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RM4964 SO7461 DECC Provision of Consultancy regarding CfD Metering, Technical
Systems and Curtailment arrangements for NI Generators
Appendix B – Service Description
APPENDIX B
SERVICE DESCRIPTION
CONTENTS
1.
INTRODUCTION ....................................................................................................... 2
2.
PURPOSE ................................................................................................................. 3
3.
BACKGROUND TO THE AUTHORITY ..................................................................... 4
4.
BACKGROUND TO REQUIREMENT/OVERVIEW OF REQUIREMENT ................... 4
5.
SCOPE OF REQUIREMENTS .................................................................................. 6
6.
SERVICE LEVELS AND PERFORMANCE ............................................................... 9
7.
ADDITIONAL REQUIREMENTS ............................................................................. 10
8.
SECURITY REQUIREMENTS ................................................................................. 11
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RM4964 SO7461 DECC Provision of Consultancy regarding CfD Metering, Technical
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Appendix B – Service Description
1.
INTRODUCTION
1. The Department of Energy & Climate Change (DECC) works to make sure the UK
has secure, clean, affordable energy supplies and promote international action to
mitigate climate change. Under the auspices of the Secretary of State for Energy and
Climate Change, the Rt. Hon. Edward Davey MP and his ministerial team, the
department develop and deliver the Government’s energy and climate change
policies. The Secretary of State has set three priorities:
-
Driving investment in the UK’s energy infrastructure and supporting growth.
Helping households and businesses take control of energy bills.
Reducing greenhouse gas emissions from the UK and internationally.
2.
The Electricity Market Reform (EMR) programme will provide incentives to
support investment in secure, low-carbon electricity generation, while
improving affordability for consumers. The electricity sector is a critical
part of the UK economy, is an important driver of growth, and is key to
meeting the UK’s commitment to reduce its emissions of carbon dioxide.
3.
The key elements of EMR will be delivered through two new mechanisms:
Contracts for Difference (CfDs) and the Capacity Market. CfDs will provide
long-term revenue stabilisation to low-carbon Generators, allowing
investment to come forward at a lower cost of capital and therefore at a
lower cost to consumers. The Capacity Market will provide certain regular
payments to reliable forms of capacity (both demand and supply side), in
return for such capacity being available when electricity supply is squeezed.
This will reduce the risk of blackouts due to insufficient capacity on the
system.
4.
CfDs will support new investment in all forms of low-carbon generation
(renewables, nuclear power and Carbon Capture and Storage (CCS)) and
have been designed to provide efficient and cost-effective revenue
stabilisation for new generation, by reducing exposure to the volatile
wholesale electricity price. CfDs require Generators to sell energy into the
market as usual but, to reduce this exposure to electricity prices, CfDs provide
a variable top-up from the market price to a pre-agreed ‘strike price’. At times
of high market prices, these payments reverse and the Generator is required
to pay back the difference between the market price and the strike price, thus
protecting consumers from over-payment. The CfD will be implemented
through a bilateral contract between the Generator and the Low Carbon
Contracts Company Ltd (the ‘CfD Counterparty’).
5.
In 2012 the Northern Irish Minister agreed to the EMR being implemented in
Northern Ireland (NI) so that the scheme can operate in unity across the UK (with the
exception of the GB capacity market). The single feature of EMR to be implemented
in NI will be the CfD contract for low-carbon generators. The plan is for NI
Renewables Obligation (NIRO) to be phased-out and for the CfD for renewables to
operate in NI as the primary support mechanism for large scale renewables from
April 2017.
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RM4964 SO7461 DECC Provision of Consultancy regarding CfD Metering, Technical
Systems and Curtailment arrangements for NI Generators
Appendix B – Service Description
6. NI is party to the wholesale electricity market covering NI and Ireland, the Single
Electricity Market (SEM). While the CfD scheme will be operational in GB from
Autumn 2014, it has been delayed in NI, due the on-going reform of the SEM (known
as SEM Regional Integration Project, I-SEM) to comply with the European Electricity
Target Model (EU Target Model). It is essential that the CfD in NI works alongside
the I-SEM, and that the new SEM market arrangements are reflected within the CfD.
There remain a number of uncertainties regarding the timeline for the delivery of the
I-SEM project and how the final market will operate. This presents a challenge to
implementing the NI CfD because the final design for the market, and a deadline on
delivery is not yet finalised.
2.
PURPOSE
7. The purpose of the tender is to procure the services of a consultant to provide
independent and expert advice to DECC on the suitability of the CfD Metering,
Technical Systems and Curtailment arrangements for NI Generators.
8. DECC is aware that a number of changes to the areas of the CfD contract relating to
Metering and Technical Systems may be necessary to ensure that they function in a
NI context. The appointed consultant will support DECC in understanding how the NI
context differs from the GB context, in providing evidence to support DECC’s
decision making process, and in advising on the implementation, specifically advising
whether the same level of risk is maintained between the CfD developed for NI and
