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Would an Energy cap make any difference ? – the devil is in the detail

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Established charging methodologies such as DUoS are published well in advance of delivery, ensuring that contracts can be priced appropriately. However, newer costs like CfD are not known until after delivery, and can be subject to ongoing reconciliation for as many as 10 quarters! The number of costs that are known after the point of delivery is growing, making the non-commodity timeline more difficult to manage going forward. This means it is imperative that Suppliers have strong forecasting models in place and a variety of recovery and reconciliation methods to suit the needs of customers meaning fully fixed, like for like comparisons and price certainty is more of a challenge than ever.

This chart uses public data from the Office of Budget Responsibility and National Grid to project costs for the next five years. Updated during March 2017, it shows a continued growth in the cost of Government schemes up to 2021. Charges continue to be impacted by a number of variables, such as total GB demand, weather, and the delivery and performance of stations and installations within each scheme.

Individual levy trajectories

RO (scheme closing) - This scheme will be closed to new accreditations from March 2017 but the charge will remain out to 2021 and just start to plateau.
FiT (new scheme costs restricted) - New capacity is limited due to capacity caps. Generation tariff rates reduced each quarter.
CfD (new scheme to replace RO) - Rapid growth in generation capacity forecast over next few years.
Capacity Mechanism – Majority of capacity and clearing prices already known to 20/21. Uncertainty regarding T-1 auctions and charging base

You can also see from the simplified pie chart below that the proportion of your overall energy costs is no longer primarily affected by wholesale market changes

 

 

As always, if you would like any further information please don’t hesitate to contact your dedicated Zenergi Customer Account Manager