase compared to the previous compliance period • Controlling the cost of Biomass and Co-firing under the RO o BEIS confirmed its final decision on its consultation on Controlling the Costs of Biomass Conversion and Co-Firing Under the RO o A generator cap of 125,000 Rocs will be applied to the generation eligible for Rocs at the biomass conversion and co-firing bands o It is intended that, subject to parliamentary approval, the cost control measures will come into effect in 2018-19 www.cornwall-insight.com 8 4
• Drax confirms the conversion of fourth unit to biomass o Drax welcomed the decision on controlling the cost of biomass under the RO, and confirmed that it will be converting a fourth unit to biomass o The generator plans to complete work on this unit as part of a major planned outage in the second half of 2018, before returning to service in late 2018 • Energy Intensive Industry exemptions o BEIS published a revised level of the RO to include EII exemptions, confirming the obligation level for the 2018-19 obligation period in GB has increased from 0.452/Rocs/MWh to 0.468Rocs/MWh www.cornwall-insight.com 9 • Government announced that it Impact per TWh if eligibility criteria is widened will consult on widening the £23.4 eligibility criteria for the EII exemptions in the Industrial £23.2 Strategy Cost to consumers (£/MWh) • £23.0 The volume of exempt supply if the eligibility criteria is widened is currently unknown £22.8 • Each additional TWh of electricity £22.6 demand exempt from the costs of the RO adds 0.4% to the £22.4 average consumer bill in GB – 0 5 10 equivalent to £0.09 TWh www.cornwall-insight.com 10 5
HELPING YOU MAKE SENSE OF THE HELPING YOU MAKE SENSE OF THE www.cornwall-insight.com ENERGY AND WATER SECTORS ENERGY AND WATER SECTORS FiT capacity – non-cumulative • 5.9GW currently accredited 200 160 across >800,000 installations 120 Capacity (MW) 80 • New capacity is slow 40 0 o 38MW accredited in Q118 so far (January and February) Micro CHP Hydro AD Wind PV o New deployment is falling FiT capacity vs deployment caps significantly short of original 140 deployment caps set by BEIS 120 Deployment (MW) 100 80 • ~6.2GW expected under the 60 scheme by end March 2019 40 20 - Q116 Q216 Q316 Q416 Q117 Q217 Q317 Q417 • BEIS confirmed its intention to Deployment (tariff) period close scheme from April 2019 Solar PV Wind Hydro AD Original cap www.cornwall-insight.com 12 6
Only sites in East HV connected solar PV in East Midlands £60.00 Midlands, East, South East and London £50.00 consistently achieved £40.00 values above export rate £/MWh in past £30.00 We calculate 60% of £20.00 above 30kW FiT £10.00 projects are now on commercial PPAs as £0.00 wholesale pricing 2015-16 2016-17 2017-18 2018-19 Regos Lecs improves Embedded benefits Wholesale power (annual day-ahead average) FiT export rate Revenue stream 2015-16 2016-17 2017-18 2018-19 Wholesale power (annual day-ahead average) £39.1 £45.8 £46.5 £47.5 Embedded benefits £8.1 £7.5 £8.1 £8.3 Lecs £5.5 0 0 0 Regos 0 0 £0.2 £0.2 Total £/MWh value £52.7 £53.6 £54.5 £56.6 £50.1 (5% £50.9 (5% £52.3 (4% £54.3(4% PPA value discount) discount) discount) discount) FiT export rate £48.5 £49.1 £50.7 £52.4 www.cornwall-insight.com 13 • 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 (inclusive of 85% liability) o 1 July 2018 earliest possible date for implementation – although we see this as unlikely as State Aid approval is still being awaited • GoO exemptions at 1.8TWh for Q317 and 2.7TWh for Q417 o We believe cap will still be reached by year end with annual reconciliation • Both exemptions see cost rises for remaining demand o Our 5 year central forecast calculates scheme costs will rise £5.2/MWh in 2017-18 to £5.9/MWh to 2021-22 www.cornwall-insight.com 14 7
• Letter from European Commission released 7 March 2018 confirmed that in line with Article 50 and Brexit withdrawal plans Directive 2009/28/EC (on promotion of renewable energy and green certificates) will no longer apply to the UK Effectively means that GoOs in UK (i.e Regos) issued on or after 30 th March • 2019 will no longer be recognised for fuel mix disclosure in the EU • Likely to mean Ofgem will respond accordingly to stop use of GoOs from same date • Potential implications: 30 th March date has implications for March GoOs – what happens to those o issued on 30 th and 31 st March? o Have contracts agreed to take all GoOS for year – break clauses? o Knock-on impacts for GB Regos and value for FMD www.cornwall-insight.com 15 Domestic green RE100 and tariffs CSR drives GoO implications Demand for solar and wind Regos Values quoted in the range of £0.1/Rego to £0.6/Rego • Rego pricing has continued to improve in the market – based on our analysis of short-term PPAs • GoO changes could see prices rise close to upper end of range • Tiered pricing structure emerging • Price rises create larger difference between brown and green power www.cornwall-insight.com 16 8
• 330MW commissioned in Q417 • 1.4GW expected to commission in 2018 • >3GW expected to be operational by end of 2018 Cumulative installed & expected CfD capacity www.cornwall-insight.com 17 • Consultation published 15 December with proposed definition of remote island wind • Remote island defined as: o Island located in UK territorial sea, other than part adjacent to Northern Ireland o And where all parts of coastline are at least 10km from mainland GB • To qualify as remote island wind project: o Must be located on remote island o Connection between unit and Main Interconnected Transmission System will require at least 50km of cabling, of which 20km must be subsea o Must be connected to GB national transmission system or distribution system www.cornwall-insight.com 18 9
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