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

2. 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 October 2015

3. 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 October 2015

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

5. 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 October 2015

6. 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 October 2015

7. 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 October 2015

8. 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 October 2015

9. 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 October 2015

10. 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 October 2015

11. 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 October 2015 11

12. Forecast
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 October 2015 12

13. 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 October 2015

14. 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 October 2015

15. 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 October 2015

16. 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 October 2015

17. 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 October 2015

18. 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 October 2015

19. 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 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 October 2015

20. 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 October 2015

21. 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 October 2015

22. 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 October 2015

23. 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 October 2015