Posted on: 19/12/2017
Wholesale prices for 2018 are on an upward trend and many generators are looking to take advantage by locking in their contracts as soon as possible. Chris Smith, Head of Renewable Sales, explains what this means for Feed-in Tariff generators who may be considering opting for the export tariff.
With wholesale prices representing a major part of project revenues, choosing the right time to lock in your power price is crucial.
This can be a difficult decision given increased market volatility and dependence on foreign markets, as was shown last week with the Austrian gas explosion sending prices soaring only to drop to lower levels within a matter of days.
However, for the next 12 months, many Feed-in Tariff (FIT) generators could see financial benefit from the wholesale market in preference to the export tariff.
The export tariff provides a published rate for every megawatt hour of electricity exported, set by the Government and increased annually in line with the retail price index. Generators choosing this option are locked-in to the tariff for 12 months which means they miss out on value in the power market and importantly, from embedded benefits.
Since the summer, we’ve been seeing an upward trend in the wholesale power price. Summer 2018 power prices have moved from £41.41/MWh to £44.25/MWh and Winter 2018 prices have increased from £46.40/MWh to £49.80/MWh – almost 7% higher in both seasons (prices correct 18th Dec).
With embedded benefits added to this, generators could be looking at PPA prices of around £55-59/MWh, excluding Triad benefit and dependant on grid connection/location.
This is significantly higher than the FiT export tariff, which is set to rise to £51.75/MWh (reflective of current RPI forecasts) from 1st April 2018.
So, while the export tariff might seem like the safer option, it could be costing you valuable revenue and with this in mind, it’s worth speaking to one of our PPA experts about your options.
But move quickly if you are considering this, as last year we saw season ahead prices trend downwards later in the winter as concerns over power supply dissipated.
Looking further ahead, the indication is the FiT scheme will end for new generation in 2019 after the Summer 2018 review - though Ofgem and Department for Business Energy & Industry Strategy (BEIS) are yet to conclude this. While it shouldn’t impact existing projects, it’s worth keeping an eye on developments.
As more renewables come onto the grid and prices become even more volatile, it’s more important than ever to ensure you have the best possible price locked in sooner rather than later.
If you would like to talk to us about PPA prices for your generation project, please get in touch with the team.
About the author
Chris joined SmartestEnergy’s Renewables team in 2017 from Danish energy trading company Neas Energy. He works with generators to develop solutions to help them maximise returns in a changing environment for renewable projects. Chris began his career in the energy sector in 1996 with Eastern Natural Gas. He went on to work as a Generation Services Senior Business Development Manager at RWE npower, developing PPA solutions for customers. He has also worked on the supply side with industrial and commercial users. His role as Business Development Manager at Neas saw him build its UK PPA and CHP portfolio from market entry. Chris has a BA in Business Studies from De Montfort University, Leicester.