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Inenco RERenewable energy management
John Dodds
Business Development Manager
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Inenco RE
• Over 40 years experience
• 15 tW of Energy delivered 2007/08
• Over £1 Billion in management
• FSA Accreditation
• Blue chip client base
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The need for renewable energy
• Government target is 20% of its total energy from renewable sources by 2020
• Currently this figure stands at less than 1.5%
• This target is driven by the need for energy security as much as climate change
• In total it is estimated that delivering the target represents £100 billion of revenue
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The scale of the challenge
Major increases are required for all three applications
Electricity Heat Transport 2008
2020
0
5
10
15
20
25
30
35
40
2008
2020
Percentage renewable contribution to total energy consumption
%
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The solution
• Distributed Generation
• Merchant plant
• Farm Diversification on a major scale
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Distributed Generation
• Renewable energy projects require:– Land
– A secure feedstock source
– Customers for the energy
• Renewable projects can provide security for:– Heat
– Electricity
– Income
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So what is required?
• A wind turbine can take up just the space needed to park four cars
• A power plant fired by Biogas or Biomass requires approximately two acres
• Expertise to develop the project
• Effective project managment and finance
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How is income earned?
• Electricity is either sold locally, used on site or sold to energy supply companies over the National Grid
• Heat produced can be used on site or sold locally
• “Gate fees” for plants that deal with waste
• Government subsidies in the form of ROCs
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Government support
• Renewable Obligation Certificates (ROCs) are the mechanism to provide financial support to renewable electricity, they are currently worth £50 per mWh. The amount of ROCs you receive depends on what type of generator is being used.
• Levy Exemption Certificates (LECs) are for the Climate Change Levy charged to all commercial users of electricity, generators of renewable electricity are paid this as a benefit, approximately 0.45p per kWh.
• Renewable Energy Guarantee of Origin (REGO) certificates have no cash value, they provide an audit trail for the energy generated.
• All of these are administered by Ofgem.
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An example income model• The types of income streams for electricity are common
to all renewable energy generators
• The ROC payments will vary for different types of technology
Income stream Pence per kWh
ROCs 0.25 – 10
LECs 0.5
Wholesale elec 5-9
Gate fees (if applicable) 0-5
Heat 2-5
Total 7.75 - 29.5
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Three ways to export
• Private wire
• End user PPA
• Wholesale energy markets
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Private Wire
• Hard wire to Neighbour or self use
• Increased value
• No transmission charges
• Could reduce grid connection charges
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End User PPA
• Guaranteed price for between 1 & 5 years
• Income security
• Bankable offering
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Wholesale Energy Market
• Maximise income
• Managed trading
• Virtual floor
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What is Virtual Floor?
• A robust procurement strategy to reduce downside risk and benefit from market increases
• The Virtual Floor strategy is managed using the ‘unlock’ and ‘relock’ tool contained in flexible supply agreements offered by the leading energy retailers.
• Dependant on your attitude to risk, we can unlock your fixed energy price to get higher export prices for your generated energy
• The share of increased profit gives more than any fixed price deal
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45.00
50.00
55.00
60.00
65.00
70.00
75.00
Time
Pri
ce
……Relock when market rise triggers ‘lock in'
Unlock
Lower lock trigger once desired gain has been
achieved – OR….
Market Fundamental and Technical analysis used to make informed unlock and relock decisions, incl.:-
Unlock/Relock – Technical Expertise
•Analysis of Oil, Coal Carbon, Currencies etc
•Relative Strength Indicators
•Value at Risk analysis
•Supply margin status
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Virtual Floor
• Optimises risk management in a PPA contract
• Controlled decisions born out of a robust and defendable process
• Provides a price floor
• Budget income set
• Maximum income achieved from unlock and relock is unlimited
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Overview
• Your position is 100% contracted at the initial reference price – ‘Actual’ (£70)
• Virtual Floor set (£69) using agreed ‘buffer’ value (£1)
• Use ‘unlock’ ‘relock’ to improve ‘Net price’ + return of ‘buffer’ (£72)
Initial Contract (£70)
‘Benefit’ (£1) Energy sold using Virtual Floor period
Timeline
Final Net Price (£71 +£1)
Virtual Floor (£69)
£
Buffer £1
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Sell, Buy & Re-Sell
£50.00
£55.00
£60.00
£65.00
£70.00
£75.00
£/M
W
‘Initial net Sell’:
“profit/loss”: £ 0/MW
£ 54/MW‘Final net Sell’:
Re-Sell: £65/MW
£ 6/MW
£ 0/MW£ 0/MW
£ 5/MW
£ 65/MW£59/MW
Sell ‘Actual’: £54/MW
Buy: £60/MW
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What’s the catch?
• The development of a renewable energy project is complex and lengthy:– Extensive feasibility work
– Arranging finance
– Supplier selection
– Project management
– Electrical and heat network connections
– Power purchasing agreements
– Feed or fuel input management
– Ofgem requirements to claim ROCs LECs and REGOs
– In life support
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Inenco RE can help you
• With 40 years experience in the energy market we can help you by:– Producing commercial and technical feasibility
studies
– Producing the specification of the plant
– Project managing the installation, connection and commissioning of your equipment
– Providing a favourable power purchasing agreement and managing the sale of ROCs and LECs
– Delivering up to date management information
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Find out more
• John Dodds 07970 069054
• Visit our website
www.inenco.com01253 785000