Strengthening Tonga's Power Sector: Technical Assistance for Private Sector Investments
Enhance the capacity of the Tonga Electricity Commission (TEC) in promoting private sector investments in Tonga's power sector through a training program by Dr. Viren Ajodhia. The program covers various components like PPA examples, regulatory tariffs, and methodology for fuel/renewable energy tariffs.
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Presentation Transcript
Technical Assistance to strengthen the capacity of the Tonga Electricity Commission in promoting private sector investments in Tonga s Power Sector Pacific Community (SPC) Tonga Electricity Commission (TEC) Training Program by Dr. Viren Ajodhia Fuel/Renewable Energy Tariff Component Friday 14 August 2020
Program 1. PPA Examples 2. Tonga ECC outline and concept 3. Methodology for Non-Fuel Tariff 4. Methodology for Fuel/RE Tariff 5. Fuel/RE Model
Program 1. PPA Examples 2. Tonga ECC outline and concept 3. Methodology for Non-Fuel Tariff 4. Methodology for Fuel/RE Tariff 5. Fuel/RE Model
Parts of the ECC Part 1 (Agreement) General concession conditions Part 2 (Regulatory Addendum) Regulatory arrangements between the Commission and the Concessionaire in respect of the Second [Third] Reset Period General provisions (chapters 1 till 17) Technical details in Schedules (1 till 14)
Regulated Tariff Set every 5 years No intermediate change Based on levelized cost Sales forecast Cost forecast Non-Fuel Component Adjusted every 3 months Based on actual fuel/purchase prices Allowed generation based on losses targets Fuel/RE Component
Program 1. PPA Examples 2. Tonga ECC outline and concept 3. Methodology for Non-Fuel Tariff 4. Methodology for Fuel/RE Tariff 5. Fuel/RE Model
General concept Non-fuel tariff fixed during the regulatory period (5 years) ???? ???? 1 ??? ???? ??????????= ??? ???? ?????????? 1 Concept of price-cap system Cost forecast set on the basis of the building blocks approach
Price-Cap Concept A. Benefit to customers (lower prices due to X- factor) Pt = (1 + CPI Xt) Pt-1 Prices A+B. Efficiency gains p0 X-factor B. Benefit to firm (higher returns due to beating the X-factor) Actual Improvements Time
Building Blocks Concept Salaries Controllable OPEX Maintenance Non- Controllable Rentals, etc. Depreciation Existing Assets Taxes CAPEX Interest New Investments Dividends 14
Projection of Regulated Asset Value New - Opening RAV Depreciation + = Closing RAV Investment Cost of Capital Allowed Return RAB x = Allowed Return (return on investment) Depreciation (return of investment) Operating Costs Allowed revenues + + =
From Building Blocks to Tariff ?????? = Allowed Cost Building Blocks t=1 5 ???(??????? ????) ???(?????) kWh Sales Sales forecast t=1 5
Program 1. PPA Examples 2. Tonga ECC outline and concept 3. Methodology for Non-Fuel Tariff 4. Methodology for Fuel/RE Tariff 5. Fuel/RE Model
Fuel/RE Tariff Fuel/RE Tariff represents the Permitted Cost of electricity generation in the next three months Tariff = Permitted Cost / kWh Sales Permitted Cost consist of Diesel cost (fuel) Renewable Energy cost Utility owned Renewable Energy cost PPA purchases
Permitted Cost Permitted Cost for Diesel Forecast/Outturn generation Forecast/Outturn fuel price Target for Diesel efficiency Target for line losses Target for Parasitic losses diesel stations Permitted Cost for RE Forecast/Outturn generation Forecast/Outturn PPA price Target for line losses Target for Parasitic losses (for PPA purchases = 0)
Losses in the power system Power plant G Gross generation Station consumption Gross Generation Billed = System Losses Net generation (= into grid) Grid Grid Losses Not billed Billed Customer
Permitted Cost Fuel ??????????????????????? ????????????????? ????? ? ??????? 1 ?????????????? ??????????????????????? ???????????????????? = = ????????? Where: Where: Sales = electricity sales FuelEfficiencyTarget = the fuel efficiency LossTargetFuel= the loss target for fuel generation rate target for fuel generation. PriceFuel= the price of fuel per litre ShareFuel= the share of net fuel generation in the total net generation
Permitted Cost RE ????????????????????? ??? ??????????????? ??? = ????????????????????? ??? ??????? ??? ????? ? ????? ??? 1 ???????????? ??? = Where: Where: Sales = electricity sales PriceRE-PPAl= the price of RE-PPA electricity per kWh LossTargetRE-PPA= the loss target for RE-PPA generation ShareRE-PPA= the share of net RE-PPA generation in the total net generation * Same concept for utility-owned RE; LossTarget will be different
Need for forecasting Constraint: Future (next quarter) variables will not be known beforehand Sales (kWh) Shares in generation (diesel/RE) Diesel cost (fuel prices) RE cost (effective PPA prices) Therefore: Make forecast of variables Correct for differences ex post
Fuel/RE Tariff approach Quarter 1 1. Forecast Permitted Cost in Q1 2. Forecast Sales in Q1 3. Forecast: ????/?? ?????????0 = ???(????????????? ) ???(????? ) Quarter 2 1. Adjustment(1) : Make new forecast for Fuel/RE Tariff for Q2 2. Adjustment (2): Correct for historical difference to zero Quarter 3 (and so forth): Repeat as Q2
Adjustment(1): New forecast for Fuel/RE ??????????(1)?+1 =???(????????????? ) ????/?? ?????????? ???(????? ) The adjustment (1) is simply the difference between the old and the new forecast Therefore: Old Forecast + Adjustment (1) = New Forecast
Adjustment(2): Balance to zero ???????? = 1 + ??? ???????? 1 + ????/?? ????????? ? 1 ?????? 1 ?????????????? 1 ???????? ???(????? ) ??????????(2)?+1= Where BalanceM = the balance at the end of the last month of the present Tariff Period p Sales* = the monthly forecast for the sales for the next twelve months
Program 1. PPA Examples 2. Tonga ECC outline and concept 3. Methodology for Non-Fuel Tariff 4. Methodology for Fuel/RE Tariff 5. Fuel/RE Model
