global energy buyer's roadmap
DESCRIPTION
A comprehensive review of all material presented in the 2013 Global Energy Buyer's Roadmap webinar seriesTRANSCRIPT
Global EnergyBuyer’s Roadmap
- eBook -
Our guide for the emerging trendsin global energy markets
Table of Contents
Introduction
About Us
Europe’s Rising Non-energy Costs
Managing Brazil’s High Volatility Power Market
India, a Story of 3 Rs: Regulation, Renewable & Reform
Philippines and Singapore - Deregulation Opportunity
The Impact of U.S. Exports on Energy Markets
Global Energy Market Conclusions
page 4
page 4
page 6
page 16
page 24
page 32
page 40
page 48
page 49
page 50
page 51
Contact Us
Audio Recordings
Forthcoming Events
© 2013 EnergyQuote JHA, Fellon-McCord and Ecom Energia. All rights reserved.
Introduction
About Us
Identifyopportunities for cost reductionand cost avoidance
Learn about the impact of regulatorychange and market evolution
Educate your internal stakeholders
Established in 1992, Fellon-McCord provides energy and sustainability management services to industrial, commercial, higher education, municipal and co-operative utility clients throughout North America. Starting with four large industrial clients, we distinguished ourselves as an early leader in the competitive energy industry and earned a reputation for providing professional expertise with a personal touch. Our business has expanded to encompass a portfolio of clients who annually consume billions of dollars in energy on a global basis.
By leveraging our long-standing industry relationships, we offer the resources, information and systems to manage our clients’ needs from the energy source to point-of-end use. We partner with our clients to create value-driven solutions by helping them manage energy prices, minimize energy usage, optimize energy assets and reduce carbon emissions.
fellonmccord.com
Over a one-month period EnergyQuote JHA, Ecom Energia and Fellon-McCord covered five emerging trends in global energy markets through a series of live webinars titled “The Global Energy Buyer’s
Roadmap”. The purpose of this series is to educate global energy buyers on market specific opportunities and drivers that will be important in 2013 by enabling them to understand:
This eBook is the culmination of “Global Energy Buyer’s Roadmap” series and will help you:
the Where, the What and the How.
Fellon-McCord
4
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energyquote.com
ecomenergia.com
EnergyQuote JHA is Europe’s largest independent energy and carbon consultancy delivering bespoke solutions to Customers since 1973. Specialist in energy price risk management, energy efficiency, onsite generation and carbon regulation EnergyQuote JHA now trades more than €4 billion of energy contracts annually. With offices across Europe and partners globally EnergyQuote JHA provides local expertise with Global Coverage.
At EnergyQuote JHA we have delivered bottom-line benefits to a wide range of FTSE 100, FTSE 250 and Fortune 500 clients. Wider services include a web based e-sourcing system for power and gas, full bureau services with data monitoring and financial management capabilities, market pricing and analysis, market intelligence publications, workshops, seminars, risk management, carbon and sustainability, generation development and energy and water audit services..
Consolidated as the biggest independent seller of energy in Brazil and experience by having already negotiated more than R$ 45 million of MW and a contracts portfolio of energy and gas superior to $ 20 billion, Ecom Energia acts in the trading of energy and natural gas, in the process of consumers migration to the free market, in the management of energy contracts in the free and captive markets and in the management of contracts for gas supplying.
Founded in 2002, Ecom was the pioneer in implementing instruments which demonstrate to the market its engagement with responsibility and security in operations to buy and sell energy. The company was born to trade energy with innovation, flexibility and transparency, operating with excellence and ensuring total satisfaction of our clients..
EnergyQuote JHA
Ecom Energia
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6
Europe’s Rising Non-energy Costs
Please click here to view the recording of theEurope’s Rising Non-Energy Costs webinar.
7
Non-energy costs in Europe are here to stay...BUT...there are possible actions to mitigate them at least partially
European policy & economic realities
Sustainability Securityof supply
Competitiveness
• Kyoto protocol
• National RES subsidy schemes
• ETS
• Does oneundermine the other?
• 20-20-20 targets
• From a sustainabilitypolicy perspectivenatural gas appears tobe the ideal “bridge”technology
• Is nuclear reallysustainable?
• Growing dependency on imports of fossil fuels
• Ageing infrastructure
• Increase in intermittentoutput from RES
• Need for efficient andflexible power plants
• Does the market sendthe right signals for much needed investments?
• Need for smart grids,which support decentralised powerproduction
• Can Europe pay theprice for necessaryinvestments andsustainable developmentwhilst keeping energyprices affordable andretain key industrieswithin its boundaries?
• Europe has to competewith other regions for“allocation” of fuels e.g.oil, LNG, etc.
Key Drivers at European Level
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8
Underlying Issues
Supply
Grids
Demand
Policy
•Nuclear phase-out•Intermittent RES•Coal & gas bridge technologies•Currently gas ‘not in the money’•The right market signals are currently notthere•Oversupplied market at least in capacityterms
•Is grid investment attractive enough atTSO and DNO level?•Can grids be built quickly enoughparticularly transmission lines (red tape)?•Connecting off-shore wind-parks•Does Germany need a differentregulation regime for T&D fees?
