Export RewardP02 19 July

Jade Energy

Outline of discussion

• CCSE Act 2006• Outline of project requirements• Overview of the export reward issues• Success criteria for solution• Possible Options (& high level assessment)• Next steps

– Options for detailed assessment– Process

© Jade Energy 2006

Outline of discussion

• CCSE Act 2006• Outline of project requirements• Overview of the export reward issues• Success criteria for solution• Possible Options (& high level assessment)• Next steps

– Options for detailed assessment– Process

© Jade Energy 2006

Climate Change and Sustainable Energy Act

Section 7 – export reward: power to modify licences

• Discretionary power exercisable by the Secretary of State, if necessary, for the purpose of…… “increasing the amount of the electricity consumed in Great Britain that is generated by microgeneration”

• Subject to normal consultation requirements

• Exercisable between August 2007 and August 2009 (1 and 3 years from commencement of Section 7)

© Jade Energy 2006

Climate Change and Sustainable Energy Act Cont

Section 7 – export reward: power to modify licences (standard & special conditions)

• Supply:– Required to “offer to acquire” electricity generated by

its customers• Distribution:

– To notify suppliers that microgeneration has been connected

– To support new supply obligations (VERY widely drawn)

© Jade Energy 2006

Outline of discussion

• CCSE Act 2006• Outline of project requirements• Overview of the export reward issues• Success criteria for solution• Possible Options (& high level assessment)• Next steps

– Options for detailed assessment– Process

© Jade Energy 2006

Purpose of ProjectTo develop (and implement) a cost effective

mechanism that allows electricity suppliers to provide a fair reward for microgeneration customers who export electricity to the network.

• To avoid, if possible, the need for licence conditions to be imposed!

• Not necessarily to avoid the need for the powers to be used.

© Jade Energy 2006

Project Requirements• Explanation of the Problem (D1)• Success criteria for any solution (D3)• Development of options (D2)• Assessment of options against criteria (D4)• Recommendations (D5)• NOT full technical design (but should test

feasibility)!• NOT about ROCs……..but• Delivery (D6) outside scope of this phase

© Jade Energy 2006

Outline of discussion

• CCSE Act 2006• Outline of project requirements• Overview of the export reward issues• Success criteria for solution• Possible Options (& high level assessment)• Next steps

– Options for detailed assessment– Process

© Jade Energy 2006

Export Settlement

MPAN

NHH DANHH DC

Takesread

CalcsAdvance

GetsEAC/AA

SAA

DNOSuper-customer

hh info(D30)

SVAA

Aggregatehh info

Customer

consumption

Gen

ImportMeter

G/ROCMeter

MPAN

NHH DC NHH DAExportMeter

© Jade Energy 2006

Commercial Value of Export• Supplier avoided costs:

– Avoided energy (SSP/mktprice, adjusted for T&D losses)

– Avoided TNUoS & BSUoS– Avoided ELEXON charges

LESS• Costs incurred by

Suppliers:– MRA per MPAN costs– Agent costs– Supplier processing/margin

costs (plus impact of reduced units)

© Jade Energy 2006

Export value“lost”

Common Practice

MPAN

NHH DANHH DC

Takesread

CalcsAdvance

GetsEAC/AA

SAA

DNOSuper-customer

hh info(D30)

SVAA

Aggregatehh info

Customer

consumption

Gen

ImportMeter

G/ROCMeter some

suppliers pay anyway

Jade Energy 2006© Jade Energy 2006

Export Reward Problems• Suppliers exposed to MRA and agent costs on export (costs

(£50/pa???) may exceed energy value) (+ other problems due to linked MPANs)– commercial hit– bad press

disincentive to promote/support microgeneration

• Microgeneration export under-valued– economic value not fully reflected– transaction costs

distorts/limit microgeneration market potential

• Value differential creates perversities:Incentive to undersize microgeneration incentive to shift consumption to generation periodsincentive to “supply” beyond premises

© Jade Energy 2006

Outline of discussion

• CCSE Act 2006• Outline of project requirements• Overview of the export reward issues• Success criteria for solution• Possible Options (& high level assessment)• Next steps

– Options for detailed assessment– Process

© Jade Energy 2006

Success Criteria• Proposals should provide a fair reward to customers with microgeneration

who export to the network• Proposals should not impose unreasonable costs on suppliers or other

industry parties• Proposals should not distort competition in supply• Proposals should eliminate or mitigate distortions inherent in the current

arrangements• Proposals should not introduce any significant new distortions• Proposals should be cost effective to implement

