Welsh water company Dwr Cymru has ‘paused’ its hedging strategy for power purchasing and is reviewing the strategy for the period to 2030, because the cost of both hedging and power remain high.
It is looking at opportunities to use its Sustainable Procurement Policy (2023) to support Wales’ green economy, including through local direct wire power purchase agreements (PPAs) or corporate PPAs. It said it had made progress over the past 12 months engaging with the market on both these opportunities for purchasing renewable electricity directly, which would promote additional investment in renewable projects.
The not-for-profit company said in its annual report that a combination of forward purchases, derivatives and exporting to grid of its self-generated electricity typically sees it around 90% hedged on electricity costs at the start of each financial year. Its electricity bill for FY 23 was £74.3 million, up from £62.7 million the previous year, “but it would have been up to £155 million without hedging and our renewable generation”.
In FY 23 self-generated renewable energy met 22% of consumption, and Dwr Cymru aims to increase that to 35% by 2025. It commissioned two solar and two hydro-electric generating stations during the last 12 months and power export income rose to £15 million from £14 million the previous year.
On gas, it forward purchased around 60% of its requirement for the five years to March 2025 in early 2020, with the remainder hedged by the export of biomethane from its gas-to-grid plant.
It announced plans to increase biomethane/biohydrogen production programme to produce 120GWh per year. This links to two hydrogen innovation projects, HyValue and H2Juice, which would convert sewage gas into biomethane and use steam reformation to convert it to hydrogen, with the addition of carbon capture technologies, in a single development.
The HyValue project will determine the feasibility of hydrogen production and opportunities for vehicle fuel displacement. The H2Juice project, with project partners Costain, Wales & West Utilities and Princes Foods, would see an end-to-end arrangement to use hydrogen. Both projects aim to move to front-end engineering design over the next 12 months.
Dwy Cymru is also engagement with the National Infrastructure Commission for Wales on interdependencies with key infrastructure providers such as power and transport.