The Energy Complex, non-commodity charges and cost mitigation

Transcription

1 The Energy Complex, non-commodity charges and cost mitigation

2 Market Movements Raw energy costs have fluctuated by over 400% in the past 15 years Gas Index Price Electricity Index Price 7/7 London Bombings followed by Hurricane Katrina Fire at Rough UK s largest long term gas storage facility Oil & Coal at record high price levels. Increased world demand & very active financial speculators Earthquake in Japan Problems with Nuclear reactors in Fukushima Extended periods of below Seasonal Norm Temperatures Tensions in Middle East & North Africa European debt crisis Uncertainty regrading French nuclear power threat of a repeat of 2016 s winter Britain voted to leave the EU OPEC announce production cuts Rallying coal prices drive energy market Gas Electricity - 2 nd warmest winter in the UK since Collapse of Phase 1 EU ETS. - New LNG import infrastructure Global economy heading towards recession. Demand for commodities has reduced leading to lower prices Russian/ Ukrainian Tensions UK exporting to France due to risk re French nuclear power. Seven reactors withdrawn from the grid over the winter period due to safety concerns. Rough announced permanent closure Jan 03 Jan 04 Jan 05 Jan 06 Jan 07 Jan 08 Jan 09 Jan 10 Jan 11 Jan 12 Jan 13 Jan 14 Jan 15 Jan 16 Jan 17 Jan 18

3 Pass Through Charge Update Electrcity Split RO AAHEDC BSUoS TUoS Losses TUoS FiT DUoS Losses CM Auction CfD CCL Commodity Commodity Supplier s DUoS DUoS Losses TUoS TUoS Losses BSUoS AAHEDC RO FiT CfD CM Auction CCL DUoS Supplier s

4 Electricity Forecast 400, , , , , , ,000 50,000 *based on an annual consumption of October 14 Annual 49.59/MWh 196,194 October 15 Annual 42.49/MWh 183,911 Saving 7.10/MWh 12,283 CCL Non Commodity Commodity

5 Electricity Forecast DUoS DUoS Losses TUoS TUoS Losses BSUoS AAHEDC RO FiT CfD CM Auction CCL Total p/kwh *based on an annual consumption of October 14 Annual 49.59/MWh 196,194 October 15 Annual 42.49/MWh 183,911 Saving 7.10/MWh 12,

6 Utility Waste Minimisation Strategy Most favoured option Turn Off Don t use it in the first place Control Using existing systems and processes Reduce Implement efficiency projects Least favoured option Switch When it makes commercial sense Report YTD and forecasted wastage Pay More than your competition

7 Monitoring & Reporting *based on an annual consumption of October 14 Annual 49.59/MWh 196,194 October 15 Annual 42.49/MWh 183,911 Saving 7.10/MWh 12,283

8 What is Voltage Optimisation Voltage Optimisation is the concept of reducing the incoming voltage from the grid to achieve the optimum voltage for your equipment. 253V Maximum level supplied by the grid 242V *based on an annual consumption of October The 14 average The Annual 49.59/MWh 196,194 October 15 level Annual 42.49/MWh optimum 183,911 Saving 7.10/MWh 12,283 supplied by the grid in UK 220V voltage for equipment efficiency 207V Minimum level supplied by the grid

9 Why Voltage Optimisation Reduce Carbon Emissions Reduce kwh Consumption Improve Energy Efficiency Reduce Electricity *based on an annual consumption of October 14 Annual 49.59/MWh s 196,194 October 15 Annual 42.49/MWh 183,911 Saving 7.10/MWh 12,283 Reduce Capital Expenditure Lighting Refrigeration Chillers AHU s Ventilation systems Motors/pumps Lifts/escalators Manufacturing machinery Electric heating IT equipment Other electrical equipment

10 Energy Storage Applications Renewable Energy Generation Large End-Users Renewable Energy Shifting and Firming Charge the battery with excess of renewable energy during off-peak periods to release it onto the grid during peak periods, and possibly to follow a predefined generation pattern Renewable Energy Smoothing Charge/discharge the battery to smooth intermittent generation and follow soft power injection ramps. Electricity Rate Optimization Store electricity when the market price is low and consume it when the market price is high MicroGrids, Diesel Abatement Use storage in isolated grids in conjunction with renewable energy and fossil fuel sources Ancillary Services Provide or absorb active power (respectively reactive power) in order to keep the grid frequency (respectively the grid voltage)within allowed boundaries Power Transmissio n and Distribution Peak Shaving Charge the battery with excess of renewable energy during off-peak periods to release it onto the grid during peak periods Investment Deferral Store Energy close to consumers during off-peak periods and release it during peak periods to avoid having to re-invest in new transmission or distribution lines

