I asked the LCCC about curtailment compensation under CFDs. They confirmed that they would only be payable if there was a Qualifying Change in Law, which there has not been. There have been no curtailment payments from LCCC, and they don't even have a procedure for re-charging them to retailers if they were to occur.
HH Gas...it is a structural decline and will end up at marginal cash cost of production by late 2020's. Which for US, as it's shale, is much higher than Qatar or Russia.
Qatar undergoing huge expansion for seaborne LNG market...North Field....while Power of Siberia 2 pipeline from Russia to China puts Yamal European gas back into the market in China. Addiong to completed PoS 2.
So US LNG exports have peaked I would guess. So domestic market has to be the dump. Not all volume coming on line has take or pays in place....So global gas going to collapse in price although freight differentials etc will remain....just as they ramp up expensive renewables....
PS..9x more expensive....Henry Hub gas prices inflation adjusted closed at record lows last night...and that is before the new Qatari fields come on.....
US prices are much lower than UK or rest of Europe. But even so, they have declined significantly since last summer. But still well above long term average.
For electricity generation in the UK the best coal price is API2 CIF Rotterdam 6,000kcal/kg. It's effectively exactly what our largest coal fired supply pays - the coal fired station MPP3 at Maasvlakte, Rotterdam right next to the BritNed HVDC converter station which spends more time operating than our own coal fired power. That's $137/tonne right now, and capable of producing electricity for under £50/MWh before green taxes. - half the cost of gas Much lower than Australian prices, although those have finally been coming back down.
Coking coal is now a rare import - so much of our steel industry has been shut down. Probably simpler to look at steel prices. Most of the wind farm jackets are made in China anyway these days.
Yes,I couldn't find a coking coal or met coal price chart on Trading Economics and I wanted to keep the same aesthetic for each chart. Well done for spotting it, but the point I made still stands.
Great article David. I've been involved in capital projects for 30+yrs (asset management through to programme and project delivery) and it is nonsensical to think that interest rates and construction costs wouldn't impact payback. The construction sector (I'm in ultilities) as a whole has tried countless initiatives to reduce costs over time but not been very successful (reducing unnecessary project scope has been the main source as opposed to real productivity improvements) - the reasons are many fold, some within control, many outwith. I think flat construction costs would be a real achievement and anyone assuming reductions is throwing investment money away. Once again the complexity of markets outwits the blunt actions of Govts. Who pays for these errors? I'm not holding my breath.
You can extract data on individual wind farm production from the Renewable Energy Foundation website, digging down to per month per wind farm. Also the Low Carbon Contracts Company provides details by CFD of daily generation, CFD payments, production weighted day ahead average prices and actual strike prices going back to the beginning. You want Actual CfD Generation and avoided GHG emissions from their data portal.
I found that Beatrice appears to have managed to avoid its CFD in part, with only 1533GWh reported under the CFD compared with 2084 GWh in its most recent financial year.
Yes. I suspect there's something wrong with the REF data. I don't think they can "avoid" reporting production under the CfD. If their realised price is above CfD strike, then they should refund the extra. But I am all ears if you know different.
I don't think a wind farm on an expensive CFD would ever get paid to curtail. There would always be cheaper curtailment options, unless they would otherwise get zero or negative income because of 6 contiguous hours of negative day ahead reference prices. That happens rarely. Usually the price is bid up to zero or above after 5 hours even if the seventh hour is negative.
I'm not sure about this. If they have a CfD at £180 say, they can bid to be constrained off, say at £50. Then they go to the LCCC and demand compensation to take them back up to £180. And because the grid constraints framework only prevents them supplying constrained power to the transmission grid, if they can sell it down a private wire they can potentially get another chunk of money on top.
The private wire answer maybe makes more sense (bypassing the CFD), especially since the missing 551GWh appear to have been sold at an average £254/MWh i.e. generated £140m of revenue at above average market prices that would have resulted in CFD repaymentsof about £90/MWh. That's huge in the context of total curtailment. This was the first year when there was not close alignment between the accounts and the LCCC data. If curtailment were involved it would have been evident in FY20/21.
