To boost renewables in the economy....

Martyn1981

cells wrote: »

Solar and wind should never have got a CFD it saves them from the impact of destroying their own prices. A fit is better to reflect the fact that they destroy their own market. Presumably solar could be installed in negative prices with a CFD contract which of course is silly

I don't understand that comment, how could you have a negative CfD price? Are you aware how the CfD mechanism works? The income is made up to the CfD 'strike price'. If the strike price was negative eg -£10, and a generator sold their leccy for £50/MWh, then they'd have to pay the government £60/MWh.

The CfD system is a reverse auction. Bidders submit their size and price (which has to be within the CfD limits), and bid within differing pots, eg on-shore wind and PV pot, off-shore wind pot, nuclear pot etc.

They are effectively competing against each other. If they bid too high, and enough bidders come in lower, then they will be pushed out as the target generation is reached.

As the average price of generation is ~£50/MWh, then as they get closer to bids of £50, they will receive a smaller and smaller amount of subsidy.

If you are eluding to spot prices dropping very low during peak generation times, and low demand times, then that's quite easily managed by revising the size of the bidding pots, and revising the maximum amount at which bids can be submitted, ensuring all bids are at, or below the limit. Also, as bids drop (on average) then they will at peak demand times receive less and less subsidy. If the price paid is greater than the CfD, then the excess actually gets paid back.

Here's the 'old' limits, and (of course) the bids were quite a lot lower.


[Edit: Does that explanation make any sense? Not the easiest subsidy to explain. Whereas the FiT pays a set amount for generation, the CfD mechanism 'tops up' the income to an agreed amount, or even reduces income, if above the agreed amount. M.]

Mart.

MFW_ASAP

Martyn1981 wrote: »

Some would argue that I post too many links and too much information on this forum. But okey dokey. Here's a Wiki link, bit old, 2010 figures, that has the average price of gas generation in the UK at £55-£110/MWh. It also shows PV farms at £125-£180, on-shore wind at £80-£110 and off-shore wind at £150-£210.

And here's a link to this years CfD auction, showing how far (and how fast) we've come, with PV farms winning contracts at £79.23/MWh to supply in 2016/17. Also on-shore wind at £79.23, and off-shore wind at £119.89 (2017/18).




I think you're being a bit harsh on intermittent renewables. They all have their weak points, and that's why we need a good mix to cover highs and lows. For instance, in the winter, wind generation is higher than in the summer, and in the summer PV can help with lower wind generation, so they fit together very nicely, so long as you look at the big picture, and don't try to bash each one individually with what it doesn't do, rather than what it does do.

Mart.

I'm actually saying that I don't see how the relative costs are calculated (and your link was useless as usual in that). If you have an offshore wind turbine that provides electricity at a cost of £119.89/Mwh and a solar farm that provides electricity at a cost of £79.23/Mwh, how is the cost calculated? Does it calculate against generation over a whole year?

As the years go by, does the calculation change? I'd imagine that an offshore wind turbine is far more reliable for the generation of electricity than solar. So in winter or at night it's generating electricity and so the costs are averaging down as more electricity is produced. The solar farm is sitting there generating nothing, so the installation costs are not being offset against production.

Martyn1981

MFW_ASAP wrote: »

I'm actually saying that I don't see how the relative costs are calculated (and your link was useless as usual in that). If you have an offshore wind turbine that provides electricity at a cost of £119.89/Mwh and a solar farm that provides electricity at a cost of £79.23/Mwh, how is the cost calculated? Does it calculate against generation over a whole year?

As the years go by, does the calculation change? I'd imagine that an offshore wind turbine is far more reliable for the generation of electricity than solar. So in winter or at night it's generating electricity and so the costs are averaging down as more electricity is produced. The solar farm is sitting there generating nothing, so the installation costs are not being offset against production.

The relative costs aren't calculated, they are winning bids submitted to provide leccy at an agreed price for an agreed length of time, starting in particular years.

It's really quite simple. They generate leccy then sell it. In the examples I gave you, the off-shore wind contract winners will start generating in 2017/18, and will receive ~£120 for each MWh they supply*. The PV farms that start generating in 2016/17 will receive ~£80 for each MWh they supply*.

