PPA Solutions IWFA Rory Mullan

Report
Potential Impact on PPA Contracts
IWFA Workshop
24th January 2014
PPA Solutions
• Established in Aug 2012: Hugh Mullany and Rory
Mullan - Mullany Engineering Consultancy and Mullan Grid
• What we have been doing?
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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 3rd Party Irish Supplier
- Supplier Lite
Outside Support Scheme PPAs
• Merchant - market pass through
- 3rd Party Suppliers
- Supplier Lite
• Fixed price with 3rd party supplier
• Hybrid with 3rd party supplier
Current Market Structure - SEM
GENERATION
SUPPLY
MONEY
POWER
PPA
Single
Electricity
Market
Supply
Co.
BILL
BILL
Wind
> 10MW
Wind
<10 MW
Supply
Co.
Intermediary
Outside SEM/
Negative Demand
PPA
SEM Payments & Charges
GENERATION
SUPPLY
MONEY
POWER
PPA
BILL
Wind
> 10MW
Wind
<10 MW
Intermediary
Supply
Co.
Single
Electricity
Market
Supply
Co.
Charges
- Energy (SMP)
- Capacity
- Imperfection
- Market
Operators
Payments
- Energy (SMP)
- Capacity
Outside SEM/
Negative Demand
PPA
BILL
2012/13 SEM Prices
SEM 2012/13
Average (€/MWh)
Energy - SMP
Capacity Payment
Capacity Charge
Imperfection Charge
66.1
6.9
14.6
4.7
Wind Generator > 10 MW
Wind Generator < 10 MW
Difference (€/MWh)
% Difference
SEM 2012/13 Wind
Weighted Average
(€/MWh)
63.5
5.8
15.0
4.7
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 3rd 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

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