Inenco RE
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There are four main components of income for your renewable energy generator:

1. Delivered electricity price
2. Renewable Obligation Certificate (ROC) price
3. Levy Exemption Certificate (LEC) price
4. Embedded benefits

1. Delivered electricity price

The wholesale electricity price in the UK is very volatile, this volatility reflects the fact that the UK's electricity system has to be constantly balanced by National Grid to ensure that demand meets supply and at the right frequency on a second by second basis. The process of system balancing usually involves bringing online generators to replace faulty ones or ramping up supply at peak times of day.

Longer term, the price of electricity is linked to:

  • The cost of producing it

  • The certainty of it being delivered by a sufficient number of power stations

  • The price of the gas, oil and coal that run a large proportion the UK's power stations.

These factors directly affect the end price paid by consumers for electricity.

The contracts for the delivery of this electricity are traded ahead of time in bilateral deals between suppliers and generators. The indexed platform these contracts are traded on mean that suppliers who require the electricity to power homes can offer to buy their quota from generators who bid into the market the amount they wish to receive for their electricity. The electricity can be bought day ahead, month ahead, even out as far as three years ahead.

The system balancing also means that if generators cannot deliver this electricity due to unforeseen circumstances such as a fault outage or, suppliers need to buy more due to increased customer demand, they must satisfy these contracts by buying or selling in the open market which further increases the volatility of energy prices.

The prices awarded to an individual generator is based on these wholesale market prices. Most suppliers will take a view as to the reliability of the plant and take a margin as an insurance policy to cover the risk of energy not being delivered i.e. for a wind turbine, insurance in case the wind does not blow! There is no standard methodology for this “imbalance premium”, the only way to check is to get a number of quotations for the delivered energy price.

 
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Why Choose Inenco RE:?

Inenco RE: is different:

  • You choose your attitude to risk and how far to price the contract into the future. You will be advised at every step of the way the right decision to make from our expert team of energy analysts.

  • You will make the profits from a rising energy price, it’s widely recognised that we do not have enough generation in the UK.

  • This shortage is likely to continue for the next few years, keeping prices up (see Inenco’s acclaimed report The Generation Gap).


Risk attitude, delivered energy prices and future strategies will be sent to you monthly in a generation report giving an overview of the constant monitoring required for your generator. 
 

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2. Renewable Obligation Certificate (ROC) price
The Renewables Obligation has been set by the government as a target for the amount of renewable energy it is mandatory for UK electricity suppliers to provide.

The UK electricity suppliers can satisfy this obligation in two ways:

  • Pay the "Buy Out Price".
  • Present Renewable Obligation Certificates (ROCs) gained from renewable generation.

 

What this means to you:

  • Generators of renewable electricity will currently receive one ROC per Megawatt hour (MWh) of electricity they generate. The suppliers will purchase ROCs from the generators at this years buy out price. This years price is £35.76 per MWh and will rise year on year in line with RPI, although this is not the only value you the generator will see from the ROC.

  • The suppliers who pay the buy out price (which represents they do not have title to a sufficient amount of renewable energy) do so to Ofgem who collect this fine and recycle it to ROC holders, this fund is known as the Renewables Obligation Buy Out Fund (ROBOF).

  • The size of the fund varies yearly dependant on the percentage of the renewables obligation and the amount of renewable electricity produced. This means that the market price for ROCs constantly varies, at the last ROC auction held on 10th April 2008, the average ROC price was £51.39.

  • The Renewables Obligation is currently being changed to give more support to emerging and useful technologies such as waste to energy and anaerobic digestion. The bill is currently going through parliament having completed the consultation stage intact, and we expect to see this ratified in Q2 2008.

The government has guaranteed backing for the Renewables Obligation until 2027. The length of entitlement to extra support for emerging and useful technologies will be established when the legislation is released later this year.

 

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3. Levy Exemption Certificate (LEC) price
The Levy Exemption Certificate can be used by commercial energy users to claim relief from the Climate Change Levy which is charged on all non domestic electricity bills.

The levy is collected by the government and spent on initiatives to tackle climate change. Levy Exemption Certificates are issued to generation embedded in the electricity distribution network who show a good efficiency or are renewable generators. The certificates are bought by electricity users as part of a green energy tariff. Essentially the Climate Change Levy is still paid by the user but the use of this for of green energy is used to demonstrate good social responsibility.

The climate change levy rate for this year is £4.56 per Megawatt hour (MWh) and rises in line with RPI year on year. Inenco will give you 100% of the value from your Levy Exemption Certificates.
 

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4. Embedded benefits
For the most part, renewable generation will be connected to the electricity grid exporting its energy.
There are two separate sections of the grid:
 
The Transmission Network

The transmission network is the extra high voltage power lines which operate at up to 400,000 volts. Most large electricity producers are connected to the transmission network to carry the electricity over long distances to where it is required. By doing this, some of the energy in the electricity is lost over the distance the electricity travels and the heat given off.

The Distribution Network

The distribution network is all electricity cabling and sub stations that carry less than 132,000 volts. These cables carry pre determined voltages all the way down to 230 volts which are used in domestic properties. Most renewable generation will be connected at these lower voltages and because of the locality of putting your generator close to properties that are using the energy, some payments can be received.
 
Because there is a net power flow from North to South in the UK due to most major stations being located in the North of the country, the payments are generally greater the further South in your country you build your generator.
 
These payments are known as embedded benefits and consist of four components:

  • Transmission Losses 
    Dependent on the electricity demand in the vicinity of your renewable generator, the actual electrical export of your generator will be multiplied by a factor greater than one to reflect the lack of losses over the power lines.

  • Transmission Network Use of System (TNUoS or Triad charge)
    Three times a year the electricity system operator randomly tests the output of every electricity generator. This results in a charge levied upon major electricity producers to reflect the strain they are putting on the Transmission Network, with most Renewable Generators, because they are in the distribution network this results in them receiving a payment.

  • Balancing Services Use of System charges (BSUoS) 
    It is the job of National Grid Electricity Trading Ltd. (NGET) to balance the UK's electricity system to ensure everyone has electricity and at the right frequency. The payments made to generators who produce this electricity and the fines dealt to those who fail to deliver are administered by a company called Elexon on behalf of NGET distributed generators receive a small amount from this fund to reflect their support to the distribution network.

  • Residual Cashflow, Reallocation Cashflow (RCRC or “Beer Fund”)
    At the end of each year there is a small amount of money left over from the BSUoS fund. This is a very small benefit shared between distributed generators.


All of these benefits add up to between £1-5, and Inenco will give you 100% of these benefits, these alone are usually enough to cover all of the services provided under Inenco RE: 
 

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Upcoming Events

Birmingham - 21st June 2012

Get Switched On: Energy Summit

Get Switched On: Energy Summit is designed to show you how to buy better by using advanced energy procurement techniques and use less energy by adopting effective energy management practices. Our experts will show you a number of ways to make changes that will more than make up for the additional costs you will incur under CRC.

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