The CfD contracts last for 15 years (35 years for nuclear).

Obviously, the price of the leccy (the bid they submitted) has to cover the cost of building and running the wind farm, PV farm etc..

* As explained (poorly?) in my previous post, the monies they receive will be in two parts, the price they sell the leccy at on the open market, and then the subsidy top up. So if the PV farm sells at £50, it will get a subsidy payment of £30, if the off-shore wind farm sells at £50, then it will get a subsidy top up of £70. If at any point they sell at a price higher than their respective CfD strike prices, then the 'extra' is paid back.

HTH.

[Edit - Should have said the top-up is based on the spot market rate at the time the leccy was sold, not on the price it's sold at (if they differ), to prevent any form of naughtiness, such as selling to a friendly leccy company very cheap, then topping up with extra subsidy. M.]

Mart.

Martyn1981

MFW_ASAP wrote: »

I'm actually saying that I don't see how the relative costs are calculated

Short answer. You work out all your costs for say a PV farm, install, land costs, maintenance, etc etc. Then divide this cost by the amount of leccy you expect to make.

This gives you a unit cost. Add on the profit you want to make, then submit your £/MWh bid.

Mart.

cells

Martyn1981 wrote: »

The relative costs aren't calculated, they are winning bids submitted to provide leccy at an agreed price for an agreed length of time, starting in particular years.

It's really quite simple. They generate leccy then sell it. In the examples I gave you, the off-shore wind contract winners will start generating in 2017/18, and will receive ~£120 for each MWh they supply*. The PV farms that start generating in 2016/17 will receive ~£80 for each MWh they supply*.

The CfD contracts last for 15 years (35 years for nuclear).

Obviously, the price of the leccy (the bid they submitted) has to cover the cost of building and running the wind farm, PV farm etc..

* As explained (poorly?) in my previous post, the monies they receive will be in two parts, the price they sell the leccy at on the open market, and then the subsidy top up. So if the PV farm sells at £50, it will get a subsidy payment of £30, if the off-shore wind farm sells at £50, then it will get a subsidy top up of £70. If at any point they sell at a price higher than their respective CfD strike prices, then the 'extra' is paid back.

HTH.

[Edit - Should have said the top-up is based on the spot market rate at the time the leccy was sold, not on the price it's sold at (if they differ), to prevent any form of naughtiness, such as selling to a friendly leccy company very cheap, then topping up with extra subsidy. M.]

Mart.

When the wind blows hard or the sun shines strong the spot prices will be crushed just like in Germany when they go towards 20 euro a MWh (less than £15/MWh) and sometimes zero and sometimes negative. As more wind and solar are put onto the system there will be more and more times when this happens. So the £80 CFD is going to be not a £30 subsidy but a minimum of £30 subsidy and upto £80 subsidy

It makes sense to have the nukes on a CFD but not the wind or solar. They should be given your suggested £30/MWh and falling to zero by 2020 like you keep staying will defo work sub free by then

Martyn1981

cells wrote: »

When the wind blows hard or the sun shines strong the spot prices will be crushed just like in Germany when they go towards 20 euro a MWh (less than £15/MWh) and sometimes zero and sometimes negative. As more wind and solar are put onto the system there will be more and more times when this happens. So the £80 CFD is going to be not a £30 subsidy but a minimum of £30 subsidy and upto £80 subsidy

It makes sense to have the nukes on a CFD but not the wind or solar. They should be given your suggested £30/MWh and falling to zero by 2020 like you keep staying will defo work sub free by then

You keep mentioning these low spot prices, but these are the extremes, they need large deployment, good sun and peak times. At other times PV generation will be lower and the impact on the grid less. So yes, with German scale PV deployment we could see very low spot prices around mid day in the summer months (on the days when mid day weather is good), but PV generates a lot more than just then.

The £30 average subsidy is really just a simplified suggestion based on the average price of leccy across the day of about £50/MWh. During the daytime it will probably be a bit higher, leading to a lower subsidy top up.

