CAP142: Temporary TEC Exchange
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
Process derived from LDTEC principles
Example Scenarios
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
Generic life-cycle
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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
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
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)

Application
minimum period 4 weeks (to align with STTEC)
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
Application – Eligibility

Donor has TEC when applying



Recipient has an operational connection when applying

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
fulfilled requirements of Construction Agreement (for “new” TEC)
be liable for transmission charges for the TEC (all TEC)
sufficient CEC (on Power Station basis) if transmission connected
does not exceed Maximum Export Capacity if distribution connected
Recipient’s connection must be Grid Code compliant


relevant conditions apply to particular class of generator
i.e. not necessarily the same for donor and recipient
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
Assessment – No interactivity


Assessed against Operational Criteria of GB SQSS
Exchange rate set to not exacerbate existing operational costs
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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
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
Assessment – Interactive applications

Some scope for interaction with


applications for STTEC, LDTEC, and TEC
other applications for short-term exchanges
i.e. quantity of additional
rights and exchange rate
could be inter-dependent

Resolve by considering applications on a sequential firstcome-first-served basis

Second comers considered sequentially
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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
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
National Grid’s 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
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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
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
National Grid’s Offer
Recipient
MW
Start app
End app
Max app
Offered
Exchange
Min app
TEC
April
Application
Assess
March
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
User acceptance / rejection

Offer will be open for acceptance or rejection for [1] BD
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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
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
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
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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
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
Access & Charging

Access
During the trade:
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donor has reduced rights
recipient has increased rights
exchange rate sets relationship
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Following the trade:
pre-trade rights restored to both
counterparties of the trade
Charging
During the trade:
Following the trade:
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
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
donor continues to pay TNUoS
for all enduring capacity rights
bilateral between donor and
recipient for exchanged capacity
Reporti
ng
donor continues to pay TNUoS
for all enduring capacity
bilateral between donor and
recipient ceases
End
of
trade
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
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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 User’s TEC

Enables Users to identify potential trading partners
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
Reporting – Exchanges

If there is a perceived industry benefit certain information
could be made available to the industry (similar to LDTEC)

Accepted exchanges
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the counterparties of the trade
the period of the trade
the amount donated
the average amount received
to enhance information about
potential exchange rates
Rejected exchanges & where no offer made

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
the donor party
the period of the trade
the amount offered for donation
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
to enhance information about
parties willing to donate rights
Reporti
ng
End
of
trade
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 donor’s original access rights
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
consistent with the enduring rights afforded by TEC that are not
afforded by a temporary TEC exchange
Donor’s enduring rights can therefore be preserved
following completion of the temporary trade
Application
Assess
Offer
Accept
or
Reject
Contrac
ts
Access
&
Chargi
ng
Reporti
ng
End
of
trade
Summary timelines
Start of the
Financial Year
Start of the
exchange period
End of the
Financial Year
9 – 12 months
6 – 9 months
3 – 6 months
1–3
mths
Assessment
(weeks)
Accept / Reject
(1 BD)
1 week for
Ctrl Rm prep
Trade effective
(months)
Example scenarios
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Scenario 1: Unity exchange rates, same charging zone
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Scenario 2: Non-unity exchange rates, same charging zone
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Scenario 3: Unity exchange rates, different charging zones
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Scenario 4: Non-unity exchange rates, different charge zones
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Scenario 5: Trading within a negative charging zone
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Scenario 6: Trading between negative and positive charging zones
Nomenclature
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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
Scenario 1A
Unity exchange rates, same charging zone
Trade agreed pre-October (TNUoS1 = TNUoS2)
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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
P1 (Donor)
P2 (Recipient)
TEC
200
0
Donated TEC
100
-
Received TEC
-
100
100
100
UoS Charges
Pays TNUoS1 for 200MW
None
Bilateral between Users
P2 could pay TNUoS1 on 100MW to P1
Access (MW)
Max Export
Scenario 1B
Unity exchange rates, same charging zone
Trade agreed post-October (TNUoS1 = TNUoS2)
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
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)
Scenario 2
Non-Unity exchange rates, same charging zone
Trade within same zone (TNUoS1 = TNUoS2)
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

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
P1 (Donor)
P2 (Recipient)
TEC
200
50
Donated TEC
100
-
Received TEC
-
80
100
130
UoS Charges
Pays TNUoS1 for 200MW
Pays TNUoS2 for 50MW
Bilateral between Users
P2 could pay TNUoS1 on 100MW to P1
Access (MW)
Max Export
Scenario 3A
Unity exchange rates, different charging zones
Donor in higher charging zone (TNUoS1 > TNUoS2)
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
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
P1 (Donor)
P2 (Recipient)
TEC
200
0
Donated TEC
100
-
Received TEC
-
100
100
100
UoS Charges
Pays TNUoS1 for 200MW
None
Bilateral between Users
P2 could pay TNUoS1 on 100MW to P1
Access (MW)
Max Export
Scenario 3B
Unity exchange rates, different charging zones
Donor in lower charging zone (TNUoS1 < 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
Scenario 4A and 4B
Non-Unity exchange rates, different charging zones
Donor in higher or lower charging zone
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

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
Access (MW)
P1 (Donor)
P2 (Recipient)
TEC
200
500
Donated TEC
100
-
Received TEC
-
50
100
550
Max Export
UoS Charges
Pays TNUoS1 for 200MW Pays TNUoS2 for 500MW
Bilateral between Users
P2 could pay TNUoS1 on 100MW to P1
Scenario 5A
Trading within a negative charging zone
Trade over Triad period (TNUoS1 = TNUoS2)
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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
P1 (Donor)
P2 (Recipient)
TEC
200
0
Donated TEC
100
-
Received TEC
-
100
100
100
Paid TNUoS1 on exports in
triad period (<100MW)
No payment - no long
term network benefit
Access (MW)
Max Export
UoS Charges
Bilateral between Users
P2 pays P1 bilaterally agreed amount
Scenario 5B
Trading within a negative charging zone
Trade does not overlap Triad period (TNUoS1 = TNUoS2)
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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
P1 (Donor)
P2 (Recipient)
TEC
200
400
Donated TEC
100
-
Received TEC
-
100
100
500
Access (MW)
Max Export
UoS Charges
Bilateral between Users
Paid TNUoS1 on exports in Paid TNUoS2 on exports in
triad period (<200MW)
triad period (<400MW)
P2 pays P1 bilaterally agreed amount
Scenario 6A
Trading between negative and positive charging zones
Donor in positive charging zone

P1 has 200MW and donates 100MW to P2 who receives 100MW
P1 (Donor)
P2 (Recipient)
TEC
200
0
Donated TEC
100
-
Received TEC
-
100
100
100
UoS Charges
Pays TNUoS1 for 200MW
No payment - no long
term network benefit
Bilateral between Users
P2 pays P1 bilaterally agreed amount
Access (MW)
Max Export
TEC in negative charging zones is not scarce therefore unlikely
that parties would seek to temporarily trade TEC into these zones
Scenario 6B
Trading between negative and positive charging zones
Donor in negative charging zone

P1 has 200MW and donates 100MW to P2 who receives 1MW
P1 (Donor)
P2 (Recipient)
TEC
200
0
Donated TEC
100
-
Received TEC
-
1
100
1
Paid TNUoS1 on exports in
triad period (<100MW)
None
Access (MW)
Max Export
UoS Charges
Bilateral between Users
P2 pays P1 bilaterally agreed amount
Questionable whether trades would take place
•
•
unlikely to result in non-zero exchange rate
TEC in a negative charging zone is an asset
Conclusions
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
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
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