the existing GB contract. Further, the consultant will advise on any barriers to
implementation of the CfD arrangements in NI.
9.
The contract is split into two phases:
Phase 1 consisting of a call-off contract for advice in support of CfD Metering,
Technical Systems and curtailment arrangements for NI Generators – to end 31st
March 2015.
Phase 2 extension pending further budget approval – to last for the period of
delivery of the NI CfD contract, associated documents and processes (maximum
end point 31 March 2017).
10. The consultant should have an excellent understanding of the NI electricity market
and regulatory framework, NI codes and licences. They will need to have knowledge
of the I-SEM project, and exhibit that they understand the implications for NI
Generators. They will have experience in working with the Balancing and Settlement
Code and the Connection Use of System Code in GB and should have expertise in
developing metering arrangements for generating sites in both GB and NI.
11. There is no guarantee of work under Phase 2 or any additional work beyond that
specified under Phase 1. Should work under Phase 2 or any additional work arise
DECC reserves the right to re-advertise.
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RM4964 SO7461 DECC Provision of Consultancy regarding CfD Metering, Technical
Systems and Curtailment arrangements for NI Generators
Appendix B – Service Description
3.
BACKGROUND TO THE AUTHORITY
12. Throughout the development of the EMR, DECC have sought to ensure that the
approach to incentivising investment in low carbon generation is applicable and
usable by all financiers and investors, and beneficial to all UK consumers.
13. DECC has responsibility for implementing the CfD scheme across the UK and
therefore in NI. We are working closely with the Department of Enterprise, Trade and
Investment (DETI), System Operator Northern Ireland (SONI) and the NI Utility
Regulator to implement the CfD in NI. Due to the nature of the market in NI, DECC
will engage with commercial and legal advisors in order to develop and implement a
CfD for NI that optimises value for money for the consumer and provides confidence
for investors.
14. Energy policy (with the exception of nuclear) is devolved to the NI Assembly,
meaning DETI is responsible for implementing renewable energy policy in NI. DETI
has been working with DECC to ensure that the introduction of CfDs in NI takes
account of the all-island Single Electricity Market.
4.
BACKGROUND TO REQUIREMENT/OVERVIEW OF REQUIREMENT
15. The CfD scheme will provide long-term revenue stabilisation to low-carbon plant,
allowing investment to come forward at a lower cost of capital and therefore at a
lower cost to consumers.
16. More specifically, a CfD is a private law contract between a low-carbon electricity
generator and the Low Carbon Contracts Company (LCCC), a Government-owned
limited liability company. The CfD pays the difference between the ‘strike price’ – a
price for electricity reflecting the cost of investing in a particular low carbon
technology – and the ‘reference price’– a measure of the market price for electricity in
the wholesale market. It gives greater certainty and stability of revenues to electricity
generators by reducing their exposure to volatile wholesale prices, whilst protecting
consumers from paying for higher support costs when electricity prices are high.
17. The Government will work closely with DETI to design a CFD implementation
programme in NI that starts from April 2017.
18. Provisional milestones for the implementation of the I-SEM include the publication of
the I-SEM high level design decision paper in September 2014 and the detailed
design is anticipated between August 2015 and September 2016. These timescales
are crucial to the development of the CfD for NI because the detailed design of the ISEM project will directly result in changes being made for the NI CfD contract.
19. The consultant will work directly with members of the CfD Design and Governance
team, which sits within DECC’s EMR Directorate. They will report to the nominated
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RM4964 SO7461 DECC Provision of Consultancy regarding CfD Metering, Technical
Systems and Curtailment arrangements for NI Generators
Appendix B – Service Description
DECC project manager who will manage contract relationships overall and act as a
central point for communication.
20. The ambition of the Ministers is that the CfD regime will operate consistently across
the UK from April 2017. Accordingly changes may need to be made to the existing
CfD (applying only across GB at the moment) to reflect the different market
arrangements, regulatory framework and the fact that NI is a distinct jurisdiction, but
the principles of the CfD policy and arrangements will remain consistent.
21. DECC’s CfD Design and Governance team have carried out initial scoping which
identified a large number of major changes that would need to be made to the CfD
Metering, Technical Systems and Curtailment terms in the CfD to ensure its
successful implementation in NI1.
22. CfD Metering Policy aims to ensure that accurate data is continually passed into CfD
settlement. The CfD contract sets out how Metered Output shall be calculated and
contains a set of undertaking provisions which ensure that the Generator’s metering
system continues to meet standards that allow for the accurate measurement of data.
A key feature of CfD Metering policy is that it utilises existing Balancing and
Settlement Code functionality in order to facilitate CfD Settlement. NI metering and
settlement processes are distinct from those in GB, whereby they are regulated by NI
institutions and governed by separate code and licence documentation. Therefore,
the NI CfD’s approach to Metering will need to be redesigned in order to be
compatible with the NI market and regulatory frameworks.
23. In terms of the Technical Systems provisions, the GB CfD contract contains
provisions which adjust Generator’s administrative Strike Price annually to account