•2050 target of 80% RES•Some sectors literally exempt from nonenergycosts•Are German non-energy cost exemptions(e.g. for EEG levy) in line with EU law?•Integrating RES into the market•Does the market design need to change?
•Increasingly I&C consumers turn towardsco- and/or onsite generation•EU economy expected to remain‘sluggish’ in the near term•Not enough peak demand to consumeRES output on a sunny/windy day
The ‘Energiewende’ a $717bn project
9
Non-energy Cost Breakdown
NB – Calculations are based on a representative consumer with 10,000 MWh/a and 2.5 MW maximum demand.Possible discounts or exemptions from taxes & levies have not been taken into account.
16.521.10
20.50
12.00
16.391.10
20.50
20.47
16.86
1.10
20.50
35.53
16.97
1.10
20.50
35.92
18.98
1.10
20.50
52.77
19.95
1.10
20.50
61.39
21.12
1.10
20.50
67.52
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Discounts & exemptions
Self-generation Energy efficiency
• EEG: Grünstrom-Privileg & Härtefall-Regelung
• Power tax: discountfor manufacturingenterprises andcertain processes
• Power tax:Spitzenausgleichcompensation
• T&D: StromNEV§19(2) discounts(exemptions deemedillegal in Mar-13)
• CHP with FiT for 10 years or up to 30,000h
• RES installation withor without FiT
• Avoid T&D costs andtaxes & levies onevery MWh produced
• Under currentconditions new CHP projects typicallyamortise within 3 years (2 in
extreme cases) subject to exact circumstances
• Make or buy
• Can Europe pay theprice for necessaryinvestments andsustainable developmentwhilst keeping energyprices affordable andretain key industrieswithin its boundaries?
• Europe has to competewith other regions for“allocation” of fuels e.g.oil, LNG, etc.
What can one do…?
Mitigating costs
Germany –A Story of Many Taxes & Levies
11
Grid investment Supply Policy
Dutch electricity and natural gas grids wellinterconnected withneighbouring countries
•Significant imports fromGermany (RES)
•Imbalance risks andcongestion make further 380 kV grid
investments necessary, albeit on a far smaller scale compared to Germany
•Considerable newgeneration comingon-line
•Large fleet of installedcentralised CCGTs
•Large coal fired plants along the coast•Profitability of many plants at risk
•Little political support for capacity market
•NL benefit hugely from rapidGerman RES development
•The largest “Dutch”generators are not actually Dutch
•No significant support for large-scale RES projects
•Netherlands are not oncourse to meet Kyoto GHG reduction targets
•A self-imposed 2020 target of 6 GW of wind capacity (on-shore) looks
ambitious but achievable
• Moderate long-term RES subsidies available
…if the underlying issues are quite similar?
How and why does the situation in the Netherlands differ…
The Netherlands –Much Ado About Nothing?
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12
Development of Non-energy Costs
NB – Calculations are based on a representative consumer with 10,000 MWh/a and 2.5 MW maximum demand.Possible discounts or exemptions from taxes & levies have not been taken into account.
Transmissie & distributie/ T&DEnergy tax/ Regulierende energie (REB)Renewable surcharge/ Opslag duurzame energie (ODE)
35.00
30.00
25.00
20.00
15.00
10.00
5.00
0.002009 2010 2011 2012 2013 2014 (F) 2015 (F)
14.00
10.78 10.99
13.30 14.00
11.0911.29
15.43 16.14
11.50
0.400.71
11.73
16.95 17.79
11.96
1.22
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Discounts & exemptions
Self-generation Energyefficiency
• REB: Discount onhighest tax band (REB)via energy efficiencybenchmarks (MJA)
• REB: households andcooperatives are eligiblefor netting consumptionvs. production even foroff-site generation fromJul-13 (up to 5 MWh/a)
• Other: No otherdiscounts e.g. on ODE
• CHP
• Avoid T&D costs andtaxes & levies on everyMWh produced
• Under current marketconditions new CHPprojects take long toamortise
• Feasibility depends very much on individualcircumstance
• Timing for new projectsmay prove crucial(changing legislation)
• Participation in energyefficiency benchmarks(MJA)
• EMS e.g. ISO 50001• The cheapest MWh isthe one that is not beingconsumed
What can one do…?
Mitigating Costs
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14
Development of non-energy costs
NB – Calculations are based on a representative consumer with 10,000 MWh/a and 2.5 MW maximum demand.Possible discounts or exemptions from taxes & levies have not been taken into account.
A comparison ofGermany & the Netherlands
15
Conclusions
Markus KrausEU Operations Manager, EnergyQuote JHA
Ask an Expert
• Europe is not one homogeneous area in terms of non-energy cost. Every single one of the 28 member states has introduced national regimes, schemes, etc. • Non-energy costs can be very high, sometimes higher than the actual commodity price, and often offer more opportunities for cost optimisation than the area of actual procurement (markets, suppliers, etc.).
