Re: Proposed Decision on Electricity Network Connection Policy CER 09/072

Transcription

1 John Orme Electricity Distribution Commission for Energy Regulation The Exchange Belgard Square North Tallaght Dublin 24 Friday, 15 May 2009 Re: Proposed Decision on Electricity Network Connection Policy CER 09/072 John, SWS Energy (SWS) welcomes the decision to consult on Electricity Network Connection Policy and the opportunity to respond to the Commissions proposed decision. However we see this as an ongoing process to resolve the limitations of the current connection policy. You have identified a number of consultations required to reach a conclusion on this consultation, we would also request that you set in place a regular review process that would allow developers to feed into the continuing development and improvement of the connection policy. In the remainder of this letter we respond to the consultation separately; on any additional comments we have in relation to the issues detailed in section 2; on the planning/design phase of connection assets; on the level of certainty within standard contracts for connection to the network and on the proposed changes to the Capacity Bond. With reference to Section 2 of the proposal, SWS have the following observations: SWS welcomes the identification of a number of consultations that the commission intend to facilitate on some of the issues raised during this consultation process. SWS will respond to these consultations separately in turn. With regard to points #1 to #31, SWS welcomes the improvements listed for most points, but we have the following specific detailed comments:

2 Planning and consents Point #4: SWS proposes that CER also consider requiring timelines to achieve necessary consents (i.e. road opening licenses etc.) would be included in modified offers (where modification is for connection from overhead line to underground cable). Point #5: SWS proposes that the system operators provide a breakdown and expected milestones related to the current generic timelines included in the offers specifically identifying the packages of work within and outside their control. Timetables Point #8: SWS proposes that TSO provide programme meets the same level of detail as that described in the DSO response (e.g. highlighting critical path items). The current TSO approach of providing programme within 30 days of CID is too late in the process; SWS proposes that it should be provided at most 30 days following execution of our connection agreement, even if detail needs to be added later. SWS proposes further breakdown of programmes to identify packages of work and expected milestone dates particularly those that are within and outside the system operator s control. Acceleration of Programme Point #9: SWS welcomes the option to purchase long lead-time equipment once planning permission has been lodged. However it should be clarified that this can be achieved with a 5%/10% down-payment from the developer(s), which are normal commercial terms for the initial phases of procurement. SWS proposes that if delay is due to the System Operator, the risk/cost would be applied to the System Operator rather than the developer. Cost Certainty Point #11: SWS welcomes the DSOs proposal to provide estimates of pass through costs at offer stage. SWS proposes that these pass through cost estimates would also be provided by the TSO at offer stage. SWS proposes that the list of pass through costs detailed in the consultation is confirmed as the complete and final list of possible pass through costs. SWS proposes that a breakdown of the TSO costs is provided in the connection agreement similar to the breakdown that DSO currently provide. The benefit of

3 this is to provide developers with further understanding of the implications of offer modifications to their connection costs. SWS also proposes that it be clarified (as we believe to the current process) that the pass through volume changes costs are updated with the actual outturn volumes (i.e. if removing some or all of the 25% (TSO) and 10% (DSO) margin applied to overhead lines distances in offers). Non acceptance of Offers Point #14: Part A - SWS suggests that there may be value in identifying in offers or connection method meetings the minimum threshold of connections that need to be accepted for the group shared assets connection method not to change. This would allow the majority of the group to proceed (once this threshold was reached) even if some offers had been disputed or delayed for some reason. Point #14: Part D While SWS welcomes the CER and system operator s endeavours to meet the Gate 3 timelines as advised, we urge that they do not lose sight of the importance of offer modifications within this time crucially for pre-gate 3 offers and also Gate 3 offers to ensure that we meet out renewable targets. Payment of Charges Point #16: SWS welcomes the DSO s proposal as detailed in the draft direction and propose that the TSO would adapt a policy inline with this. Commissioning Point #17: Contrary to the DSO s assertion that there are significant and adequate commissioning resources available, we have experienced a delay on every wind farm we have commissioned to date due to the shortage of commissioners. With reference to Section 3.0 the Planning/design phase of connection assets within the proposal, SWS have the following observations: SWS welcome the introduction of landowner consultation at pre-construction stage by DSO, SWS request that TSO also include this consultation in their process. SWS also welcome the more collaborative approach between developers and the system operators at the pre-

4 construction stage in the process, developers have valuable knowledge in local areas that would identify if wayleaves for certain routes are achievable or not. SWS welcomes the option, in the collaborative approach, and in consultation with the system operators, to put in place wayleave agreements in advance of seeking planning permission for an overhead line. We agree that this should be optional, and may not be appropriate in all cases. With reference to Section 4.0 the timelines of connection assets within the proposal, SWS have the following observations: SWS welcome the further consideration that is to be applied to providing a fixed date with a payment if the connection assets are not completed by the stated date. SWS have the following initial comments for consideration by the commission in developing the consultation on this: - CER propose that if this is to be implemented by decision of the developer then a margin would be applied to the standard costs. As detailed in our response to your consultation CER/08/167 on Standard Transmission Charges & Timelines we believe that the costs are already inflated and to apply further additional costs to these is an untenable situation. As an alternative to a risk price premium the commission could consider applying a margin to the fixed date (i.e. 3 months). - More detail is required on what level the payment is likely to be. It could take the form of a deemed firm date mechanism, or a fixed day penalty rate related to the wind farm output, but the rate only has any value if it is equal or close to the loss incurred due to the system operators default. - Fixing the date only once consents are achieved is too late in the process. There should be a fixed date within connection offer, and extensions of time only allowed to the extent of any delays outside the control of the system operators such as delays in securing planning permission, consents and wayleaves. - While the deep reinforcements are not being paid for directly by developers, the consequence of their delay to the constraints applied to projects is expected to be significant from Gate 2 connection onwards and so payments/incentives should equally apply to the delivery of deep reinforcements, since the impact could be of a similar magnitude.