for Technical Systems Charges applied by Elexon and National Grid to all licenced
GB Generators. The charges covers for costs incurred by the System Operator
balancing the network, and the BSC Company recovering the cost of energy lost
between the point of generation and demand on the transmission system. These
charges are referred to as BSUoS and TLM (D) in the CfD contract, and are enforced
through GB code and licence documentation, and the adjustment is made to avoid
the charges being passed onto consumers as would occur in an open market
situation. Similarly to the issues regarding Metering, it will not be possible to transfer
the GB CfD mechanism to NI; therefore the arrangements for Technical Systems
charges will also require significant redesigning to fit the NI context.
24. The Curtailment provisions in the CfD contract are a further area in which changes
will be required for NI. Curtailment sits outside of the Metering and Technical System
sections of the contract and the provisions outline how Generators will be
compensated in the event their output is curtailed as a result of a change in law
(provided it qualifies as such an event), and provided they meet other qualifying
criteria. This provision is included to reflect existing GB market arrangements
whereby Generators receive compensation in the event their output is curtailed. A
recent decision taken by the Single Electricity Market Committee has ruled that as of
2018 NI generators will no longer be compensated for any revenues lost as a result
1
https://www.gov.uk/government/publications/contracts-for-difference-standard-terms-and-conditions
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Systems and Curtailment arrangements for NI Generators
Appendix B – Service Description
of a curtailment event. This decision has created a significant difference between the
NI and GB markets, therefore a new mechanism will need to be designed which is
more compatible with the NI provisions for Curtailment.
5.
SCOPE OF REQUIREMENTS
Mandatory Deliverables
25. DECC will be responsible for developing and managing the project plan for delivery
of the required outputs to time. The consultant will be expected to comply with those
timescales and to provide material in the format, to be agreed, and in accordance
with the quality standards of the provider.
26. The consultant will start by considering the initial questions which DECC put forward
in this Service Description and at the Inception Meeting; and producing detailed
evidence-based responses to these questions with specific focus given to the
implementation potential and commercial viability in the responses.
27. The remainder of the contract will be conducted on a call-off basis whereby DECC
will be able to contact the consultant with questions relating to Metering, Technical
Systems and Curtailment. Where required, the consultant will be expected to
undertake modelling work, and produce detailed analyses in response to questions
posed by DECC, and will make themselves available to meet to discuss any findings.
28. Prior to beginning its work the contractor will be expected to have familiarised itself
with the CfD Metering, Technical Systems and Curtailment policy developed by
DECC and the relevant sections of the existing CfD Standard Terms and
Conditions234.
29. These are examples of initial questions that the consultant will be expected to
provide detailed responses to (subject to changes at inception meeting). Answering
these questions will be the 1st deliverable expected from the consultant.
a. Is there anything in the Metering Code which would prevent DECC from utilising
its disputes process for CfD purposes?
b. What are the average timescales for resolving an issue of metering noncompliance under the Metering Code?
2
https://www.gov.uk/government/groups/contracts-for-difference-expert-sub-group-on-metering
3
https://www.gov.uk/government/publications/contracts-for-difference-standard-terms-and-conditions
4
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/267735/EMR__Update_on_Terms_for_the_Contract_for_Difference_v8.pdf
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Appendix B – Service Description
c. Will the timescales prescribed in the CfD Metering Undertakings prove
challenging to implement in NI, and what effect will they have on the investment
potential of the contract?
d. Is the requirement to provide an electrical schematic diagram to the CfD
Counterparty, in the event of a material change to the metering equipment,
reflective of the different metering ownership arrangements in NI?
e. Is offering a strike price adjustment according to changes in NI use of system
charges providing an unfair commercial advantage for NI Generators over their
GB counterparts? What are the barriers to implementing such a process in NI?
f.
How will the new Curtailment provisions for price taking generators in NI impact
upon the CfD Curtailment compensation provisions?
30. The consultant will then be available to assist DECC as further questions that require
their expertise are required on a call-off basis. A provisional timetable for delivery of
this contract is shown in Section 6.
31. DECC expects the consultant to consider whether existing provisions contained
within NI industry code and licence documents or NI regulation could prevent DECC
from implementing the intended CfD arrangements and how that would affect their
responses to the questions. .
32. The consultant will be expected to identify one named point of contact through whom
all enquiries can be filtered, and to ensure timely replies to these queries against
agreed timescales.
33. Throughout the course of the contract the consultant will be expected to undertake
regular meetings with DECC’s Contract Design and Governance team to discuss
findings and any new proposals arising out of work carried out. Because of the calloff nature of the work, the consultant will be expected to be flexible and available at
short notice. As a minimum DECC expects:



