Regulatory requirements for the integration of wind projects into the grid

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Knowledge Exchange Workshop on Wind Projects Planning
May 9, 2013
Beirut, Lebanon

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Regulatory requirements for the integration of wind projects into the grid

  1. 1. EgyptEraRegulatory Requirements for the Integrationof Wind Projects into the Grid‫الكهرباء‬ ‫بشبكات‬ ‫الرياح‬ ‫مشروعات‬ ‫لربط‬ ‫التنظيمية‬ ‫المتطلبات‬‫الرياح‬ ‫طاقة‬ ‫لمشروعات‬ ‫اإلعداد‬ ‫خبرات‬ ‫حول‬ ‫الوطنية‬ ‫العمل‬ ‫ورشة‬‫بيروت‬–‫لبنان‬Dr. Walid El-KhattamEgyptERA’s Consultant9th. May, 2013 1
  2. 2. EgyptEraContents Background on the Egyptian Electric Utility and ConsumerProtection Regulatory Agency “EgyptERA” Electricity Sector Status and Challenges Regulatory Requirements for RE Integration into Grids Regulatory Measures Supporting Policies for RE Types of Contracts Technical Requirements for RE Integration into Grids Codes2
  3. 3. EgyptEraBackground on the Egyptian Electric Utility andConsumer Protection Regulatory Agency “EgyptERA” Established in 2000 by a Presidential Decree and came toeffect in 2002 as a legal entity affiliated to the Minister ofElectricity and Energy.3 Regulates and supervises all electricity activities Ensures availability of supply to users Considers interests of stakeholders Prepares for fair competition in the electricity sectorObjectives
  4. 4. EgyptEra4Regulatory OperativeMechanismsCodesPerformanceAssessmentsCompetitionPromotion& ElectricityMarketDevelopment Cost ofServiceLicensesDraft ElectricityLawPreparationforcompetitiveMarketInvestmentPromotion inthe fieldof ElectricityDemand SideManagement(DSM)
  5. 5. EgyptEraElectricity Sector Status and Challenges Electricity coverage is above 99% of the population The electrical peak demand increased by an average of 6%annually over the last decade, however, it increased morethan 8% in the year 2011/2012. To meet the increase in demand an average annualexpansion in generation, transmission, and distribution of2.5 GW is needed over the next 20 years. The potential of adding more hydro-generation is limited.5
  6. 6. EgyptEra Currently:o The installed RES (mainly wind) represents only 2% ofthe installed capacity (1.2% of the electrical energygenerated). Hydro (almost 10% of the installedgeneration capacity), wind (<2%), and small solarprojects.o Electricity purchased from self generation andcogeneration units in industry represents only 0.07% ofthe total electrical energy generated.o Electricity tariff does not reflect the cost of service (fuelcost subsidy is provided). 6Electricity Sector Status and Challenges
  7. 7. EgyptEra High annual rate of increase in electricity demand Huge investments required to meet the demand Public investments is not enough to cover all additionalcapacities Fuel needed for the power generation expansion The present tariff is less than the economic cost ofservice (Subsidy)Therefore, there is a need to establish an attractiveenvironment for investors (mainly RE).7Electricity Sector Status and Challenges
  8. 8. EgyptEra8Reasons for giving Wind Energy First Priority Egypt possesses the best sites with high capacity factor Local experience in wind energy since 20 years ago, support by acurrent installed capacity of 545 MW High potential for an increasing share of local manufacturing ofwind energy equipment Electricity generated from wind resources represent a near reachopportunity where it has the closest price to electricity generatedfrom oil and gas
  9. 9. EgyptEraContents Background on the Egyptian Electric Utility and ConsumerProtection Regulatory Agency “EgyptERA” Electricity Sector Status and Challenges Regulatory Aspects for RE Integration into Grids Regulatory Measures Supporting Policies for RE Types of Contracts Required Technical Aspects for RE Integration into Grids Codes9
  10. 10. EgyptEra10Key Challenges for Promoting RE105Insufficient availablegrid capacity andcoverage4Electricity marketstructure3Lack of experienceamongst decision makers2Lack of coordinationbetween authorities1Absence of longterm planningRegulatory Aspects for RE Integration into Grids