• Local knowledge is required to get the best out of each and every market.
• In order to obtain certain rebates/discounts/exemptions, the involvement of 3rd parties may become necessary (e.g. lawyers, auditors, etc.).
• Some non-energy costs can be forecasted relatively easily, whilst others are more difficult to budget for effectively.
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16
Managing Brazil’sHigh Volatility Power Market
Please click here to view the recording of theManaging Brazil’s High Volatility Power Market webinar.
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Brazil’s power prices are volatile and driven by the rain...BUT...there are mitigation strategies to help manage your exposure
Managing Brazil’sHigh Volatility Power Market
Brazilian Power MarketOpen Market Entrance Barriers
• Open market represents 25% of Brazilian power consumption and around 60% is based on primary and secondary industry sector.
• Free consumers represents 23% of Brazilian power consumption and can procure power produced by any source.
• Special consumers represents 2% of Brazilian power consumption and receives a 50% or 100% discount on the Distribution System Tariff.
• BrazilianPower Market
• Short-TermPerspectives
• Power Prices
Free Consumers Contracted Demand Supply Voltage
Special Consumers Contracted Demand Supply Voltage
Conected before July/1995 Conected after July/1995
≥ 3MW≥ 3MW
≥ 69 kVAny
Must purchase energy fromsmall hydros, biomass, wind orsolar plants.
≥ 0.5 MW Any
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Generation Sources
Short Term Market Price (PLD)
• Hydro-Thermal power system with several run-of-the-rivers plants. Generation capacity (120 GW) is100% above average consumption (60 GW average). Assured capacity 63 GW average.
• Hydro generation depends on conjuncture conditions.
• Centralized and cost-bases dispatch. Expensive sources are used under adverse hydrologicalconditions.
• PLD is based on Operating Marginal Cost (OMC)
• Rain is the main power price driver, which means spot prices are very volatile.
• OMC is established by a Independent System Oper-ator (ONS) using a chain of computational models(NEWAVE and DECOMP) developed to calculate the optimal hydro-thermal dispatch.
InflowsStorage LevelsLoad ForecastNew Power PlantsTransmissionRisk Aversion CurveDeficit Cost
NEWAVE+
DECOMPOMC/PLD
Initial Condition
Generation Capacity - 2012 Power Generation - 2012
HydroNatural GasBiomassOilCoalNuclearWindOther
70%9%8%6%2%2%2%1%
HydroNatural GasNuclearBiomassOilWindCoalOthers
84%6%3%3%1%1%1%1%
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Short Term Market Price (PLD)
• Spot prices are highly volatile and don’t provide a clear economic signal for investors.
• Hydro systems are designed to ensure load supply under adverse hydrological conditions, which occurvery infrequently.
• Most of the time there are temporary energy surpluses, which result in very low marginal costs.
• In a very dry period, spot prices increase sharply.
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• In an overview, the last rainy season was below the historical average in the whole country.
• SE/CW: In May the precipitation was below the historical average
• S: The precipitation in May was lower than in April.
• NE: The precipitation has been below the historical average since Dec/12.
• N: In May/13 the precipitation was above the historical average.
In March the precipitation was below the average inSE/CW, NE and N regions
Short-Term Perspectives
Precipitation Anomaly – Jan/13
Precipitation Anomaly – Feb/13
Precipitation Anomaly – Apr/13
Precipitation Anomaly – Mar/13
Precipitation Anomaly – May/13
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• yearly inflow occurs between January and April.
• The National Interconnected System (NIS) inflow was below the historical average between Ago/12 and Mar/13.
• From April to May the NIS inflow decreased from 110% to 85%.
• Reservoirs has allowed the integration of renewable electricity sources with seasonal production patterns.
• Due to environmental concerns, Brazil has been projecting smaller hydro plants reservoir over theyears.
• The relationship between storage capacity and consumption will decrease in the next years.
• Probability of ration plan is very small in 2014.
In April the inflow was above the average in the NIS
NIS stored energy has been the lowest for the last 10 years
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• Available thermal capacity is no higher than 14 GW and represents 12% of the system generation capacity or 24% of the average consumption.
• Thermoelectric generation has been extremely high in Brazil since September/12.
• In Mar-13 the thermoelectric generation was around 11,6 GW, as a consequence of persistentlyunfavorable hydrologic conditions and low storage levels.
Thermal plants at full speed
• The Brazilian ISO (ONS) can order additional dispatch of thermal generation in order to improve thesecurity of supply. This additional cost (PLD - thermal plant cost) used to be paid by consumers througha sectorial charge (ESS).
• Due to adverse hydrological conditions, ISO has been ordering the dispatch of all available thermalplants.
• ESS has reached R$ 25/MWh in Feb-13 (10% of the total electricity cost).
