EMR overview and RO transitional arrangements

Jeremy Smith
Head of Development Strategy
RWE Innogy UK Ltd
07584 312380
@jeremyMHsmith
Low Cost, Low Carbon and Little Grid –
Future Challenges and Opportunities for
Renewable Energy in Wales
RWE Innogy 4/29/2016
PAGE 1
* Biomass is no longer a strategic business area for RWE Innogy (selected remaining activities including generation from recycled wood and pellet
production, no growth), decentralized biomass bundled in RWE Energiedienstleistungen, large-scale biomass co-firing in RWE Generation
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1) Capacity with <50% RWE Innogy ownership is consolidated to 0 MW, capacity with 50% is consolidated to 50% of capacity, and capacity with >50% RWE Innogy ownership is
consolidated to 100% of capacity.
2) Biomass generation is split between RWE Generation, RWE Innogy and RWE Energiedienstleistungen. While RWE Innogy and RWE Energiedienstleistungen are focused on smaller
dedicated biomass plants
RWE Generation runs mainly co-firing in some of its Dutch coal stations (mainly Amercentrale).
3) RWE Group renewables capacity, of which 3,112 MW are operated by RWE Innogy (December 2014).
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RWE Group | RWE Innogy | Renewable Technologies | Political Framework
RWE Innogy in the UK
RWE Innogy assets UK
Capacity (MWel)
1
Inverbain
1 Burgar Hill
2 Bilbster
3 Causeymire
4 Maldie I+II
5 Inverlael
6 Novar II
7 Black Rock I+II
8 Novar
2
Garrogie
3
4
Cia Aig (under construction)
5
6
8
Garry Gualach
7
9
Braevallich
10
11
Douglas Water
29
12
13
15
14
16
Auchtertyre
Blantyre
18
Wind onshore
5001)
Wind offshore
5702)
Biomass
Under
construction
1773)
46
Biogas
Kielder
Tow Law
17
Windy Standard
9 Farr
10 Rivere
11 Carnoch
12 Beinn Ghlas
13 An Suidhe
14 Markinch
15 Stanley Mills
16 Lochelbank
In
operation
Hameldon Hill
19
Selset
Hydro
78
3
Solar
Kirkby Moor
Lambrigg
Gwynt y Môr
20
21
Dolgarrog
Rhyl Flats
24
27
Llyn Alaw
22
Dulyn
The Hollies
25
Trysglwyn
23
26
17 Middlemoor
18 Hellrig
19 Kiln Pit Hill
20 Knabs Ridge
21 Goole Fields 1
22 Lindhurst
23 Bradwell
24 Cym Dyli
25 Mynydd Gorddu
26 Ffynnon Oer
27 Cwm Croesor
28 Bears Down
29 Glen Tarbert
(Accounting view + PPA as at Q4 2014)
North Hoyle
Greater Gabbard
Cynwyd
Garnedd
Bryn Titli
28
Carno
Taff Ely
RWE Innogy activities in UK
 In last 5 years with our investment partners
commissioned more than £4.5bn of new generation
 In 2014 we spent £0.7bn with UK contractors
 We have 385 employees across 13 offices, with many
more contractors
 In 2014 contributed over £1.1m to local community
benefit funds
Little Cheyne Court
Hydro plants
Onshore wind sites
Offshore wind sites
Sites of Green Gekko consortium (RWEI 51%)
1)
2)
3)
Biomass plants
Including 196 MW of Zephyr assets and 19 MW of Green GECCO assets.
Including 60 MW owned by Zephyr and 100% contracted to RWE npower through a PPA.
Gwynt y Môr to be fully commissioned in 2015.
RWE Innogy | Factbook Renewable Energy 30/09/2013
PAGE 5
Low-Cost, Low-Carbon and Little Grid –
Future Challenges and Opportunities for
Renewable Energy in Wales
 I want to give a flavour of where we are at the moment and some
of the challenges facing the renewable energy industry in Wales
 …and to try and give my view of what this might mean for the
industry, how the industry might evolve, and what will be different
in the future…
Confidential for internal use only
Where we are now:
 UK Government acted fast to fulfil their manifesto commitment to
end new subsidies for onshore wind by proposing to close the RO
early
 Currently no certainty on future Contract for Difference (CfD) route
to market for Onshore Wind
 Reviewed Feed in Tariffs (FITs) reducing caps and subsidy for
other smaller renewable technologies
 CfD for Offshore but with reducing subsidy levels
→ Govt narrative around reducing “cost to consumer”
→ Reduction in development activity for most technologies.
Confidential for internal use only
Where we are now:
 UK Government is facing a 134TWhr energy gap in 2030 and very
little is being built.
DECC UEP2015
Confidential for internal use only
Why Low Carbon?
 The UK Government signed up to COP21 climate change commitments in
Paris 2015, agreed a long-term goal of keeping the increase in global
average temperature to well below 2°C above pre-industrial levels; with
an aim to limit the increase to 1.5°C.
 The Climate Change Act established a target for the UK to reduce its
emissions by at least 80% from 1990 levels by 2050. This target
represents an appropriate UK contribution to global emission reductions
consistent with limiting global temperature rise to as little as possible
above 2°C – needs review post COP21 to ‘toughen it up’
 UK Government must agree 5th Carbon Budget by June 2016 for period
2028-2032. Recommendation from the CCC at 57% below 1990 levels.
Confidential for internal use only
Why Little Grid?
 The national grid network was not built for distributed generation.
 Rapid deployment of solar over the last three years - deployment
in 2014 where it was expected to be in 2030;
4.00
Connected/Contracted DG vs Maximum Demand
3.50
3.00
Voume GW
2.50
2.00
Contracted
Connected
1.50
System Maximum Demand
1.00
0.50
0.00
N WALES
SWALES
Confidential for internal use only
How does a constrained grid affect
renewables development?
 Cost of connection – consenting, build and reinforcement –
potentially affects viability, especially an issue where the Industry
is being asked to deliver the “lowest cost to consumer.”
 Delay – grid blocking, queuing, consenting times etc.. Delay is not
good in an uncertain market with changing levels of support.
 Risk of being “constrained off” affects investor confidence and
project viability.
→ New copper is not the answer!
Confidential for internal use only
So putting this all together..
 The Government is committed to significant
decarbonisation of energy, especially of heat and
transport, and..
 They are facing a big gap in generation, but..
 They have implemented policies that have
significantly curtailed renewable energy
development, and..
 Nobody is investing in conventional generation either, and…
 There are significant problems getting more renewable generation
onto the network.
Confidential for internal use only
Maybe, soon time to buy a generator?
Confidential for internal use only
The future?
 “Subsidy-free” renewables?
 Onshore - bigger turbines at windier locations
 Generally less development at best sites
 Hubs / direct wire connections
 Changes to grid networks?
 Storage, smart grid, pro-active
reinforcement, innovation, devolution
 Local networks?
 Heat & de-carbonising transport
Confidential for internal use only