Going once, going twice, gone…to FID Enabling Contents Principles of allocation under EMR Three key questions: • How significant is allocation risk? • Which technologies are likely to fair best? • What should developers be doing? Levy Control Framework – The Budget bn £2011/12 Levy Control Framework 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2.4 3.0 3.3 4.3 4.9 5.6 6.5 7.0 7.6 Levy Control Framework - The Budget bn £2011/12 Levy Control Framework Incremental increase 2012/13 2013/14 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 2.4 3.0 0.6 3.3 0.3 4.3 1.0 4.9 0.6 5.6 0.7 6.5 0.9 7.0 0.5 7.6 0.6 Levy Control Framework – The Budget *Assuming DECC smooths delivery Limited pot of money available Project Pipeline No need for STW, Round 3 or NI!! Offshore wind (not including high offshore scenario) • • • • Onshore wind Hinkley Point C CCS Exports from Republic of Ireland (and Isle of Man) Solar and biomass Combined > £5.1 billion CCS – x billion W+T - £0.2 billion Hinkley Point - £1 billion Offshore wind - £2.5 billion Solar - £0.1 billion Biomass - £0.6 billion Onshore wind - £0.7 billion £3billion in 2020 Allocation process ‘14 Go Live Summer 2014 ‘15 ‘16 ‘17 ‘18 ‘19 “There are some scenarios in which FCFS may only last for a short No delay Unconstrained allocation period or may not be able to operate No rationing rounds aka the holding pen at all” - DECC Administrative Strike Price Constrained Allocation aka • 6 month window auctions • No rationing First Come First Served • • • ‘20 • Administrative strike prices (but developers asked to submit price) • 6 month window • Rationing • Price set at auction FID Enabling 18GW in total = 9GW offshore wind + 6GW biomass + others Auctions – price is key W&T admin SP Price (£/MWh) Offshore admin SP Clearing price and offshore strike price 2018 Budget Biomass admin SP Onshore admin SP MW allocated contracts Quantity (MW) With no maxima or minima, more expensive technologies struggle and cheaper technologies have no incentive to bid competitively Timing matters - The long arm of the offshore industry For auctions taking place in 2014/15… 2014/15 2015/16 2016/17 2017/18 2018/19 2019/20 2020/21 Solar projects (short lead time) Onshore wind (medium lead time) Offshore wind (long lead time)… …or even longer with phasing Which technology will fair best? Price Ring-fencing (Maxima/Minima) Timing Concluding remarks How significant is allocation risk? - Very, we have too many projects FID Enabling could mean no pot available once system goes live All eyes on DECC’s Allocation Framework consultation Which technologies will fair best? - Too early to say - Onshore wind should be in good position - Offshore wind will struggle in auctions but can go long - W+T has minima What should developers be doing? - Understand where you are in the pipeline, go early if you can Understand the merit order within your technology Appreciate that the strike prices are a maximum, you may well receive less Thank you for your attention. [email protected] Assumes: • 3GW FID Enabling Offshore Wind • CCS • No increase in LCF post 2020 (Hinkley Point)