Renewables post-2020: Neighbouring view from Sweden (and Norway) Bodecker Partners

Transcription

1 Renewables post-2020: Neighbouring view from Sweden (and Norway) Mia Bodin

2 WE ARE BODECKER PARTNERS Fredrik Bodecker has 20 years of experience in trading power, gas, coal, oil and EUA s. He has worked in several leading positions at RWE, Alfakraft, Gunvor, DONG and latest as CEO at Modity Energy Trading. Mia Bodin has 15 years of experience from analysis in energy trading. She previously held the position as Head of analysis at Modity Energy Trading and has before worked many years as an analyst of EUAs and Nordic Power at Gustaf Sundelius has 11 years of experience from the energy industry trading hedge and proprietary portfolios within power, gas, green certificates, EUA s and FX. He has held positions as physical power trader, production optimizer, senior risk analyst and portfolio manager at E.ON and Modity

3 Independent advisory...and management of Elcertificates, EUA and Nordic power price risks

4 Private Energy Like a traditional bank vs private banking: you can choose one bank for all your needs or you can choose the best provider for every individual service.

5 Some examples of our assignments Riskpolicys and hedging strategies Procurement and re-negotiations of e.g. balance responsibility, market access, portfolio management and optimization services. Set-up of new electricity sales companies. Eduction for boards/leadership teams Advisory and analysis reports on Elcertificates and Carbon rights (EUA s)

6 Elcertificate market Sweden and Norway

7 Electricity certificate market z Marketbased support scheme to increase renewable electricity production Start 2003 in Sweden Norway since 2012 Goal +28,4 TWh from

8 Basic facts Supply Producers receive 1 elcertificate per produced MWh. These can be sold on the market. Demand Consumers are obliged to buy elcertificates as a percentage (set politically for each year) of electricity consumption. Some electricity intensive companies are excluded. Process is handled by the consumer s electricity company.

9 Cost effective system Cost Swedish consumer : 2,6 öre/kwh (= 0,27 cent/kwh) Increased quotas from : 3,2 öre/kwh 2017: 1,6 öre/kwh Germany: 7 cent/kwh

10 Price is set where supply meets demand. Balance in the market is an important pricedriver Ack. balance (TWh or million elcertificates) Faster expansion than expected z Technology development Lower costs Lower required return on capital Adjustments in quotas (demand) take time

11 Prices in free fall Price development

12 Production beyond goal = pricecrash? 29,4 TWh Not including projects with taken investment decisions (1,5 TWh only in Sweden+ atleast 1,7 TWh Norway) No extension = pricecrash

13 Large problems for early investors Kr/MWh 600 Kr/MWh Elcertifikat Elpris (=Power price) Elpris Elcertifikat % decrease in income for power producers from 2012 to 2017

14 Which price is needed? Kr/MWh In total ca 40 öre/kwh for next 20 TWh Report Energimyndigheten 45 öre/kwh (=Power price) Elcertifikat Elpris With current market prices on electricity: 2018: 80 SEK 2025: 90 SEK One month ago: 2018: 200 SEK 2025: 160 SEK Now 60 kr

15 Extension of the system to 2030 New goal for Sweden: +18 TWh from Same conditions for Norwegian and Swedish producers for full 15 years after BUT Norwegian sites in place by end Linear increase of quotas (demand) Swedish quotas to increase already (adjustment in reserves) Stop rule in place for end of next period. Timebased or volumebased?

16 Consequenses some thoughs Very important decision to avoid pricecrasch! Earlier increased quotas could decrease the oversupply to nearly zero during next 2 years Tigher balance should result in higher prices next years BUT Will lead to faster and larger build-out lower electricity prices Longer term oversupply and risk for falling elcertificate prices Stop rule very important!

17 Lower balance can double elcertificate prices to 2020 Elcert agreement will result in tight system to 2020, risk of shortage Elcertprices can rise towards 170 SEK to 2019

18 Why do we not see prices rise? Bearish market Sellers react to negative news. Long term oversupply??? Demandside is price inelastic Consumers do not react to market signals. Price reaction will show when reduced supply is noticed How much depend on what is left of goal to 2030

19 Summary price outlook Production will rise targets will be exceeded Prices could hold long-term if stop rule is implemented Short-term higher prices depending on production increases next 3 years Long-term: Projects will be built even with elcertificate price of zero, especially with increasing power prices. Stop rule 2030?

20 Don t trust forecasts

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