Following policy announcements over the last quarter, future Roc values and costs have changed substantially, according to Cornwall Energy's latest long-term Roc forecast.
The report, re-branded into a slide deck format with accompanying webinar, analysed the impacts of the closure of the RO to onshore wind projects from April 2016, proposed closure to below 5MW solar from the same date and detailed the new uncertainties created in the Roc market.
Despite the change for onshore wind, capacity forecasts increased from the April 2015 report. This was due to grace periods provided in the recent closure, which are expected to allow large amounts of projects to accredit over the next two years and incentivise a rush in the market similar to that seen recently for solar. More projects, if compliant with grace periods, could also accredit now DECC has confirmed onshore wind will not be participating in future CfD auctions. Cornwall Energy's final onshore wind capacity estimates in April 2017 are now in line with DECC's 11.7GW forecast.
In the case of solar, more uncertainty persists with the proposed removal of grandfathering, potentially leading to cancellation of projects and change of terms for funding arrangements. As a result solar capacity forecasts remained unchanged.
The rise in onshore wind capacity was the key driver of change over the quarter, with supply forecasts increasing by an average 5.2% in compliance periods. This impacted value forecasts, with CP14 values down by £0.2/Roc.
Because of the rise in RO targets, forecast costs to suppliers had also increased. CP15 costs were £0.4/MWh higher, while values were up £0.7/MWh (5%) on average, from 2016-17(CP15) out to 2026-27 (CP25).
Rising RO targets and costs were dampened slightly by an increase in demand forecasts, which were amended with updates to new National Grid Future Energy Scenarios for 2015. As a result of significant changes to National Grid assumptions on future demand, forecasts switched to using the "slow progression" scenario to forecast out to 2027, as this now seems the more representative view of future demand. Demand is still forecast to fall out to 2026-27 (CP25), but at a slower rate than previously forecast, hence the rises in demand compared to last quarter. Assumptions of falling demand typify current trends, with UK demand in CP13 showing a fall of 2.3% (7TWh) on CP12 despite a colder winter.
In a new addition to the report, Cornwall Energy expanded its scenario forecasting this quarter to take into account new uncertainties in the market created by recent policy announcements, and the move towards RO closure. Along with low, central and high wind forecasts, Cornwall Energy assessed the impacts of the 340MW Galloper offshore wind project if it gained RO accreditation, and forecast the impacts of banking from CP13 into CP14 and beyond. The varying uncertainties displayed a range of Roc values of £6/Roc and a range in costs of the scheme of £0.5/MWh.