Renewable Energy Management: Meeting Government Targets and Maximizing Income

1. Inenco RERenewable energy management John Dodds Business Development Manager

2. Inenco RE • Over 40 years experience • 15 tW of Energy delivered 2007/08 • Over £1 Billion in management • FSA Accreditation • Blue chip client base

3. The need for renewable energy • Government target is 20% of its total energy from renewable sources by 2020 • Currently this figure stands at less than 1.5% • This target is driven by the need for energy security as much as climate change • In total it is estimated that delivering the target represents £100 billion of revenue

4. The scale of the challenge Major increases are required for all three applications % Percentage renewable contribution to total energy consumption

5. The solution • Distributed Generation • Merchant plant • Farm Diversification on a major scale

6. Distributed Generation • Renewable energy projects require: • Land • A secure feedstock source • Customers for the energy • Renewable projects can provide security for: • Heat • Electricity • Income

7. So what is required? • A wind turbine can take up just the space needed to park four cars • A power plant fired by Biogas or Biomass requires approximately two acres • Expertise to develop the project • Effective project managment and finance

8. How is income earned? • Electricity is either sold locally, used on site or sold to energy supply companies over the National Grid • Heat produced can be used on site or sold locally • “Gate fees” for plants that deal with waste • Government subsidies in the form of ROCs

9. Government support • Renewable Obligation Certificates (ROCs) are the mechanism to provide financial support to renewable electricity, they are currently worth £50 per mWh. The amount of ROCs you receive depends on what type of generator is being used. • Levy Exemption Certificates (LECs) are for the Climate Change Levy charged to all commercial users of electricity, generators of renewable electricity are paid this as a benefit, approximately 0.45p per kWh. • Renewable Energy Guarantee of Origin (REGO) certificates have no cash value, they provide an audit trail for the energy generated. • All of these are administered by Ofgem.

10. An example income model • The types of income streams for electricity are common to all renewable energy generators • The ROC payments will vary for different types of technology

11. Three ways to export • Private wire • End user PPA • Wholesale energy markets

12. Private Wire • Hard wire to Neighbour or self use • Increased value • No transmission charges • Could reduce grid connection charges

13. End User PPA • Guaranteed price for between 1 & 5 years • Income security • Bankable offering

14. Wholesale Energy Market • Maximise income • Managed trading • Virtual floor

15. What is Virtual Floor? • A robust procurement strategy to reduce downside risk and benefit from market increases • The Virtual Floor strategy is managed using the ‘unlock’ and ‘relock’ tool contained in flexible supply agreements offered by the leading energy retailers. • Dependant on your attitude to risk, we can unlock your fixed energy price to get higher export prices for your generated energy • The share of increased profit gives more than any fixed price deal

16. Unlock/Relock – Technical Expertise 75.00 Market Fundamental and Technical analysis used to make informed unlock and relock decisions, incl.:- 70.00 Unlock • Analysis of Oil, Coal Carbon, Currencies etc • Relative Strength Indicators • Value at Risk analysis • Supply margin status 65.00 Price 60.00 Lower lock trigger once desired gain has been achieved – OR…. 55.00 50.00 ……Relock when market rise triggers ‘lock in' 45.00 Time

17. Virtual Floor • Optimises risk management in a PPA contract • Controlled decisions born out of a robust and defendable process • Provides a price floor • Budget income set • Maximum income achieved from unlock and relock is unlimited

18. Overview • Your position is 100% contracted at the initial reference price – ‘Actual’ (£70) • Virtual Floor set (£69) using agreed ‘buffer’ value (£1) • Use ‘unlock’ ‘relock’ to improve ‘Net price’ + return of ‘buffer’ (£72) Final Net Price (£71 +£1) Energy sold using Virtual Floor period ‘Benefit’ (£1) Initial Contract (£70) £ Buffer £1 Virtual Floor (£69) Timeline

19. Sell, Buy & Re-Sell Re-Sell: £65/MW Buy: £60/MW Sell ‘Actual’: £54/MW £ 0/MW £ 65/MW ‘Initial net Sell’: £ 54/MW ‘Final net Sell’: £59/MW £ 0/MW “profit/loss”: £ 0/MW £ 6/MW £ 5/MW

20. What’s the catch? • The development of a renewable energy project is complex and lengthy: • Extensive feasibility work • Arranging finance • Supplier selection • Project management • Electrical and heat network connections • Power purchasing agreements • Feed or fuel input management • Ofgem requirements to claim ROCs LECs and REGOs • In life support

21. Inenco RE can help you • With 40 years experience in the energy market we can help you by: • Producing commercial and technical feasibility studies • Producing the specification of the plant • Project managing the installation, connection and commissioning of your equipment • Providing a favourable power purchasing agreement and managing the sale of ROCs and LECs • Delivering up to date management information

22. Find out more • John Dodds 07970 069054 • Visit our website www.inenco.com 01253 785000