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UTILITY WEEK | 24TH - 30TH APRIL 2015 | 29 Markets & Trading This week Market risks rising for green investors Shift to 'top-up tariffs' throughout Europe exposes investors to wholesale markets Investors in renewable energy projects face more risk as fund- ing regimes across Europe shi away from an "invest and forget" model. Analysts at consultancy Poyry said that investors were increas- ingly exposed to wholesale market risk as assets matured and renewable subsidy arrange- ments shied away from fixed feed-in-tariffs to "top-up tariffs", meaning operators may have to set up trading operations to mitigate their exposure. "European renewable energy markets have histori- cally been a low-risk investment proposition," the report said. But "the point in time when they will cease to be eligible for support – and be forced to trade their power in the wholesale electricity markets – draws ever nearer". Also, top-up tariffs – such as the UK government's contracts for difference regime – expose investors to "significant balancing risks" because their revenue is based on the difference between the market price and the agreed upon "strike price" for their technology. "New projects funded under the 'top-up' schemes will be far more exposed to the market than their predeces- sors under the old FiT regime," the report said. "Operators will also have to actively manage these new risks by setting up trading operations or finding financial or physical trading counterparties and then implementing risk-management strategies," said Phil Hare from Poyry Management Consulting. "The virtually risk-free environment of FiT schemes, will cease to exist," he added. JA ELECTRICITY Exchange merger 'will cut trader costs' The merger of two European electricity exchanges could cut traders' costs, increase flexibility and drive the development of an integrated European market. Anglo-Dutch energy exchange APX and German exchange giant EPEX Spot plan to integrate their operations in the UK and central western Europe. APX is one of two exchanges that offer a platform for trading wholesale UK power in a daily auction linked to European exchanges as part of the market- coupling project. The exchanges said market participants would benefit from "harmonised trading systems, one single rulebook and one admission process for the entire region, therefore reducing trad- ing costs and lowering entry barriers for new participants". The newly merged offering would also allow greater access to a wider range of products and benefit from "best-of-both" standards and customer sup- port. "Overall, the integration will lead to a more effective govern- ance and further facilitate the creation of a single European power market fully in line with the objectives of the European electricity regulatory frame- work," the exchanges said. ELECTRICITY Capacity tendering deadline extended National Grid has extended the deadline for its second round tendering to secure an extra 1GW of capacity before the mid-dec- ade capacity crunch this winter. At the beginning of March the transmission operator opened the current round to bidders, offering both power supply and demand reduction services with a deadline of Friday 24 April. But the deadline has been extended to 7 May because inter- ested parties say they need more time to make their submissions. A spokesman for National Grid told Utility Week said it did not expect there to be any delays in awarding contracts by the end of next month, but the submis- sion deadline was extended aer feedback from potential demand-response bidders that more time was needed. The demand-side balancing reserve (DSBR) is a relatively new measure taken by National Grid to balance strong winter demand against shrinking supply margins by contracting heavy energy users to reduce demand at peak times. So far National Grid has pro- cured 242MW of DSBR contracts for the coming winter and will procure a further 1GW from demand and supply services. A third tender round in the summer is possible. Renewable markets: no longer a low-risk proposition Tricks of the trade Jillian Ambrose "Jump to transparency – it won't always be optional" Flash back to the winter: secur- ing the supply-demand balance of electricity was almost entirely a supply-side issue with over £30 million paid to ageing plant to remain on standby in case the already thin margins dwindled beyond further. At the time, just £2.25 million was paid out to the likes of Tata Steel and Anglian Water, which agreed to cut their demand on the grid during the period when demand peaks. Back then, the popularity of tender has had to be extended while demand-side capacity pro- viders wrap their minds around the concept. I don't mention this to criticise the fledgling industry – far from it. It seems everyone has cottoned on to the idea that while we've spent years chas- ing megawatts we should have spent more time on negawatts. But now that the industry has embraced the idea, perhaps more businesses should be encouraged to follow suit. demand-side innovation and decentralised solutions was just beginning to gain traction and National Grid had to stress that actually it really did want to sup- port the burgeoning demand- side sector, and that its share of the grid balancing pie would increase every year. It's new stuff, you see, and we've all got to walk before we run. This week saw evidence that perhaps National Grid is right: it's opted to take a second round of tendering for 1GW of capac- ity to both supply and demand sides (with no specific alloca- tion target) but far from being welcomed with open arms, the