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12 Electricity Non-Commodity Charges Forecasted rates are based on latest industry estimates and assumptions have been made on some rates. Commodity This has been assumed as 5.5p/kWh. DUoS This is the distribution cost, which covers substations and underground cables to supply your meter with electricity. The charges vary depending on location and voltage, and have been estimated as a single p/kwh based on an average of all supplies in the UK. DUoS Losses This covers the cost of lost energy in the DUoS system and again varies depending on location and voltage. This charge is also affected by the commodity costs as losses are applied as a % of energy against commodity rate. For this representation an estimated p/kwh has been used. *based on an annual TUoS This is the transmission cost, which covers pylons and the over consumption ground of network which in turn supplies the distribution system. On HH supplies this is measured by Triads where October the 14 3 Annual highest national 49.59/MWh demands are measured 196,194 and an average demand then October charged. 15 Annual Rates vary depending 42.49/MWh on location and 183,911 are reconciled in April of each Saving year. 7.10/MWh 12,283 TUoS Losses This covers the lost energy in the TUoS system and is applied as a % increase on the Triads. As the system is EHV the losses are minimal compared to DUoS Losses. BSUoS This cost is levied by the system operators for balancing supply and demand on the National Grid. It is applied as a p/kwh for all energy used at Grid Supply Point and the rate fluctuates from half hour to half hour.

13 Electricity Non-Commodity Charges Forecasted rates are based on latest industry estimates and assumptions have been made on some rates. AAHEDC Otherwise known as the Lighthouse tax. This charge is a socialised levy to help subsidise the high distribution costs in the remote areas of Northern Scotland. RO The Renewable Obligation charge has been the governments primary model to incentivise large scale renewable projects, but the shift to CfD for largescale renewable has already begun meaning this charge is expected to peak in 2017 with no further projects to be added. Increases can still be expected due to the EII (Energy Intensive Industry) exemption which could lower the current demand base. *based on an annual FiT The Feed in Tariff provides incentives for small scale renewables consumption and has of primarily provided financial support to the installation of PV across the UK as well as wind, hydro and micro CHP. Although the rates to support these renewable projects has reduced over the last few years, new projects are still being added to the scheme and that charge could be affected by EII exemption. CfD Contracts for Difference is the replacement scheme for RO. This has exceeded initial forecasts recently due to the fall in commodity rates. Examples of the projects included are Drax s 3 rd Biomass conversion and the new Hinckley Point. CM The Capacity Market is the latest charge to be added to electricity bills. The scheme is to ensure there is enough generation capability to match maximum demand on the National Grid. The latest auction had a significantly low clearing price, but future forecasts are set for high increases. October 14 Annual 49.59/MWh 196,194 October 15 Annual 42.49/MWh 183,911 Saving 7.10/MWh 12,283

14 Forecast Complexities There is still a lot of uncertainty around the future prices of the non-commodity charges, but one thing is for certain they will be increasing. Part of the complexity is down to the data settlement period of 14 months which means charges like RO, FiT and CfD can be reconciled over a year later than the actual consumption period in question. This has meant forecasting has been difficult and is still uncertain, but CfD and CM are expected to show the biggest increases. The ageing DUoS and TUoS systems are likely to require significant investment within the next decade. This could be brought sooner with the influx of Renewable energy onto the local grids and forecasts could change depending on the result of the next general election. In 2016 George Osborne announced that CRC would be abolished *based from on April an annual 2019 with the income generated from this scheme to be replaced by an increase in CCL rates consumption for both of electricity and gas. Discussions are still ongoing for a 1:1 ratio for electricity and gas by 2025 also which could provide further uncertainty. To Summarise October 14 Annual 49.59/MWh 196,194 October 15 Annual 42.49/MWh 183,911 Saving 7.10/MWh 12,283 The most recent charges of CfD and CM have provided the biggest impact in forecasted charges having only been implemented in 2016 and Although the commodity costs are vital to manage correctly with future years currently showing value, the increasing non-commodity costs mean the future is about cost mitigation and not year on year savings.