Onshore Energy Conference — London Onshore Energy Conference — London | Page 33
POWER MARKET
From a BI perspective the Capacity Market
income for a station should be relatively
straight forward to quantify. The difficulty
will be establishing the claw-back of revenue
as this can only be confirmed once the
actual number of Stress Events are known.
Theoretically, a 6 month outage could result
in the entire annual revenue being lost if
there are sufficient Stress Events and a
12 month outage could result in no loss at all
if there are no Stress Events. This will make
setting reserves more challenging still.
Touching briefly on the BI implications of
Brexit, the current level of uncertainty make it
difficult to be too specific. For example, it could
impact our electricity imports from Europe,
which are increasing year-on-year as shown in
Illustration iii, and our participation in the EU
ETS carbon trading scheme. However, what is
certain is the pound’s devaluation against other
currencies such as the Euro and US Dollar will
have a financial impact on costs and sales.
iii) INTERCONNECTOR IMPORTS
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TWh
As explained at last year’s conference,
the Electricity Market Reforms (“EMR”)
have introduced a Capacity Market to help
maintain security of supply. The Capacity
Market financially incentivises new and
existing generators to maintain availability.
However, the incentive payments do not
start until late 2018 and so will be of
little assistance in the short term.
The Capacity Market comprises of an annual
auction which takes place four years before
the year of delivery (to allow time to build
new stations). The first auction was held on
18 December 2014 for the year commencing
1 October 2018 and it secured 49,259MW of
Capacity at a clearing price of £19.40 per KW.
A second auction was held on 10 December
2015 for the year commencing 1 October
2019 and this secured 46,354MW of Capacity
at a clearing price of £18.00 per KW. The
results of this auction by technology (i.e. fuel)
type are summarised in Illustration ii.
Successful units will then receive
this additional revenue
for each KW of capacity
they bid so, for example,
7.0
a 600MW station will
receive £10.8M for the year
6.0
commencing October 2019.
These payments are made
5.0
to the station regardless
of their actual generation.
However, should the station
4.0
not be providing this level
of generation during a
3.0
System Stress Event* then
the revenue is clawed back
2.0
at a rate of 1/24th of the
annual payment for each
1.0
hour of non-generation.
The claw-back is capped
0.0
at two months revenue per
month and 100% of the
annual revenue per year.
* A System Stress Event is a settlement period in which a System Operator Instigated Demand Control Event (“SOIDCE”) occurs lasting for at least
15 minutes. A SOIDCE is when the System Operator issues a demand reduction instruction to one of more Distribution Network Operators.
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