  11. 11. EgyptEra11Key Challenges for Promoting RE111- Absence of long-term planning leads to risk in the market andloss of credibility to investors. To ensure reliable long term-planning:o RE Data updates,o Transparency of Electricity Pricing,o Standardization of Power Purchase Agreements (PPA)long-term planning (the Egyptian Experience):In Feb. 2008, the Supreme Council of Energy has set a target to havea 20% of the total generated electrical energy from RES by the year2020 as follows: 12% wind (7.2 GW), 6% hydro, and 2% others.Regulatory Aspects for RE Integration into Grids
  12. 12. EgyptEra12Key Challenges for Promoting RE12long-term planning (the Egyptian Experience):- In 2009:o Presidential Decrees were issued for allocating lands in Gulfof Suez, to NREA (7,600 Km²) to build wind power plantseither by NREA or through usufruct system (the Cabinetapproved the land allocation regulations in 2012).o Egypt announced the 1st BOO wind project (250 MW)following the competitive bidding scheme.Regulatory Aspects for RE Integration into Grids
  13. 13. EgyptEra1313long-term planning (the Egyptian Experience):- In 2011, the Board of Directors of the General Authority ofInvestment and Free Zones approved the establishment ofprojects in the field of designing, building, managing, operating,and maintaining power plants from various resources (includingRE) as special free zones projects.Key Challenges for Promoting RERegulatory Aspects for RE Integration into Grids
  14. 14. EgyptEra1414long-term planning (the Egyptian Experience):- In 2012:o the Cabinet approved activating the “RE Fund” to cover thedifference between the cost of electricity production from REprojects and the selling price to the Grid.o the electricity tariffs have been increased to elevate portion ofthe governmental subsidy.Key Challenges for Promoting RERegulatory Aspects for RE Integration into Grids
  15. 15. EgyptEra1515long-term planning (the Egyptian Experience-EgyptERA):o In 2005, EgyptERA’s Board of Directors of approved the“Guidelines for Energy Supply to Investment Projects”;o Prepared Power purchase Agreements (PPA)o Ensuring private sector participation for 20-years commercialbased projects through enhancing the regulationo Developed Feed-in-Tariff (FiT) mathematical models (wind &solar), the contracting template for 15-years project, and theTariff’s issuing procedures are under approval by the CabinetRegulatory Aspects for RE Integration into Grids
  16. 16. EgyptEra1616long-term planning (the Egyptian Experience-EgyptERA):o The Grid Code and the Wind Code are completed (Based onIEC and IEEE standards).These codes are under approval by EETC and EgyptERA.o The templates for the “Grid Connection” and “Network Use”contracts of RE plants are under approval by EgyptERA.o EgyptERA has approved Network Use tariff structure ondifferent voltage levels.o In 2012, the Board of Directors approved the implementation of“Guarantee of Origin” (GoO) -certification scheme- as a methodfor promoting RE trade.Regulatory Aspects for RE Integration into Grids
  17. 17. EgyptEra17172- Coordination between relevant authorities; severalgovernmental entities are responsible for the same decision.Coordination between relevant authorities (the EgyptianExperience):a proposed framework has been developed so that the developercan submit all of paperwork to one unit that handles all permits.3- Experience among decision makers; highly delegateddecision-making can rely on committees that are unfamiliar withthe details of the processes of RE projects.Key Challenges for Promoting RERegulatory Aspects for RE Integration into Grids
  18. 18. EgyptEra1818Experience among decision makers (the Egyptian Experience):many recommendations are proposed to mitigate the effect ofinexperience among them:o skills already learnt must be formulated in knowledge systemso further private sector engagement is essential to provide helpfulfeedback to regulators and to find shared solutions.4- Electricity market structure; many countries have electricitymarket structures that do not provide the reliable and long-termprice signals needed to encourage private investment in RES.Key Challenges for Promoting RERegulatory Aspects for RE Integration into Grids