Yes, the effect will be the same for wind, especially at night and this combined with nuclear (which is inflexible on cost grounds) will lead to low prices and higher subsidy top ups. The biggest winner will probably be nuclear, receiving higher top ups at night as wind pushes down prices, and, if you are right, higher top ups during summer middays too. Also its subsidy element is already higher than PV and on-shore wind by £13/MWh.

You also have to consider storage. For PV in the UK to have as dramatic effect on prices as you suggest, we will probably need 20-30GWp, and around 20GW of generation (allowing for heat impact, varying panel orientation/pitch, localised weather and water heating diversion). The govt now suggest we will have around 12GWp of PV by 2020, so I doubt we'll see the disruptive levels you suggest before 2025/30. By then we should have rolled out a fair bit of storage, and have a sizeable fleet of EV's parked up and charging, whilst people are at work.

For nuclear (and wind) it will presumably be necessary to continue the E7 type schemes to create additional demand (alongside storage and EV's).

But back to the CfD scheme, as previously mentioned, the government can set maximum bid prices, so if they felt the subsidy element was going too grow, they could manage it that way. However, it seems (even to my surprise) that PV costs are still falling fast, so lower bids solve the problem anyway ...... assuming the govt offers PV and on-shore wind the opportunity to bid again.

Mart.

Martyn1981

cells wrote: »

It makes sense to have the nukes on a CFD but not the wind or solar. They should be given your suggested £30/MWh and falling to zero by 2020 like you keep staying will defo work sub free by then

If you're interested, there are (at least) two other options:

1. PPA's (power purchase agreements). A large consumer agrees to let the solar company build a system on their property, then buy the leccy at a predetermined price, but obviously lower than they normally pay (somewhere between wholesale and retail prices).

2. Similar to 1. but the install takes place on the solar companies land and is then sold to the business. But this requires a leccy supply license. Some councils are looking at doing this, and can apparently buy a leccy company and license 'off the shelf' now.

These options bypass both subsidies and selling leccy into the grid, going directly to the end user.

Mart.

silverwhistle

MFW_ASAP wrote: »

On this particular forum, we like to see statements like this backed up with links to proof.....

Really? On another thread there were complaints that Martyn gives too many links, and I've never noticed many references in your own emotive laden posts.

cells

Martyn1981 wrote: »

If you're interested, there are (at least) two other options:

1. PPA's (power purchase agreements). A large consumer agrees to let the solar company build a system on their property, then buy the leccy at a predetermined price, but obviously lower than they normally pay (somewhere between wholesale and retail prices).

2. Similar to 1. but the install takes place on the solar companies land and is then sold to the business. But this requires a leccy supply license. Some councils are looking at doing this, and can apparently buy a leccy company and license 'off the shelf' now.

These options bypass both subsidies and selling leccy into the grid, going directly to the end user.

Mart.

I was going to say after the meter accounting tricks wont make a technology viable but then why are there so many accountants if accounting tricks don't 'work'

cells

Martyn1981 wrote: »

You keep mentioning these low spot prices, but these are the extremes

but they wont be extremes if the dream of PV and Wind power are to become a reality they will be the norm.

50GW PV 50GW Offshore-Wind 50GW CCGT would result in something like 60% renewables 40% NG. In those cases the majority of the solar output will be sold into very depressed prices and a lot of the wind too.

you seem to be arguing two things. one that pv and wind is great and will take over the world the day after tomorrow and then arguing that well we don't plan to install a lot of pv so they wont crush their own prices

this all leads back to one of my earlier suggestions that there should be two markets a primary one and one for intermittent supply. the primary market would be the normal one selling at about £50/MWh and the secondary market for PV and wind and anything else that is not controlable selling at the fuel saving rate of ~£20/MWh. Anything that can turn the secondary market into a primary market product can buy from the £20 market and sell into the £50 market

instead a complicated mess of different subsidies will be put in place for gas and nuclear generators to account for the two different products. maybe some will even cry that gas and nuclear is getting a capacity payments (that will surely rise) and its a subsidy to them but the reality is that its a subsidy to make the variable sources work