• On the 8th of March the National Council for Energy Policy (CNPE), trough the Resolution 03/2013,tried to reduce this impact for consumers and ensure that stop prices (PLD) will better reflect the realdispatch.
• Up to Aug-2013, all players will pay 50% of additional generation cost and buyers in short term market at CCEE will pay the other 50%.
• In Aug-2013, CNPE expects that new PLD methodology will better reflect the real dispatch.
Changes in the methodology of spot price (PLD)
Power Prices
11.6GW
23
• Brazilian spot prices are very volatile and are driven by the rain.
• Thermal generation will remain high.
• Considering the reservoirs levels and thermal availability the probability of arationing plan is very small in 2014.
• Quantify changes in PLD methodology is impossible.
• Impacts in long term prices depends on the PLD methodology.
• Lack of liquidity in power market, due to the high volatile in spot prices and uncertain in PLD new methodology.
Negotiations are basically over-the-counter
Conclusions
Vitor AtikAccount Executive, Ecom Energia
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24
India, a Story of 3 Rs:Regulation, Renewable & Reform
Please click here to view the recording of theIndia - A Story of 3 Rs: Regulation, Renewables & Reform webinar.
25
Reform of India’s electricity market is incomplete…BUT ...it is possible to benefit from open access opportunities.
• GDP growth 5.1pc in FY 2011-12
• Electricity demand growth 10-12pc/pa (to 2017)
• Power deficits between 9 and 13pc• Installed capacity 211,766 MW (March ’13)• Electrification 65pc• State utility losses 200,000 Cr ($36bn) – Jan ’12• T&D losses 28.4pc (FY 2012)• Renewable Energy 12.2pc of installed capacity, 4pc of generated electricity
• Solar generation target of 20 GW by 2020
• Long-term power market 90pc of capacity (Jan ‘12)
• Foreign direct investment allowed in generation, transmission and distribution• FDI of $1.25bn in FY 2010/11 (5.4pc of total sector investment)
• Private equity investment of $2.1bn in 2010 (46pc of total PE)
• Two power exchanges – IEX and PXIL• 40 licensed traders• Functional market for Renewable Energy Certificates
• Record annual capacity of 12.2 GW commissioned in 2010/11
• Power market regulated by CERC– Tariffs regulated by
regulatory commissions(state and central)• Competitive bidding for tariff determination for power procurement (excl. Hydro/RE)
• Return on equity of around 15pc (+/-1pc) allowed through tariff determination
• Merchant power preferably sold in short-term market (higher prices)• Downward price trend since power exchanges established• Special incentives for renewable energy in Indian Electricity Grid Code• Spot power exchange prices based on double-sided closed auction
Overview-Power Sector
Generation and Generation SharesGeneration Generation Shares
State SectorCentral SectorPrivate Sector
41%30%29%
CoalHydroRESGasNuclearOil
57%19%12%9%2%1%
15pc
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Interconnections andRegional LoadsInterconnections
Regional Loads
• Deficit region• Snow fed river hydro
• Highly weather sensitive load• Adverse weather
conditions, fog and dust storm
• Industrial & agricultural load
• High load (40% agricultural load)• Monsoon dependant hydro
• Low load• High coal reserves• Pit head base load
plants
• Very low load• High hydro potential
• Evacuation problems
• 2006-07 Capacity: 2080• 2011-12 Capacity: 4180• Requirement 2011-12: 1535
• 2006-07 Capacity: 4220• 2011-12 Capacity: 13620• Requirement 2011-12: 10559
• 2006-07 Capacity: 1760• 2011-12 Capacity: 6660• Requirement 2011-12: 6036
• 2006-07 Capacity: 1680• 2011-12 Capacity: 3780• Requirement 2011-12: 1535
• 2006-07 Capacity: 3120• 2011-12 Capacity: 3620• Requirement 2011-12: 2828
• 2006-07 Capacity: 1240• 2011-12 Capacity: 2840+3000• Requirement 2011-12: 3264
27
Gross utility generation Power station consumptionNet utility generation Purchases / imports Net electricity for supply Electricity sold Transmission losses
FY 2011GWh
GrowthFY 2010/11
CAGRFY 1971/11
FY 2011 Growth CAGRFY 2010/11 FY 1971/11
15.149.7815.9111.0412.857.1713.34
5.578.619.678.295.847.676.98
GWh pc
272,589131,967169,32667,28914,00339,218694,392
39,2619
24.389.692.025.65
844,84652,380 792,466 16,989 809,455663,392146,063
6.15.38 6.15 10.62 6.24 8.67 -3.57
6.857.356.8214.56.876.866.95
Electricity Supply
Electricity Consumption
Industry Agriculture Domestic Commercial Rail / Transport OtherTOTAL
Electricity Supply &Consumption
– Tamil Nadu accountsfor a third of total RES,followed by Maharashtra, U.P and Andhra Pradesh
– Biomass availabilityestimated at 540m tons/year that can generate 16 GW