  19. 19. EgyptEra19194- Electricity market structure (the Egyptian Experience)Key Challenges for Promoting REThe Egyptianelectricitymarket isproceedingwith itsunbundlingprocess.Regulatory Aspects for RE Integration into Grids
  20. 20. EgyptEra20205- Grid capacity and coverage; technically, it is essential that gridsare not only well connected, but also stable and capable ofaccommodating fluctuations on both the supply and demand sides.Grid capacity and coverage (the Egyptian Experience):the Egyptian transmission grid is far from the candidate REterritories. A roadmap for enhancing the grid is under study at thecandidate locations of RES.Key Challenges for Promoting RERegulatory Aspects for RE Integration into Grids
  21. 21. EgyptEra21International Policies for Supporting RE ProjectsPolicies For RESupplementaryPolicesMainPolicesQuantitativePolicesPricingPolicesFeed inTariffAddedPremiumQuota(RPS)GreenCertificates , GoOCompetitiveBidsFinancialTaxes andCustomsIncentivesContractualPowerPurchaseAgreementsTPA withPrivilege inDispatchingRelated toProductionRelated toConsumptionSoft LoansGovernmentalPurchasesNet Metering
  22. 22. EgyptEra22Egyptian Supporting Policies for RERenewable Energy IncentivesDemand Incentives(RE consumers)Production Incentives(RE producers)NREA ProjectsCompetitive BiddingFeed in TariffWind CommercialProjectsGoO CertificatesPower Purchase Agreement (PPA)
  23. 23. EgyptEra23FiTCompetitive BiddingNew and Renewable EnergyAuthorityProject sizeMedium & Small < 50MW(Total=2500MW)Large (Total=10x250= 2500MW)Large (Total 2200MW)DeveloperPrivate (local)Private (international)NREAFinancesCommercial financeCommercial financeGovernmental & soft financing frominternational development agenciesTariff Settingproposed by EgyptERA andapproved by cabinet ofministersAccording to the bid outcome forthe PPAProposed by EgyptERA and approvedby the cabinet of ministersOff takerGrid or distribution systemGridConstruction Responsibility and O/MDeveloperNREAEgyptian Production Incentives for RE
  24. 24. EgyptEra24Egyptian Production Incentives for REGeneration CompaniesIPPs NREAEETC(Single Buyer)Distribution CompaniesCustomersIPPs
  25. 25. EgyptEraInternational FIT Pricing Schemes for Wind Energy
  26. 26. EgyptEraFITYearsRef site(worst site)FITYearsBest site5 15Project life time Ref site(average site)5 15Vertical Model(French Model)Horizontal Model(German Model)International FIT Pricing Schemes for Wind Energy
  27. 27. EgyptEraEgyptian FIT for Wind Energy• Site specific Differentiation• Tariff design ( flat rate, time blocks or descending)• Tariff adjustments ( site, capacity, technology ,..etc)• Return on investment (alternative investment opportunity, premium, hours offull outputs)• Payment terms (total foreign currency, local, mixed)• Termination of contract• Ownership of carbon credit• Limiting size (capacity or annual kWh produced)• Minimum size (yes/No)• Local manufacturing (premium, minimum requirements, no requirements)• Eligibility Criteria• Intersection with other mechanisms• Second hand machines (allowed/ not allowed)• Development approach (public wind parks, private, mix, auctioning)
  28. 28. EgyptEraEgyptian FIT for Wind EnergyRecommendations< or = 50 MWMinimum capacity determined as the technicalrequirements defined by the grid or distribution codesCapacityNo restrictions concerning the local componentsavoiding any complications that could ariseLocalComponentsNot allowed for any other mechanisms as an exampleprojects done through competitive bidding to switch tothe FiT mechanismOther PreviousProjectsEgyptian currency and foreign currency (at thechanging date according to the central bank changerate) to distribute the risksCurrency
  29. 29. EgyptEra29
  30. 30. EgyptEraEgyptian FIT for Wind EnergyRecommendationsUsed equipment are not allowed for theestablishment of wind power plantInstalling usedunitsThe contract is terminated if the wind power plantstopped producing energy for more than 60 daysActions in caseof plant failure2-4 years according to technical and financial changesthat may occurFiT RevisionPeriodDue to EETC or discos (per case)Carbon CreditIssued by EgyptERAFiT issuing date
