2. Overview
• Benefits of cross-border trading
• Impediments for investment in new interconnections
• Issues related to the economic valuation of
interconnections
• Issues related to the licensing procedure
8. DC transmission system
Connect systems with
•
different frequencies
– or different tolerances in
frequency regulation
– or different schemes of
load-frequency control
Very long transmission
•
lines
Submarine links beyond a
•
certain length
To solve specific stability
•
problems
12. Wind power accelerating
27% increase in installed capacity in 2007 (94 GW installed)
Wind power MW end 2007 Windpower (Watt/capita)
0 5000 10000 15000 20000 25000 0 200 400 600 800
Germany Denmark
USA Spain
Germany
Spain
Portugal
India
Ireland
China
Austria
Denmark
Netherlands
Italy
Sweden
France New Zealand
UK Greece
Portugal Costa Rica
Canada Norway
Canada
Netherlands
USA
Japan
Italy
Austria
Australia
Greece
France
Australia
UK
Rest Europe Belgium
Ireland World
Sweden Japan
Norway Jamaica
India
New Zealand
Poland
Egypt
China
Belgium
Egypt
Taiwan
South Korea
Poland
Morocco
Brazil Tunisia
South Korea Brazil
Morocco Chile
13. Benefits of electricity interconnection
Ensure supply to end consumers by connecting sources with demand.
•
Reduce the costs to meet the load by allowing optimization of primary
•
resources.
Increase the electricity markets’ competitiveness
•
– Benefits from trading
– Mitigation market power through reduction of generation ownership concentration.
Improve the quality and reliability (security) of supply by allowing to share
•
reserves among market members:
Security of supply: describes the system’s ability to withstand sudden disturbances.
–
Adequacy of supply: represents the system’s ability to meet the aggregate demand of all
–
consumers at all times.
Adequacy of primary sources: describes the system’s ability to meet all aggregate demand
–
of fuels, either destined to final consumption or to transformation industries.
Adequacy means not only enough generation/fuel supply to meet the load, but also
–
reserves to allow the system withstanding outages of major facilities, extreme dry periods
or credible lack of fuel availability.
Enable the diversification of primary resources supply.
•
14. New lines needed...
Interconnection NTC (MW) Schedule Interconnection NTC (MW) Schedule
Czech Rep. – Germany 100 / 800 Not scheduled
Belgium-France 1100 / 2700 Between 2010-2015
Poland – Czech Rep. 1700 / 800 Not scheduled
Germany-Denmark West 950 / 1500 Completed in 2012
Poland – Slovakia 450 / 450 Not scheduled
Denmark West-Norway 950 / 1000 Scheduled for 2012
Czech Rep. – Slovakia 1050 / 950 Not scheduled
Finland-Sweden 1600 / 2000 Scheduled for 2010
Czech Rep. – Austria 350 / 600 Scheduled for 2009
Poland-Germany 1200 / 800 Scheduled for 2010 and
2013
Hungary – Austria 200 / 500 Not scheduled
Ireland- Great Britain 170 / 330 Scheduled for 2012
Hungary – Slovakia 600 / 1100 Scheduled for 2017
Austria – Italy 200 / 70 Between 2013 and 2018
Austria – Slovakia ? Scheduled for 2015
Austria – Slovenia 350 / 1000 Scheduled for 2009
Slovenia – Italy 330 / 120 Scheduled for 2010
Norway – The Netherlands 700 Scheduled for 2008
Austria – Slovenia 350 /1000 Scheduled for 2009
Great Britain – The 1320 Scheduled for 2010
France – Italy 2400 / 870 Not defined yet
Netherlands
Greece – Italy 500 / 500 Not defined yet Germany – Great Britain n/a Not scheduled
Spain – France 500 / 1200 Scheduled for 2010 Germany – Denmark West n/a Not scheduled
Poland – Germany 1200 / 800 Scheduled for 2010 Norway – Great Britain n/a Not scheduled
15. Drivers for investment in new interconnection
capacity
• Regulatory push
– EU Priority Interconnection Plan
– Development of regional markets
• Market pull
– Market demand for more international trade
• System needs
– Accommodating load flows
– Safeguarding system stability
– Accommodating renewable power generation
• Regulatory pull
– Enlarging the TSO asset base
16. Impediments for new interconnections
1. Underlying economics for new investments
• Uncertainties on the cost side
– uncertainty on the track due to planning procedures
• Uncertainties on the benefit side
– Market revenues related to the new link
– Value of the link related to its contribution to enhanced
security of supply
– Value of the link effectuated by its contribution to increased
network security
– Value of the link for improved market functioning
– Social value of the link in the shape of the increased social
welfare
17. Impediments for new interconnections
2. Missing regulatory framework
a. Agreements, among the regulators, on the allocation principles for the
costs incurred by the TSOs for interconnection investment.
