Fit for 55 - impact on PPAs
- Category: Energy market
Power Purchase Agreements (PPAs) are a complementary route to the market of renewable power generation - in addition to support schemes or to selling directly on the wholesale electricity market.
Fit for 55 Package will introduce frameworks to facilitate the uptake of PPAs. RED II draft amendment also promotes the use of credit guarantees to reduce these agreements’ financial risks. Such agreements will be strictly evidenced as National Energy and Climate Plans will indicate the volume of renewable power generation supported by renewables power purchase agreements.
Given the estimate that only 14% of industry PPAs’ demand is bankable it seems that RED II draft amendments on credit guarantees could really help to develop this market segment.
My take-home points on MiFIR transaction reporting regarding emission allowances
- Category: Financial Market
The ESMA's recent Report of 15 November 2021 has summarised application of MiFIR transaction reporting regime to emissions markets.
The regulator's views are always valuable, hence I took some brief notes (as below), maybe will be of interest to you.
For more extensive overview of the MiFIR transaction reporting agenda read here.
Capacity distribution tariffs recommended
- Category: Energy market
The most prominent distributions tariff's classification is the distinction between capacity tariffs and volumetric tariffs.
This differentiation is based on whether tariffs are levied on a MW/kW (capacity) or MWh/kWh of consumption (or production).
Although most EU Member States currently charge grid costs through volumetric grid tariffs, European Distribution System Operators (E.DSO) recommend partial switch to the kW-based system.
According to the EU DSOs, shifting from kWh-based towards kW-based network tariffs is reasoned by the fact that the kWh-component of network tariffs rises artificially the value of self-produced (e.g. solar) kWhs, which makes it more attractive to produce your own electricity.
With more self-production, the amount of energy taken from the grid decreases, and besides the decrease of network losses (which is a relatively small effect), the costs of the network do not decrease, since they are mostly fixed, and the network is still needed for periods of low self-production.
These network costs need to be covered with less kWhs, so the kWh-tariff has to increase.
Then it will be even more attractive to invest in solar panels to produce your own kWhs.
In that way the kWh-tariff will spiral upwards as more and more customers adopt self-consumption, or the network cost-recovery will spiral downwards.
DSOs conclude that the kWh-based network tariff component “has a kind of perverse incentive”.
Busy end of the year at Innovation Fund
- Category: Emissions trading
The EU ETS Innovation Fund has recently become fully-fledged operational vehicle to supply projects with money.
On 26 October 2021 the European Commission launched the second call for large-scale projects with a budget of €1.5 billion (the deadline for submission of applications is 3 March 2022 with the results of the evaluation to be determined in the third quarter of 2022).
Just days ago, on 16 November 2021 Innovation Fund distributed over €1 billion between innovative large-scale projects.
This pace is quite impressive given that only on 4 November 2021 the first three grants from Innovation Fund were awarded (totalling EUR 12.7 million, small-scale projects were at issue this turn).
Grants for project development assistance are also at stake (EUR 1.7 million distributed on 4 November 2021 between 10 projects - the European Investment Bank (EIB), which provides the service, helps them advance their maturity through tailored assistance, such as improving their technical documentation and financial models).
In parallel, Fit for 55 package increases the Innovation Fund’s resources and, apart from traditional projects portfolio, brings Carbon Contracts for Difference (CCfDs) to the scene.
Electricity balancing market - not for everyone
- Category: Energy market
Bidding strategy consisting in predetermined intent of covering possible shortages in the balancing electricity market can be qualified as a market manipulation.
P2P only behind one single connection to the grid
- Category: Energy market
This seems to be really important determination, at least when it comes to DSOs: concerning tariffs, P2P only have significance when behind one single connection to the grid - in all other situations, without such a single connection, the regular network tariffs have to be applied to each individually connected customer.