www.cornwall-insight.com Tom Palmer and Tom Edwards HELPING YOU - - PowerPoint PPT Presentation

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HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS

Tom Palmer and Tom Edwards

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HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS

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Flexibility market has undergone significant change over the last 6 months often not great

• Low capacity market clearing prices
• Storage capacity market de-rating
• Optimistic revenue assumptions based 2016/17 outturn
• CMP264/5 - triad
• P354 – spill payments
• System Needs and Product Strategy
• Medium Combustion Plant Directive
• Targeted charging Review Significant Code Review
• Storage licencing and co-location
• Rough closure & Beast from the East

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Things are changing

• Ofgem ‘Supplier Hub’ market arrangements
• Regulatory sandbox
• Technology developments – peer to peer and blockchain
• DSO trials and tenders
• Balancing Mechanism
• P305 – Par 1
• Project TERRE
• Storage costs and competition
• Charging futures forum
• Coal and nuclear closure
• Capacity market review
• Route to market offerings and financing arrangements
• System Needs and Product Strategy
• Smart Meter Roll-out
• HH settlement

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HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS

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• Increasing competition has driven

down prices

• Gas reciprocating engines are

able to deliver provision at aggregated level

• Introduction of P354 in April 2020

will impact non BM participants

• Will there be increased

participation from gas reciprocating assets and storage,

• Competition in Dynamic FFR
• Over expectation in wholesale

revenues

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• Typically dominated by CCGT,

Hydro, DSR

• Market increasingly occupied by

Non-BM participants with spill payments reducing utilisation prices

• Availability prices for BM and

NBM are consistent

• The market has yet to price in the

P354 changes due to start in 2020

• Recent high level use by National

Grid due to low utilisation prices – interaction with O&M agreements

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Utilisation - £/MWh Availability- £/MW/hr

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• Annual Market Report 2016/17
• Total availability payments of

£53.6m and £22.3 for utilisation

• Key facts
• 67% of units are between 3-

10MW

• 59.7% can deliver contracted

level within 10mins

• Average utilisation price of

£142.3/MWh

• Average contracted prices of

£4.2/MW/h for availability

• 90% of instructions last for 30

minutes

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• Secondary market still very active

and oversubscribed

• Dominated by DSR providers and

gas/diesel generators

• Limited volumes contracted ahead
• f time
• Introduction of EFA blocks may

impede revenue stacking potential

• r change bidding behaviour

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• Prices have levelled out as a result of aggregator and diesel participation
• Future changes to static may encourage assets that have traditionally been

unable to participate (FCDM and other) – further pressure on prices

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• Market has become oversaturated

compared with the requirement

• Almost fully contracted until April

2019…but never certain with tender results

• Dominated by storage and hydro

predominately

• recent introduction of EFR
• Introduction of EFA and seasonal

products may change behaviour

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One accepted British Gas Trading battery (GHFFR-1). Offering 3MW of response for just £7.5/MW/hr. Limejump (LJDYQ-1) were accepted at £20/MW/hr for 3MW

• f response. Similarly successful

again in Dec & Jan, though

• ffering 2MW. Statera with 48MW

Max prices fell in Feb to £15/MW/hr, with British Gas Trading (GHFFR-1) offering 3MW of response. The lowest accepted price by a battery assets was £6/MW/hr from Limejump (LJDYN-1) offering 6MW. Up until April 2017 the battery market was dominated by Noriker Power, Kiwi Power and Limejump. With a limited price range

• f £19.5-20.1/MW/hr. Procuring 16MW of

response on average. *Dynamic response prices

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• In 2018 the service will run from 1 May to

28 October

• Demand turn up
• Distributed generation turn down or

charge

• In 2017 138.6MW was accepted from six

parties with an average availability was 82MW

• Overall utilisation of DTU service: 4%

utilisation rate

• Driven by lower priced alternative

services

• DTU was used less in Summer 2017 than

anticipated

• 2018 footroom requirement expected to

range from 0 - 4.5GW

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HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS

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Work to date

• Rationalisation
• STOR Runway
• Enhanced Optional STOR

Where next

• Standardisation
• Simplified contract
• Platform for Ancillary Services

(PAS) – Fast Reserve – Then STOR

• Planning for TERRE
• Review outcomes of FFR trial

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What is missing?

• Bilateral Fast Reserve participants paid

for utilisation ~300MW

• £1m a month versus >£4m a month
• Register of asset with and without contracts
• EFA blocks

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Work to date

• Rationalisation
• EFR, Rapid FFR, Bridging,

FCDM

• Simplification (May tender)
• Windows and duration

Where next

• Simplified contract
• Auction trial
• Testing and compliance
• Faster acting response

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What is missing?