b. Regulatory mechanisms, such as TSOs incentive payments or increased
regulated return on investments in case of the development of new
interconnection infrastructures.
c. Remuneration methodologies for intra-country transmission investment
that increase interconnection capacity.
d. Solutions which encompass required investment by a third country to
upgrade interconnection capacity between two other countries.
e. Arrangements which permit merchant developments and allows those
developers to retain congestion rents as the reward for taking the
investment risk in the first instance.
f. Evaluative framework from which obligations for TSOs can be derived to
plan and construct new links.
g. Effective regulatory supervision of international tie lines.
h. Missing framework how to take into account the present market demand
for transport capacity when assessing the need for new interconnection.
18. Impediments for new interconnections
3. Lengthy planning procedures
a. Request of permission at national level
b. Request of permission at regional and local levels
c. Environmental impact assessment
d. Approval for conformity to technical standards
e. Public consultation and debate
f. Obtaining rights of way with property owners
19. Identifying the need for new interconnection
Two approaches
•
– Deterministic approach to comply with security criteria
– Cost-benefit approach to compare costs of incremental transmission
investments with benefits provided by the investment
Identifying the reference network
•
Estimation of generation development
•
Estimation of load developments
•
Other relevant issues
•
– Expected market behaviour e.g. renewable power generation or
impact of CO2 credits market
Analysis of new lines
•
– Operational measures
– Addition load flow control elements
– Addition of new links
20. Issues related to interconnection planning
• Differences in market design, tarification
methodologies, subsidization of renewable power
generation, etc.
• (Future) geographic distribution of power generation
• Stochastic nature of wind power generation
21. Issues related to the economic valuation of
interconnections
a. General approach for cost-benefit analysis flawed
Benefits are often equated to the congestion revenues
•
Any investment that dissolves the congestion is uneconomic by
•
definition
b. Difficulty to quantify many economic benefits:
security of supply
•
network stability
•
system flexibility to accommodate for wind energy
•
c. Difficulty to attribute new capacity offered to the market to a
specific link
d. Often consumer price reductions used as a proxy for increase in
welfare
e. Risk factor in financing costs
Height of WACC
•
f. Risk due to unforeseen investments in generation
Lead time for transmission investments 5-10 years, but lead time for
•
new plant equals 2-5 years.
22. Issues related to the licensing procedure
• Time consuming
• Complexity
• Lack of uniform methodology to perform an
environmental impact assessment
• Opposition from environmentalist groups or local
organisations
• Lack of political support
23. EU priority corridors
• Definition of priority corridors:
“In view of European added value of interconnections with the
objective to creating a European-wide internal energy market, it
appears necessary to focus the Community support on projects with
particular high European significance. This leads us to establish -
prior to specification of executable projects – the main corridors
called “priority axes” and, further, additional generic criteria”
• Identification of priority corridors will probably be
based on how each corridor supports EU policies:
– Increase Security of Supply
– Facilitate renewables penetration
– Increase competition
• With the additional filtering condition of increasing
social welfare.
24.
25. Thank you very much for your attention!
Rudi Hakvoort
D-Cision B.V.
+31 88 18 000 81
r.a.hakvoort@d-cision.com
www.d-cision.com