An inception meeting with DECC officials at the start of the contract to discuss the
detail of the work, to ensure that the remit and scope are appropriately defined, and
to agree the approach to the work.
An interim meeting during Phase 1 to discuss the responses to the initial questions.
Ad-hoc meetings thereafter to commission further work and discuss conclusions from
further analysis by the consultant.
34. The consultant will build on their experience of and work with NI stakeholders to test
any assumptions or proposals that arise from the work undertaken, and will
endeavour to make available a robust set of evidence to DECC. Likewise, DECC will
make best efforts to make available all necessary background materials from DECC,
DETI or the EMR Delivery Partners and other consultants.
Mandatory skills
35. The consultant will possess and be able to clearly demonstrate the following
experience, skills and attributes:
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Appendix B – Service Description

A detailed knowledge of the NI electricity market and the role of the key institutions
SONI, NIE and NIAUR.

An in-depth understanding of NI regulatory frameworks, specifically the SONI Grid
Code, Trading and Settlement Code and the NIE Distribution Code. Familiarity with
the interrelationships between these documents is also desirable.

Expertise in the GB electricity market and regulatory frameworks, specifically the
workings of Elexon and the Balancing and Settlement Code. Also the consultant
should have a thorough understanding GB Grid Code and the Connection Use of
System Code.

An up to date knowledge of the operational and governance aspects of the Single
Electricity Market, mandate of the SEM Committee and direction of the I-SEM
reforms.

Familiarity with EMR and the CfD contract.