• Register of asset with and those

terminated

• Bilateral information – volume and dates

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Standardised duration of contract (traded products)

• Month ahead, Quarter ahead

and Seasons - 30 months

• No 6 month ahead rule
• 2 bids per unit per tendered

period

• P/S, or P/S/H or H only
• Increase transparency
• Price discovery
• Reduce complexity
• Lower price

Standardised within-day windows (EFA blocks)

• 23:00 start of the day
• 4 hour blocks as traded the

wholesale market

• Procure up to the minimum
• Remaining requirement from

static market (Total to Min Dyn) NGET benefit

• Market diversity
• Balancing Costs

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• Webinar held on 14th March
• Focus on technical requirement, not commercial
• 3 services proposed
• Static Containment - post fault – 30 mins or under
• Dynamic Balancing - pre fault, maybe 10-30 mins
• Dynamic Containment – post fault, maybe 20mins
• Procurement from December 2018

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• First Quarter of 2018 Document outlining

the SO's proposed actions in the remaining service areas (reactive power, black start, and constraints) ?

• Black Start Strategy ended in April 2018.

Exploring the following

• Interconnectors
• Islanding or Trip to House Load as a

restoration service

• Renewable generation can contribute

to restoration

• Black Start service developed with

more than one provider

• Spinal Restoration model –

energising a single energy corridor during restoration, rather than creating power islands

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Short-term = Baseline Medium-term = Tendered Medium-term = Market

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HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS

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• T-1 auction provided one-year agreements for delivery over winter

2018-19

• Followed T-4 auction in 2014 which secured 49.3GW
• T-1 auction procured more capacity than normal

– Due to withdrawal of Trafford (CCGT) and Longannet (coal)

• 10.7GW of capacity entered auction
• 5.8GW awarded agreements

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• Auction cleared at

£6/kW/year

• Lowest ever clearing price

in a capacity auction

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• T-4 2021-22 auction cleared at £8.40/kW
• Record low for four year ahead auction
• 74.2GW of capacity entered auction
• 50.4GW of capacity awarded agreements

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35000 37000 39000 41000 43000 45000 47000 49000 51000 53000 55000 2017-18 2018-19 2019-20 2020-21 2021-22

De-rated capacity (MW)

Existing Generating CMU New Build Generating CMU Refurbishing Generating CMU Proven DSR CMU Unproven DSR CMU Existing Interconnector CMU New Build Interconnector CMU

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• 10.0%
• 5.0%

0.0% 5.0% 10.0% 15.0% 20.0% 25.0% 30.0% 35.0% 40.0%

• 10000
• 5000

5000 10000 15000 20000 25000 01/04/2019 01/04/2019 01/04/2020 01/10/2020 01/10/2020 01/10/2020 01/10/2020 01/10/2021 01/10/2021 01/10/2021 01/10/2021 01/10/2021 01/10/2022 01/10/2022 01/10/2022 01/10/2022 01/04/2023 01/04/2023 01/04/2023 01/04/2023 01/04/2023 01/04/2023 01/04/2024 01/04/2024 01/04/2024 01/04/2025 01/04/2025 01/04/2025 01/04/2025 01/10/2025 01/10/2025 01/10/2025 01/10/2025 01/10/2025 01/10/2025 01/04/2026 01/04/2026 01/04/2026 01/04/2026 01/04/2027 01/04/2027 01/04/2027 01/04/2027 01/04/2027 01/04/2028 01/04/2030 01/04/2030 01/04/2031 01/04/2035

% of LoLP target De-rated capacity (MW)

Cumulative coal closed Cumulative nuclear closed Cumulative CCGT closed % of LoLP Target

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2018 2019

• 1. Auction can’t clear without exit bid in price round
• 2. CMU units can self-select period of evidence for historical output
• 3. Allow opted out T-4 units to participate in T-1 auctions
• 4. Rounding excess capacity at bidding floor to 100MW in T-1 auctions
• 5. Construction reports need only be updates when circumstances change

1. Creating technology classes for Renewables?

• 2. Applying storage duration to DSR?
• 3. Creating technology types for behind the

meter CMUs?

• 4. Changes to require firm connections?
• 5. Allowing DSR components to altered during

the delivery year Apply in the upcoming auction Apply in the following auction

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HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS HELPING YOU MAKE SENSE OF THE ENERGY AND WATER SECTORS

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5000 10000 15000 20000 25000 0.0 4.1 8.1 12.2 16.3 20.3 24.4 28.5 More

Frequency Difference between PAR50 and PAR 1

500 1000 1500 2000 2500 5 10 15 20 25 30

maximum prices (£/MWh) Average prices & HH change (£/MWh)

Average PAR50 HH change Average Par 1 HH change Maximum PAR1 price Maximum PAR50 price

• EBSCR implemented in

November 2015

• Reduced PAR to

50MWh

• Introduced VoLL and

RSP

• Hard coded changes in

2018

• From 1 November 2018
• PAR reduces to 1MWh
• VoLL increases to

£6,000/MWh

• Static LoLP > Dynamic

LoLP

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National Grid Project TERRE BSC parties Settlement

