CAP142: Temporary TEC Exchange

1
CAP142 Temporary TEC Exchange

• Process derived from LDTEC principles
• Example Scenarios

2
Aim of CAP142

• To develop a process that allows access rights to
  be temporarily exchanged between two parties such
  that the pre-trade state is reverted to at the
  end of the trade
• Processes and timescales presented are based on
  those developed for LDTEC / STTEC and assume a
  relatively low level of utilisation

3
Generic life-cycle

• Application by Users
• Assessment by National Grid
• Offer by National Grid
• Acceptance / Rejection by User
• Contracts with National Grid changed
• Access charging changes take effect during
  exchange
• Periodic reporting by National Grid
• End of trade period

End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
4
Application

• Joint application by the two parties seeking to
  trade
• One application fee paid to cover assessment
  costs
• could stipulate who pays suggest recipient
• Submitted within the financial year that the
  trade is sought
• Seeking to identify the capacity provided at a
  recipient node by virtue of a reduction of
  capacity at a donor node
• Application will need to state
• the identities of the two trading parties
• capacity that will be surrendered by the donor
  party
• minimum and maximum capacity sought by the
  recipient party
• time period for trade (whole number of weeks, or
  end of FY)
• minimum period 4 weeks (to align with STTEC)

End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
5
Application Eligibility

• Donor has TEC when applying
• fulfilled requirements of Construction Agreement
  (for new TEC)
• be liable for transmission charges for the TEC
  (all TEC)
• Recipient has an operational connection when
  applying
• sufficient CEC (on Power Station basis) if
  transmission connected
• does not exceed Maximum Export Capacity if
  distribution connected
• Recipients connection must be Grid Code
  compliant
• relevant conditions apply to particular class of
  generator
• i.e. not necessarily the same for donor and
  recipient

End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
6
Assessment No interactivity

• Assessed against Operational Criteria of GB SQSS
• Exchange rate set to not exacerbate existing
  operational costs
• establish model considering generation and demand
  conditions
• take into account planned transmission outages
  for construction and maintenance using best
  available data
• reduce the export of donor by the amount in
  application
• disregard will any constraint benefit of capacity
  donated
• incrementally increase export of recipient within
  limits of the application until constraint
  exacerbated
• Time required dependent on duration of exchange
• varies between 3 to 7 weeks (timelines details
  later)
• more complex than LDTEC

End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
7
Assessment Interactive applications

• Some scope for interaction with
• applications for STTEC, LDTEC, and TEC
• other applications for short-term exchanges
• Resolve by considering applications on a
  sequential first-come-first-served basis
• Second comers considered sequentially
• notified they are interactive
• wait their turn (up to 7 weeks, if one
  interactive application), or
• given option to withdraw (TEC available from
  following 1 April)
• refunded application fee

i.e. quantity of additionalrights and exchange
ratecould be inter-dependent
End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
8
National Grids Offer

• At end of assessment period, if the request can
  be accommodated, an offer will be made by
  National Grid
• Offer will
• state the capacity available as a result of that
  donated
• could be profiled (including zero)
• be bounded within the time period requested
• be bounded by the minimum and maximum capacity
  sought
• be described on a weekly granularity
• be commercially firm for period if accepted
• be valid only for defined offer / acceptance
  period

End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
9
National Grids Offer
RecipientMW
Start app
End app
Max app
Offered Exchange
Min app
TEC
April
March
End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
10
User acceptance / rejection

• Offer will be open for acceptance or rejection
  for 1 BD
• trade-off required between flexibility, impact on
  other applicants, validity of exchange rate
  offered, adequate decision time
• Accepted or rejected by the recipient party only
• donor party gives agreement to change its
  bilateral on application
• enhances a timely and efficient process
• If rejected, not change and application fee not
  refunded
• If accepted, bilateral agreements changed as
  described in the offer and trade effective from
  date stated in offer

End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
11
Contract change for temporary exchange

• National Grid amends the bilateral agreements it
  has with the counterparties of the exchange (see
  next slide)
• Separately identify temporary and enduring access
  rights
• facilitates transparent tracking of rights
• facilitates unwinding of trade
• enables charging donor party for enduring TEC
• Exchange starts on a Monday and at least 1 week
  following acceptance of the offer
• alignment with existing week-ahead Control Room
  processes

End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
12
Access Charging

• Access
• During the trade
• donor has reduced rights
• recipient has increased rights
• exchange rate sets relationship
• Following the trade
• pre-trade rights restored to both counterparties
  of the trade

• Charging
• During the trade
• donor continues to pay TNUoS for all enduring
  capacity rights
• bilateral between donor and recipient for
  exchanged capacity
• Following the trade
• donor continues to pay TNUoS for all enduring
  capacity
• bilateral between donor and recipient ceases

End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
13
Reporting Available TEC to exchange

• TEC Register details who currently has TEC (and
  therefore who could temporarily exchange rights
  to another party)
• TEC Register provides the following information
• the identity of the User
• the station name
• the point of connection
• TEC (MW)
• the applicability i.e. whether current or future
  TEC (and if so, when)
• Updated 5 business days after a change to a
  Users TEC
• Enables Users to identify potential trading
  partners