• NB – objectives may be mutually exclusive

“…..increasing the amount of the electricity consumed in Great Britain that is generated by microgeneration”……

© Jade Energy 2006

Success Criteria• Proposals should provide a fair reward to customers with microgeneration

who export to the network• Proposals should not impose unreasonable costs on suppliers or other

industry parties• Proposals should not distort competition in supply• Proposals should eliminate or mitigate distortions inherent in the current

arrangements• Proposals should not introduce any significant new distortions• Proposals should be cost effective to implement

• NB – objectives may be mutually exclusive

“…..increasing the amount of the electricity consumed in Great Britain that is generated by microgeneration”……

© Jade Energy 2006

Outline of discussion

• CCSE Act 2006• Outline of project requirements• Overview of the export reward issues• Success criteria for solution• Possible Options (& high level assessment)• Next steps

– Options for detailed assessment– Process

© Jade Energy 2006

Settlement Outcomes

SE

TTLEM

EN

T

SE

TTLEM

EN

T

SE

TTLEM

EN

T

Total Generation

Total Consumption

GROSSSettlement

(Net G) Export

(Net C) Import

NETSettlement

NET NETSettlement

(Net G) Export

(Net C) Import

LOTS OF BELLS AN WHISTLES!!!© Jade Energy 2006

Options1. Lilac (net) Options

a) Supplier quote optionb) Supplier mandated price option c) DNO “subsidy” optiond) Single MPAN (net) option

2. Blue (gross) Optionsa) DNO “subsidy” optionb) Average output option

3. Yellow (net net) Optionsa) two directional meterb) Single MPAN (net net) optionc) “Smart meter” single MPAN (net net) option d) Deemed/average option

Jade Energy 2006

NB There are otherpossible variants!

Are there any otherimportant ones?

© Jade Energy 2006

Lilac Options NET

© Jade Energy 2006

Option 1a – Suppliers required to offer terms for export

Suppliers required to quote

MPAN

NHH DANHH DC

Takesread

CalcsAdvance

GetsEAC/AA

SAA

DNOSuper-customer

hh info(D30)

SVAA

Aggregatehh info

Customer

consumption

Gen

ImportMeter

G/ROCMeter

MPAN

NHH DC NHH DAExportMeter

Jade Energy 2006© Jade Energy 2006

Option 1a - thoughts

• Aids transparency• (may increase pressure for lower Agent

charges)• Doesn’t appear to solve (m)any problems

© Jade Energy 2006

Option 1b – Suppliers required to offer specified terms for export

Suppliers’ tariff fixed (minimum)

MPAN

NHH DANHH DC

Takesread

CalcsAdvance

GetsEAC/AA

SAA

DNOSuper-customer

hh info(D30)

SVAA

Aggregatehh info

Customer

consumption

Gen

ImportMeter

G/ROCMeter

MPAN

NHH DC NHH DAExportMeter

Jade Energy 2006

(form of feed in tariff)

© Jade Energy 2006

Option 1b - thoughts

• Solves problem for generator (depends on price)

• Creates problems for supplier

© Jade Energy 2006

Option 1c DNO “subsidy” option

• Supplier Tariff mandated (minimum)• Supplier “standard excess cost” per kWh

assessed• Total kWhs determined & hence total

excess cost determined• DNOs recover from customers through

increased DUoS (pro-rata to DNO size)• DNOs compensate suppliers

(form of feed in tariff)© Jade Energy 2006

Option 1c - thoughts

• Solves problem for generator• Solves cost problem for supplier• Aids transparency/easy to understand• Works in Germany (but big differences)• Complex to implement• Subsidy rather than “fair reward” – alternative to

ROCs?• Issues for DNOs (alternative fund through

suppliers/RO?)

© Jade Energy 2006

Option 1d (Single MPAN (net) option)

MPAN

NHH DANHH DC

Takesread

CalcsAdvance

GetsEAC/AA

SAA

DNOSuper-customer

hh info(D30)

SVAA

Aggregatehh info

Customer

consumption

Gen

G/ROCMeter

MPAN2

NHH DC NHH DA

Importregister

Exportregister

Single MPAN optional – saves (some) supplier costs

Gen can opt for single MPAN

© Jade Energy 2006

Option 1d - thoughts

• Avoids per MPAN charge in MRA may reduce Agent charges (currently per MPAN)

• Optional 1 or 2 MPANs should allow for export to be sold to different supplier

• Relatively simple (no change to impact on settlement processes)

