Green, ethical, energy issues in the news

michaels

Thinking out loud, as there is no max on the offshore wind or alternative renewables pots there is no reason to bid below the strike prices for these as any bids at the strike price will be automatically accepted - depending on the current economics perhaps the BEIS have missed a trick here?

The last auction bids were as low as £39.85.  I wonder what will happen if bids come in for 100+ GWh at £46?!

ABrass

michaels said:

Thinking out loud, as there is no max on the offshore wind or alternative renewables pots there is no reason to bid below the strike prices for these as any bids at the strike price will be automatically accepted - depending on the current economics perhaps the BEIS have missed a trick here?

The last auction bids were as low as £39.85.  I wonder what will happen if bids come in for 100+ GWh at £46?!

Do they have to accept any under the strike price? It's a subtle difference but it would help limit excessive game playing.

Martyn1981

michaels said:

Of course the more cheap renewables we contract via this CFD auction the lower forward electricity prices are likely to be, and the less the value of HPC output and thus the more expensive the HPC CFD will be....

Tbh, the CfD for HPC was rigged from the start. I've previously mentioned that the House of Lords challenged the governments estimated costs for RE in 2030, suggesting they were pessimistically high, in order to flatter HPC.....

Th̲i̲s̲ i̲s̲ t̲h̲e̲ ̲G̲o̲v̲'̲t pr̲e̲d̲i̲c̲t̲i̲o̲n̲ f̲o̲r̲ 2̲0̲3̲0̲.̲ ̲(2012 pricing)
Onshore wind to be in the range £45-72/MWh
Offshore wind will be in the range £85-109/MWh
Nuclear, at £69-99/MWh.
For solar they predict £59-73/MW

and of course we saw £39.65 for offshore wind in 2019 for 2024/25 delivery.

Another trick I'd forgotten about, was the max bid price set for PV in the first auction. The industry and the Solar Trade Association asked for a price of £100/MWh, but the Gov set it at £120/MWh. This made the news at the time, as no one could understand why it was so high, and the bids came in at £79/MWh. Sadly the trick worked, as I saw £120/MWh for PV quoted on many sites and discussions, and BTL comments on news articles 'showing' how expensive PV was compared to nuclear, for years.

Just to be clear, whilst I thought the HPC price/contract in 2012 was high, I could understand it, especially in context to off-shore  wind prices at the time. What annoyed me, was that the contract was issued in 2015, after a last minute review, by which time it had become clear that it was horrendously expensive v's RE.

Back to the fun, I'm looking forward to seeing what PV and on-shore wind will come in at. I used to watch the European CfD's, especially Germany, as they have similar PV generation (per kWp) as us. Those prices rapidly fell into the mid / low €40's/MWh, but I'm out of date now, and also UK prices include grid connection/expansion costs, so tend to be a bit higher anyway. Still, fingers crossed for £40(ish)?

Martyn1981

Obviously, no new coal, is better than less new coal, but it's nice to see how much plans have changed over a relatively short time period:

Most plans for new coal plants scrapped since Paris agreement

The global pipeline of new coal power plants has collapsed since the 2015 Paris climate agreement, according to research that suggests the end of the polluting energy source is in sight.

The report found that more than three-quarters of the world’s planned plants have been scrapped since the climate deal was signed, meaning 44 countries no longer have any future coal power plans.

The remaining coal power plants in the pipeline are spread across 31 countries, half of which have only one planned for the future.

Chris Littlecott, the associate director at E3G, said the economics of coal have become “increasingly uncompetitive in comparison to renewable energy, while the risk of stranded assets has increased”.

The report found that if China, which is responsible for more than half of the world’s coal plant plans, opted to scrap the projects, alongside India, Vietnam, Indonesia, Turkey and Bangladesh, then the number of coal power plants in the pipeline would shrink by almost 90%.

Martyn1981

Just been watching Tony Seba's video on the disruption(s) of transport and energy supply. The predicted speed and scale of change always amaze me, and seem simply impossible. In fact, I'll openly admit that he, Cathy Wood, and Elon Musk constantly suggest figures that I'm unable to process.

I assume, like most 'mere mortals' my linear processing brain, struggles to fully appreciate what is possible, so these 'experts' in disruption, talk about issues in a calm and obvious way, that almost seems like magic to me. But I can just about hold on to the idea/theories by looking at each small step, and appreciating that they make sense, and are fair/rational, even if the sum of the parts is more than my ickle brain can manage.

Here's to the disruptive rollercoast ride that the 2020's will deliver, hold on tight!

The Great Disruption - Rethinking Energy, Transportation, Food & Agriculture / August 17th, 2021

michaels

Martyn1981 said:

michaels said:

Of course the more cheap renewables we contract via this CFD auction the lower forward electricity prices are likely to be, and the less the value of HPC output and thus the more expensive the HPC CFD will be....

Tbh, the CfD for HPC was rigged from the start. I've previously mentioned that the House of Lords challenged the governments estimated costs for RE in 2030, suggesting they were pessimistically high, in order to flatter HPC.....

Th̲i̲s̲ i̲s̲ t̲h̲e̲ ̲G̲o̲v̲'̲t pr̲e̲d̲i̲c̲t̲i̲o̲n̲ f̲o̲r̲ 2̲0̲3̲0̲.̲ ̲(2012 pricing)
Onshore wind to be in the range £45-72/MWh
Offshore wind will be in the range £85-109/MWh
Nuclear, at £69-99/MWh.
For solar they predict £59-73/MW

and of course we saw £39.65 for offshore wind in 2019 for 2024/25 delivery.

