Energyst DSR Event: Flex outlook - where's value heading and impact on strategy - The Energyst
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Energyst DSR Event: Flex outlook – where’s value heading and impact on strategy Tom Harper, Baringa Partners 11 September 2019 Copyright © Baringa Partners LLP 2019. All rights reserved. This document is subject to contract and contains confidential and proprietary information. Baringa Confidential
Introduction to Baringa
Company profile Our activities in the energy sector
We are an independent business and technology consultancy. We help 50% of our projects are for customers from the energy industry. The energy
clients using our deep industry insight to run more effective businesses, consulting team comprises 210 employees and over 20 partners.
launch new businesses and reach new markets as well as understand and
navigate industry change. We support a wide range of topics in the energy industry:
Strategy and Regulation
Our clients include: Energy Business and Market Analysis as well as Market Modelling
Energy and Water Retailers Conception and Implementation of new Business Models
Oil and Gas Supermajors Operational Excellence
Resources/Commodities Companies HR and Change Management
Asset Investors and Private Equity Companies Financial Transformation
Banks, Financial Services and Insurance Companies Digital Transformation
Telecoms, Media and Technology IT Strategy and Data Analytics
Consumer Products and Retail
Baringa was founded in 2000 and now has: Baringa was awarded by the Financial Times (2019) as the only ‘Gold’
consultancy in the ‘Energy, Utilities and Environment’ sector:
660 Employees 61 Partners
6 OfficesUK,worldwide
Germany, Ireland,
UAE, USA and
Australia
Copyright © Baringa Partners LLP 2019. All rights reserved. This document is subject to contract and contains confidential and proprietary information.
2
Baringa Confidential
Where are we now?
On paper, 2019 is one of the best of the last 15 years for monetising DSR flexibility
Historical value stack for 1MW of DSR, £’000s/MW p.a.
100,000
90,000
80,000
70,000 Capacity Market
60,000
FFR (S)
50,000
40,000
30,000
Avoided TNUoS
20,000
10,000
0
2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019
Assumptions: Pre aggregator sharing; East Midlands based customer; 1MW load; CM transitional auction contract in 2017/18; FFR Secondary Static for 10
hours per day; no DUoS avoidance included
Copyright © Baringa Partners LLP 2019. All rights reserved. This document is subject to contract and contains confidential and proprietary information.
3
Baringa ConfidentialSo why is there unease about the future?
Regulatory reform is likely to result in a £20-60k/MW reduction from the loss of avoided TNUoS
Value stack for 1MW of DSR, £’000s/MW p.a.
100,000
Capacity Market
90,000 FFR (S)
Targeted Charging Review
80,000 Avoided TNUoS
Timing uncertain: (2021
70,000 (as shown), or 2023, or
60,000 “ramp down” 2021-2023)
50,000
40,000
30,000 c. £25,000/MW p.a. remaining
20,000
10,000
0
2018 2019 2020 2021 2022 2023
Copyright © Baringa Partners LLP 2019. All rights reserved. This document is subject to contract and contains confidential and proprietary information.
4
Baringa ConfidentialWhat is the missing money and where will it come from?
Historical value stack for 1MW of DSR, £’000s/MW p.a.
100,000
80,000 DSO markets:
60,000 £1-8k/MW/p.a.?
40,000
20,000
0
Traded markets, incl. wholesale
2013
2014
2015 and BM?
DSR really started taking
off between 2013-15, New TSO balancing services?
when c.£50k/MW was
New components
achievable – implying
of the revenue
around £25k/MW missing stack New network incentives, e.g.
money after TCR which under future charging and
could stall momentum…
access?
5
Copyright © Baringa Partners LLP 2019. All rights reserved. This document is subject to contract and contains confidential and proprietary information.
Baringa Confidential
Source: WPD Flexible Power portalHow are our clients using this time to position for the future?
Suppliers and route to Large corporates: Aggregators and
market providers: Renewables procurement technology companies:
Refining B2B propositions International expansion
“Go-to market” commercial Taking advantage of low renewable Seeking out markets where high
propositions, including levelised costs, and meeting value flexibility markets can be
infrastructure frameworks, testing corporate net zero objectives combined with robust
route to market/revenue sharing through running corporate PPA fundamental value in traded
contract structures, and associated tendering processes for long term markets, and investigating first
energy management services supply hedges steps for new entry
Copyright © Baringa Partners LLP 2019. All rights reserved. This document is subject to contract and contains confidential and proprietary information.
6
Baringa ConfidentialContact:
Tom Harper
Email: tom.harper@baringa.com
Phone: +44 7743 514 502
Subscription services Bespoke analysis Advisory services
Our market reports are available as Including markets that we update on- Using our analytical capabilities, and
individual products or annual demand, or modelling new markets to deep market knowledge as a basis to
subscriptions to keep you up to date meet our clients’ increasingly global provide market leading commercial
with our latest view on market horizons advice on the economic performance
developments and price evolution of new projects and companies in the
power sector
This document: (a) is proprietary to Baringa Partners LLP (“Baringa”) and should not be re-used for commercial purposes without Baringa's consent; (b) shall not form part of any contract nor
constitute acceptance or an offer capable of acceptance; (c) excludes all conditions and warranties whether express or implied by statute, law or otherwise; (d) places no responsibility or liability on
Baringa or its group companies for any inaccuracy, incompleteness or error herein; and (e) the reliance upon its' content shall be at user's own risk and responsibility. If any of these terms is invalid or
unenforceable, the continuation in full force and effect of the remainder will not be prejudiced. Copyright © Baringa Partners LLP 2019. All rights reserved.
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