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Energy Essentials for Cost Reduction NIPA 4th October 2012 1 Title of presentation and date Presentation Overview •ESB Group / Electric Ireland •Market Price Drivers – Electricity •Procurement Options •Summary 2 Title of presentation and date About ESB Group ESB Group ESB Services & Electric Ireland 3 ESB Networks Title of presentation and date NI Networks Group Finance & Commercial Generation & Wholesale Markets Group People & Sustainability Innovation About Electric Ireland Competitive supply business of ESB Group: Established in 2000 – 32 county business Wholly owned subsidiary company of ESB •Selling generation output to I & C market from Synergen CCGT, Ringsend (400 MW) Coolkeeragh CCGT, Derry (400 MW) Renewable energy sources Pool Pass Through Contracts •Offering tailored solutions Competitive STOD prices Retail Gas Offers (ROI & NI) Energy Efficiency Services High Quality Customer Service Emphasis on Win-Win partnerships 4 Title of presentation and date Electricity market shares by consumption (GWh) – Northern Ireland Source: RETAIL MARKET MONITORING Quarterly Transparency Report AUG 2012 5 Title of presentation and date Market Price Drivers •Electricity – Key Price Determinants • Gas prices (NBP) • Coal prices • Pool prices • Stg/€ exchange rates (regulated charges) • Carbon price • Regulatory Charges • International events 6 Title of presentation and date Market Price Drivers - Natural Gas Trends For October 1st 2012, the most recent measurement date, the year ahead gas price is 62.65 p/ therm). 7 Title of presentation and date Market Price Drivers - Pool Price 250 Price €/MWH Gasoil, HFO, etc CCGT 200 Interconnector 150 CHP Coal & Peat 100 Wind & Hydro 50 0 Size (MW) Summer Winter •Units stacked up in order of price – driven by Fuel •Unit that meets demand set the price •Capacity Payment charged to suppliers and awarded to generators •Fuel Price the fundamental driver – especially gas 8 Title of presentation and date Pool Price Movements – SMP Prices Daily Average SMP €/MWH 140.00 120.00 100.00 80.00 60.00 40.00 20.00 - Close correlation with Day Ahead Gas prices 9 Title of presentation and date Market Price Drivers – Regulatory Charges Impact depends on consumption profile 10 Title of presentation and date Regulatory Charges – Typical HV Customer (5 GWh) Excludes CCL 11 Title of presentation and date Procurement Strategies – Contract Options Fixed price contracts – up to 3 yrs Flexible contracts – partial Flexible contracts – fully transparent Pool Price Pass Through 12 Title of presentation and date Procurement Strategies other than fixed price Indexed Contracts •Pool Pass Through + Mgt Fee •Day Ahead Gas price / Heren Index Framework Flexible Contracts •Monthly / Quarterly Lock in of prices •Monthly Partial volume lock in Fully Flexible Contracts •Fixed Energy Charge (Conversion Charge) •£cost per MWh •Variable Energy Charge •Lock and Unlock transactions •Default gas/carbon price is Day Ahead Price Minimum volume but can participate through Portfolio / Basket arrangement. 13 Title of presentation and date Summary •Wholesale energy markets (Gas) are the key market drivers of energy costs. •Company needs to agree appropriate contract option to balance the management of budget risk and cost containment. • NB to understand the benefits of Fixed / Flexible alternatives. •If Flexible – must involve all stakeholders • Clearly agreed strategy • Devolved decision making in accordance with agreed strategy • Regular performance reviews 14 Title of presentation and date Thank you Michael Counihan Sales Manager Tel: 01 893 4417 Mob: 087 6495306 E-mail: [email protected] 15 Title of presentation and date