Previous involvement with electricity generation projects in NI.
More Specifically:

Expertise in the field of metering and the current arrangements for settlement in NI,
and how these interact with the GB CfD metering requirements.

Knowledge of how the BSC deals with metering disputes, non-compliance and
existing procedures for estimating missing data.

An understanding of how use of system charges are dealt with in the NI market, and
how these are factored into the current calculation of the System Marginal Price.

Familiarity with loss adjustment factors applied in NI (both transmission and
distribution), and how these differ to the treatment of similar multipliers in the GB
market.

Knowledge regarding the extent of licence-exempt generation in NI and the
deployment of Private Network Generators.

Awareness of the mechanisms for dealing with issues of metering non-compliance
contained within each of the SONI Grid Code, Trading and Settlement Code and the
NIE Distribution Code. Technical knowledge regarding the nature of these issues of
non-compliance is also desirable.

An in-depth understanding of existing mechanisms for raising a metering dispute
under the respective code documents in NI.
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RM4964 SO7461 DECC Provision of Consultancy regarding CfD Metering, Technical
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Appendix B – Service Description

It would be desirable for the consultant to have an understanding of the potential
impact of the I-SEM proposals upon system balancing costs in NI.
Other Requirements
36. The services may be supplied by a single organisation, by several organisations subcontracting through a lead organisation or managing agent, or by a consortium with a
lead organisation; in all cases DECC requires that a single person from the selected
organisation / lead consultant is responsible for the effective delivery of all aspects of
the service and the contract will be with a single organisation.
37. The consultant must have the ability to act as an independent organisation, having
no conflict of interest.
6.
SERVICE LEVELS AND PERFORMANCE
38. DECC will measure the quality of the Supplier’s delivery by:

The timeliness and quality of responses to customer’s queries, and

The effectiveness of knowledge transfer processes;
39. The Plan as at the Effective Date is set out below (this is provisional and subject to
change – to be discussed at the inception meeting and reviewed throughout the
project):
Deliverables
Indicative Milestone
Date
Milestone
Customer
Responsibilities
Phase 1: 09th December 2014 – 31 March 2015
Inception meeting with
DECC
Presentation of project
methodology
10th December
1st deliverable:
responses to initial
questions
Initial views on
questions posed
19th December 2014
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Confirm or refine initial
questions
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RM4964 SO7461 DECC Provision of Consultancy regarding CfD Metering, Technical
Systems and Curtailment arrangements for NI Generators
Appendix B – Service Description
Meeting to review
detailed responses to
initial questions
Presentation of more
detailed conclusions
of responses to initial
questions
7th January 2015
Ad-hoc call off work
TBC
TBC
Discuss initial analysis
and commission
further work
Phase 2: 1st April 2015 – 31st March 2017
Ad-hoc call off
TBC
TBC
40. If so required by the Customer, the Supplier shall produce a further version of the
Plan (based on the above plan) in such further detail as the Customer may
reasonably require. The Supplier shall ensure that each version of the
Implementation Plan is subject to approval. The Supplier shall ensure that the
Implementation Plan is maintained and updated on a regular basis as may be
necessary to reflect the then current state of the implementation of the Services.
41. The Customer shall have the right to require the Supplier to include any reasonable
changes or provisions in each version of the Implementation Plan.
42. The consultant shall perform its obligations so as to achieve each Milestone by the
Milestone Date.
43. Payment can only be made following satisfactory delivery of pre-agreed certified
products and deliverables.
44. Before payment can be considered, each invoice must include a detailed elemental
breakdown of work completed and the associated costs.
7.
ADDITIONAL REQUIREMENTS
45 The consultant’s staff will be expected to work at their own premises and when
required to at the customer’s premises of 3 Whitehall Place, London WC1 for the
duration of the project. Meetings will be held at DECC Offices in London unless
advised otherwise.
46 DECC will have full ownership of any written products, legal drafting, and intellectual
property rights.
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Appendix B – Service Description
8.
SECURITY REQUIREMENTS
47.
Findings should only be discussed with the DECC Contract Design and Governance
team and other parties as outlined by them.
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