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CFD Generator Workshop
19 November 2014
Ruth Herbert
Low Carbon Contracts Company
2
AGENDA – CFD GENERATOR WORKSHOP
19 November
Timing Session Delivery partner
09.30 Welcome and Introduction Low Carbon Contracts Company
09.40 Sealed Bids National Grid
10.55 Tea, Coffee Served
11.10 Contract Allocation & Next Steps Low Carbon Contracts Company
11.35 EMR Settlement Services: Generators EMR Settlement Ltd
11.55 Forecasting & Transparency Tool Demonstration Low Carbon Contracts Company
12.30 CLOSE
Please take a moment to fill in our survey – thank you!
CFD Generator Workshop 19 November 2014
3
The Role of the Low Carbon Contracts Company
Working in partnership with DECC and industry to oversee the delivery of the end-to-end CFD scheme, facilitating:
- Delivery Partner Cooperation and
- Industry Readiness
Low Carbon Contracts Company is the independent counterparty to the private law
contracts known as “CFDs”
CFD Generator Workshop 19 November 2014
The Government’s Electricity Market Reform programme is aimed at
attracting up to £110bn investment needed to transform the sector
Implementation Business As Usual
4
Our Obligations under CFDs
CFD Generator Workshop 19 November 2014
We have been established as an
independent counterparty to
increase investor confidence in
CFDs
Forecasting CFD payments, and setting
Supplier Obligation interim rate and
reserve
Signing and managing the life-cycle of a CFD
and investment contracts
Managing settlement process including
collecting payments from Suppliers passing on to
Generators and vice-versa when required.
5
Key messages
We are here to provide…
• Operational independence key to maintaining
investor confidence in the CFD scheme
• Proactive contract management approach focussed on
generation outcomes
• Transparent forecasting of supplier obligation and
operational costs
• Partnership working on implementation
6
CFD Implementation Plan update
Ruth Herbert
Low Carbon Contracts Company
7
CFD Timeline
Contracts for Difference
John Perkins Contracts for Difference Manager
Allocation Round Progress Update
Applicants Apply
Assess
Eligibility
Request
Review
Review
Request
Appeal
Appeal
Round Variation / Budget Revision Notices
Qualified
Applicants
RO Check
5.
Appeal 6. Valuation
7. Sealed Bids
8. Allocation &
Independent Audit
9. Allocation Notification
1. Pre-Application Activities
2. Application 3.
Qualification 4. Review
CfD Qualification – Reviews
Review Requirements
Concise statement identifying dispute
No new documentary evidence but can
clarify original evidence
Schedule listing the documents submitted
Succinct presentation of
arguments
Summary of grounds for dispute
Non-Qualification Review Form
Non-Qualification Review Form
Please provide a statement identifying the relevant part of the non-qualification
determination in dispute and set out the facts on which you (Applicant) rely on.
Please provide a summary of the grounds for disputing the non-qualification
determination.
Please provide a succinct presentation of the arguments supporting each of
the grounds for dispute.
Please provide a schedule listing the documents submitted with the review
notice
Review Submission via Egress
Secure email of
determination
Automatic
delivery receipt
Delivery Body
Receipt
Delivery Body Applicant Applicant
Switch
Upload
relevant form
Switch
Secure email Switch
1 2
3
4
Applicants
Round Variation / Budget Revision Notices
Submit Sealed
bids if requested
Value
qualified
applicants
Allocation &
Independent
Audit
Request
sealed bids
if required
5.
Appeal 6. Valuation
7. Sealed Bids
8. Allocation &
Independent Audit
9. Allocation Notification
1. Pre-Application Activities
2. Application 3.
Qualification 4. Review
Applicants
Allocation
Reports Review
Ro
un
d C
loses
CfD
Notification
Issue
Contract
s
Contract
Signature
5.
Appeal 6. Valuation
7. Sealed Bids
8. Allocation &
Independent Audit
9. Allocation Notification
1. Pre-Application Activities
2. Application 3.
Qualification 4. Review
Scenarios of Key Dates
Step No reviews Reviews and Appeals
Review Requests Request Window Closes 5pm on 20th November
Review N/A 21st Nov – 5th December
Appeal Requests N/A 8th -12th December
Appeals N/A 6th February 2015
(assumed)
Notify SoS of Budget
Impacts
21st November 9th February 2015
Auction Notice 2nd December 17th February 2015
Sealed Bids 3rd – 9th December 18th -24th February 2015
Allocation Notice to SoS 29th December 12th March 2015
CfD Notifications 6th January 18th March 2015
Contracts for Difference
Yasharn Smith EMR Delivery Manager
Allocation Rules
When is an Auction Required Illustration only
AUCTION
REQUIRED
NO AUCTION
REQUIRED
CfD Allocation – General Principles
Budget Rule
• Pot /Budget (Cannot Be Exceeded Except for Pending Projects)
Constraint • Only competitive where binding constraint (E.g. MIN capacity/Pot Budget)
Across Years
• All projects in same Pot will compete on strike price basis, regardless of delivery year.