• 1. Grid submits

requirements to TERRE platform

• 2. Parties submit TERRE

bids to Grid

• 3. Grid submits TERRE

bids in €/MWh to platform

• 4. TERRE platform

issues RR acceptances to Grid

• 5. Grid issues BOAs to

match RR acceptances

• 6. GB RR acceptances

fed into imbalance at clearing price

• 7. Parties paid for

energy and imbalance

Virtual Lead Parties

• A. New BSC parties can enter

DSR and balancing energy into TERRE & BM

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Network charges

Forwards Looking Charges

Residual Charges Fairness Distortions Practical Principles Demand Generation Both Who Pays? Options

• Charged on gross metered volume for business and I&C

customers

• Based on ex ante or ex post capacity
• Based on fixed connection capacity
• Mixture of approaches

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Network charges

Forwards Looking Charges

Residual Charges

Using Auctions

• Fairness
• Access
• Practicality

Constraint management

• Depth of

access

• Complexity

UoS Charges

• Nodal V Zonal
• Network

models

• Core access
• vulnerability

BSUoS

• BSUoS could be split up and recovered through

access or UoS charges

• Could be recovered as a residual charge

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• Ofgem invited parties to a

second tender round for the regulatory sandbox in 2017

• The sandbox allows trials of

products and services which cannot operate under existing regulations

• Trials can be undertaken

where consumer benefits are being held back by regulation

• There are proposals to

create sandboxes in the BSC and CUSC

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Name Description Owens Square Community Energy A community shared battery to balance local generation and consumption Gower Power Solar Storage Direct local supply arrangement in Swansea, with community Solar, Storage and load Good Energy Community battery paired with micro-generation SIG and Smartklub Behind the meter digital switching and control technologies to optimize a local power network Energise Barnsley Peer to peer trading for social housing tenants Verv Peer to peer trading for social housing tenants

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• Distribution System Operator: Securely operates and

develops an active distribution system comparing network demand generation and other flexible resources

• Open Networks Project is looking at developing a detailed

view of the required transition from DNO to DSO

• 2018 will be looking at an impact assessment of options and

preferred design

• Following by regulatory enactment in 2019-20 and designing

and testing before RIIO ED2

• Meanwhile DNOs are procuring Active Network Management

(ANM) services

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• On 3 April ENWL issued an Expression of Interest for

provision of flexible services across its network

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Locations with a need for Flexibility

Location Voltage MW (2018-19) Months Times Days Utilisation rate Alston LV/HV 0.5 Nov - Mar 06:30 to 21:30 All week <40h/year Blackfriars LV/HV 0.5 Jan - Feb 16:30 to 21:30 Weekdays <40h/year Cheetham Hill LV/HV 2.5 Nov - Mar 11:30 to 21:30 All week <40h/year Coniston LV/HV 1 Nov - Mar All Day All week <40h/year Easton LV/HV 2 Apr-Mar All Day All week <40h/year Sturt Street HV or 33kV 9.5 Nov - Feb 06:30 to 21:30 Weekdays <40h/year Nelson HV or 33kV 20 Oct - Mar 06:30 to 21:30 All week <40h/year

Service requirements

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Service Overview Delivery Flexibility Forum

• A forum hosted by Cornwall Insight aimed at

stakeholders with flexibility interests

• A platform for information exchange on balancing

services, embedded benefits and more

• Presentations on topical issues to stimulate

understanding and debate Monthly Frequency Response Report

• Commentary on policy and regulatory developments
• Forecasts of value obtainable from non-bilateral

frequency response services

• Analysis of technical and commercial requirements of

the schemes Monthly Capacity Market Forecast

• Forecasts of CM clearing prices across T-4 and T-1

auctions

• Auction outturn analysis
• Assessments of costs to the consumer of CM

Numerous issues

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Service Overview Delivery Embedded benefits model

• Simple tool to help value and estimate embedded

benefit values for distributed generation

• Current year assessments and further four year

forecast

• Used by off takers and generators for PPA and

financial planning processes Model and quarterly updates Third Party Charges

• Commentary on policy and regulatory developments
• Forecasts of value obtainable from non-bilateral

frequency response services

• Analysis of technical and commercial requirements of

the schemes Annual Report and Quarterly updates

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Consultancy projects

• International flexibility review
• Storage optimisation and financial modelling
• Behind the meter storage
• Power Purchase Agreement support
• Market and regulatory due diligence for flexibility assets

Flexibility Forum

• Now over 19 members, with only a few spaces left
• Monthly meeting covering all aspects of commercial, policy

and regulatory

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Next Cornwall Insight Flexibility Customer Event September 2018 Please join us for drinks in the bar downstairs

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