Sgcp12 simon-farmpower
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Sgcp12 simon-farmpower Sgcp12 simon-farmpower Presentation Transcript

  • 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   mark.simon@farmpowergen.co.uk  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   mark.simon@farmpowergen.co.uk  Farm  Power   0796  816  4171   Farm  Power  for  Smart  Grids  &  Cleanpower  2012  Conference   8