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I-SEM Arrangements for REFIT – DECISION! 18 Jun 2018

I-SEM Arrangements for REFIT- DECISION!

I-SEM Arrangements for REFIT – DECISION!

On Thursday 14th June, the Department of Communication, Climate Action and the Environment (“DCCAE”) released the long-awaited decision on the interaction of Electricity Support Schemes in I-SEM. In this blog post, we outline the key points in the decision and highlight the likely scenarios going forward for generators about to enter into I-SEM PPA negotiations.

 

Reference Markets for Wind

The DCCAE has opted to stick with its minded to decision and push ahead with Option B from that paper. The table below indicates the reference markets for wind as a result;

Inclusion of Costs and Revenues

The decision paper notes that DS3 revenues will continue to be considered as upside for generators who are under subsidy and capacity costs (i.e. penalties for non-delivery in the Reliability Options) will not be covered by REFIT. This has had a largely neutral effect on wind at least, given that most REFIT wind generators have not participated in the capacity remuneration mechanism.

 

Notification to the European Commission

Following the decision paper, the DCCAE has indicated that it will now inform the changes to the European Commission and go through the State Aid notification process. Following this, the paper indicates that the PSO Order will then be changed as necessary.

The paper has not provided any timelines on when they see this process concluding.

 

PPA Renegotiations & Changing PPA Providers

The DCCAE has recognised in the paper that generators are currently progressing through major market change to their existing SEM contracts, and with this in mind it has been recognised that it would be unfair to expect generators to be locked into their existing Supplier with no rights to enter into a more commercially advantageous PPA with a new Supplier.

With this in mind, the paper has provided for two opportunities to change PPA provider, initially prior to the beginning of the next PSO year (PSO Year 18/19) and the following PSO year (PSO Year 19/20), “where it can be demonstrated that such a change is necessary for the continued operation of the project”.

As we have explained in our previous series of Blogs on this point, the DCCAE has allowed existing generators to change Supplier ahead of the next PSO Year by notifying a new Supplier and PPA before 17th August 2018.

 

What Happens Next?

As a result of this decision, we expect most REFIT change clauses to trigger in PPAs which will result in a period of negotiation between the Generator and the Existing Supplier. Should both parties be unable to agree commercial terms, the Generator will have the opportunity to change Suppliers and will hence have up until the 17th August 2018  to finalise and notify arrangements with a new supplier.

Here at ElectroRoute, we’ve been busy finalising new PPAs to add to our 1GW of assets which are already under management and are seeing an increase in interest in our Fixed Price Balancing PPAs and products.

If you would like to discuss your PPA / Supplier Lite options ahead of I-SEM, please get in touch with our team clientservices@electroroute.com

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