I investigated curtailment behaviour back in 2020 when there were more negative prices looking at B1630 reports from BM Reports by settlement period for selected windfarms, finding that CFD wind only curtailed when prices were negative for 6 hours continuously, but otherwise low ROC wind dominated curtailment. I also read the CFD Standard Terms in detail. They only allow for payment against production. National Grid are obligated to pursue the cheapest to curtail, which is why Moray with no CFD or ROCs gets curtailed by marginally undercutting onshore wind on 1 ROC. If you have a CFD at £180, you are guaranteed to be paid £180 if you produce. Also, I ran a cross check on the CFD payments vs weighted average price per day les strike on the reported volume. On days with negative reference prices the CFD payment is capped at the strike price - i.e., it is lower, not higher.
I checked the planning submissions for Blackhillock where Beatrice ties in to the grid. Any alternative connection is either closer to landfall, or even offshore. The battery planned at Blackhillock was only in planning in 21/22 and is still not built.
Hmm, if they include constrained production, then that ends up 1) Understating the subsidy per MWh actually produced and b) Overstates their actual load factor.
The more I look at this stuff, the more horrified I become.
Arguably it gets their load factor right, because they could have generated but grid constraints prevented them. I guess it depends on the question being asked.
I asked the LCCC about curtailment compensation under CFDs. They confirmed that they would only be payable if there was a Qualifying Change in Law, which there has not been. There have been no curtailment payments from LCCC, and they don't even have a procedure for re-charging them to retailers if they were to occur.
yes fair enough...I used to work for one of the largest seaborne coal traders...thermal, coking and coke
HH Gas...it is a structural decline and will end up at marginal cash cost of production by late 2020's. Which for US, as it's shale, is much higher than Qatar or Russia.
Qatar undergoing huge expansion for seaborne LNG market...North Field....while Power of Siberia 2 pipeline from Russia to China puts Yamal European gas back into the market in China. Addiong to completed PoS 2.
So US LNG exports have peaked I would guess. So domestic market has to be the dump. Not all volume coming on line has take or pays in place....So global gas going to collapse in price although freight differentials etc will remain....just as they ramp up expensive renewables....
PS..9x more expensive....Henry Hub gas prices inflation adjusted closed at record lows last night...and that is before the new Qatari fields come on.....
US prices are much lower than UK or rest of Europe. But even so, they have declined significantly since last summer. But still well above long term average.
You use thermal coal price. You need to use the coking coal price. Point remains the same however.
For electricity generation in the UK the best coal price is API2 CIF Rotterdam 6,000kcal/kg. It's effectively exactly what our largest coal fired supply pays - the coal fired station MPP3 at Maasvlakte, Rotterdam right next to the BritNed HVDC converter station which spends more time operating than our own coal fired power. That's $137/tonne right now, and capable of producing electricity for under £50/MWh before green taxes. - half the cost of gas Much lower than Australian prices, although those have finally been coming back down.
Coking coal is now a rare import - so much of our steel industry has been shut down. Probably simpler to look at steel prices. Most of the wind farm jackets are made in China anyway these days.
http://www.dailymetalprice.com/metalpricecharts.php?c=st&u=mt&d=1200
Yes,I couldn't find a coking coal or met coal price chart on Trading Economics and I wanted to keep the same aesthetic for each chart. Well done for spotting it, but the point I made still stands.
not perfect but....u can get ten year data here..
super work by the way....everybody thinks LCoE "costs" fell because of innovation....not risk free rates :)
https://www.investing.com/commodities/coking-coal-futures-streaming-chart
Great article David. I've been involved in capital projects for 30+yrs (asset management through to programme and project delivery) and it is nonsensical to think that interest rates and construction costs wouldn't impact payback. The construction sector (I'm in ultilities) as a whole has tried countless initiatives to reduce costs over time but not been very successful (reducing unnecessary project scope has been the main source as opposed to real productivity improvements) - the reasons are many fold, some within control, many outwith. I think flat construction costs would be a real achievement and anyone assuming reductions is throwing investment money away. Once again the complexity of markets outwits the blunt actions of Govts. Who pays for these errors? I'm not holding my breath.
Great work!
