The Treatment of Combined Heat and Power (CHP) under the Trading and Settlement Code A Draft Decision by the Commission for Electricity Regulation

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1 The Treatment of Combined Heat and Power (CHP) under the Trading and Settlement Code A Draft Decision by the Commission for Electricity Regulation CER/01/66 6 th June 2001

2 Introduction This document contains a decision by the Commission for Electricity Regulation under Regulation 3(4) of SI No. 49 of 2000 Electricity Regulation Act, 1999 (Trading Arrangements in Electricity) Regulations, Commission s Decision Principles 1. A Combined Heat and Power (CHP) generator requires a generation licence under Section 14(1)(a) of the Electricity Regulation Act, A 14(1)(a) Generation Licence will permit a person to generate electricity and will fulfill their licensing requirement for the purposes of accession to the Code if required. This person can then trade electricity in the bilateral contracts market and Spill or Top Up, as appropriate, within the terms of the Trading and Settlement Rules (the Rules). 2. A person wishing to supply CHP electricity to final customers requires a CHP supply licence as specified in Section 9 of the Electricity (Supply) (Amendment) Act, 2001, which amends Section 14(1)(d) of the Electricity Regulation Act, The Electricity Regulation Act, 1999 does not include CHP in its definition of renewable, sustainable or alternative forms of energy and therefore this energy is not green electricity and cannot be used as such. CHP electricity cannot be mixed with green electricity to supply green or CHP final customers. 4. A CHP generator may sell the electricity it generates using CHP production as Spill or to a Generator be it CHP, green or non-chp and non-green. It may also sell to a CHP supplier (14(1)(d) licence), an eligible customer supplier (14(1)(b) licence) or a green supplier (14(1)(c) licence). (However, an eligible supplier or green supplier will not be able to use this energy as green electricity, it will be treated as brown. The green supplier will have to balance this with green). 5. A CHP supplier may sell electricity generated using CHP production to any final customer, to other CHP suppliers, to an eligible supplier, a green supplier (although this energy will not be classified as green) or a Generator be it CHP, green or non-chp and non-green. Trading Arrangements 6. A CHP plant is subject to central dispatch under the Grid Code on the same basis as conventional generating units. At present, any 1 An eligible supply licence could be used to supply the customer if it is eligible, however this energy will no longer be classed as CHP.

3 unit greater than 10MW [or site size greater than 30MW] is subject to central dispatch. 2 The holder of a 14(1)(a) Generation Licence is obliged to comply with this requirement to be centrally dispatched and, as a direct consequence, to accede to the Trading and Settlement Code (the Code). 7. A non-centrally dispatched holder of a 14(1)(a) Generation Licence does not have to accede to the Code, unless they wish to trade electricity. For the avoidance of doubt the sale of electricity as Spill or via a bilateral contract and the purchase of electricity as Top Up or via a bilateral contract are trades under the Code and the Rules. Therefore, a CHP unit that spills or tops up is trading electricity across the site boundary, and whether it trades its full output or not and as such it must accede to the Code. 8. The energy imported to a CHP site will be treated as a demand load and will not be treated as negative generation, a supplier must be responsible for the imported energy. 9. Where a CHP site is both importing and exporting energy under the Rules, a net position for CHP sites will be established, that is, imports and exports to/from a site will be netted off for each trading period (i.e. a net position is established for each half hour). The MRSO shall provide the net metered quantities to the SSA on a trading period basis. 10. CHP imports across the interconnector will be permitted and will have to be certified as CHP electricity. CHP exports will not be recorded as a CHP sale, merely as a normal trade (as is the case for green exports). 11. A CHP generator may purchase Top Up as per the Commission s Decision on Limits on Access to Top Up. 3 This states that 8 per cent of the generator s registered capacity will be available at the first Top Up price and the remainder at the Secondary Top Up Price. 4 These purchases will be tracked as brown and not CHP energy. 12. A CHP supplier may purchase its entire Top Up requirements at the first Top Up price. However, a CHP supplier has a requirement to balance these purchases with CHP energy purchases. This balancing requirement will be limited to 95 per cent of the suppliers demand which will be calculated as net metered imports 2 Therefore, a unit less than 10MW, or a site less than 30MW, is not subject to central dispatch. However, a unit between 5MW and 10MW may elect to be centrally dispatched. 3 On Monday 26 th February 2001 the Commission published its Decision on Limits on Access to Top-Up. This can be found on the Commission s website or at the direct link 4 Top Up and Spill entitlements and prices are subject to change by the Commission and it may change them via a subsequent decision as it sees fit.

