Independent Power Provision in the UK Presenta)on to 4th Annual Smart Grids & Cleanpower 2012 Conference 14 June 2012 Cambridge www.cir-‐strategy.com/events Mark Simon firstname.lastname@example.org Farm Power 0796 816 4171
Objec9ve • Describe the genesis of IPP and why it maOers • What is an IPP? • Why is it a good thing? • What obstacles does it face? • What does a perfect world for IPPs look like? • Opportunity arising from IPPs • How you can help Farm Power for Smart Grids & Cleanpower 2012 Conference 2
Site /Asset What is an IPP? Owners Investors Energy Suppliers Genera)on • Power Genera)on business – Renewables: wind; solar PV; biomass; micro-‐hydro; renewable heat – Demand-‐led: despatchable, on demand Renewable Energy – Process-‐led: excess provided from industrial processes Sales • Independent of Big Six and other incumbents – But interdependent with them as suppliers and customers • Management – Entrepreneurial, technology-‐literate – Project management skills – Focus on environmental policy – investment experience – Low overheads • Economically dependent (in 2012) on tariﬀ incen)ves and long term electricity price trends • Dependent upon UK Electricity Market reforms (exis)ng and future) – Obliga)on of registered FIT licensed suppliers to buy electricity and oﬀer FIT • Philosophy : partnership, focus on eﬃciency, spend, best prac)ce, modular approach 3 Farm Power for Smart Grids & Cleanpower 2012 Conference
IPP Case Study: Farm Power • Renewable distributed power company – “we generate green electricity” • Low-‐risk assets, easy to explain – Exploi)ng regulated marketplace – Low risk technology, low risk projects • Local UK-‐based business/close to community/landlords/suppliers – Small scale, small sites, low impact • Annuity return, index-‐linked, guaranteed • Close to investors – direct link, frequent communica)on, maximum trust, eliminate fees, project scale (£100K-‐£1m) • Commitment to investors – All money goes into assets – Each project to deliver strong IRR – No project undertaken unless it can be completed – Funds commiOed but called only when needed – Cash ﬂow posi)ve on commissioning – No salaries or overheads at company level (except statutory costs) • Solid and proven SME model, applies broadly to genera9on investment 4 Farm Power for Smart Grids & Cleanpower 2012 Conference
Why IPPs are a good thing • For development of secure and local electricity genera)on assets – Pornolio approach – best sites get developed, and have the best genera)on capacity deployed – Range of power sources can be developed with diﬀerent characteris)cs – Which develops the electricity genera)on market, resul)ng in more niche provision, market eﬃciency ..... and lower prices • For market responsiveness – Changes in policy and technology require agile decision making – Rapid learning results in improved market prac)ce • For development of new jobs – Rapidly redeploy capital and focus in new sectors, channel capital eﬃciently, encouraging new skills and technologies • For investors – Arms length from contractors – allows contractors compete and improve, while providing investor security Farm Power for Smart Grids & Cleanpower 2012 Conference
Obstacles to IPP market • Incen)ve uncertainty – Government consulta)ons cause doubt for long term interests of IPPs • DNO network reinforcement costs • Decision making data on grid and connec)vity – Held by DNOs, resistant to sharing (unlike government data) • Long-‐term ﬁnance – Debt periods which match genera)on / incen)ve life)mes – Long-‐dated junior debt providers • Electricity market illiquidity – Would like to be able to bid my supply compe))vely online (>800MWh pa) • Legals – Unfamiliarity (especially regarding Land Registry) by landowners and solicitors – Lack of standard legal structures to allow permanent genera)on sites to be established NOT Environment Agency, SNH, Planning Farm Power for Smart Grids & Cleanpower 2012 Conference 6
Opportunity for IPPs Desired environment IPP as agents for change • Incen)ve / FIT certainty • Specialist providers of electricity – over project delivery period (5, 20 yrs) – Electricity quality of supply – or pre-‐cer)ﬁca)on – Origina)on • Open access to DNO data – Licensed to sell to corporates and others • DNO funding responsibility • Enablers of community schemes – Linked to consumers loca)on – Retail corporate bonds – Marketplace for electricity ‘islands’ – Partnering with communi)es, landowners, companies • Electronic market for the sale of long • Partners with mul)ple DNOs and term electricity provision in UK/ contractors Europe – Reﬂec)ng nature of electricity provided • Working with companies and public (intermiOency, despatchability, bodies to ‘buy-‐out’ heat / CHP renewable) provision • Land Registry innova)on – Schools, MOD, Health – giving telephone mast rights to generators Farm Power for Smart Grids & Cleanpower 2012 Conference 7
What you can do to help • Keep thinking about SME and non-‐tradi)onal power genera)on players – Involve – Invest – Introduce • Inﬂuence policy-‐makers to favour innovators – Link back to informa)on technology analogy Mark Simon email@example.com Farm Power 0796 816 4171 Farm Power for Smart Grids & Cleanpower 2012 Conference 8
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