Demand Side Response

How to value flexibility

Febeliec infosession : 10th June 2013

Geert Meynckens

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

INEOS sales by business

ABS
Oligomers 3%
3%

Other
7%
Refining
25%

Nitriles
4%
Oxide
4%
Styrenics
5%

ChlorVinyls
6%
Olefins
15%
Phenol
9%
Olefins & Polymers
USA
9%

Polyolefins
10%

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
Chlor-Alkali production costs

21%

18%

Fixed Costs
Electricity costs

61%

Other variable
costs

Overview of the VCM production process

Sodiumchloride
Ethylene

Pottasiumchloride

Electricity

Electrolysis

Chlorine

VCM
Toluene

Caustic Soda
Pottasium Hydroxide

Benzylchloride

Toluene derivatives

PVC

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 genstalleerde megawatt kunnen ontvangen.

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
Jaar

Kwartaal

Maand

Week

Dayahead
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

Jaar

Kwartaal

Maand

Week

Dayahead
uur prijs

Intraday

Balancing

Cooperation between departments is crucial

Planning

Use contractual framework

Manage constraints
Time shifting
Profit margin calculations

Spot
prices

Operations
Execution
Process impact analysis
Search for flexibility
Awareness at operators

Procurement
Awareness at mgt.
Contractual framework
Tendering products

Different products to capture the DSR value

Capacity product
Fixed yearly remuneration
Engagement: Y-1
Reaction time: x h/m/s

10

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)

Main contractual conditions of the Elia interuptibility product

Products
Max nr. activations
Max duration/activation
Max duration/year
Response time (min)

SLA 2
12
2
24
3

SLA 4
4
4
16
3

SLA 8
4
8
24
3

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
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

Access contract

ARP contract

Belpex contract

Elia invoice

Bank guarantee

Subscription

Nominations

Bankguarantee

24h service

Full
12k setup
25k / y
0.10 /MWh fee
Escrow
Broker
0.5k setup
5k/y
0.1 /MWh fee
Broker fee

Appoint ARP

14

Value that can be captured by reacting on belpex prices

140.000
120.000

/MW

100.000
2012_4

80.000

2012_1
2007_4

60.000

2007_1
40.000

20.000
jan

15

feb

mrt

apr

mei

jun

jul

aug

sep

okt

nov

dec

Value that can be captured by reacting on belpex

prices: scenario A very flexible
2

90,00

80,00
70,00

50,00
1

40,00
30,00

20,00
10,00

0,00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Hour

16

/MWh

MW

60,00

profiled 1h

baseload
price

Value that can be captured by reacting on belpex

prices: scenario B semi flexible
2

90,00
80,00
70,00

50,00
1

40,00
30,00
20,00
10,00
0

0,00
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24
Hour

17

/MWh

MW

60,00

baseload
profiled 4h
price

Value that can be captured by reacting on belpex prices

140.000
120.000

/MW

100.000
2012_4

80.000

2012_1
2007_4

60.000

2007_1
40.000

20.000
jan

18

feb

mrt

apr

mei

jun

jul

aug

sep

okt

nov

dec

Also the balancing market offers opportunities

150,00

100,00

50,00

0,00
01/04/2013

02/04/2013

03/04/2013

04/04/2013

-50,00

-100,00

Imbalance Negative Price

(/MWh)

19

BELPEX Hourly Price

More information

Autumn School : 08 09 October 2013

Basic balancing training

Commercial actors: aggregators/suppliers
20

Questions

?
21