colin prestwich (smartest energy)
TRANSCRIPT
Creating the Conditions for New Market Entry
SmartestEnergy’s Experience and Views
3rd March 2011
Colin Prestwich
Agenda
• Introduction to SmartestEnergy
• The NETA environment
• Setting up as a supplier and issues
• Engaging with the demand-side
• Looking forward
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UK’s leading purchaser and supplier of electricity generated by the independent generation sector
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Introduction to SmartestEnergy
*Financial figures 2009/10 audited accounts
• Wholly-owned subsidiary of Marubeni Corporation of Japan• Established in 2001 on the back of deregulation• Licensed Electricity Supplier, and Gas Shipper and Gas Supplier• Annual turnover £841 million*• Profit after tax £8.6 million • Physical and financial trader in UK power, gas, carbon, and renewables in both
forward and spot markets• Retail business launched in Summer 2008
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SmartestEnergy Overview
• Largest purchaser of electricity from embedded independent generators– 1700 MW installed capacity¹– 150+ customers– 500+ generation sites
• Launched Retail business in Summer 2008 with focus to supply renewable power to industrial and commercial
business customers– 6TWh contracted volume²– 300 customers– 1500 sites*
¹Figures quoted as of 31st October 2010²Figures quoted as of 31st January 2011
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• Founded in May 1858 and incorporated in December 1949• One of the leading Sogo Shosha or general trading house• Gross Trading Profit: JPY 491.7 Billion (£3.5 billion ¹) • Net Income: JPY 95.3 Billion (£681 million)• Total Assets: JPY 4,586.6 Billion (£32.8 billion)• Total Capacity (MW) of overseas Independent Power Producer Projects Power
Assets: 25,725• Operations
– 118 Offices in 71 Countries– Over 32,300 Marubeni employees Worldwide ²
• 12 divisions ranging from Energy to Food, from Metals & Minerals Resources to Forest Products
• SmartestEnergy sits within the Power Project and Infrastructure Division
Fairness
Harmony
Innovation
Marubeni’s Company Creed
¹Financial figures from 2009/10 audited accounts ,converted into £ using the exchange rate as of Mar 2010² As of September 2010
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SmartestEnergy Operations
• 77 employees across two offices within the UK• 6 regional Account Managers across the UK• London Office (registered head office)
– Executive Committee & Board– PP Sales and Customer Service Teams– Marketing– Trading and Transaction Team– Credit and Risk Management Teams– Finance
• Ipswich Office – Retail Sales Team and Customer Service Teams– Business Operations and Analysts
NETA
• NETA created:
– Bi-lateral trading– Balancing incentive
• Further extension of free-markets after the Pool
• Freedom (to trade) brings with it responsibility (to pay your way)
Setting Up as an Electricity Supplier
• Licence• Accreditation
• Trading, risk and billing systems• Front, middle, back office staff
• Credit for bi-lateral agreements, Elexon, exchanges
Main Risks
• Wholesale market movement
• Imbalance costs
• Distribution costs
• Transmission costs
• Market rule changes
Other issues facing suppliers/wholesale players
• Liquidity
• Ofgem/Elexon reporting
• Other obligations– RO– Metering and Data Collection– Distributors– etc
Engaging with demand side
• Lack of pricing granularity– Brokers want to compare identical products– Customers want easy to understand bills
• Demand management– Technology cost effectiveness (over and above SmartMeters)– Scale, aggregation of many customers is required
• Trust– Difficult for pricing to be both granular and transparent– Demand control
Looking forward
• SmartGrids or Smart Energy
• SmartMeters will allow stronger price signals• Price should incentivise
• Suppliers may or may not develop technology• Other types of entrant (aggregators, meter operators)
EMR
• FiTs with CfD
– Additional bidding process– Price setting will affect the wholesale market
• The market should operate as a level playing field for all players and where necessary incentives should be built around those arrangements, not as a part of them.
• We prefer to see incentives, not taxes.
Other things that could help
• Level the playing field on the other side of the fence– Locational transmission losses– Costs of reserve– Etc
• No need to question the embedded benefit at this stage
• Less regulatory uncertainty eg FiTs
• Half hourly settlement for all customers
Conclusions
• Consolidation and technology will evolve further, but the basic market structure is right
• Risk and set-up costs
• Customers need to be engaged through technology and price
• NGT have ultimate responsibility for balancing the system