2. Contents
▲ Where did we start
▲ Where we are now
▲ How we did it
▲ Building on the basics and going forward
▲ Summary of savings
3. Performance
Indicator
2010 Outturn Value Compared to 2009
npower energy usage 61.0 GWh 7.2%
Total energy spend £5.55m 7.8%
CO2 produced 28,800 Tonnes 7.5%
# Sites not supplied
by npower
14 No Change
Electricity Price npower 2010 – £91.00/MWh (Retail price No VAT)
The beginning − 2010
09
4. Performance
Indicator
2015 End of Year
Forecast
Compared to 2010
npower energy usage 31.5 GWh -48%
Total energy spend £3.33m -40%
CO2 produced 14,600 Tonnes -49%
# Sites not supplied
by npower 0 -100%
Electricity Price npower 2015 – £105.57/MWh (Retail price No VAT)
Where we are now – 2015
6. Forecasting Measure
Targeting Controlled Energy Budget
SingleGroup AccountMinimise
Monitor
AMR
ISO50001
EASY
Management Systems
Monthly Report
Year on year comparison
Flex Purchasing
Carbon intensity target
Sub-metering
CO2 Reduction
Encompass
Ska Gold Refits
New Equipment
Audits
Benchmarking
7. ▲ Monthly comparison and communication of energy spend
against budget.
▲ Comparisons of year on year energy reduction by sites.
▲ AMR & sub-metering ensures accurate data. and has been
installed across the entire portfolio.
▲ Collaborating with the optimisation desk to forecast
site specific consumption and cost.
▲ Targeting using benchmarks e.g. 2008 CRC Committee
carbon intensity reduction target of 50% reduction by end
of 2015 (Currently at 56.13%)
▲ Future possibility of rating each segment of the business
by their energy consumption.
Business area
Total billed
year to date
(exc VAT)
Budget
year to date
(exc VAT)
Difference
Electricity
Corp Gen and Ren £355,848.90 £377,162 -£21,313
Retail £754,708.88 £783,573 -£28,864
£1,110,557.78 £1,160,735 -£50,177
Gas
Corp Gen and Ren £43,359 £69,556 -£26,196
Retail £53,997 £119,108 -£65,111
£97,356.86 £188,664 -£91,307
£1,207,914.64 £1,349,399 -£141,484
Site MPAN Jan Feb Mar
Swindon – Trigonos 2000027385659 -9% -8% -5%
Worcester – Oak House 1410627113007 -20% -21% -16%
Oldbury – Birchfield House 1414236103000 -5% -2% -30%
Oldbury – Birch House 1410705013000 -10% -15% -25%
Solihull – Princes Way 1419570413007 -9% -15% -43%
Worcester – Acorn House 1413056013004 -5% -5% -18%
Peterlee – Tyne House 1507889210116 -12% -7% -5%
Kingswinford – Larch House UPS 1424340100003 -15% -15% -35%
Leeds – Limewood House 2300001075238 -8% -15% -25%
Leeds – Scarcroft House 2300001080655 -17% -6% -14%
Hull – Bridge House 2390000004330 -13% -19% -43%
Thornaby – Phoenix House 1599001010597 -11% -3% -14%
Peterlee – Tees House 1580000269492 -10% -12% -38%
Taking control − three easy steps to drive performance
8. ▲ Encompass, AMR and sub-meters work together to
empower the energy manager and facilities.
▲ Building Management systems are centralised and
optimised from data analysis.
▲ Site audits can focus on specific issues already identified.
▲ We have also acquired and implemented the prestigious
ISO 50001 Energy Management System to ensure effective
energy monitoring & were the first of the ‘Big 6’ to achieve
this.
9. ▲ The SKA system is used for all major site refits, npower is
currently UK and World leader with 7 Gold awards.
▲ System ensures all refits are conducted in a sustainable
and energy efficient way at no additional cost.
▲ It includes a list of recommended energy efficient
technologies.
▲ If this is adhered to and refits are conducted in an
innovative way then a Ska standard can be awarded – we
achieve the Gold standard on all our refits.
▲ Benefits include an enhanced capital allowance and a
brilliant place to work.
▲ Energy Performance contracts trialled.