4 (across the site boundary in the case of CHP on-site demand), this means that an 5 per cent margin of error will be permitted A CHP supplier will have a requirement to balance the electricity it purchases in place of CHP electricity and supplies to final customers, with purchases of electricity produced using CHP generation. 14. The trading system will track CHP electricity trades. The system will track: a. CHP net exports across the boundary where the CHP generator only trades its excess (where the meter is at the site boundary); b. total CHP generation where the CHP unit elects to trade all its output (where the CHP generation unit will be separately metered); c. tracking will also take account of CHP Imports and bilateral trades of CHP electricity between participants. 15. For the purposes of tracking a generation unit s tradable quantity of CHP will be: a. a non-dispatchable CHP plant s tradable quantity is equal to electricity produced using CHP generation as defined in the Electricity Regulation Act, 1999; b. a dispatchable CHP plant s tradable quantity is equal to its XNOM. The SSA will run spot checks on this value to compare it with the actual level of physical generation to prevent consistent gaming. Metering Requirements 16. If a CHP generator wishes to trade its energy in the market a half hourly profile meter must be installed: a. dispatchable CHP plants require separate half-hourly meters for the CHP generated by the CHP plant, and the electricity demand of the demand customer on site; b. non-dispatchable CHP plants who trade their excess output above that which is taken by the on site demand customer, require half-hourly metering at the site boundary; c. non-dispatchable CHP plants who trade all their output require half-hourly metering at the site boundary (or alternately the on-site demand customer) and on the CHP unit; Transmission Loss Factors and Use of System Charges 17. Transmission Loss Factors (TLFs) apply to the quantity traded across the site boundary. 18. The application and charging of Transmission Use of System (TUoS) and Distribution Use of System (DUoS) charges will be set out by the Commission s forthcoming paper regarding the treatment of autoproducers. 5 This value is subject to change by the Commission as it sees fit.

5 Background The Commission published a consultation paper on the 12 th February 2001 titled Handling of CHP Plant under the Trading and Settlement Rules. 6 Comments were received and have been considered. However, in the meantime parts of this paper became out of date due to Section 9 of the Electricity (Supply) (Amendment) Act, 2001 which amends the Electricity Regulation Act, 1999 in Section 14(1)(d) the CHP supply licence and the deletion of Section 14 (10) and Section 28 and the removal of subject to section 28 in paragraph (c) of subsection (1) in Section The result of the amendments is to remove the term Main Heat Customer (MHC) and permit CHP energy to be sold to any final customer. This decision seeks to resolve the issues arising out of the earlier paper and the new amendments. Tom Reeves Member of the Commission May

6 Appendix I Terms defined under the Electricity Regulation Act, 1999: final customer means a person being supplied with electricity at a single premises for consumption on those premises; generate in relation to electricity, means to produce electricity; generating station means a station for the generation of electricity; combined heat and power means the simultaneous production of utilisable heat and electricity from an integrated thermo-dynamic process where the overall process operating efficiency, based on the gross calorific value of the fuel used and defined as the ratio of energy output usefully employed to the energy input, is greater than 70 per cent. and where the integrated thermo-dynamic process satisfies such technical, operational, economic and environmental criteria as may be specified by the Minister from time to time, following consultation with the Commission.

7 Appendix II Metering where there are no Exports from the Site Import Meter M Site Boundary LOAD CHP unit Customer owned CHP with Exports only to Trade (as Spill to ESB or via Bilateral Contract to an independent supplier) Import / Export Meter at Site Boundary M Site Boundary LOAD CHP unit

8 Trading all the CHP output Site Boundary Import Meter M M Export Meter LOAD CHP unit