Inenco RE Renewable energy management John Dodds Business

Inenco RE Renewable energy management John Dodds Business Development Manager understanding energy

Inenco RE • Over 40 years experience • 15 t. W of Energy delivered 2007/08 • Over £ 1 Billion in management • FSA Accreditation • Blue chip client base understanding energy

The need for renewable energy • Government target is 20% of its total energy from renewable sources by 2020 • Currently this figure stands at less than 1. 5% • This target is driven by the need for energy security as much as climate change • In total it is estimated that delivering the target represents £ 100 billion of revenue understanding energy

The scale of the challenge Major increases are required for all three applications % Percentage renewable contribution to total energy consumption understanding energy

The solution • Distributed Generation • Merchant plant • Farm Diversification on a major scale understanding energy

Distributed Generation • Renewable energy projects require: – Land – A secure feedstock source – Customers for the energy • Renewable projects can provide security for: – Heat – Electricity – Income understanding energy

So what is required? • A wind turbine can take up just the space needed to park four cars • A power plant fired by Biogas or Biomass requires approximately two acres • Expertise to develop the project • Effective project managment and finance understanding energy

How is income earned? • Electricity is either sold locally, used on site or sold to energy supply companies over the National Grid • Heat produced can be used on site or sold locally • “Gate fees” for plants that deal with waste • Government subsidies in the form of ROCs understanding energy

Government support • Renewable Obligation Certificates (ROCs) are the mechanism to provide financial support to renewable electricity, they are currently worth £ 50 per m. Wh. The amount of ROCs you receive depends on what type of generator is being used. • Levy Exemption Certificates (LECs) are for the Climate Change Levy charged to all commercial users of electricity, generators of renewable electricity are paid this as a benefit, approximately 0. 45 p per k. Wh. • Renewable Energy Guarantee of Origin (REGO) certificates have no cash value, they provide an audit trail for the energy generated. • All of these are administered by Ofgem. understanding energy

An example income model • The types of income streams for electricity are common to all renewable energy generators • The ROC payments will vary for different types of technology Income stream Pence per k. Wh ROCs 0. 25 – 10 LECs 0. 5 Wholesale elec 5 -9 Gate fees (if applicable) 0 -5 Heat 2 -5 Total 7. 75 - 29. 5 understanding energy

Three ways to export • Private wire • End user PPA • Wholesale energy markets understanding energy

Private Wire • Hard wire to Neighbour or self use • Increased value • No transmission charges • Could reduce grid connection charges understanding energy

End User PPA • Guaranteed price for between 1 & 5 years • Income security • Bankable offering understanding energy

Wholesale Energy Market • Maximise income • Managed trading • Virtual floor understanding energy

What is Virtual Floor? • A robust procurement strategy to reduce downside risk and benefit from market increases • The Virtual Floor strategy is managed using the ‘unlock’ and ‘relock’ tool contained in flexible supply agreements offered by the leading energy retailers. • Dependant on your attitude to risk, we can unlock your fixed energy price to get higher export prices for your generated energy • The share of increased profit gives more than any fixed price deal understanding energy

Unlock/Relock – Technical Expertise 75. 00 Market Fundamental and Technical analysis used to make informed unlock and relock decisions, incl. : - 70. 00 Unlock • Analysis of Oil, Coal Carbon, Currencies etc Price 65. 00 • Relative Strength Indicators 60. 00 • Value at Risk analysis • Supply margin status 55. 00 Lower lock trigger once desired gain has been achieved – OR…. 50. 00 ……Relock when market rise triggers ‘lock in' 45. 00 Time understanding energy

Virtual Floor • Optimises risk management in a PPA contract • Controlled decisions born out of a robust and defendable process • Provides a price floor • Budget income set • Maximum income achieved from unlock and relock is unlimited understanding energy

Overview • Your position is 100% contracted at the initial reference price – ‘Actual’ (£ 70) • Virtual Floor set (£ 69) using agreed ‘buffer’ value (£ 1) • Use ‘unlock’ ‘relock’ to improve ‘Net price’ + return of ‘buffer’ (£ 72) Final Net Price (£ 71 +£ 1) Energy sold using Virtual Floor period ‘Benefit’ (£ 1) £ Initial Contract (£ 70) Buffer £ 1 Virtual Floor (£ 69) Timeline understanding energy

Sell, Buy & Re-Sell: £ 65/MW Buy: £ 60/MW Sell ‘Actual’: £ 54/MW ‘Initial net Sell’: £ 65/MW 0/MW £ 54/MW “profit/loss”: £ 0/MW 6/MW 5/MW ‘Final net Sell’: £ 59/MW £ 0/MW understanding energy

What’s the catch? • The development of a renewable energy project is complex and lengthy: – – – – Extensive feasibility work Arranging finance Supplier selection Project management Electrical and heat network connections Power purchasing agreements Feed or fuel input management Ofgem requirements to claim ROCs LECs and REGOs – In life support understanding energy

Inenco RE can help you • With 40 years experience in the energy market we can help you by: – Producing commercial and technical feasibility studies – Producing the specification of the plant – Project managing the installation, connection and commissioning of your equipment – Providing a favourable power purchasing agreement and managing the sale of ROCs and LECs – Delivering up to date management information understanding energy

Find out more • John Dodds 07970 069054 • Visit our website www. inenco. com 01253 785000 understanding energy