10. ▲ State of the art UPS systems installed in Limewood House
and Rainton House
▲ Fantastic energy savings from PIRs, LED lighting
installations
▲ Voltage optimisation at 11 major sites.
▲ Smart STOR generators to generate revenue and reduce
TNUoS charges through the npower TRIAD prediction
service.
▲ Using the EASY initiative (Environment, Action,
Sustainability, You) to engage the workforce, empower
individuals and unify sustainable activities.
Winners of the 2013 Excellence in Carbon Reduction Award
11. Building on the basics
▲ Flexible Purchasing
▲ By combining our site supplies into one group account we took
advantage of npower’s flex contract, whilst being the first ever
customer allowing us to test the contracts and strategy setting.
▲ In 2013 we saw a 12% (£297,225) saving against an equivalent
fixed-contract energy price.
45
47
49
51
53
55
57
59
61
Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13
RWE npower fixed v. flex cost (£/MWh)
Fixed Contract Price @ 31/08/2011 (£/MWh) Market Average for Strategy (£/MWh)
npower Flex Price (£/MWh)
12. Building on the basics
▲ Leading The Way In Princes Way
▲ Ska Gold rated refit including the Energy
Innovation Centre – 3rd floor A-block.
▲ 44MWh generated by Solar PV at Princes
Way – enough to power the site for two
weeks.
▲ STOR generation at site capable of net
export during peak times with a second
generator currently being fitted.
▲ Sub-metering with AMR installed to better
understand energy consumption.
▲ This has resulted in a brilliant place to work
and to show our customers how an energy
company manages it’s energy.
▲ Total income from wind, solar and STOR in
excess of £175k p.a.
13. Across RWE Group UK
Driving performance with the CRC Energy
Efficiency Scheme & ESOS
The npower Sustainability team is also
responsible for managing the CRC Energy
Efficiency Scheme, Carbon Trust Standard
and ESOS submissions for all RWE Group
companies in the UK.
The team drive reductions in CO2 emissions
across Trading, Generation, Energy Services
and Retail arms of the company.
This reduces the spend on CO2 permits, which
is currently in excess of £270k at £12 per Tonne
with permits going up this year. This allows us to
engage customers with the success of our
efficiency journey.
Our ISO50001 accreditation also aids ESOS
compliance & helped finalise our >70TWh ESOS
submission for RWE in the UK.
14. Our next steps
Driving Performance –
Further refine data analysis
and forecasting
Challenge – Install
brilliantly innovative
energy solutions
Focus – Develop new
finance opportunities to reduce
our CAPEX spend
Collaboration – Work with
I&C, SME and Energy Service
to develop new products
Customer First – Share our energy efficiency
journey with I&C and SME customers
Accountability – Review performance with
external audits which has led to several awards
Respect – Continue to respect
the needs of our employees and customers.
15. To summarise
Performance Indicator Savings in 2014 compared to 2010
RWE npower energy usage 30.5 GWh
Total energy spend £2.22m
CO2 production 14,200 Tonnes
Cost of CO2 permits (£12/Tonne) £233k
Total Annual Saving £2.45m (44%)
17. Npower’s DBM Offering
DBM Silver
DBM Gold
DBM Platinum
Productsupport
Strategy
consultation and
design service
Strategy design &
recommendations
No obligation for npower
to deliver budget
VaR tool and mandated
volumes
Can opt up to DBM
Platinum during contract
term
Strategy design
service
Active exposure
management
Npower appointed as
agent to deliver the
agreed strategy and
guarantee a cap/floor
for the commodity
budget
Budget written into
contract
17
18. Building a Hedging Strategy that fits your Risk Appetite
To build an effective risk management strategy we need to set risk appetites against four key parameters:
The budget level will control the degree to which you are happy to let the market move from ‘today’s’ levels in order to preserve downside
opportunity. It is essentially your risk capital
The hedging window is the amount of time you wish to hedge volume for, a long period will provide greater opportunity to hit markets averages
while shorter windows increase the level of fundamental understanding. The Hedge deadline determines how far in advance of delivery you wish to
be 100% hedged and know your final achieved price
The holding period and path flexibility control the level of flexibility afforded to trade execution in order to optimise based on market
intelligence. Opportunity vs. Emotion
The exposure to prompt markets – determines your contract mix. Seasons vs. Quarters vs. Months or day-ahead
18
Min Hedge
Max Hedge
14% Hedged Monthly
86% Volume Hedged Before Seasonal Contract Expires
19. Setting the Budget
Part of a successful risk management
strategy is understanding your budget
By understanding your maximum and
target commodity costs you can ensure
you stay within those limits.
