Ripple Energy wind farm?

Exiled_Tyke

I bought in as a hedge against rising electricity prices. So for me I'm against CfD. If prices are low then I don't mind losing the bonus the CfD would have given as my electricity bill will be lower. However if prices go up I'd like the extra benefit from Ripple to help with my higher bills.   

Reed_Richards

CfD = Contract for Difference???? Some financial product offering a hedge against rising electricity prices?

Exiled_Tyke

Netexporter said:

So far I'm leaning towards going for the CfD, but at a "comfortable" price. If it is accepted then we should be mostly above the prediction curves but if it fails then we are where already we were, anyway.

If it hadn't been for the delays we wouldn't have had a chance of going for a CfD.

I don't think we'll get a say on the price. We just get to vote whether the scheme rules allow the board to enter a CfD contract. 

NedS

Reed_Richards said:

CfD = Contract for Difference???? Some financial product offering a hedge against rising electricity prices?

https://www.gov.uk/government/news/over-1-billion-budget-for-renewable-energy-auction

NedS

Exiled_Tyke said:

I bought in as a hedge against rising electricity prices. So for me I'm against CfD. If prices are low then I don't mind losing the bonus the CfD would have given as my electricity bill will be lower. However if prices go up I'd like the extra benefit from Ripple to help with my higher bills.   

I agree. I'm not invested in ripple, but when I considered it, ripple made most (financial) sense when viewed as a hedge against very high electricity prices (as we have recently experienced).

What the CfD model would allow is more clearly defined returns from the scheme that would make it easier to evaluate on a financial basis as you now have improved visibility of income. But then I would still argue that dedicated Solar or Wind farm investment trusts (e.g, BSIF, FSFL, UKW) would give a better financial return and a steady inflation-linked income (which can be used to put towards/offset electricity bills) if that is what one desires.

For reference, FSFL currently yields 9.5% return that is largely inflation-linked, and you will still have your capital after 20-30 years. So a £10,000 investment is going to pay you £950/year (towards your bills if you like), and you can cash in your investment at any time, with the potential your capital investment may also have risen (or fallen) in value.

Ripple's strength is it's value as a hedge against very high electricity prices, as there are not many other easily accessible financial products that can offer the same. If you cap the upside, you lose that protection against the very situations when you would benefit from Ripple the most.

70sbudgie

I suspect the share offer for project 4 won't be available until after Ripple have seen how the Kirk Hill and Derril Water members vote on CFDs. 

Imo, the ability to hedge, that is sacrificed with CFDs, is the unique selling point for the Ripple projects. It will still be a worthwhile investment, but I expect that CFDs would mean that it attracts a completely different type of investor.

Netexporter

Exiled_Tyke said:

Netexporter said:

So far I'm leaning towards going for the CfD, but at a "comfortable" price. If it is accepted then we should be mostly above the prediction curves but if it fails then we are where already we were, anyway.

If it hadn't been for the delays we wouldn't have had a chance of going for a CfD.

I don't think we'll get a say on the price. We just get to vote whether the scheme rules allow the board to enter a CfD contract. 

I wasn't suggesting we have a say in the CfD price. I'm just expressing my thoughts on how I'd pitch it. If a higher end bid price was accepted we'd be quids in on a permanent basis, but if the bid failed we would be where we put our money in the first place. So nothing to lose by bidding.

I suppose I don't see the status quo as much of a hedge, as I'm on Agile, at the moment, which is also linked to the wholesale price, the relative difference might not be all that much.

imeldamarcos

In case of any help to other Kirk Hill Co-op members, I am passing on my ideas on whether to vote for the Contract for Difference (CFD) arrangement, to help stimulate discussion. These are based on time spent researching this and are my personal opinions which relate purely to the financial considerations.:

1. Rejecting the CFD arrangement will suit those who are willing to accept higher risk in the hope of higher potential rewards  if electricity prices spike or remain quite high. Voting for the CFD arrangement will produced guaranteed stable but unexciting financial benefits which I guess are likely be roughly in line with Ripple's original forecasts.

2. Based in what Ripple said, without the CFD arrangement the higher risk mentioned above will include the potential impact of locational electricity prices if they are implemented by the government. Kirk Hill Wind Farm will already pay National Grid a fairly high generator tariff (equivalent to £15.9M per GW) as shown at :

https://reports.electricinsights.co.uk/q3-2022/locational-pricing-for-britains-electricity/

This is because National Grid regards the cost of transmitting our electricity as fairly high because Kirk Hill is quite a long way from most centres of population. If the government introduces locational pricing this could intensify this pricing effect and I would suggest should be a major concern to members. We are therefore exposed to pricing risk arising from government policy as well as normal market forces.

