Energy Matters Global and Domestic

[bobins]

<Tongue firmly in cheek : ON> I think you'll find that if you did a root-cause analysis of the reasons for all of our energy and planetary woes, that thing would be near the top of the pile. That burning bright orb is responsible for supporting life on this utterly insignificant little blue green planet, and it's human life that's got us into this mess - so the sooner we get rid of the sun, the better off the planet will be. <Tongue firmly in cheek - OFF>

[mickthemaverick]

You clearly DO need another motorbike bobins!! It will ease your troubled mind!!

[thorter]

All CfD prices are referenced at a 2012 price, so presumably the indexing for nuclear will be the same as for wind farms. Also suppliers do not need to to accept the CfD immediately, and reportedly all of the recently commissioned wind farms are currently taking the much higher market price, so talk of ultra cheap renewables is premature!

[NewcastleFalcon]

All CfD prices are referenced at a 2012 price, so presumably the indexing for nuclear will be the same as for wind farms. Also suppliers do not need to to accept the CfD immediately, and reportedly all of the recently commissioned wind farms are currently taking the much higher market price, so talk of ultra cheap renewables is premature!

If the market price is higher than the strike price, payments are made to the government by the companies of the difference. In theory the strike price stabilises prices for 15 years of wind projects.

This piece here was my attempt to wrestle what was going on. Hinkley C was the last nuclear project done under CFD arrangements, the new one at Sizewell uses a different model Regulated Asset Base even more unintelligible, but tries to attract investors with less risk, at the expense to the Tax and Bill payer.

My effort here on CFD
viewtopic.php?p=708101&hilit=cfd#p708101
From the horses mouth

Regards Neil

[NewcastleFalcon]

Regulated Asset Base post from last January

Brief head over to Nuclear and Sizewell C.
In the news today £100m to grease the wheels of investment, but a different funding model from Hinkley Point C.

Government readies Sizewell C nuclear project for future investment
Plans to build a new nuclear power plant in the UK have been backed by £100 million of government funding

Contracts for Difference ditched, in favour of a few quid extra on consumers bills over the construction phase under what is known as the RAB (Regulated Asset Base) model.

Future funding for nuclear plants An explanation of the Regulated Asset Base (RAB) model option.

Good luck in interpreting that.

REgards Neil

[thorter]

"If the market price is higher than the strike price, payments are made to the government by the companies of the difference. In theory the strike price stabilises prices for 15 years of wind projects."

This is only the case once the supplier has activated the CfD. The "contract" is merely an offer which the supplier need never activate, though once contracted he is indeed bound by the terms.

[NewcastleFalcon]

"If the market price is higher than the strike price, payments are made to the government by the companies of the difference. In theory the strike price stabilises prices for 15 years of wind projects."

This is only the case once the supplier has activated the CfD. The "contract" is merely an offer which the supplier need never activate, though once contracted he is indeed bound by the terms.

Didn't know that.

I would have thought that would have been stitched up in the price they offer for the licences when they bought the right to develop the windfarm, and the conditions were that the strike price was mandatory to use. The CFD is intended to work both ways after all In the current circumstances that is just lose for the UK State. I suppose the tougher the licence conditions are the less companies will bid for them, but a minimum level of toughness you would expect to be enforced.

Regards Neil

[NewcastleFalcon]

This is only the case once the supplier has activated the CfD. The "contract" is merely an offer which the supplier need never activate, though once contracted he is indeed bound by the terms.

Have you the chapter and verse or an article on that for reference? Seems completely against the whole point of the Auctions. They are auctions of "contracts for difference" after all for which they bid a price. Seems odd that the contracts for difference is an optional bit only applicable if they activate it.

REgards Neil

[thorter]

No, but long understood that was the case. However, see

[media]https://www.current-news.co.uk/news/bei ... wer-prices[/media]

[NewcastleFalcon]

No, but long understood that was the case. However, see

[media]https://www.current-news.co.uk/news/bei ... wer-prices[/media]

The headline in itself suggests a gaping hole in the process. There should be no question of

"BEIS calls on companies to act ‘fairly’ when triggering CfD support amid high power prices"

It should be cast iron certain, black and white in the contract, that having bid for and won against others a CFD auction at a particular strike price, that they have no option whatsoever to choose when to activate the CFD contract. Here's and idea...when the first Megawatt is produced out of the field the CFD contract automatically begins. If they dont like it bid less for the contracts and risk losing them.

