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 ID: 383879
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Slide1
Potential Impact on PPA Contracts
IWFA Workshop
24th January 2014Slide2
PPA SolutionsEstablished 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 OptionsNegotiating PPAs for Merchant, REFIT II and REFIT IIIReview Terms & Conditions of PPAs
Audit and review of REFIT I PPAsSetting up Supplier Lite StructuresDue DiligenceReview SEM prices for GeneratorsRegistering Generators for LECsSupporting REFIT audited year-end submissionsSlide3
TodayCurrent PPA Position of Generators
Questions to consider to understand impact of European Target Model on Existing PPAsSlide4
The Power Purchase Agreement
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
Supply
Co.
BILL
PPASlide5
Types of Generator PPAsSupport Scheme PPAs
AER Electric IrelandREFIT I & IIAny 3rd Party Irish Supplier
Supplier Lite Outside Support Scheme PPAsMerchant - market pass through3rd Party SuppliersSupplier Lite
Fixed price with 3
rd
party supplier
Hybrid with 3
rd
party supplierSlide6
Current Market Structure - SEM
PPA
Supply
Co.
BILL
Single
Electricity
Market
Supply
Co.
BILL
GENERATION
SUPPLY
POWER
MONEY
Intermediary
Wind
>
10MW
Wind
<10 MW
Outside SEM/ Negative Demand
PPASlide7
SEM Payments & Charges
GENERATION
SUPPLY
Wind
>
10MW
Wind
<10 MW
PPA
Supply
Co.
BILL
Single
Electricity
Market
Supply
Co.
BILL
POWER
MONEY
Intermediary
Payments
- Energy (SMP)
- Capacity
Charges
- Energy (SMP)
- Capacity
- Imperfection
- Market
Operators
Outside SEM/ Negative Demand
PPASlide8
2012/13 SEM Prices
SEM 2012/13 Average (€/MWh)
SEM 2012/13 Wind Weighted Average (€/MWh)Energy - SMP66.163.5
Capacity Payment
6.9
5.8
Capacity Charge
14.6
15.0
Imperfection Charge
4.7
4.7
Wind
Generator > 10 MW
69.3
Wind
Generator < 10 MW
83.2
Difference (€/MWh)
13.9% Difference
20%Slide9
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 SEMSlide10
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 skillSlide11
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 PPASlide12
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 PPAImpact of changes in PPA on loan
agreementsShould also consider impact of new market on project revenues post REFIT termSlide13
Impact of new Market on Existing PPAs
Outside
Support Scheme
PPAs
Merchant - market pass
through
T
erm of current PPAs generally end in 2016 or earlier
Availability, structure and price of new PPAs post 2016??
Fixed
price with 3
rd
party supplierDepends on Market Change Clauses in PPANeed to also consider new market’s impact on future project revenues
PPA structure required for repowering?Slide14
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 ….Slide15
Conclusions
Know Your
O
wn
P
osition
Too early to fully understand potential impact
Need to stay informed
Ensure this sector has a strong voice, individually and collectively Slide16
Thank You
Rory Mullan
rory@ppasolutions.ie087 3287213