NMI Utilities Meeting Wholesale Market 15 June 2016 · NMI Utilities Meeting Wholesale Market ... and carbon management for clients. ... is ISO 9001:2008 Quality Management certified

NMI Utilities Meeting

Wholesale Market

15th June 2016

[email protected]

01473 599183 UX Energy Services is a trading name of The Utilities Exchange Ltd

Dr. Craig Lowrey

Consultant

UX Energy Services

Orwell Landing

Fox’s Marina

The Strand

Wherstead

Ipswich

IP2 8NJ

P: 01473 599 599

E: [email protected]

W: www.uxenergyservices.com

The Utilities Exchange Ltd

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• The Utilities Exchange – established 1995 - independent

• Experienced staff (22)

• Manage 7 TWhs

• Fixed (UX Online®) and Flexible Procurement

• Risk Management

• Portfolios

• Carbon Services, EU ETS, CRC, CCA’s, ESOS, Renewables

• Supply Contract and Estate Management services (Bureau)

• Online reporting

• Bespoke work: 10 year price forecasts; PPA’s; CHP, renewables evaluation

• Data Services – AMR, HH MOP and reporting services

• Water services

• Engineering services

• Europe

UX Energy Services - Overview


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OUR HISTORY

Since its founding in 1995, UX Energy Services (UX) and its people have helped redefine the options for energy procurement, contract management

and carbon management for clients. The company has continually evolved in advising our clients on both strategic and operational matters,

pioneering the development of innovative energy market solutions and contractual services, and offering new opportunities for individual and

portfolio clients to control and reduce the cost of energy.

Some of our key developments are listed below.

• UX Energy Services (UX) is a trading name of The Utilities Exchange Limited, incorporated in 1995.

• Also in 1995 UX launches a new system for Half Hourly electricity procurement providing dedicated client site procurement systems for electronic supplier procurement.

• In September 2000 the company acquired Buyenergyhere, a web-based procurement platform owned by Norsk Hydro and this provided the basis for significant development

and strengthening of the company and its ability to service ever more sophisticated energy clients.

• January 2002 UX introduces UX Online, the first fully web enabled procurement system for the procurement of Half Hourly and Non-Half Hourly Electricity and Natural Gas.

• June 2004 UX introduces Bureau Services for energy supply contract management and invoice validation, addressing the major challenges of incorrect billing and supplier

service delivery.

• June 2006 UX implements further development of the UX Online system to allow full integration with supplier pricing systems, creating the opportunity for greater efficiency

and flexibility in offers.

• September 2008 – UX implements AMR services to provide clients with online access to D+1 half hourly data, reporting and analysis of NHH and gas supply consumption

information.

• April 2009 – UX announces the introduction of Water Audit Services to deliver significant retrospective and ongoing water supply savings.

• December 2010 – UX acquires JCRA Energy to drive growth in the I&C market with a dedicated Risk Management Service and trading desk.

• April 2011 – UX introduces a dedicated Carbon Management team for managing client’s legislative compliance and carbon reduction demands in support of the increasing

burden of carbon reduction schemes.

• March 2013 – UX commences a Renewable Energy Services division focussing on the increasing consultancy requirement for independent feasibility studies, renewables

contract procurement, asset procurement, existing asset optimisation and PPAs.

• February 2014 – UX introduces the Water Buying Group for business water procurement in Scotland.

• January 2015 – UX appoint a new Head of Energy Services to support growth in energy management services, with emphasis on ESOS compliance and energy management

projects to reduce the cost of consumption and improve operational efficiency through the implementation of technical and behavioural change programmes.


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ABOUT US: Introduction

UX Energy Services (UX) is one of the leading providers of energy procurement, risk management, renewable

energy, carbon management and compliance services to corporate, I&C and public sector organisations. We work

with clients to create and deliver an energy strategy and services that meet operational requirements, controlling

exposure to energy market volatility and cost.

We help you:

•Become more competitive while freeing you to focus on core business activities

•Reduce energy use, driving efficiencies throughout your organisation

•Create a cost-conscious culture

•Deliver on your environmental commitments


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ABOUT US: What UX Do

Cut costs, carbon use and become more competitive

Risk Management and Procurement

At UX Energy Services (UX) we provide a unique array of services that control and reduce energy use and costs. We handle the detailed

administration, secure more preferable terms and conditions and support you in managing the risks associated with price fluctuations.