– Geothermal generationpotential
– Estimated renewable energy potential from commerciallyexploitableresources:• wind (45 GW);• Small Hydro (15 GW);• Biomass/Bioenergy (25 GW)
– Solar potential(pv and solar thermal)
– Average daily irradiation
Renewable Energylargest installed wind capacity in the world
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Wind Capacity
Wind capacity (2009-10) MW
Capacity Potential PotentialMW pc MW pc Realised (pc)
245.552,866.311,933.55
35.2376.39
2,733.352,070.926,987.62
1.13.2
17,253.19
14.2316.6111.210.22.1515.84
1240.50.010.02
14,49735,07113,593
8372,9315,9615,05014,152
10,696102,788
14.134.1213.220.82.855.84.9113.77
10.41
1.78.1714.224.2112.8445.85
4149.38
0.0316.79
Wind capacity (2011-12)
Andhra PradeshGujarat Karnataka Kerala Madhya Pradesh MaharashtraRajasthanTamil NaduWest BengalOthersTOTAL
RajasthanGujaratMadhya PradeshMaharashtraWest BengalKarnatakaAndhra PradeshKeralaTamil Nadu
1088.371863.64
229.392077.70
1.11472.75
136.0527.75
4906.74
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Solar Irradiation andGeothermal Provinces
Reform
Solar Irradiation Geothermal Provinces
Pre-2003 Post-2003
6.6-6.46.4-6.26.2-6.06.0-5.85.8-5.65.6-5.45.4-5.25.2-5.05.0-4.84.8-4.64.6-4.4
kWh/sq.m. Heat River Values /Thermal GradientnW/m2 °C/Km
PugaManikaran
Tattapani Bakreswar
Jalgaon
Tuwa
Unai
72°
16°
20°
28°
32°
36°
76° 80° 84° 88°
Bay of BengalArabian Sea
HYMALAYA
HYMALAYADELHI
SOHANA
SONATACAMBAY
BOMBAY
WEST COASTGODAVARI
MAHANADI
468/234
93/70
129/59
120/60 280/90200/90
104/60
76-96
RegulatedMarket
IPP IPPGenerator Generator
Transmission
Distribution
Bulk Supplier
Retail Supplier
Customer CustomerCustomer CustomerCustomer Customer
Transmission & Bulk Supply
Distribution & Retail Sales
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30
Open Access TransactionsBilateral• a PPA is signed between buyer and seller, usually facilitated by a trader for a margin;
Collective• electricity is traded through an exchange (either IEX or PXIL) by exchange members for a fixed margin
Open Access– Long-term open access (LTOA) – allowed for a period of 12 years to 25 years
Intra-state open access – SERC regulations are followed with the same maturitycatregorisations as inter-state open access.
Open access threshold is 1 MWInter-state open access – CERC regulations are followed with open access categorised as:
– Short-term open access (STOA) –allowed for a period of less than a month
– Medium-term open access (MTOA) – allowed for a period of 3 months to 3 years
Regulation“Non-discriminatory provision for the use of transmission lines or distribution systems or associated facilities with such lines or system by any licensee or consumer or a person engaged in generation in accordance with the regulations specified by the Appropriate Commission”
Two types of transaction are possible:
Electricity Act, 2003:
Market Trading Structure
RegulatedMarket
IPPs Other Generators Captive Generation
Customer Customer Customer
Distribution
Transmission
Power Ex Traders
31
Open Access Charges
Conclusions
Open Access Example
Additionally, consumers have to fulfill the renewable purchase obligation, by purchasing a share of the electricity from renewable generation.
5. WRLDC and SRLDC have to ascertain transmission adequacy in their regional transmission systems6. All concerned require common understanding on treating/sharing transmission losses and levy on transmission/wheeling charges for the use of intra-state and inter-state systems.
• Connectivity charges• Transmission charges and losses• Wheeling charges and losses• Cross subsidy surcharge• Local distribution company charges
Reform good on paper, poor in practice
Infrastructureinvestment required in generation capacity, transmission and distribution
Competition cross-subsidies and non-cost reflective tariffs constrainmarket development
1. The company and distributor have to agree on terms and conditions of sale2. The company has to get the consent of MSEB and “no objection” of MSERC3. Distributor has to get consent of APTransco and “no objection” of APSERC4. MSLDC and APSLDC have to ascertain transmission adequacy, and agree to metering,scheduling, accounting and settlement
A company in Maharashtra wanting to sell 100 MW to a distributor in Andhra Pradesh has to meet the following steps:
In addition to the power purchase cost the following costs are levied:
Jeremy WilcoxAssociate Consultant, EnergyQuote JHA
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32
Philippines and Singapore- Deregulation Opportunity
Please click here to view the recording of thePhilippines and Singapore - Deregulation Opportunity webinar.