5 We look forward to receiving and responding to your consultation on this topic.

6 With reference to the Capacity Bond proposal, we have the following observations: Placement of Bond SWS propose that the commission include a caveat on Capacity Bond placement 2 years from CID, failure to meet MEC or operational certificate within 12 months of connection to cover the situation where the delay/failure is due to reasons outside a developer s control (i.e. that placement of the Bond is as defined provided construction has commenced and is progressing to meet stated connection date) Drawdown of Capacity Bond SWS understand the aim to create an escalating penalty. However we believe in practice that a developer is unlikely to be able to develop proportionate mitigation. He will either lose 3 turbines in planning or he won t, and an escalating penalty based on some arbitrary 1.5 exponent won t have any effect. We propose that a much simpler penalty directly pro-rata to the shortfall in MW will have practically identical effect, but is much more transparent. We suggest the following wording: Condition 1 - Drawdown of the bond for not achieving an MEC greater than or equal to ninety-five percent of the contracted MEC within twelve months from connection of a generation scheme will result in a drawdown of the bond equal to twice the percentage MEC not achieved and an amendment of the contracted MEC to the MEC achieved. Drawdown of the bond under this condition will not be invoked if failure to meet the MEC is due to reasons outside the developer s control. Comparison of the CER proposal for % drawdown = 0.5*[(% MEC not achieved)^1.5] and the SWS proposal = 2*(% MEC not achieved) are both displayed in the following graph.

7 Drawdown % of Bond % of Bond Drawndown % MEC not achieved Drawdown of Bond CER Proposal Drawdown of Bond SWS Proposal Graph 1: Drawdown of bond comparison of SWS and CER proposals - MEC SWS also proposes that rather than tying both requirements of MEC and Operational certificate into the one calculation that they would be 2 standalone conditions for release of the bond. The second related to the achievement of an operational certificate within 12 months being: Condition 2 - Drawdown of the bond for not achieving an operational certificate within twelve months from connection of a generation scheme will result in a drawdown of the bond equal to three times the number of months, twelve months post connection date that operational certificate has not been achieved. Drawdown of the bond under this condition will not be invoked if failure to obtain the operational certificate is due to reasons outside the developer s control Comparison of the CER proposal for % drawdown = 0.5*[(no of months post connection date - 12)^1.5] and the SWS proposal = 3*(no of months post connection date - 12) are both displayed in the following graph.

8 Drawdown % of Bond % of Bond Drawndown # Months OP Cert not achieved 12 months after conection date Drawdown of Bond CER Proposal Drawdown of Bond SWS Proposal Graph 2: Drawdown of bond comparison of SWS and CER proposals OP Cert

9 Payment on Offer Acceptance Again in the interests of simplicity SWS proposes that you require all applicants with a connection charge less than or equal to 100,000/MW to pay 10,000/MW on offer acceptance and all applicants with a connection cost greater than 100,000/MW to pay 10% of the connection cost on offer acceptance. There is no reason to single out developers with connection costs less than 20,000/MW, and indeed there is an argument that you should give equal incentive to discourage hoarding and minimise disruption in groups. This is a more straightforward approach that ensures developers with cheap grid connections are treated equitably. Your current proposed calculation is displayed graphically in Figure 1; the only difference to our proposal is projects with a connection charge less than 20,000/MW would pay 10,000/MW rather than 50% of cost of connection on offer acceptance. Payment at Offer Acceptance (,000/MW) Connection Cost (,000/MW) 10% of Connection Cost Payment at Offer Acceptance X Figure 1: Payment on offer acceptance X = lesser of (50% of cost of Connection & 10,000/MW) Payment at Offer Acceptance = Greater of (10% of Cost of Connection & X) SWS request the CER to caveat slightly the proposal that the initial payment be nonrefundable, SWS would envisage that a refund of the initial payment less costs incurred on progressing the application should remain refundable to the customer, when failure of a project is for reasons outside the developer s control (i.e. system operator failure to get planning permission/necessary consents to deliver the grid connection).

10 An additional point that was not raised in the consultation to date is as follows; SWS see the constraints that the infrastructure agreement (IA) places on EirGrid as a major obstacle to successful project delivery. SWS have recent experience of 2 projects that were substantially delayed due to the limitations placed on EirGrid by the IA. SWS request that the CER look to have the processes within the IA reviewed and proposals from the industry received in an effort to resolve this as a matter of urgency. Finally, we note that Eirgrid made the following statement in their input to this consultation: EirGrid has drafted an enhanced business process for monitoring and reporting on the deep reinforcement works associated with transmission and distribution connecting projects. EirGrid hopes to reach agreement on the process with ESB Networks during Q This process is designed to ensure that all connecting parties are kept regularly informed on progress and current status of deep reinforcement works. Given that SWS has over 200MW of operational wind farms in the south west, all of which are non-firm to varying degrees, this issue is very significant for us, and we will certainly be awaiting further details with interest. Once again we thank the CER for the opportunity to respond to this consultation. We are available to discuss or further develop any of the points raised in this response. Regards, Peter Harte SWS Energy w: t: m: