CERN Procurement Strategy Serge Claudet, Energy coordinator for the Accelerator & Technology sector, CERN 30 Oct. 2015

Thanks to all for very open exchanges and share of experience Content Context for CERN energy consumption Elementary basis energy market Call for tender, market based Complements Summary Thanks to CERN project team: Purchasing, EL, EnCoord, concerned management Information provided following discussions/meetings with: Institutes: ESRF - ITER Consultants or equivalent: Bergen Energy, Chartered Institute for Procurement & Supply Companies: Alpiq, EDF, ENEL, E.ON, GdF-Suez, Iberdrola, RWE, SIG-Axpo, Verbund + RTE Thanks to all for very open exchanges and share of experience S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Technical sites for a series of particle accelerators and detectors CERN Facilities Technical sites for a series of particle accelerators and detectors S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

CERN’s Electrical Network (geographical overview) Chamoson (Swissgrid) Génissiat (RTE) 130 kV 400 kV Back-up (ADM): 60 MW Nominal (ADM + Accel.): 200 MW   Bois-Tollot Main Supply from French Grid => French Market based offers ! S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015 4

CERN Energy Consumption Hi-Lumi LHC Multi-years cycles for LHC LHC LEP2 Next Cycles: 9m+3m Cycles: 3 or 4 x (11m+1m) + 1yr S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Recent energy consumption Breakdown (averaged) per major system for LHC 125 GWh 120 GWh 31 GWh 42 GWh 30 GWh 35 GWh 245 GWh 628 GWh Compiled from yearly EN-EL Energy flyers CERN (per activity) Buildings and conventional facilities represents about 10% of the total energy consumption Typical cycle of 3-4 years up, then 1-2 year down S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Electricity market, basic considerations Traders Market Producers Suppliers Clients At large scale, electricity cannot be stored, a “balancing entity” has to match production w.r.t consumption for each zone (country) The “spot” market defines the cost of balancing energy with rectangular blocks of energy (P=cste) To facilitate long term perspectives, derivative products available on “Forward” basis for year, quarter, month and week, day 1996: European directive for progressive transfer from regulated “tariffs” to market, starting 1999/2007 with maxi end 2015 … 400’000 companies not yet done mid 2015 in France ! S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

A large variety of type for offers Risk Blocks (+ spot market) + balancing Who will take the risk ? If suppliers: extra costs for uncertainty of various kind Indexed formula, multi click Coefficients based on profile type (usual tolerance +/- 15%) Fixed Price Cost S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Content Context for CERN energy consumption Elementary basis energy market Call for tender, market based Complements Summary S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Tendering milestones Kick-off meeting: Sept. 4th, 2014 Preparation phase: visits, forums, reviewed consumption and forecasts, meetings with some potential suppliers, consultants Qualification phase: market survey (3 major criteria: producer > 30 TW.h, Balancing responsible > 10 TW.h, industrial clients > 200 GWh) Pre-tender checks: to avoid conditions that would be detrimental to efficient competition and prices (no future 2nd round negociations) Tendering phase: Technical specification, adjudication rule Evaluation, and validation Contract signature phase Purchase and follow-up 8 months 6 months S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

CERN consumption profile : 2.5 years scale Past data to illustrate typical power consumption of the site And a table for typical incidents with: - Technical reason Duration Power reduction Periodicity Warning notice time Long shutdown 40 MW (–75 %) Run Appreciated by bidders to quote typical deviation, therefore associated risk S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015 11

Forecast 2016-2020 New contract foreseen for 3 years, with maxi 2 years as option + 210 GWh over 5 months (+75%) – 210 GWh over 12 months (–22%) 2 month planning shift Notice time: 6 months Long Shutdown 2 Run 2 Run 3 … 2016 2017 2018 2019 2020 S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015 12

