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Tom Palmer and Tom Edwards HELPING YOU MAKE SENSE OF THE HELPING YOU MAKE SENSE OF THE www.cornwall-insight.com ENERGY AND WATER SECTORS ENERGY AND WATER SECTORS
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HELPING YOU MAKE SENSE OF THE HELPING YOU MAKE SENSE OF THE www.cornwall-insight.com ENERGY AND WATER SECTORS ENERGY AND WATER SECTORS
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 www.cornwall-insight.com 5
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 www.cornwall-insight.com 6
HELPING YOU MAKE SENSE OF THE HELPING YOU MAKE SENSE OF THE www.cornwall-insight.com ENERGY AND WATER SECTORS ENERGY AND WATER SECTORS
• 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, o Competition in Dynamic FFR o Over expectation in wholesale revenues www.cornwall-insight.com 8
Utilisation - £/MWh • Typically dominated by CCGT, Hydro, DSR • Market increasingly occupied by Non-BM participants with spill payments reducing utilisation prices • Availability prices for BM and Availability- £/MW/hr 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 www.cornwall-insight.com 9
• Annual Market Report 2016/17 • Total availability payments of £53.6m and £22.3 for utilisation • Key facts o 67% of units are between 3- 10MW o 59.7% can deliver contracted level within 10mins o Average utilisation price of £142.3/MWh o Average contracted prices of £4.2/MW/h for availability o 90% of instructions last for 30 minutes www.cornwall-insight.com 10
• Secondary market still very active and oversubscribed • Dominated by DSR providers and gas/diesel generators • Limited volumes contracted ahead of time • Introduction of EFA blocks may impede revenue stacking potential or change bidding behaviour www.cornwall-insight.com 11
• 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 www.cornwall-insight.com 12
• 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 o recent introduction of EFR • Introduction of EFA and seasonal products may change behaviour www.cornwall-insight.com 13
Max prices fell in Feb to £15/MW/hr, with British Gas Trading Limejump (LJDYQ-1) were ( GHFFR-1) offering Up until April 2017 the battery market was accepted at £20/MW/hr for 3MW 3MW of response. dominated by Noriker Power, Kiwi Power of response. Similarly successful and Limejump. With a limited price range again in Dec & Jan, though of £19.5-20.1/MW/hr. Procuring 16MW of offering 2MW. Statera with 48MW response on average. The lowest accepted price by a battery assets was £6/MW/hr from Limejump (LJDYN-1) offering One accepted British Gas 6MW. Trading battery (GHFFR-1). Offering 3MW of response for just £7.5/MW/hr. *Dynamic response prices www.cornwall-insight.com 14
• In 2018 the service will run from 1 May to 28 October o Demand turn up o 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 o 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 www.cornwall-insight.com 15
HELPING YOU MAKE SENSE OF THE HELPING YOU MAKE SENSE OF THE www.cornwall-insight.com ENERGY AND WATER SECTORS ENERGY AND WATER SECTORS
Work to date • Rationalisation o STOR Runway o Enhanced Optional STOR Where next • Standardisation • Simplified contract • Platform for Ancillary Services (PAS) What is missing? – Fast Reserve • Bilateral Fast Reserve participants paid – Then STOR for utilisation ~300MW • Planning for TERRE • £1m a month versus >£4m a month • Review outcomes of FFR trial • Register of asset with and without contracts • EFA blocks www.cornwall-insight.com 17
Work to date • Rationalisation o EFR, Rapid FFR, Bridging, FCDM • Simplification (May tender) o Windows and duration Where next o Simplified contract o Auction trial o Testing and compliance What is missing? o Faster acting response • Register of asset with and those terminated • Bilateral information – volume and dates www.cornwall-insight.com 18
Standardised within-day windows Standardised duration of (EFA blocks) contract (traded products) • • 23:00 start of the day Month ahead, Quarter ahead • 4 hour blocks as traded the and Seasons - 30 months • wholesale market No 6 month ahead rule • • Procure up to the minimum 2 bids per unit per tendered • Remaining requirement from period • static market (Total to Min Dyn) P/S, or P/S/H or H only • Increase transparency NGET benefit • Price discovery • Market diversity • Reduce complexity • Balancing Costs • Lower price www.cornwall-insight.com 19
• Webinar held on 14th March • Focus on technical requirement, not commercial • 3 services proposed o Static Containment - post fault – 30 mins or under o Dynamic Balancing - pre fault, maybe 10-30 mins o Dynamic Containment – post fault, maybe 20mins • Procurement from December 2018 www.cornwall-insight.com 20
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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 o Interconnectors o Islanding or Trip to House Load as a restoration service o Renewable generation can contribute to restoration Short-term = Baseline o Black Start service developed with more than one provider Medium-term = Tendered o Spinal Restoration model – energising a single energy corridor Medium-term = Market during restoration, rather than creating power islands www.cornwall-insight.com 24
HELPING YOU MAKE SENSE OF THE HELPING YOU MAKE SENSE OF THE www.cornwall-insight.com ENERGY AND WATER SECTORS ENERGY AND WATER SECTORS
• 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 • Auction cleared at £6/kW/year o Lowest ever clearing price in a capacity auction www.cornwall-insight.com 26
• T-4 2021-22 auction cleared at £8.40/kW o Record low for four year ahead auction • 74.2GW of capacity entered auction • 50.4GW of capacity awarded agreements www.cornwall-insight.com 27
55000 53000 51000 49000 De-rated capacity (MW) 47000 45000 43000 41000 39000 37000 35000 2017-18 2018-19 2019-20 2020-21 2021-22 Existing Generating CMU New Build Generating CMU Refurbishing Generating CMU Proven DSR CMU Unproven DSR CMU Existing Interconnector CMU New Build Interconnector CMU www.cornwall-insight.com 28
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