• Years can close independently
Bids/ Prices
• Projects will be awarded in order of lowest to highest strike price
• Sealed bid process (includes bidder flexibility)
Pay as Cleared
• Clearing Price set by most expensive successful project in each year (subject to cap at the Technology Admin Strike price).
CfD Allocation – Flexible Bids
Project SP Bid Del Yr MW
A2 115 16/17 43
K1 113 18/19 700
G3 112 18/19 5
C2 108 17/18 28
A1 105 15/16 47
C1 105 17/18 38
D6 97 16/17 42
D1 94 16/17 80
H4 93 17/18 35
B2 92 16/17 50
F2 90 17/18 80
E1 88 16/17 63
B7 85 15/16 50
Fle
xib
le B
ids
- In
cre
as
ing
Pri
ce
15/16 16/17 17/18 18/19
B7
Str
ike
Pri
ce
Bid
s
B2
D1
D6
A1
A2
Bids are assessed in order of strike price bid
(cheapest first) . If they fit the budget profile after
clearing consideration, they are accepted.
Same Commissioning Year Flexibility
If a bid is successful, remove from stack all other
bids relating to same project
E1
G3
Close Year
Reject all
other bids
for 16/17
Budget
would be
exceeded
in 16/17
Next
cheapest
bid is for
same
project
F2
H4
Close Year
C1
C 2
K1
Close Year
Tiebreak with
A1 & C1
A1 uses budget
best in final year
CfD Allocations – Tiebreaker Rules
Tie-breaker rules applies where 2 or more projects with the same strike
price bid, both cannot be awarded a CfD without exceeding budget limits
Assess all
combination of tied
projects which
exceeds budget
Choose combination
of projects which
best uses budget
For further ties –
Random number
generator is to be
used
Confirm projects
with same S.P would
exceed budget
Consider other flex
bids for
unsuccessful
projects
Remove other flex
bids for successful
projects
Contracts for Difference
Yasharn Smith EMR Delivery Manager
Sealed Bids
Sealed Bids
Submission Rules
General
No bids above the
ASP
Bids must be in
2012 prices
Withdraw & re-
submit bids during
submission
window
No bids accepted
after window
closes
Relevant ASP is
used if no bids are
submitted
Detail
Submit combination of different bid price, capacity, TCW,&
TCD
Max 10 Bids per project
No more than 3 bids for the same Delivery Year (DY)
No two bids can have the same price
Must be same DY or later than original application
Must be same capacity or less than original application
Lowest price in each DY expressed to nearest whole
pence (e.g. £100.01)
All bids other bids (except for lowest in each DY)
expressed to nearest 0.1 pence (i.e. £100.011)
Only 1 Sealed Bid can have the same first DY and
capacity as original application
Sealed Bids Submission process
Auction Notice Published
Pre-populated Sealed Bid Forms
Applicants Fill in Sealed Bid Forms
Applicants Validates Form
Send form to DB
Withdraw Application/
Sealed Bids + Resubmit
DB Uses Bids to Run Auction
Auction Notice
Notice of Auction will be sent from the DB to:
Inform qualified & pending applicants that the value/capacity (min) of
a pot(s) has been exceeded and therefore a competitive allocation is
required for that pot;
Inform Applicants of the dates for opening and closing sealed bids
submission window
Provide link to guidance on how to submit and fill a sealed bids form
Provide applicants with pre-populated sealed bids submission form
for each one of their qualifying/pending applications;
Sealed Bids Form
Sealed Bid Forms User Guide will be available
alongside the Auction Notice and release of
pre-populated Sealed Bid forms
Sealed Bids Form Demo
Sealed Bids Form
The DB will make copies of blank Sealed Bids
form available to all applicants for
familiarisation only
To be published on DB EMR Portal from w/c 21 November
Application/ Sealed Bids Withdrawal
Applicants participating in an auction may
Withdraw applications during the submission window;
Withdraw and re-submit sealed bids during the submission
window.