Global adjudication scenario Not the lowest compliant offer, but the “best value for money” scheme considering as well value for quality-flexibility Price part [85%]: a price to be proposed for the next 3 years to match our specified forecasts, based on “forward calendar” products according to an “indexed formula” An option for a “block program” (towards trading tendency), mostly defined to evaluate the competitiveness of baseline scenario, and if valuable, with the possibility to switch to it for the 3rd year Quality-Flexibility price [15%]: a series of requests to be answered and quoted, assessed across a non-communicated pre-defined grid Flexibility for deviation, reward scheme for accurate forecasts Mechanism for revision of forecasts Conditions to use French “ARENH” mechanisms (possibility to cap a part of consumption in case of price increase above a threshold, regulated by law) Reward scheme for peak shaving Support for energy efficiency measures S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Pricing mechanism for indexed formula Price [E] = energy [MW.h] . Unit price [E/MW.h] Specified (simplification) 2016 To get competitive offers, unit prices to be derived from market products, with the most easy/standard ones being the Calendar Baseload and Peakload, And splitted per season (Winter: Q1≈Q4 and Summer: Q2≈Q3) => 4 different sub-energy quantities Given for adjudication purposes Unit Price = a . P_ARENH + b . P_Baseload + c . P_Peakload + k Coefficients a,b,c,k defined as well for Winter/Summer and Peak or off/peak 16 contractual index values per year Real price will be defined based on market prices at purchase “orders” Adjudication price for 2016 S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Total price for adjudication All offers within maximum 5% above lowest => How does it compare for absolute energy price, and are there any other important criteria that matters? S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Energy price Calendar Baseload (off-peak, year) as best guess for CERN profile, for conditions defined in our technical specification S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Quality and Flexibility criteria Quality of support Volume deviation flexibility Flexibility revision forecasts CAP mechanism Price fixing, floating or fixed Quality points Four criteria makes the largest difference S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Best value for CERN Combination of energy price AND quality-flexibility criteria A nice way to identify and select what really matters for us ! A contract was signed with EdF mid October 2015, to start Jan. 2016, with energy to be purchased for next 3 years S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Market evolution, and decision to purchase ! moving quotation over the last 4 years 54 Procedure to purchase energy for the next 3 years launched (≈ 37.5 E/MWh) 43 Equivalent to about 5 to 10% below previous regulated “tariffs” 38 2012 2013 2014 2015 Market prices at the lowest for the last 10 years Trading is not part of our mission (even forbidden!) S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Content Context for CERN energy consumption Elementary basis energy market Call for tender, market based Complements Summary S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Transport costs and taxes Energy cost structure Case 1 Case 2 Low energy High taxes High energy Significant others CERN Moderate energy Low others Taxe(s) Transport Energy Market and Rules for each country ! Large spread for transport costs and taxes, resulting mostly from political decisions No miracle to be expected, but could be worth reviewing periodically transport costs and taxes, at least for budget anticipation (capacity market: +1 E/MWh !): incentives/reductions made for pro-active energy management (certification ISO 50’001?) New taxes or increased values envisaged to correct market tendencies S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

CERN Energy Management Panel, 2nd generation Similar forum was in place at CERN up to 10 years ago (Power subscription, budgetary estimates) The CERN Energy Management Panel reports to Director of Accelerators, and is expected to bring all main energy consumers and stakeholders at CERN together in order to: Make the main energy consumers aware of the new conditions and rules under CERN’s new energy supply contracts. Compile estimates of CERN’s projected power and energy consumption up to and including HL-LHC, in coordination with the various users and EN-EL power network operations. Manage CERN energy consumption, with regular checks against planned consumption. Define how CERN will handle changes to projected energy consumption due to changes in programs, both foreseen and unforeseen. Implement the mechanism by which CERN will inform CERN’s energy supplier(s) of changes to the projected energy consumption. The mechanism itself will be defined in the supply contract(s). Develop degraded operation scenarios for periods of reduced power availability. EN/EL will provide the estimations for the reduced available power. Define and implement the mechanisms by which the degraded operation scenarios, as defined above, will be triggered. Make recommendations to reduce CERN’s energy bill with minimal impact on CERN’s operations. S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015

Thank you for your attention ! Summary Before the end of 2015, a new contract for the supply of electricity to CERN has been placed, following a one year effort learning-preparation-implemention to go from regulated “tariffs” to “market” With extremely low energy prices (lowest last 10 years), we have already secured the next 3 years to complete LHC physics Run2, at a level around 1.3 TWh/year, with almost full flexibility for volumes and time. As a complement, actions are taken to limit or reduce other costs: transport and taxes! Besides reduced energy costs w.r.t previous years, a comprehensive energy management is now being prepared via a modernised “CERN Energy Management Panel”, aiming as well at spreading energy awareness and promoting and coordinating energy efficient practices. We have now a reference for some years, that will have to be reviewed and adapted periodically. Thank you for your attention ! S. Claudet - CERN Procurement Strategy 3rd Energy Workshop 29-30 October 2015