33
Singapore’s electricity market is exposed to oil price risk…BUT…these risks can be effectively hedged
Singapore – Overview (2011)
Schedule
Petroleum products Crude oil Natural gas
• Market Fundamentals• Regulation, Reform and Competition• Opportunities
• Market Fundamentals• Open Access
GasPetroleum products Other
Commerce / ServicesIndustrial / Goods Other
105.846.3 8.1
66.028.95.1
78.018.43.6
69.026.64.4
Mtoe pc
pc
pc
Energy imports: 160.2mtoe
Singapore Philippines
Generation Output: 46TWh
GDP: S$326.8bn
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34
OverallIndustryCommerceHouseholdsTransportOther
ContestableIndustryCommerceTransportOther
37.70914.72714.2966.5141.653519
41.02116.53015.0946.7182.145535
41.72516.77515.6536.5602.278459
40.237.515.75.51.1
25.15313.9449.6091.526
74
27.80415.49510.2302.006
73
28.21415.58410.4602.126
74
55.237.17.50.2
2009 2009 2010 2010(pc)
Electricity Sales, GWh
Regulation Timescale
Electricity Industry Structure
Vertically integrated & government owned through the Public Utilities Body (PUB)
PUB transfers gas and electricity activities to Temasek Holdings, which creates a holding company for generation, transmission and market services companies.
Energy Market Authority created to regulate the market; Energy Market Company formed as EMA
subsidiary to operate Singapore Electricity Pool. Liberalisation process commences.
National Electricity Market of Singapore (NEMS) formed.
Contestable threshold at 10,000kWh/month.
Contestability threshold will be lowered to full retail contestability in two phases.
Generator
Grid Company
Market Support Services Licensee Electricity Retailers
Non-Contestable Customers Contestable Customers
1995pre
35
2005200620072008200920102011
100.0141.4127.9196.6134.5167.3192.2
100.0119.4114.4144.5116.0133.0147.2
HSFO Tariff
YTL PowerSerayaSembCorp CogenPacificLight PowerKeppel Merlimau CogenTuas Power GenerationShell Eastern Petroleum (C)Senoko Waste to EnergySenoko EnergyExxonMobil Asia Pacific (C)Keppel Seghers Tuas Waste to Energy PlantTuaspringTP UtilitiesSingapore Refining Company (C)
Keppel ElectricSembCorp PowerTuas Power SupplySenoko Energy SupplySeraya EnergyPacificLight EnergyDiamond EnergyHyflux Energy
Biofuel IndustriesPfizer Asia PacificBanyan UtilitiesISK SingaporeSingapore Oxygen Air LiquideMSD InternationalGreen Power AsiaSingpaore LNG CorporationCGNPC Solar-Biofuel Power (Singapore)Eco Special Waste ManufacturingGlaxo Wellcome Manufacturing
Diamond EnergyAir Products SingaporeChesterfield Manufacturing
Generation:
HSFO / Tariff indexation:
Retailers:
Wholesaler (Generation):
Wholesaler(Interruptible Load Service):
Electricity Market Participants
Pricing & Tariff Breakdown
Energy CostsGrid ChargesServices*Admin**TOTAL* Market support services fee** Power system operations and market administration fees
11.85.50.30.117.7
15.35.40.30.121.1
14.55.40.30.120.2
19.95.20.30.125.5
15.34.90.30.120.5
18.34.90.20.123.5
20.94.80.20.126.0
05 06 07 08 09 10 11Tariff Breakdown
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36
Electricity Price
Case Study
Electricity Price, 28 May 2013(S$/MWh)
Tariff History(¢/kWh)
• Remain with SP Services• Buy electricity from an electricity retailer• Buy electricity directly from the wholesale marketas a market participant• Buy electricity indirectly from the wholesale market through SP Services
Manufacturing company operates a 12-hour day between 0900 and 2100 hours, that leaves it fullyexposed to peak rates.It is not economically feasible for company to change its operating hours to benefit from some off-peakrates.