The CfD sealed bids withdrawal form and the CfD application
withdrawal form will be made available on the EMR DB Portal
when an auction commences
Submission through Egress
Applicants must send filled in (validated) sealed bids
form/withdrawal forms to the Delivery Body through Egress Switch:
https://secureform.egress.com/emr/
Applicant contact
details required
here
DB will not accept
Sealed Bid forms
from unregistered
person
Submission through Egress
Upload file to be
sent here
1. Select CFD Sealed
Bids on the [Type of
Submission] drop
down box;
2. Click on the Add Files
button;
3. A file dialog box will
appear which enables
4. Users to select their
files, upload Validated
Sealed B
Applicants must not change the file name of the pre-populated
Sealed Bid form sent from the DB
Enter an alternative
email address if
required for copies of
submission to be shared
National Grid Contact Details
' Phone: 01926 655300 (calls recorded on this number)
* Email: [email protected]
website: www.emrdeliverybody.com
BREAK
19 November 2014
Next steps following CFD contract allocation
Puk Lykke-Moller
Contract Management
35
Disclaimer
• Parties should rely upon the drafting of the relevant
CFD Agreement and FiT CFD Standard Terms and
Conditions in relation to the contract they enter into, not
these slides
• Parties are recommended to obtain their own Legal
advice.
CFD Timeline
37
The Contracts for Difference (Standard Terms)
Regulations 2014
Offer to contract
10.—(1) An offer of a CFD is made by the CFD counterparty signing two copies of a CFD completed in accordance with
regulation 9(3) and sending both copies to the eligible generator.
(2) The CFD counterparty must make an offer of a CFD within 10 working days of receiving a CFD notification.
(3) The eligible generator, to whom the offer of a CFD is made, enters into a CFD where—
(a) the eligible generator signs both copies of a CFD and returns one copy to the CFD counterparty; and
(b) the CFD counterparty gives the eligible generator a notice stating that the CFD counterparty has received a
copy of the CFD from the eligible generator which has been signed by both contracting parties.
(4) The CFD counterparty must give the notice under paragraph (3)(b) as soon as reasonably practicable after the CFD
counterparty receives a signed copy of a CFD from an eligible generator.
(5) Where a CFD is entered into, the CFD counterparty must inform the delivery body as soon as reasonably practicable.
Failure to accept an offer
11.—(1) Where the CFD counterparty does not receive a signed copy of a CFD from an eligible generator within 10 working
days of the offer being made, the offer lapses.
(2) Where an offer lapses, the CFD counterparty must, as soon as is reasonably practicable, give the eligible generator and the
delivery body a notice which states that the offer has lapsed.
38
Timeline
Day 0
• Delivery Body sends notification of contract allocation to applicant/generator and LCCC (date subject to reviews and appeals)
• LCCC populates the CFD agreement with the information received from the Delivery Body • Sends two signed copies of the CFD agreement to the generator
+ 10 working
days
• Deadline for LCCC to make CFD offer to the generator
39
In practice – first 10 working days
• The LCCC have very limited time to check information
provided by the generator in application to delivery body
• We can only change information that was not used as part of
decision making process in allocation
• We will be able to change a postcode but not MW
• If we do not get a very rapid reply to any requests for
confirmation of data - LCCC will have no choice but to send
agreement with the information that we hold
• Please note allocation is not public knowledge at this
point!
40
What you will receive
The CFD agreement,
• This CFD Agreement, together with the terms and conditions set
out in version 1 of the document entitled “FiT Contract for
Difference Standard Terms and
Conditions” as at 29 August 2014,
constitute an agreement entered
into on "standard terms"
(as defined in section 11(1) of
the EA 2013)
The Standard Terms and
Conditions,
• Front page for signatures
41
Timeline: following working days
• CFD offer is made to generator
• Generator must sign both copies and return one of them to LCCC
+ 10 working
days
• CFD offer lapses if LCCC has not received the countersigned CfD agreement before 17:00
Closed DECC consultation on Non-Delivery Disincentive Exemptions; proposal
to implement 13 months exclusion from CfD allocation if generator fails to sign
42
In practice – follow up
• The LCCC must notify generators of receipt of countersigned
agreement
• LCCC must inform the delivery body of CFDs entered into
• LCCC will notify both generator and delivery body of any lapsed offers
43
In practice
All CFD holders will get a dedicated Contract Manager:
Nic Rigby Arezou Farhadi James
Krzyszkowski
Puk Lykke-
Moller
Stephanie
Houston
44
Next steps
• Initial conditions precedent
• Legal opinion
• Know your customer
• Description of the facility
• Milestone Delivery Date
• ………
• How we work together
45
Further information
• Question and Answer document can be found at
www.lowcarboncontracts.uk
• Further queries can be emailed to:
• Visit our site or contact the team for more information
CFD Implementation Event
Wednesday 19 November 2014
Hannah Pargeter
Generator
Public
Settlement System – Progress update & Testing
■ We’ll need to undertake testing in issuing Notices, Invoices, Backing
Data and Reports to CFD Generators, Capacity Providers and
Suppliers
■ February 2015 is scheduled for UAT testing
■ Early March 2015 is scheduled for Data Transfer Network (DTN)
testing
■ We’ll confirm specific dates once available
Jun Jul Aug Sep Oct Nov Dec Jan Feb Mar Apr
Design and Build
System Testing
EMR Interfaces – When will examples be available?
