Analysis of Global Power Market

Analysis of Global Power Market Wind Power Subsidy and Price Scheme in the UK (2/2) • • . The Electricity Market Reform (EMR)'s central mechanism for supporting a range of low carbon technologies is a form of long-term private law contract capable of increasing revenue certainty and bringing forward new investment into the sector. The contracts are structured as Feed-in Tariffs (FiTs) in the form of Contracts for Difference (CfDs), in most cases for a total duration of 15 years. Unlike the prior Renewable Obligation scheme, CfD contracts are intended to support a range of low carbon technologies, including carbon capture and storage as well as renewables. CfDs are managed by the Department for Business, Energy and Industrial Strategy (BEIS) and the UK Treasury, and are allocated within the budget constraints of the 'Levy Control Framework' Capacity Market Capacity market payments are to remunerate plants for being available during periods of system stress. Auctions are held annually and four years ahead of delivery. Four T-4 auctions are held in 2014-18 for the delivery in 2018-22. T-1 auctions (i.e. one year ahead of delivery) are also held for short-term capacity delivery. - Generation capacity providers, including conventional and renewable power generators, non-generation capacity providers, such as storage, are eligible for capacity market auction. However, power generators who receive other forms of renewables support, such as RO, CfD, etc., are not eligible. Therefore, renewables are generally don't benefit from capacity revenue, especially offshore wind. European court ruling on capacity mechanisms In Nov 2018, the EU ruled that the UK's Capacity Market was illegal on state aid grant, and the Capacity Market would be suspended indefinitely. In Feb 2019, the European Commission launched a review of the Capacity Market scheme which could take 12 months to complete. In early March 2019, Tempus Energy sought judicial review on UK Capacity Market payments. In late March, UK gave possible date ranges for delayed power capacity auction which could be held in June/July 2019. In June 2019, T-1 Capacity Auction for delivery in 2019/20 was held. The European Union court ruling means any contracts issued under the 2019 auction will be conditional. Historical T-4 Auction and T-1 Auction Results T-4 Auction Results Clearing Price(£/kW) Awarded Capacity (GW) Delivery Year 19.4 47.53 2018/2019 18.0 46.35 2019/2020 22.5 52.40 2020/2021 8.4 50.42 2021/2022 *The first T-1 auction was held on February 2018. T-1 Auction* Results Clearing Price(£/kW) Awarded Capacity (GW) Delivery Year 6.0 5.78 2018/2019 0.77 3.63 2019/2020 Source: Government Documents, Frost & Sullivan FROST & SULLIVAN 31

View entire presentation