• May be only a tweak to value available for export

© Jade Energy 2006

Blue Options GROSS

© Jade Energy 2006

© Jade Energy 2006

Option 2a DNO “subsidy” Gross

MPAN

Customer

consumption

Gen

ImportMeter

G/ROCMeterExportMeter

SVAANHH DC NHH DA

smart meter records exports & imports & generation

Calculates/records gross consumption

Jade Energy 2006

SVAANHH DC NHH DA

Gross generation

Gross consumption

Tariff specified for TOTAL generation

Import tariff for TOTAL consumption

Excess cost covered by DNO

Another form of “feed-in tariff”

Option 2a - thoughts

• Similar to 1c • Advantages over 1c

– Settlement of total consumption may benefit suppliers and avoids profile issues

– Single value for generation avoids distortions• Disadvantage over 1c

– Larger pot of money to be recovered by DNOs (but cost of recovery should be unchanged)

– Generation meter needed for settlement– Consumption calculated

© Jade Energy 2006

Customer

consumption

Gen

SVAA

MPAN

NHH MO (MAP/MAM)

NHH DC NHH DA

Gmeter

Cmeter

Normal EAC/AASimple advance

Pseudo NHH DAcalcs “deemed” entitlements

Per supplier and passes to settlement

Jade Energy 2006

Option 2b average output option

© Jade Energy 2006

Option 2b - thoughts

• Could be simple to administer• Preserves gross consumption for imports• Values all generation at the same price• Would (probably) reduce total value to

generator as all generation rewarded at export value (but hopefully at higher than current export value)

© Jade Energy 2006

Yellow Options NET NET

© Jade Energy 2006

Option 3a (two direction meter)

SVAANHH DC NHH DA

Single readSingle advance

EAC/AAMPAN

Customer

consumption

Gen

Importter

G/ROCMeter

ExportMe

Meter runs backwards & forwards

Jade Energy 2006© Jade Energy 2006

Option 3a - thoughts

• Values export at import price – removes current distortions

• Potential risk to supplier if export approaches import

• Profile accuracy? • CANNOT USE EXISTING BACKWARD

RUNNING METERS – illegal abstraction• data recovery/error management issues• Simple to implement (?)

© Jade Energy 2006

Option 3b (Single MPAN “net net”Option)

SVAANHH DC NHH DA

Reads both meters/registersCalc both meter advances

Calc net advance

Net EAC/AA

MPAN

Customer

consumption

Gen

ImportMeter

G/ROCMeter

ExportMeter

Gen can opt for single MPAN

Jade Energy 2006© Jade Energy 2006

Option 3c - thoughts

• Values export at import price – removes current distortions

• Potential risk to supplier if export approaches import

• Profile accuracy? • Relatively simple to implement?• Avoids backward running meters problems• Increase DC costs and activities (who pays?)

© Jade Energy 2006

© Jade Energy 2006

Option 3c “smart meter” net net

SVAANHH DC NHH DA

Calcs SINGLE (net net) advanceNet Net EAC/AA

MPAN

Customer

consumption

Gen

ImportMeter

G/ROCMeter

ExportMeter

Gen can opt for single MPAN& smart meter

smart meter records exports & imports

calculates/records running net import Jade Energy 2006

Option 3c - thoughts

As per 3b BUT• Avoids DC issues

© Jade Energy 2006

Option 3d average output option 1

Customer

consumption

Gen

SVAA

MPAN

NHH DC NHH DA

Gmeter

TOTAL consumption metered

Cmeter

TOTAL generation “deemed”

Net EAC/AAMeter LESS deemed

Jade Energy 2006

DNO

SAA

© Jade Energy 2006

Customer

consumption

Gen

SVAA

MPAN

NHH MO (MAP/MAM)

NHH DC NHH DA

Gmeter

TOTAL import metered

cmeter

TOTAL generation “deemed”

Net EAC/AAReads:- Import/export- G meter

Calcs total consumptionDeducts deemed gen

Jade Energy 2006

Option 3d average output option 2

© Jade Energy 2006

Option 3d - thoughts

• Appears to add complexity and reduce accuracy……

© Jade Energy 2006

Are there anycritical ones

missing?

Which ones merit furtherassessment?

Options for further development• Lilac (net) Options

a) Supplier quote optionb) Supplier mandated price option c) DNO “subsidy” optiond) Single MPAN (net) option

• Blue (gross) Optionsa) DNO “subsidy” optionb) Average output option

• Yellow (net net) Optionsa) two directional meterb) Single MPAN (net net) optionc) “Smart meter” single MPAN (net net) option d) Deemed/average option

© Jade Energy 2006