You can find out more about localised electricity prices at:  https://researchbriefings.files.parliament.uk/documents/POST-PN-0694/POST-PN-0694.pdf

3. For those who vote for the CFD arrangement it should also be possible to communicate to Ripple the minimum level of discount per kW/h for members which you consider acceptable.  This may help Ripple decide the level of bid to put in for the CFD auction, if this option wins the vote. I do not believe this would be classed as the manipulating the bidding process as we, as members, do not have any power over what level of bid Ripple may decide to implement, but it may give Ripple some guidance.

4. This is not intended as advice and I am not suggesting which way it would be best to vote as that is a personal decision. My initial view was that leaving the agreement as it is would be best because, like some others, I want to hedge against high electricity prices. However, having learnt more about the risk arising from localisation of pricing, which has already been implemented in some other countries, I am probably going to vote for the CFD arrangement but would welcome further discussion, particularly if I have got anything wrong.

 

JKenH

Thanks for including those links. Most useful. A well considered post.

I am not a Ripple investor but FWIW, it seems to me the idea of a CfD is quite contrary to what most members were looking to achieve and would remove a lot of the fun. However your comments about the risks from locational pricing are worth taking on board. 

Out of interest has has there been any more clarification of the tax position recently?

70sbudgie

imeldamarcos said:

In case of any help to other Kirk Hill Co-op members, I am passing on my ideas on whether to vote for the Contract for Difference (CFD) arrangement, to help stimulate discussion. These are based on time spent researching this and are my personal opinions which relate purely to the financial considerations.:

1. Rejecting the CFD arrangement will suit those who are willing to accept higher risk in the hope of higher potential rewards  if electricity prices spike or remain quite high. Voting for the CFD arrangement will produced guaranteed stable but unexciting financial benefits which I guess are likely be roughly in line with Ripple's original forecasts.

2. Based in what Ripple said, without the CFD arrangement the higher risk mentioned above will include the potential impact of locational electricity prices if they are implemented by the government. Kirk Hill Wind Farm will already pay National Grid a fairly high generator tariff (equivalent to £15.9M per GW) as shown at :

https://reports.electricinsights.co.uk/q3-2022/locational-pricing-for-britains-electricity/

This is because National Grid regards the cost of transmitting our electricity as fairly high because Kirk Hill is quite a long way from most centres of population. If the government introduces locational pricing this could intensify this pricing effect and I would suggest should be a major concern to members. We are therefore exposed to pricing risk arising from government policy as well as normal market forces.

You can find out more about localised electricity prices at:  https://researchbriefings.files.parliament.uk/documents/POST-PN-0694/POST-PN-0694.pdf

3. For those who vote for the CFD arrangement it should also be possible to communicate to Ripple the minimum level of discount per kW/h for members which you consider acceptable.  This may help Ripple decide the level of bid to put in for the CFD auction, if this option wins the vote. I do not believe this would be classed as the manipulating the bidding process as we, as members, do not have any power over what level of bid Ripple may decide to implement, but it may give Ripple some guidance.

4. This is not intended as advice and I am not suggesting which way it would be best to vote as that is a personal decision. My initial view was that leaving the agreement as it is would be best because, like some others, I want to hedge against high electricity prices. However, having learnt more about the risk arising from localisation of pricing, which has already been implemented in some other countries, I am probably going to vote for the CFD arrangement but would welcome further discussion, particularly if I have got anything wrong.

 

In addition to the above links on locational pricing:
https://www.gov.uk/government/news/energy-secretary-takes-action-to-reinforce-uk-energy-supply

https://www.ofgem.gov.uk/sites/default/files/2023-10/Ofgem Report - Assessment of Locational Pricing in GB (final).pdf

Ref point 3: I haven't seen anything from Ripple to suggest that they are considering this - just comments from members asking for it. Can you post a link to the Ripple response? Thanks.

My reasons for investing in Ripple projects:

1) Helping to secure and stabilise the national electricity supply and therefore bring the price of wholesale electricity down in the long term.

2) Hedging my own electricity costs over a shorter term.

I knew that there would come a point where success in point 1 would reduce the returns on my investment and the need for point 2. The investment decisions I made for KH and DW reflected my thoughts on the timeline for this.

3) Ripple enables me to invest in grid scale renewable generation because as part of a co-op I could join in a process that would otherwise be out of my reach. I see this as a fantastic way to socialise renewable electricity generation. (It is a different investment to buy shares in a developer)

4) The mechanism that allows me to receive my returns through my energy provider, therefore providing a direct offset of energy bills in a similar way to domestic solar panels.

So of the 4 reasons I had for investing in KH and DW, CFDs only change the ability to hedge my energy costs. It could be argued that it is just changing the timeline, but I don't believe KH and DW are enough to reduce the need for hedging.

It does mean that I will be voting no to CfDs for both KH and DW. But it won't stop me investing in project 4 if the offer wording allows for CfD bids. I will just adjust my investment accordingly.