Contract and Estate Management

UX offer energy and water supply contract management services and estate management operations. From the ongoing administration of your

energy and water estate and facilitation of site works for new premises, to reporting services for invoice validation, exceptions, and aM&T of

consumption for energy and water efficiency programmes, UX delivers services for administrative, efficiency and cost recovery savings.

Carbon Management and Compliance Services

As the burden of legislative demands begins to bite, from an operational cost basis, a corporate social responsibility perspective and to conform with

regulation and carbon standards, UX has the specialist knowledge and diligence to deliver a competitive edge to compliance for our energy

intensive client base. We also design and deliver energy reduction programs and audits to reduce your energy usage and carbon emissions,

including implementation of energy awareness training and processes to companies and is of particular relevance in supporting ESOS and CCA

compliance services.

Renewable Energy Services

UX assist clients to determine if on-site renewable technologies are the right investment. Of the technologies available for electricity and heat

generation, UX also assist clients to determine which is the most appropriate technology or combination of recommendations for an organisation to

achieve its cost and CSR objectives, quantifying payback through a demonstrable record of ROI and within a defined period.


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ABOUT US: Standards

Our Commitment To You

OUR CERTIFICATION – We’ve been independently assessed by BSI against internationally recognized standards showing our commitment to quality and

assurance. UX Energy Services (UX) is ISO 9001:2008 Quality Management certified by BSI under certificate number FS61999.

You can trust our service.

OFGEM CODE OF CODUCT – In character with the forthcoming Ofgem TPI Code of Conduct, UX Energy Services has always been an advocate of honesty,

transparency and professionalism in its business dealings.

This is reflected in the adoption of the following principles that UX has always upheld in its customer charter, to ensure business is conducted with:

Honesty – UX always clearly states the services we can offer a client or prospect in response to a specific request from the client

Respect – UX only ever engages with prospects as determined by them

Accuracy – UX clearly presents ALL market responses to a client’s business tendered

Transparency – UX is explicitly clear to prospects and clients with regard to the services offered, at what cost and how costs are recovered, as determined by the

client.

Customer Focus – Serving clients and delivering what we have promised is our primary objective through which all endeavours are borne

Professionalism – All staff at UX are handpicked for their depth of specialist expertise and diligent approach to delivering client needs and maintaining the

reputation UX has secured

UX regularly monitors the above requirements in line with our BSI Quality Management Accreditation, to ensure processes are adhered to, continually reviewed to

seek enhancements and that client’s expectations are exceeded. This is supported by a regular client satisfaction survey where a recent survey scored UX 10 out

of 10 for every aspect of our service delivery, from proposal of services through to initial and then on-going delivery, also achieving an exceptional net promoter

score.


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Wholesale market update


Rolling front month ICE Brent Crude oil price

($/barrel)

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Rolling Front Month ICE Brent Crude Oil ($/barrel)


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Crude oil prices

• Crude oil is the key driver for gas and electricity prices

• Market c. $50.00 per barrel after seeing 12-year low ($28 per barrel) in January

• China no longer the engine of growth for the fuel in doubt

– Economic growth at 25-year low, with IEA highlighting India as source of growth

• Main oil market variables are on the supply side

– Plans for an oil production freeze (OPEC and Russia) collapsed amid broader

disputes between Saudi Arabia and Iran

– OPEC, and specifically Saudi Arabia, continues to pump oil in order to maintain

market share and force US producers out of the market

– Iran and Iraq production expected to increase as both countries look to re-

establish market share

– Canadian wildfires cut production by 1 million barrels per day

– Nigeria production down by c. 1 million barrels per day on militant attacks

– IEA does not expect global oil market to rebalance until late 2016

• Crude oil market outlook is highly volatile


UK Year-Ahead Gas Price History

Last two years (p/therm)

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Rolling 12 Months' Year-ahead UK NBP Gas (p/therm)


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UK Gas Market

• Long-term downward trend halted by oil and weather-induced

volatility at the end of April

– These were compounded by offshore maintenance and the needs of the power

generation sector

• Power generation sector remains key day-to-day variable

– Uncertainty over renewable energy output compounded closure of coal-fired

units

• LNG market structurally oversupplied but tight in the short term

– Chinese economic uncertainty and Japanese nuclear reactor restarts are

eroding demand; US exporting to South America and Europe; Australian

exports curtailed due to problems at the Gorgon development

– LNG availability is a key variable in National Grid 2016 Summer Outlook Report

• Crude oil remains the barometer for the gas sector

– Mixed views on the speed at which the global market for oil will become less

oversupplied, dependent primarily upon supply rather than demand


UK Year-Ahead Electricity Price History

Last two years (£/MWh)