‘Contracted Budgets’ will ensure you lock
in wholesale prices before they rise too
far.
Our systems will be configured to provide
warnings based on observed volatility
and VAR in a single day.
Budgets can be set at contract level or
broken down seasonally.
‘Target Price Levels’ allow you to close
out positions to secure lower wholesale
rates in case they rise again
These don’t have to be set if you do not
want to limit potential gains.
19
The DBM Platinum product contractually guarantees you
will not fall below your commodity budget
Target Price Level
Contracted Budget
Current
market
Risk Capital
Active Management
Budget price = forward market + volatility allowance
Summer 2016 Baseload = £40/MWh
Volatility allowance = 10%
Budget = £45/MWh * 110% = £44/MWh
Close out to limit upside risk
Close out to lock in profits
20. The optimisation desk’s approach combines fundamental analysis with risk analytics to best execute the hedge path
within the tolerance limits set out and guaranteed within the strategy.
The desk develops a structured approach to hedging based around an
average hedge path which is determined by hedging window and the
deadline to become fully hedged
The longer the hedging window the greater opportunity to ensure that a
contracts market average can be achieved. Statistically speaking you
increase the sample size to achieve a more reliable mean
Depending on your business requirements you may require achieved
commodity costs in advance of the actual commodity delivery and therefore
there is flexibility to bring forward the hedging deadline
A degree of tolerance is beneficial in order to provide the flexibility to
acceralate or decelerate hedging in order to take advantage of bullish or
bearish runs, respectively
Hedged
Volume
20
Time
Exposure
Average Hedge Path
Tolerance
Example hedge profile
Hedging
Deadline
Hedging Window
Strategies are loaded into our fully supported Oracle position management system.
Configured alongside budget and daily VaR reporting. The customer and the Optimisation Desk receive daily position
emails, VaR and P&L reports alongside market updates and analysis.
This flexibility to deviate long/short against an average profile has helped import customers take full advantage of the
recent bearish trends through 2015 while saving the bacon for export customers given their long hedge profile and ability
to accelerate
Setting the Hedge Path Profile
21. 21
Strategy Item High Medium Low
Seasonal Hedging 50% 70% 90%
Prompt Hedging 50% 30% 10%
Min/Max Volume 10MW 6MW 3MW
Budget Level 15% 10% 5%
Holding Period 6 months 3 months 1 month
Hedge Window 1 years 1.5 years 2 years
Strategy Risk Level
Selecting the Right Contract Mix – 2014 DBM Performance
Optimisation Desk Performance 2014
The full benefit of the Optimisation Desk hedge
performance passed onto the customer.
Absolute DBM 2014 P&L - £850k
Value delivered of nearly £4/MWh
DBM RORAC – 42%
Price quality across the portfolio contributes to P&L
73% of DBM customer trades inside spread
In 2014 customer shown full benefit of £0.12/MWh
22. Hedging Strategy – Risk Metrics
P&L measurement typically includes
… analysing changes in portfolio value due to movements in the forward curve
… but could include performance vs. market average or budget, price quality vs. spread
etc.
Value at Risk measures the potential loss in portfolio value
… at a user-configured probability (usually 95th percentile = 1/20 worst case)
… using observed market volatility
… and random sampling of potential prices
Return on risk adjusted capital compares P&L to VaR enabling us to assess
performance against risked capital
… calculate potential losses (anything to the left of the 50th percentile) up to the 95th
percentile
… work out the difference between P50 and P95 (the amount of £ risked that results in a
loss)
… and dividing P&L by the risked capital - typical levels are ~20%
Wholesale market liquidity and spread analytics alongside netting opportunities
Is +£10k P&L risking £100k better than +£5k risking £20k?
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Bespoke Reports to Suit
Risk Analytics Available
