PPA Solutions IWFA Rory Mullan

download report

Transcript PPA Solutions IWFA Rory Mullan

Potential Impact on PPA Contracts IWFA Workshop 24

th

January 2014

PPA Solutions

• • Established in Aug 2012: Hugh Mullany and Rory Mullan Mullany Engineering Consultancy and Mullan Grid What we have been doing?

– Restructuring Supplier Lite Registrations – – – – – – – – – Reviewing PPA Options Negotiating PPAs for Merchant, REFIT II and REFIT III Review Terms & Conditions of PPAs Audit and review of REFIT I PPAs Setting up Supplier Lite Structures Due Diligence Review SEM prices for Generators Registering Generators for LECs Supporting REFIT audited year-end submissions

Today

• Current PPA Position of Generators • Questions to consider to understand impact of European Target Model on Existing PPAs

The Power Purchase Agreement

PPA Supply Co.

BILL • • • Fixed: A fixed rate per MWh, without or without indexation Pass through: All SEM/REFIT/LEC/GO revenues, less a flat administration fee or price per MWh traded Floor with upside, or price guarantee

Types of Generator PPAs

• • Support Scheme PPAs AER – Electric Ireland REFIT I & II - Any 3 rd Party Irish Supplier - Supplier Lite • • • Outside Support Scheme PPAs Merchant - market pass through - 3 rd Party Suppliers - Supplier Lite Fixed price with 3 rd Hybrid with 3 rd party supplier party supplier

Current Market Structure - SEM

GENERATION SUPPLY MONEY POWER Wind > 10MW PPA Supply Co.

BILL Intermediary Single Electricity Market Supply Co.

BILL Wind <10 MW Outside SEM/ Negative Demand PPA

SEM Payments & Charges

GENERATION SUPPLY MONEY POWER Wind > 10MW Wind <10 MW PPA Supply Co.

BILL Intermediary

Payments

- Energy (SMP) - Capacity Single Electricity Market

Charges

- Energy (SMP) - Capacity - Imperfection - Market Operators Supply Co.

BILL Outside SEM/ Negative Demand PPA

2012/13 SEM Prices

Energy - SMP Capacity Payment Capacity Charge Imperfection Charge SEM 2012/13 Average (€/MWh) 66.1

6.9

14.6

4.7

SEM 2012/13 Wind Weighted Average (€/MWh) 63.5

5.8

15.0

4.7

Wind Generator > 10 MW Wind Generator < 10 MW Difference (€/MWh) % Difference

69.3

83.2

13.9

20%

Benefits of Current SEM Structure

• Identical generators producing the same power at the same time receive the same revenues – Shared SMP and Capacity Payment • Transparency of prices • Wind prices are relatively close to average prices • Generators < 10 MW can register as negative demand • Relatively low cost to operate in SEM

New Market Changes

• New prices: – Day Ahead – – Within-Day Balancing • Supplier who has bought your power under a PPA can choose how to trade-on your power • That choice impacts how much money your windfarm makes – Choice may be restricted by lack of available counterparty • Identical generators producing the same power at the same time receive revenues based on their trading skill

Impact of new Market on Existing PPAs

Support Scheme PPAs - REFIT I & II • Relevant differences in REFIT I & II – The REFIT II reference and technology rate (not including balancing payment) is guaranteed and has to be passed on to the generator – Less potential for market upside in REFIT II • • Market Change Clauses in PPAs – Two general types of Market Change Clauses: • Allow mechanical changes, for examples changes in payment timelines • Reopening of price negotiations to allow both parties to maintain commercial positions If the supplier is making less money trading your power, they may – PPA permitting – seek to change the price under the PPA

Impact of new Market on Existing PPAs

Support Scheme PPAs - REFIT I & II - continued • What market prices will be utilised by CER for REFIT?

– For forecasts (Day Ahead, Within Day, Balancing) – For reconciliation (REFIT currently tops up any supplier to the guaranteed rates, irrespective of how much or little money the supplier has made selling on your power) • Impact on potential for upside if allowed under the PPA • Impact of changes in PPA on loan agreements • Should also consider impact of new market on project revenues post REFIT term

Impact of new Market on Existing PPAs

Outside Support Scheme PPAs • Merchant - market pass through – Term of current PPAs generally end in 2016 or earlier – Availability, structure and price of new PPAs post 2016??

• Fixed price with 3 rd – – party supplier Depends on Market Change Clauses in PPA Need to also consider new market’s impact on future project revenues • PPA structure required for repowering?

Impact of new Market on Existing PPAs

General • Will there be Capacity Payments & Capacity Charges?

• • • • • What will market revenues be like in the European Target Model?

– Will the choice of when to trade make much of a difference on revenues?

Will <10MW generators still see the benefits of offsetting demand?

Cost of forecasting and trading in the new Market?

Implementing of priority dispatch?

And of course the detail ….

Conclusions

• Know Your Own Position • Too early to fully understand potential impact • Need to stay informed • Ensure this sector has a strong voice, individually and collectively

Thank You Rory Mullan [email protected]

087 3287213