Tariffs reflect the various risk/reward profiles of cus-tomers and their environmental conscience.• Fixed full day tariff• Flexi tariff (peak, off-peak and mid-peak periods)• Indexed tariff (against HSFO and/or FX)• Green tariff
Enter into a customized flexi-tariff where peak rate is increased with the peak period reduced so as toenable the company to benefit from some off-peak supply
Contestable Customer Options
Problem:
Tariff Options
Solution:
Contestable CustomerOptions & Tariff Options
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Time Tier Rate Consumption Cost Time Tier Rate Consumption Cost
0000-07000700-23002300-2400
220260220
01500
390.000000-07000700-19001900-2400
220265220
012525
331.2555.00
Without customization:
TOTAL TOTAL390.00 386.25
With Customization:
Philippines
Oil-basedHydropowerGeothermalCoalGas Renewables
TOTAL
Installed Capacity (MW):
2.9943.4911.7834.9172.861117
3.1933.4001.9664.8672.861
73
3.1933.2911.9534.2272.831
64
16.162 16.359 15.610
2011 2010 2009
Philippines – Fundamentals
CoalDieselGasGeothermalHydropowerRenewables
49.850.2335.597.656.670.01
45.423.040.0050.330.171.04
18.3017.290.007.9456.470.00
Luzon Visayas Mindanao
Regional Generation Mix (pc)
Generation mix as of March 20132011 generation output (GWh): Luzon, 50,017; Visayas 10,456; Mindanao 8,703
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38
HydropowerGeothermalWindOther RE
ResidentialCommercialIndustrialOthers
Population (m)Power demand (pc share)Private distribution utilitiesElectric cooperatives
Own use*System Loss
TOTAL
TOTAL Sales
TOTAL Sales
5.4683.131548131
58.933.85.91.4
1.9971.348431131
13,558,19413,975,28713,975,287
779,129
2,526,6941,324,2403,037,863335,571
2,608,6581,324,3082,902,455331,557
49.877.01058
17.212.0
431
21.611.0
639
4,113,7755,144,668
996,1461,287,799
288,5591,247,112
9.278 3.907
41,706,246 7,224,369 7,166,977
50,964,688 9,508,314 8,702,648
MW pc vs. 2011 (MW)
Luzon Visayas Mindanao
Luzon Visayas Mindanao
Renewable Capacity
Sales & Consumption
Distribution Summary
Planned capacity, 2013:
* Own use includes distribution utilities and generation plant
• Luzon – Visayas 400 MW• Largest Visayas islands of Cebu, Negros, Panay, Bohol, Leyte and Samar are interconnected
• Mindanao – Leyte (Visayas) interconnection planned
Interconnector Capacity:
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Bohol Light Company (BCLI)Dagupan Electric Corporation (DECORP)Manila Electric Company (MERALCO)Subic Enerzone Corporation (SEZ)Visayan Electric Company (VECO)
BoholDagupan
Manila MetroSubic Bay Freeport Zone
Cebu
VisayasLuzonLuzonLuzon
Visayas
Franchise Area Grid
Open Access
Conclusions
• Contestable customers are those with a minimum monthly average peak demand of 1 MWfor the preceding 12 months.
Two supply options:• Local Retail Electricity Supply (RES) company non-regulated business division of distribution utilities authorized to supply contestable customersin their franchise area;
• Open access transition period ends 25 June 2013.
• Retail Electricity Supply companies companies authorized by the ERC to sell, broker, market or aggregate electricityto contestable customers
Aboitiz Energy SolutionsAdventenergyCabanatuan Electric CorporationDirectPower ServicesEcozone Power Management Ferro EnergyFirst Gen Energy SolutionsGlobal Energy Supply Corporation GN PowerGN Power Mariveles Coal Plant Corporation
KratosMasinloc Power PartnersPremier Energy Resources CorporationPRISM EnergySan Miguel Electric CorporationSEM-Calaca, SN Aboitiz Power TEAM PhilippinesEnergy CorporationTrans-Asia Oil and Energy Development
Local RES companies:
RES Companies:
Efficient liberalised electricity market which would benefit from a competitive gas market
Significant competitive market potential which will benefit from infrastructure investment
Singapore Philippines
Jeremy WilcoxAssociate Consultant, EnergyQuote JHA
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40
The Impact of U.S. Exports onEnergy Markets
Please click here to view the recording of theUnited States - Impact of Fuel Exports on Domestic Prices webinar.
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The export of natural gas presents a potential rebalancing agent…BUT…the delta between U.S. and EU/Asia prices continues to shrink
Natural Gas Supply
2007 2012
The U.S. supply landscape has changed dramatically over the past five years, with domestic production rising and imports falling
52.8 Bcf/day 83% 65.7 Bcf/day 94%
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42
• With domestic production expected to continue to rise throughout the next 10 years, the U.S. is moving toward becoming a net exporter of natural gas by 2020
Source: EIA
LNG Exports Update• In early May, Freeport LNG Export was granted Department of Energy Approval to export domestically-sourced to non-FTA countries- Freeport’s 1.4 Bcf per day facility still needs to pass an environmental test and receive FERC approval before construction- DOE approval was the first since Sabine Pass was cleared last year
• Sabine Pass secured financing for Trains 3 & 4 and immediately began construction
• Sabine Pass filed for the approval of two additional trains (5 & 6) that would add about 1.2 Bcf per day of additional capacity
• Two additional facilities have gained preliminary approval in Western Canada totaling 3.3 Bcf per day on top of Kitimat’s already-approved 1.3 Bcf per day facility- Canadian LNG exports could have residual impacts on the U.S. landscape
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• Of the 27.5 Bcf per day of export capacity that has been proposed in the United States, only 3.6 Bcf per day has been granted DOE approval
Source: Platts *Freeport is still awaiting environmental review and FERC approval
Sabine PassFreeport*SP Trains 5&6CambridgeCameronCove Point Gulf Coast LNGSouth TexasCorpus Christi Elba IslandGolden Pass Gulf LNG Clean EnergyJordon CoveLavaca BayMagnolia LNG Maine Pass EnergyOregon LNG ExportTrunkline Lake CharlesWaller