End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
14
Reporting Exchanges

• If there is a perceived industry benefit certain
  information could be made available to the
  industry (similar to LDTEC)
• Accepted exchanges
• the counterparties of the trade
• the period of the trade
• the amount donated
• the average amount received
• Rejected exchanges where no offer made
• the donor party
• the period of the trade
• the amount offered for donation

to enhance information about potential exchange
rates
to enhance information about parties willing to
donate rights
End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
15
Arrangements at the end of the exchange

• Following trade all access rights return to
  pre-trade position
• Different from enduring trade as subsequent
  applications for incremental TEC received within
  the exchange period will be assessed against the
  pre-trade contractual background i.e. with the
  donors original access rights
• consistent with the enduring rights afforded by
  TEC that are not afforded by a temporary TEC
  exchange
• Donors enduring rights can therefore be
  preserved following completion of the temporary
  trade

End oftrade
Contracts
Access Charging
Reporting
Application
Assess
Offer
Accept orReject
16
Summary timelines
Start of theFinancial Year
End of theFinancial Year
Start of theexchange period
9 12 months
6 9 months
3 6 months
1 3 mths
Assessment(weeks)
Accept / Reject(1 BD)
1 week forCtrl Rm prep
Trade effective(months)
17
Example scenarios

• Scenario 1 Unity exchange rates, same charging
  zone
• Scenario 2 Non-unity exchange rates, same
  charging zone
• Scenario 3 Unity exchange rates, different
  charging zones
• Scenario 4 Non-unity exchange rates, different
  charge zones
• Scenario 5 Trading within a negative charging
  zone
• Scenario 6 Trading between negative and positive
  charging zones

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Nomenclature

• P1 is the Donor party
• P2 is the Recipient party
• TNUoS1 is the prevailing TNUoS tariff applicable
  to P1
• TNUoS2 is the prevailing TNUoS tariff applicable
  to P2

19
Scenario 1AUnity exchange rates, same charging
zone

• Trade agreed pre-October (TNUoS1 TNUoS2)
• P1 has 200MW and donates 100MW to P2 who receives
  100MW
• Trade starts in April and ends in August (4
  months)
• Application assessment time 4 weeks

20
Scenario 1BUnity exchange rates, same charging
zone

• Trade agreed post-October (TNUoS1 TNUoS2)
• Same trade takes place but between November and
  March
• Exactly the same process, rights and charges as
  Scenario 1A
• TNUoS tariffs determined considering allocated
  enduring TEC
• retained and incremental TEC provides investment
  signals to National Grid
• TNUoS based on long-run incremental costs of
  providing TEC at a node
• National Grid will assume TEC remains with donor
  party
• Donor should continue to receive charge that
  reflects retention of LT right
• Recipient does not have LT right (but does make
  use of the transmission system by virtue of
  rights surrendered by another user and the
  bilateral agreement between users should take
  this into account)

21
Scenario 2Non-Unity exchange rates, same
charging zone

• Trade within same zone (TNUoS1 TNUoS2)
• P1 has 200MW and donates 100MW to P2 who receives
  80MW
• Trade starts in April and ends in September (6
  months)
• Application assessment time 5 weeks

22
Scenario 3AUnity exchange rates, different
charging zones

• Donor in higher charging zone (TNUoS1 gt TNUoS2)
• P1 has 200MW and donates 100MW to P2 who receives
  100MW
• Trade starts in April and ends in January (10
  months)
• Application assessment time 7 weeks

23
Scenario 3BUnity exchange rates, different
charging zones

• Donor in lower charging zone (TNUoS1 lt TNUoS2)
• Exactly the same process, access, and charges as
  Scenario 3A
• TNUoS charges levied should reflect the long-run
  costs incurred to provide new and existing users
  long-term transmission access rights
• need to ensure that donor party continues to face
  a cost reflective signal that reflects the cost
  of it retaining an long-term access right
  regardless of the location of any party that
  makes temporary use of this

24
Scenario 4A and 4BNon-Unity exchange rates,
different charging zones

• Donor in higher or lower charging zone
• P1 has 200MW and donates 100MW to P2 who receives
  50MW
• Trade starts in April and ends in May (2 months)
• Application assessment time 3 weeks

25
Scenario 5ATrading within a negative charging
zone

• Trade over Triad period (TNUoS1 TNUoS2)
• P1 has 200MW and donates 100MW to P2 who receives
  100MW
• Trade starts in November and ends in February (4
  months)
• Application assessment time 4 weeks

26
Scenario 5BTrading within a negative charging
zone

• Trade does not overlap Triad period (TNUoS1
  TNUoS2)
• P1 has 200MW and donates 100MW to P2 who receives
  100MW
• Trade starts in April and ends in September (6
  months)
• Application assessment time 5 weeks

27
Scenario 6ATrading between negative and positive
charging zones

• Donor in positive charging zone
• P1 has 200MW and donates 100MW to P2 who receives
  100MW

TEC in negative charging zones is not scarce
therefore unlikely that parties would seek to
temporarily trade TEC into these zones
28
Scenario 6BTrading between negative and positive
charging zones

• Donor in negative charging zone
• P1 has 200MW and donates 100MW to P2 who receives
  1MW

• Questionable whether trades would take place
• unlikely to result in non-zero exchange rate
• TEC in a negative charging zone is an asset

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Conclusions

• Processes
• Should be based on those developed for LDTEC
• Access
• Long-term right retained by donor party
  post-trade
• Temporary right acquired by receiving party
  during trade
• Charging
• Donor still charged / paid TNUoS for long-term
  right
• Bilateral agreement between donor and recipient