Information Method
Notices • Email PDF encrypted file
Invoices – Billing Statement • Email PDF encrypted file
Backing Data • Data Transfer Network (DTN) • Email Attachment • Portal Downloadable file
■ We’ll present visual examples, with supporting information
– When? Early January 2015
– How? We’ll plan to hold a workshop
Payments to CFD Generator
■ Billing statement issued no
later than 7 working days from
billing period
■ Payment due 28 calendar
days from the billing period
CFD Payments
Payments to the LCCC
■ Billing statement issued no
later than 7 working days from
billing period
■ Payment due 10 working days
from issue of the billing
statement
Payments to CFD Generator
CFD Payments (2)
Payments to the LCCC
Billing Period
28 Apr 15
Billing Statement
April 2015
Payment Date
10 WDs ~7 WDs
1 Apr 15 14 Apr 15
28 calendar days 29 Apr 15 14 Apr 15 1 Apr 15
April 2015
~7 WDs
Billing Period Billing Statement Payment Date
What’s coming up?
December 2014
• CFD Metering Guidance
January 2015
• CFD Implementation Event - Examples of Billing Statement & Backing Data
• Billing Statement & Backing Data Guidance
• Working Practice - Settlement Required Information
February 2015
• Settlement System – User Testing
March 2015
• Settlement System – User Testing
• Confirmed CFD Generator – Authorised Contact and Company Information
• Settlement Calendar – Billing Statement and Payment Date
April 2015
• EMR Payments commence
EMR Settlement Website
■ EMR Settlement Website
– http://emrsettlement.co.uk/
■ Keep updated via the following
methods, News, EMR Circular,
Calendar and the ELEXON
Newscast
■ All queries - Settlement Service
Provider
■ Hannah Pargeter – EMR Customer
Support
– 020 7380 4025
Forecasting & Transparency Tool
SOFM is a probabilistic model with
three main components Power Market Forecasting
Model (PMFM)
Uses a Dispatch Model to
calculate hourly power prices
for given probabilistic
demand/generation/gas
market price scenarios.
Typically 100-1000 scenario
runs
Cash Flow Forecasting
System (CFFS)
Uses CfD information to
calculate future cash flow in
each scenario. Average and
P95 (19 in 20) views used for
levy recommendations
Transparency Tool
Gives suppliers and others
visibility of the main inputs
and outputs
Expert Groups
• We have two Expert Groups to help us design the SOFM
and the accompanying Transparency Tool:
• Expert Group 1: SOFM Modelling EG
• 17th of July 2014.
• Includes representation from Large Suppliers, Small Suppliers and
Consultants.
• Expert Group 2 : Transparency Tool EG
• 30th September 2014.
• Includes representation from Large Suppliers, Small Suppliers,
CAB, Generators and Consultants.
• These groups were advertised via trade associations (EUK,
RUK etc.) and at our stakeholder events.
Transparency Tool (demo version)
Note that figures are illustrative, and the final public version will be LCCC branded
Development & testing
1) Monitored and
administered by the
Communications team
2) All input data or sources
published except where
confidentiality prohibits
3) Output data summary at a
useful summary level
4) Proposing to provide
projections beyond levy
period:
One year out with Reserve
Fund calculation
Five years out based on
scenarios around future
allocations
Release to Expert Group
for testing week
commencing 24 November
2014
Will be released publically
at time of levy setting
Timeline and Process
June
• Supplier awarded
July • Project kick-off, scoping and design period begins
• Stakeholder engagement on design, assumptions and inputs of Power Market Forecast Model begins
Aug. • Beta Phase Testing of Power Price Forecasting Model
Sept. • Power Market Forecast Model submitted for quality assurance
• Stakeholder engagement on transparency tool design begins
Oct. • Final Transparency Tool design submitted
Nov. • Power Market Forecast Model signed-off for forecasting Levy Period 1
• Transparency Tool made available for internal ‘beta’ testing
Dec.
• Design and build of cash flow forecast functionality to be updated by actual settlement data
• Transparency tool signed-off for external publication
• Supplier Obligation interim rate and reserve published and Transparency Tool go-live
Mar. • Daily update of cash flow forecast by actuals go-live
• Handover of Supplier Obligation Forecast Model to Counterparty completed
Forecasting & Transparency Tool
Demonstration by Lane Clark & Peacock
60
Plenary sessions:
Summary and close
Ruth Herbert
Low Carbon Contracts Company
61
Online support for CFDs
• Q&A for suppliers and generators
• Q&A from previous events on specific topics including legal, technical
and planning
• Site under development – Give us your feedback!!
• Feedback via online survey and [email protected]
Generators Suppliers www.lowcarboncontracts.uk
62
Information for Generators
63
Plenary sessions:
Summary and close
Ruth Herbert
Low Carbon Contracts Company
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