Surely it has been tightened up in future auction rounds.

Probably hasn't,
but the current rules allow Generators to commission anywhere within a three year window, facilitating the delay in the CFD commencing, they cannot as you would expect avoid the CFD activating indefinitely.

‘Significant commercial incentive’ for offshore wind farms to delay CfD activation

"Under current regulation, theoretically, an offshore wind farm can commission anywhere within a three-year window, with current assets that are operational but haven’t yet activated their CfD able to make use of this to make additional revenue on the wholesale market"

Regards Neil

[bobins]

Probably hasn't,
but the current rules allow Generators to commission anywhere within a three year window, facilitating the delay in the CFD commencing, they cannot as you would expect avoid the CFD activating indefinitely.

‘Significant commercial incentive’ for offshore wind farms to delay CfD activation

"Under current regulation, theoretically, an offshore wind farm can commission anywhere within a three-year window, with current assets that are operational but haven’t yet activated their CfD able to make use of this to make additional revenue on the wholesale market"

Regards Neil

I think you misunderstand the concept of energy generation, Neil. It's not there primarily to generate electricity - it's there primarily to make the shareholders richer, and that's the most important thing.

[Gibbo2286]

Probably hasn't,
but the current rules allow Generators to commission anywhere within a three year window, facilitating the delay in the CFD commencing, they cannot as you would expect avoid the CFD activating indefinitely.

Regards Neil

I think you misunderstand the concept of energy generation, Neil. It's not there primarily to generate electricity - it's there primarily to make the shareholders richer, and that's the most important thing.

Or poorer if it all goes belly up Bobins, buying shares in any company or project is never risk free as shareholders in Railtrack found when the Labour government nicked it off them, renationalised it after John Prescott engineered its collapse. But that's pollitics and we don't do that here.

[NewcastleFalcon]

From the archives

The UK isn't unique in the "how its done" development of offshore wind farms. Auctions for leases/licences are the norm. Conditions attached to the leases affect the value achieved in the auction.

All over the world, those with the expertise to build out the desired capacity will be very much in demand, and to get your projects taken from drawings to production in the time scale you desire is going to be a very competitive market. The companies concerned can build these things in any part of the world they desire, and their greatest problems, are not in securing finance or winning lease auctions but in having to scale up capacity and secure supply either from within or from the companies producing the components.

As covered on the thread before, much of the gubbins for wind farm infrastructure comes from overseas, but agents of government look to ensure knock on benefits for local supply chains in the conditions attached to the Auction. From this article it would appear that a "the sale notice includes a 20% credit to bidders to encourage direct investment in domestic US supply chain development or workforce training programs – a first for the US government." That does translate presumably to lower overall direct receipts than would have been the case without the condition being attached.

US announces the first offshore wind lease sale off the Carolinas

No doubt one of the bidders will be Ørsted the largest offshore wind company in the world, and an example of a different approach adopted by Denmark, to that of the UK in offshore wind energy. The Danish Government own a majority stake in Ørsted, will suffer its losses of course, but also enjoy its dividends. The UK adopts an equally valid approach, takes a no taxpayer risk to development and no liability for company losses, but foregoes dividends and capital growth.

Regards Neil

[bobins]

Contrary to what you might think, I'm not against the private sector supplying our needs per-se, what I am against is gaming the system for excessive profits combined with a 'screw you' attitude from the shareholders. It's not just the energy providers - Southern Water down here got prosecuted for astonishingly poor practices in the name of profits.
What of the huge numbers of public that can't afford to put bread on the table as the result of profiteering ? Let them eat cake ?

[NewcastleFalcon]

Jeremy Vine did energy and teddy bears today. Had to really, on the back of BP's Profit Announcement.

How about a bit of trivial, member of the public fact checking, assume 50p/kWh for the purposes of the first and a bog-standard 2 slice electric toaster.

Couple of soundbytes from the show....

Jeremy was shocked at

"£1.68 to do 2 bits of toast?" to be fair I think the chap appearing on the programme got his decimal point in the wrong place.

and read this out in suitably indignant fashion

"Hugh in Taunton says "The French Government have imposed a Maximum 4% Rise that Energy Companies can increase their prices by. "Why can't we do that here "

REgards Neil