30.00

35.00

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50.00

55.00

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£/

MW

h

Rolling 12 Months' Calendar Year-ahead UK BSL Electricity

(£/MWh)


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UK Electricity Market

• Electricity tracking trends in line with oil, coal and gas prices

– Winter season prices finding comparatively more support

• National Grid predicting surplus supplies at times this summer

– Demand forecast to reach a new summer low this year

– Growth of wind and solar generation means UK could see surplus electricity

– This would result generators being paid not to generate, while also paying end

users to move demand into such surplus periods

• Generating electricity frequently unprofitable on an intra-day basis

– Gas and coal plants struggling to make money, but are still operating

• Spare generation margins to be further eroded by plant closures

– Wylfa (nuclear), Longannet (coal) and Rugeley (coal) all closed

– Eggborough and Fiddlers Ferry (coal) to remain open until April 2017

– These changes have led UK government to bring introduction of Capacity

Mechanism forward by twelve months to Winter ‘17

• Spare capacity margins “remain manageable” for the coming winter


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Legislative Update


UK Electricity Market Reform: FIT CFDs

• What are they?

– A contract (minimum 15 years) under which generators obtain a guaranteed electricity price

• Why did the government introduce them?

– To promote new renewable and low carbon generation

• What about the Renewables Obligation (RO)?

– The RO remains in force and there is a transition period through to 31st March 2017 during which

both the RO and FIT CFD schemes will be open for application.

• How do they work?

– The generator is guaranteed a fixed price for their output – this is the “Strike Price”. If the

wholesale price at which electricity is sold into the market is below the Strike Price, a top-up

payment to ensure that the generator receives the Strike Price. However, if electricity is sold at a

price in excess of the Strike Price, generators must return the difference

• How much are generators getting paid?

– There are published Strike Price figures for certain renewable and low carbon technologies, e.g.

£65 per MWh (in 2011-12 prices) for landfill gas and £305 per MWh for tidal power.

– However, the government has sought to negotiate directly with companies for certain sites, e.g.

EDF Energy’s £92.50 per MWh for Hinkley Point C

• What will they mean for bills?

– There are two main elements: the supplier obligation and the administration charge

– The charges associated with FIT CFDs started in April 2015, and for 2016-17 is predicted to be

between £0.60 per MWh and £1.00 per MWh.

– Forecasts indicate that this could increase to £10.00 per MWh by the end of the decade


UK Electricity Market Reform: Capacity

Mechanism (CM) • What is it?

– The Capacity Mechanism (CM) is intended to ensure that there is sufficient generating capacity

available at short notice in order to meet demand at peak periods and/or times of system stress.

• Why did the government introduce it?

– With the retirement of a large proportion of the UK’s fossil fuel-fired and nuclear generation

capacity expected by the end of the decade, the country is facing a potential shortfall

– The CM was not originally intended to start until October 2018, but the closure of a number of

coal fired power stations in late 2015-early 2016 saw it brought forward to October 2017

• How does it work?

– Generators will be paid for generating at peak times and also for making themselves available to

generate – even if they are not called upon to do so. Large energy users will also be able to

participate by offering to turn down consumption at times of peak demand

• How much are generators getting paid?

– If successful in an auction, in addition to their auction payment if called upon to generate (or to

cease consumption, in the case of demand-side participants), the providers of capacity will

receive revenue in the form of “availability payments” – generators and demand-side participants

alike. Penalties will be levied if this capacity is ultimately not available

– 2017-18 auction cleared at £19.40 per kW, the 2018-19 at £18.00 per kW (total cost c. £2 billion)

• What will the scheme mean for bills?

– There are two main elements: the supplier obligation and the administration charge

– Currently only the administration charge is being paid, which is a negligible amount

– Initial estimates show a total £5.00 per MWh (approx) charge for 2017-2018, rising in future years


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The Utilities Exchange – UX Energy Services

Thank you

[email protected]

01473 599599

www.uxenergyservices.com

@UXEnergyService

Documents

NMI Utilities Meeting Wholesale Market 15 June 2016 · NMI Utilities Meeting Wholesale Market ... and carbon management for clients. ... is ISO 9001:2008 Quality Management certified