Demand Side Response

How to value flexibility

Febeliec infosession : 10th June 2013

Geert Meynckens

1

About INEOS

Global, vertically-integrated chemical company

Founded in ‘98 - rapid growth by acquisitions

40 b$ sales

15 000 employees

51 manufacturing locations in 11 countries

Privately owned

2

INEOS sales by business

Olefins

15%

Polyolefins

10%

Olefins & Polymers

USA

9%

Styrenics

5%

Oxide

4%

Nitriles

4%

Other

7%

ChlorVinyls

6%

Refining

25%

Phenol

9%

ABS

3%Oligomers

3%

Electricity is a major cost for INEOS operations

• Total INEOS electricity consumption of about 12 TWh

• Electricity is main cost driver for Chlor-Alkali business

– Electricity is a raw material

– Electricity costs are more important than labour costs

– Electricity costs determine where to produce and where to invest

4

18%

61%

21%

Chlor-Alkali production costs

Fixed Costs

Electricity costs

Other variablecosts

Overview of the VCM production process

5

Electricity

Electrolysis

Sodiumchloride

Pottasiumchloride

Caustic Soda

Pottasium Hydroxide

Chlorine VCM

Benzylchloride

Toluene derivatives

Ethylene

PVC

Toluene

Value of Demand Side Response ?

“Goverment wants to subsidse new power plants

Het ontwerp van koninklijk besluit dat nu op de tafel ligt, bepaalt dat

die nog op te richten centrales tien jaar lang een jaarlijks steunbedrag

van 87.682,1 euro per geïnstalleerde megawatt kunnen ontvangen.

6

400 MW – 13h

1000 MW – 100h

Most important precondition for Demand Side Response :

the correct price of electricity

• “I have a yearly fixed priced contract so I am protected

against price spikes”

• “for 60 €/MWh I will not even think about stopping a

production process”

• Budget / Contract price => have no relevance

• All purchased electricity is to be valued at Belpex prices

– Increased with the variable transport costs + taxes

7

Jaar Kwartaal Maand Week Day-

ahead uur prijs

Intraday Balancing

Most important condition for Demand Side Response:

Correct value of electricity

• “ik heb een jaarprijs en ben beschermd tegen prijspieken”

• “voor 60€ leg ik geen proces stil”

• Budget / Contract prijs => niet van belang

• Alle gekochte elektriciteit krijgt de waarde van Belpex

– Verhoogd met de variable transportkosten + heffingen

8

Jaar Kwartaal Maand Week Day-

ahead uur prijs

Intraday Balancing

Cooperation between departments is crucial

9

Spot prices

Planning

Procurement Operations

• Execution

• Process impact analysis

• Search for flexibility

• Awareness at operators

• Awareness at mgt.

• Contractual framework

• Tendering products

• Use contractual framework

• Manage constraints

• Time shifting

• Profit margin calculations

Different products to capture the DSR value

Capacity product

• Fixed yearly remuneration

• Engagement: Y-1

• Reaction time: x h/m/s

• Elia Interuptibility

• Aggregators

• Suppliers

• Elia R1 Load

Energy product

• Value of the energy at a

given moment

• Engagement: D-1 or later

• Reaction time: D-1 or later

• Belpex bieding

• Intraday/Balancing

• Elia : free bids (under

construction)

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Main contractual conditions of the Elia interuptibility product

• Products

• Capacity fee (€/MW)

• Activation fee

– Max (75 €/MWh ; 108% Belpex)

• Reference Reserve Power : min. 5 MW

– Average load (MW) per period

– Compared ex-post with the actual ref. power

SLA 2 SLA 4 SLA 8

Max nr. activations 12 4 4

Max duration/activation 2 4 8

Max duration/year 24 16 24

Response time (min) 3 3 3

Peak Off-peak Weekend

Shedding Limit SL 25 20 20

Reference Power PRef 35 30 30

Reference Reserve Power Rref 10 10 10

Elia interuptibility : operational requirements

• Elia provides a signal

• Shedding Limit must be reached within 3 min.

• 87 h unavailability allowed

How to react to the spot prices

• Include spot prices in the contract

– Fixing can happen via a CfD

– Sell-back options

– Transparency on profile & unbalance costs/benefit

• Aggregators

– Recent evolution

– More flexible criteria due to pooling

13

DIY: Contractual framework in order to react on the spot

prices via Belpex membership

14

Access contract

• Elia invoice

• Subscription

• Bankguarantee

• Appoint ARP

ARP contract

• Bank guarantee

• Nominations

• 24h service

Belpex contract

•Full

•12k€ setup

•25k€ / y

•0.10 €/MWh fee

•Escrow Broker

• 0.5k€ setup

• 5k€/y

• 0.1 €/MWh fee

• Broker fee

Value that can be captured by reacting on belpex prices

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-

20.000

40.000

60.000

80.000

100.000

120.000

140.000

jan feb mrt apr mei jun jul aug sep okt nov dec

€/M

W 2012_4

2012_1

2007_4

2007_1

Value that can be captured by reacting on belpex

prices: scenario A very flexible

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0,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

80,00

90,00

0

1

2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

€/M

Wh

MW

Hour

profiled 1h

baseload

price

Value that can be captured by reacting on belpex

prices: scenario B semi flexible

17

0,00

10,00

20,00

30,00

40,00

50,00

60,00

70,00

80,00

90,00

0

1

2

1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24

€/M

Wh

MW

Hour

baseload

profiled 4h

price

Value that can be captured by reacting on belpex prices

18

-

20.000

40.000

60.000

80.000

100.000

120.000

140.000

jan feb mrt apr mei jun jul aug sep okt nov dec

€/M

W 2012_4

2012_1

2007_4

2007_1

Also the balancing market offers opportunities

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-100,00

-50,00

0,00

50,00

100,00

150,00

01/04/2013 02/04/2013 03/04/2013 04/04/2013

Imbalance Negative Price (€/MWh)

BELPEX Hourly Price

More information

20

Autumn School : 08 – 09 October 2013

Commercial actors: aggregators/suppliers

Basic balancing training

Questions

?

21