You can extract data on individual wind farm production from the Renewable Energy Foundation website, digging down to per month per wind farm. Also the Low Carbon Contracts Company provides details by CFD of daily generation, CFD payments, production weighted day ahead average prices and actual strike prices going back to the beginning. You want Actual CfD Generation and avoided GHG emissions from their data portal.
I found that Beatrice appears to have managed to avoid its CFD in part, with only 1533GWh reported under the CFD compared with 2084 GWh in its most recent financial year.
Could you clarify. The 1533GWh is from the REF data, and 2084 from the accounts?
The 1533GWh data is from the LCCC. I posted a full analysis at Nalopkt in Paul Homewood's article on the recent Beatrice accounts.
https://notalotofpeopleknowthat.wordpress.com/2023/01/29/beatrice-has-been-paid-614-million-in-subsidies-since-2019/
I've had some input from Gordon Hughes. Can we take this offline please. Whatsapp/Twitter DM/Signal all work for me. Email if we must.
Sending email to info at thegwpf.org marked for your attention. I don't do social media.
Yes. I suspect there's something wrong with the REF data. I don't think they can "avoid" reporting production under the CfD. If their realised price is above CfD strike, then they should refund the extra. But I am all ears if you know different.
Could be that they include constrained MWh. They can claim compensation up to the value of their CfD.
I don't think a wind farm on an expensive CFD would ever get paid to curtail. There would always be cheaper curtailment options, unless they would otherwise get zero or negative income because of 6 contiguous hours of negative day ahead reference prices. That happens rarely. Usually the price is bid up to zero or above after 5 hours even if the seventh hour is negative.
If the part of the grid they connect to, or the interconnector is congested, they may have to be constrained.
There are lots of options for curtailment in Northern Scotland, starting with Moray and anything onshore on ROCs.
I'm not sure about this. If they have a CfD at £180 say, they can bid to be constrained off, say at £50. Then they go to the LCCC and demand compensation to take them back up to £180. And because the grid constraints framework only prevents them supplying constrained power to the transmission grid, if they can sell it down a private wire they can potentially get another chunk of money on top.
The private wire answer maybe makes more sense (bypassing the CFD), especially since the missing 551GWh appear to have been sold at an average £254/MWh i.e. generated £140m of revenue at above average market prices that would have resulted in CFD repaymentsof about £90/MWh. That's huge in the context of total curtailment. This was the first year when there was not close alignment between the accounts and the LCCC data. If curtailment were involved it would have been evident in FY20/21.
I investigated curtailment behaviour back in 2020 when there were more negative prices looking at B1630 reports from BM Reports by settlement period for selected windfarms, finding that CFD wind only curtailed when prices were negative for 6 hours continuously, but otherwise low ROC wind dominated curtailment. I also read the CFD Standard Terms in detail. They only allow for payment against production. National Grid are obligated to pursue the cheapest to curtail, which is why Moray with no CFD or ROCs gets curtailed by marginally undercutting onshore wind on 1 ROC. If you have a CFD at £180, you are guaranteed to be paid £180 if you produce. Also, I ran a cross check on the CFD payments vs weighted average price per day les strike on the reported volume. On days with negative reference prices the CFD payment is capped at the strike price - i.e., it is lower, not higher.
I checked the planning submissions for Blackhillock where Beatrice ties in to the grid. Any alternative connection is either closer to landfall, or even offshore. The battery planned at Blackhillock was only in planning in 21/22 and is still not built.
Hmm, if they include constrained production, then that ends up 1) Understating the subsidy per MWh actually produced and b) Overstates their actual load factor.
The more I look at this stuff, the more horrified I become.
Arguably it gets their load factor right, because they could have generated but grid constraints prevented them. I guess it depends on the question being asked.
As they say.... It doesn't add up...
See my analysis at
https://notalotofpeopleknowthat.wordpress.com/2023/01/29/beatrice-has-been-paid-614-million-in-subsidies-since-2019/
Thanks for that. I will take a look.
Or from REGO certificates data from Ofgem
https://renewablesandchp.ofgem.gov.uk/Public/ReportViewer.aspx?ReportPath=/DatawarehouseReports/CertificatesExternalPublicDataWarehouse&ReportVisibility=1&ReportCategory=2