Another trick I'd forgotten about, was the max bid price set for PV in the first auction. The industry and the Solar Trade Association asked for a price of £100/MWh, but the Gov set it at £120/MWh. This made the news at the time, as no one could understand why it was so high, and the bids came in at £79/MWh. Sadly the trick worked, as I saw £120/MWh for PV quoted on many sites and discussions, and BTL comments on news articles 'showing' how expensive PV was compared to nuclear, for years.

Just to be clear, whilst I thought the HPC price/contract in 2012 was high, I could understand it, especially in context to off-shore  wind prices at the time. What annoyed me, was that the contract was issued in 2015, after a last minute review, by which time it had become clear that it was horrendously expensive v's RE.

Back to the fun, I'm looking forward to seeing what PV and on-shore wind will come in at. I used to watch the European CfD's, especially Germany, as they have similar PV generation (per kWp) as us. Those prices rapidly fell into the mid / low €40's/MWh, but I'm out of date now, and also UK prices include grid connection/expansion costs, so tend to be a bit higher anyway. Still, fingers crossed for £40(ish)?

Useful as ever.  Is my understanding that all bids for offshore wind at/below £46 will be accepted however many GW as there is no capacity cap?

In which case no one will bid any lower than this a why would they - perhaps this is deliberate so we don't see bids that make HPC look even more expensive?!

Martyn1981

michaels said:

Martyn1981 said:

michaels said:

Of course the more cheap renewables we contract via this CFD auction the lower forward electricity prices are likely to be, and the less the value of HPC output and thus the more expensive the HPC CFD will be....

Tbh, the CfD for HPC was rigged from the start. I've previously mentioned that the House of Lords challenged the governments estimated costs for RE in 2030, suggesting they were pessimistically high, in order to flatter HPC.....

Th̲i̲s̲ i̲s̲ t̲h̲e̲ ̲G̲o̲v̲'̲t pr̲e̲d̲i̲c̲t̲i̲o̲n̲ f̲o̲r̲ 2̲0̲3̲0̲.̲ ̲(2012 pricing)
Onshore wind to be in the range £45-72/MWh
Offshore wind will be in the range £85-109/MWh
Nuclear, at £69-99/MWh.
For solar they predict £59-73/MW

and of course we saw £39.65 for offshore wind in 2019 for 2024/25 delivery.

Another trick I'd forgotten about, was the max bid price set for PV in the first auction. The industry and the Solar Trade Association asked for a price of £100/MWh, but the Gov set it at £120/MWh. This made the news at the time, as no one could understand why it was so high, and the bids came in at £79/MWh. Sadly the trick worked, as I saw £120/MWh for PV quoted on many sites and discussions, and BTL comments on news articles 'showing' how expensive PV was compared to nuclear, for years.

Just to be clear, whilst I thought the HPC price/contract in 2012 was high, I could understand it, especially in context to off-shore  wind prices at the time. What annoyed me, was that the contract was issued in 2015, after a last minute review, by which time it had become clear that it was horrendously expensive v's RE.

Back to the fun, I'm looking forward to seeing what PV and on-shore wind will come in at. I used to watch the European CfD's, especially Germany, as they have similar PV generation (per kWp) as us. Those prices rapidly fell into the mid / low €40's/MWh, but I'm out of date now, and also UK prices include grid connection/expansion costs, so tend to be a bit higher anyway. Still, fingers crossed for £40(ish)?

Useful as ever.  Is my understanding that all bids for offshore wind at/below £46 will be accepted however many GW as there is no capacity cap?

In which case no one will bid any lower than this a why would they - perhaps this is deliberate so we don't see bids that make HPC look even more expensive?!

That's a good question. I think the ASP (administrative strike price) is the maximum price that can be bid, and still be eligible for auction. In the case of off-shore wind £46/MWh. What I don't know, or understand is what price the bids will be referenced against, to decide if the subsidy pot of £200m pa has been 'used up' - and I suspect that's what you are thinking of.

For example, if there was one bid for 4GW of capacity, estimated to generate ~20TWh (20,000,000MWh) pa of generation at £45/MWh, and all other bids were between £45 and £46, and the expected market price* was £35/MWh, then the first bid would be successful, but would consume the whole £200m.

*Presumably there is a forecasted average wholesale price used for this calculation? Also, I assume it is based in some way on the average market reference price (that QrizB mentioned). But as you suggest, if the bids came in at, or under that price, then theoretically there's no limit to the capacity that could win a contract?

I'm guessing at a lot here, but not really coming up with any answers.

Martyn1981

OK, I think I've found the forecasted prices against which the subsidy pot allocation of £200m can be calculated by looking at the difference between 'them' and the submitted bids.

But, and this is a really big BUT, I may have gotten all of this completely wrong, so don't trust me, have a look and a think.

See appendix 2 of schedule 2 in the allocation framework, page 56, "Reference Prices":-

Contracts for Difference Scheme for renewable electricity generation Draft Allocation Framework for the Fourth Allocation Round, 2021

michaels

Thanks Martin. Prices seem to start about mid 40s for 23/4 but fall sharply in the final two years. I wonder if these are in current prices or 2012 £s? 

Martyn1981

Yep, they are 2012 prices. I waded, and mostly sank, through many documents, and they all seem to use the 2012 baseline, then as you pointed out earlier, have to explain and give ratio's for updating. Bit of a pain.

Just for fun, we can compare the oldest and most expensive off-shore contracts to the newest and cheapest:

Issued at £150/MWh, commissioning date 2017, now £176.57
v's
Issued at £39.65/MWh, targeted commissioning date 2023, now £47.20

Hopefully this year's auction will beat that ~£40 figure, but if not £40-£46 is still impressive.

Germany has, I believe, held subsidy free off-shore auctions, where companies bid for the leasing rights to areas to build out a wind farm.

Also, whilst wading away, I noted that the Government is estimating that off-shore wind load factors will grow to over 60% for these new deployments, very impressive.