We have adjusted the Interim Levy Rate (ILR) for the period from 25 February 2024 to 31 March 2024. The ILR has been adjusted to £10.748/MWh from £4.540/MWh. No adjustment has been made to the Total Reserve Amount.
In making this determination, we noted the high volatility of power market prices, including the recent, sharp, market price drops. We now consider that there is a high degree of likelihood that the current level of the ILR will be insufficient to cover payments to generators under the CfD scheme.
Capture prices in our CfD forecasting methodology
At LCCC, we are committed to transparency across all our schemes, especially in our forecasting capabilities. We know that accurate forecasts provide suppliers with greater certainty regarding future costs in the CfD scheme.
As such, we are excited to share, for the first time, more details on our methodology in April. Please look out for these details shortly.
We take feedback seriously and following enquiries from suppliers regarding our methodology to effectively model capture prices, we wanted to share an explanation on how we currently approach and model this market dynamic.
LCCC's CfD forecasting model relies on a Monte Carlo simulation, typically generating 10,000 different future scenarios, all simulating hourly prices and generation.
In individual simulations, we model capture price differences (the difference of volume-weighted average IMRP and time-averaged IMRP). The typical values are around 5% for a quarter, but occasionally reach extremes as large as 25%.
This simulation process produces an extensive dataset compromising around 22 million rows of data for each forecast. We publish the average results of these 10,000 simulations averaged over the quarter by firstly averaging the price and generation for each hour across the simulations and then we do a further average (prices) and summing (generation) for the quarter.
Due to this process, trying to derive capture price differences using averaged forecast generation and averaged prices published on our website is not representative of the effect being modelled simulation-to-simulation.
We have included a note in both our dashboard and datasets to provide clarity to users.