Terminal
2.21.41.21.11.70.72.81.01.80.32.01.50.91.31.03.11.32.00.2
ApprovedAppliedAppliedAppliedAppliedAppliedAppliedApplied
ProposedProposedProposedProposedProposedProposedProposedProposedProposedProposedProposed
Capacity (Bcf per Day) Status
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Global Price DisparityLNG exports to Europe and Asia are still profitable, but when taking into account liquefaction and shipping charges, the margins have declined over the past 12 months
Henry Hub Gas Price+ $2.50 Liquefaction+ $0.60 Fuel+ $1.00 Shipping (Europe)+ $2.80 Shipping (Asia)
Source: Platts
LNG Exports Likely Outcome• The U.S. will likely end up with 6-7 Bcf per day of LNG export capacity by the end of this decade- This new demand is one of several “rebalancing agents” that will help to relieve oversupply in the natural gas market
• LNG exports are supportive of deferred natural gas futures prices- This has already been demonstratedon the forward curve- U.S. export capacity will not bring parity to global
natural gas prices, but will likely help provide a level of relief to end users in Europe and Asia
• Additional approvals for LNG export facilities face significant risks and roadblocks- Regulatory approval for new facilitieswill remain difficult to obtain- Shifting global market dynamics pose uncertaintyfor long-term projects- Large capital investment provideshigh barrier to entry
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Pipeline Exports to MexicoWith production booming in Texas, natural gas exports to Mexicohave nearly tripled from 2007 levels
• New pipeline projects under constructionwould nearly double export capacity to Mexico
• Norte Crossing project has already been completed, adding 0.37 Bcf per day of capacity– or nearly 10 percent of 2012 levels
• Mexican production has remained stagnant,but the nation hopes to developpotential shale resources in the future
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Canadian Imports Falling • Rising domestic production in areas near the Cana-dian border has diminished the need for natural gas imports via pipeline from Canada
• Imports are likely to continue to decline as Marcellus production is brought to market in the U.S.
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Conclusions•The U.S. is on track to become a net exporterof natural gas by the end of the decade
•Approved LNG export facilities will potentiallybe up and running within the next 2-4 years,with more projects in the planning stages
•Exports to Mexico are growing rapidly,while imports from Canada continue to fall
•Combined with other growing demand sectors– namely power generation and industrial –natural gas exports are likely to be supportiveof pricing, even as production continues higher
Andy HuenefeldMarket Analyst, Fellon-McCord
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Europe’s rising non-energy costs• Europe is not one homogeneous area in terms of non-energy cost. Every single one of the 28 member states has introduced national regimes, schemes, etc. • Non-energy costs can be very high, sometimes higher than the actual commodity price, and often offer more opportunities for cost optimisation than the area of actual procurement (markets, suppliers, etc.).• Local knowledge is required to get the best out of each and every market.• In order to obtain certain rebates/discounts/exemptions, the involvement of 3rd parties may become necessary (e.g. lawyers, auditors, etc.).• Some non-energy costs can be forecasted relatively easily, whilst others are more difficult to budget for effectively.
Managing Brazil’s High Volatility Power Market• Brazilian spot prices are very volatile and are driven by the rain.• Thermal generation will remain high.• Considering the reservoirs levels and thermal availability the probability of rationing plan is very small in 2014.• Quantify changes in PLD methodology is impossible.• Impacts in long term prices depend on the PLD methodology.• Lack of liquidity in power market, due to the high volatile in spot prices and uncertain in PLD new methodology.
India, a story of 3 Rs: Regulation, Renewable & Reform• Reform - good on paper, poor in practice.• Infrastructure - investment required in generation capacity, transmission and distribution.• Competition - cross-subsidies and non-cost reflective tariffs constrain market development.
Philippines and Singapore - Deregulation Opportunity• Philippines - significant competitive market potential which will benefit from infrastructure investment.• Singapore - efficient liberalised electricity market which would benefit from a competitive gas market.
The Impact of U.S. Exports on Energy Markets• The U.S. is on track to become a net exporter of natural gas by the end of the decade.• Approved LNG export facilities will potentially be up and running within the next 2-4 years, with more projects in the planning stages.• Exports to Mexico are growing rapidly, while imports from Canada continue to fall.• Combined with other growing demand sectors – namely power generation and industrial – natural gas exports are likely to be supportive of pricing, even as production continues higher.
Global Energy Market Conclusions
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Audio Recordings
Please click on the image below to view the recording of theUnited States - Impact of Fuel Exports on Domestic Prices webinar.
Please click on the image below to view the recording of the Philippines and Singapore - Deregulation Opportunity webinar.
Please click on the image below to view the recording of theIndia - A Story of 3 Rs: Regulation, Renewables & Reform webinar.
Please click on the image below to view the recording of the Managing Brazil’s High Volatility Power Market webinar.
Please click on the image below to view the recording of the Europe’s Rising Non-Energy Costs webinar.
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