Rwe Ag · XETR:RWE
Rwe — Non-Deal Roadshow (October 2014)
20 slides from Rwe's roadshow presentation, Oct 21, 2014
Slide 1: Capacity Remuneration Mechanisms
Capacity Remuneration Mechanisms Investor lunch London, 21 October 2014 Volker Stehmann Corporate Affairs, RWE AG
Slide 2: Forward Looking Statement
Forward Looking Statement This presentation contains certain forward-looking statements within the meaning of the US federal securities laws. Especially all of the following statements » Projections of revenues, income, earnings per share, capital expenditures, dividends, capital structure or other
Slide 3: Agenda
Agenda 1. Why a CRM in Germany? 2. The BDEW concept of decentralised capacity market 3. CRMs in neighbouring markets 4. Options discussed in Germany 5. Current government activities in Germany with respect to market design RWE Investor Lunch I RWE AG I London, 21 October 2014 Page 3
Slide 4: Capacity market – what is the issue?
Capacity market – what is the issue? What happens in the Central-Western What do we know for sure? European electricity market? > Renewables (RES) are reducing the capacity utilisation of conventional power stations Photovoltaics/Wind > Overcapacity in conventional power plant park and renewables ar
Slide 5: Growing uncertainty as to whether sufficient secure capacity will be available
Growing uncertainty as to whether sufficient secure capacity will be available Development of secure capacity in Germany, 2012 – 2022 [GW] 2 5 88 6 12 0–10 69–79 5 3 5–15 Secure Addition of Secure Closures Phase-out Plant Secure Balancing Demand side Shortfall of capacity thermal capacity due to Lar
Slide 6: Can renewables replace conventional capacities?
Can renewables replace conventional capacities? 2012 2030 2012: BDEW, Entsoe DENA RES 135 TWh 85 GW 85 GW 315 TWh 308 TWh RES 480 TWh Firm Generated Firm Generated Capacity Electricity Capacity Electricity Needed Needed Today, 480 TWhs are financing 85 GW capacity. In 2030, only 315 TWhs need to fin
Slide 7: Rights, obligations and responsibilities in a capacity certificate system
Rights, obligations and responsibilities in a capacity certificate system Monitoring (TSO & Certificate Registry) Capacity certificates are recorded in a central registry Seller (issuer and current holder). In times of shortage in the Purchaser (voluntary) system, compliance with obligations will be
Slide 8: The capacity market complements the energy market
The capacity market complements the energy market: Required power plants receive two sources of income The following costs of plant operators have to be Supply behaviour in electricity covered in the long term and capacity market Electricity market EUR/MWh A power plant operator offers power in a De
Slide 9: New responsibilities of the suppliers/ balancing group managers
New responsibilities of the suppliers/ balancing group managers Responsibilities of suppliers Estimation of own load at times of shortage 1. Estimation of own load at times Load Times of shortage in Load of of system shortage the whole system supplier relevant for 2. Utilisation of opportunities for
Slide 10: The decentralised capacity market provides earlier incentives to provide guaranteed capacity
The decentralised capacity market provides earlier incentives to provider guaranteed capacity Electricity market after introduction Energy Only of capacity market Max RLoad Max RLoad P P 99% Excess 99% DSM Excess capacity Safety capacity Safety margin DSM margin PScarcity Assumption: DSM in both mar
Slide 11: Capacity mechanisms are a European issue
Capacity mechanisms are a European issue A purely national introduction of a capacity mechanism ... > is expensive because capacity available abroad is not used, > does not guarantee per se definite security of supply as the markets are connected to one another, > is contrary to the idea of a Europe
Slide 12: Pilot: Germany – France?
Pilot: Germany – France? > Many similarities between the BDEW proposal and the French capacity market model > Coupling the two systems could serve as a pilot for the region Points to be agreed with France > Close, cross-border network operator co-operation necessary > How to deal with different supp
Slide 13: After the reform of the renewables support scheme until summer, market design is next
After the reform of the renewables support scheme until summer, market design is next on the agenda > Government program acknowledges the necessity of a capacity mechanism > Meseberg conclave confirmed this view Four competing concepts for capacity mechanisms Power plant reserve Centralised, or Dece
Slide 14: Which capacity mechanism proposals are discussed in Germany?
Which capacity mechanism proposals are discussed in Germany? Centralised Capacity Focussed Capacity Decentralised Capacity Strategic Reserve Market EWI Market Öko-Institut Market BDEW/VKU Ensures sufficient firm capacity ? Ensures sufficient firm capacity Ensures sufficient firm capacity Ensures
Slide 15: Impacts of capacity mechanism concepts on RWE
Impacts of capacity mechanism concepts on RWE Impacts & Probability RWE acknowledges the strategic reserve as possible interim solution but in the long term the reserve would have to be designed quite large to ensure security of supply. RWE won‘t benefit significantly and neither face adverse effect
Slide 16: Reports for the German Government on the need for CRMs, July 2014
Reports for the German Government on the need for CRMs, July 2014 Distributional Effectiveness Effectiveness compatibility International preferences) Reversibility Competition Note: Note: Regulatory (consumer Efficiency accuracy) (political not an economic not an economic effects policy risks / valu
Slide 17: Government reports: CRMs offer security of supply at limited extra cost
Government reports: CRMs offer security of supply at limited extra cost Total extra costs of different CRMs (NPV 2015*) € bn Comprehensive CM includes centralised and decentralised models EOM 2.0 Reserve Reserve Comprehen- Comprehen- Focussed Focussed (higher sive CM sive CM CM CM (higher capacity (
Slide 18: RWE's view on the government reports: Results are valid in theory only, but not in practice
RWE’s view on the government reports: Results are valid in theory only, but not in practice Pro: EOM offers sufficient security of Contra: EOM does not offer sufficient supply security of supply Today‘s overcapacity needs to be removed OK When overcapacity is removed, we will witness again scarcit
Slide 19: Back-up
Back-up
Slide 20: Decentralised capacity markets require intelligent rules – however these are few in number
Decentralised capacity markets require intelligent rules – however these are few in number FAQs Arrangement Who has to purchase Suppliers/balancing group managers who provide energy to end customers capacity certificates? How high is the penalty? A multiple of the certificate price (e.g. 4 times) Wh