  31. 31. EgyptEraTypes of Contracts Required Interconnection contract (between the plant and the grid) Land Use Agreement (between the plant and the land owner) Commercial contract “Power Purchase Agreement (PPA)” (betweenthe plant (supplier) and purchaser) Third Party Access (TPA) (in case if the transmitter is not the offtaker) (between the plant and the grid “commercial contract”) Implementation Agreement (cross linked Agreement between AllParties involved in the project (plant, transmitter, land owner andpurchaser)
  32. 32. EgyptEraTypes of Contracts RequiredInterconnection Contract:• It is primarily technical contract between the plant and thetransmitter• It is subjected to the grid code• It specifies the point of common coupling (PCC)• It specifies the responsibilities of each party on his side fromthe “PCC”• It includes operation requirements and obligations
  33. 33. EgyptEraTypes of Contracts RequiredLand Use Agreement (USUFRUCT AGREEMENT): It specifies the relation between the land owner and the plantdeveloper It includes access arrangements Payment arrangement could be based on cost recovery orannual payments Liability clearance of the plant owner Terms for dual land use Terms regarding plant demolition
  34. 34. EgyptEraTypes of Contracts RequiredThird Party Access (TPA) Contract: It is a commercial contract, which specifies the relationbetween the plant and the transmitter in case if the grid is notthe off taker It is usually subjected to grid access fee It specifies metering requirements Conditions of limiting access Methodology for calculating dimmed capacity andcompensations
  35. 35. EgyptEraGuarantee of Origin (GoO) CertificatesEU Schemes for Promotion of RE35SUPPORTprogramOBLIGATIONto Power ProducersOBLIGATIONto Energy Suppliers orto Energy Consumers Feed-in Tariffs  Power Producershave to justify X%generation from REsources Either they build theirown RE plants, orthey buy the requiredamount of Tradable Calls for tenders Premiumpayments Tax Reductions Energy Suppliersor Energyconsumers have toprove X% of REorigin in its finalenergyconsumption(through TradableGreen Certificate)
  36. 36. EgyptEraGuarantee of Origin (GoO) CertificatesEU Schemes for Promotion of RE
  37. 37. EgyptEraGuarantee of Origin (GoO) CertificatesGoO is an Electronic Document whose sole function is to provideproof to a final consumer that a given quantity of electricity has beenproduced by RES (specifies date and location of generation, and REgeneration type): Standard size 1 MWh,Measures for no “double counting”, Usage within 12 months from the time of production, Issuance, Transfer, and Cancellation, Independent Issuing Body (IB) – owns the mechanisms forRegistration, and Data on the GoO – Investment Support.
  38. 38. EgyptEraGuarantee of Origin (GoO) Certificates38Relate to the RE generated in agiven calendar year.Issued on response to a requestfrom a producer of RE1 MWhIssued,transferredandcancelledelectronicallyElectricityEnergy Source HydroIdentity Arlanza MHPLocation E-09346Type Mini-hydroCapacity 600 kWOperational from 10/10/2009Issued on: 01/02/2011Issued in: SpainUnique Id Number E-2010-MH-54213Investment aid :TypeIDAE(national)Junta CyL(regional)Amount 10 k€ 5 k€Each Member State designates aSingle Competent BodyNATIONALREGISTERIssues, records transfersand cancels GoO
  39. 39. EgyptEraGuarantee of Origin (GoO) Certificates39GoO’s life cycle:RE Generation ConsumptionElectricityCancelationTransferIssuingGoO Certificate SystemGoO Certificate Market
  40. 40. EgyptEraGuarantee of Origin (GoO) CertificatesSUPPORTprogramOBLIGATIONto Power ProducersOBLIGATIONto Energy Suppliers orto Energy ConsumersFeed-in TariffsCalls for tendersPremiumpaymentsTax Reductions GoOVOLUNTARYOBLIGATIONTo Energy ConsumersThe Proposed Schemes for National Promotion of RE
  41. 41. EgyptEraThe Proposed Schemes for National Promotion of RE41 Tourism Facilities represented as “Green Tourism Facility” X% from hotel consumption is required to obtain the Green HotelCertificate from Ministry of Tourism.GoO have tobe submittedVOLUNTARYOBLIGATIONto EnergyConsumers Exporting Industries & Services “Green Products” X% from facilities consumption is required to obtain the GreenLabel Certificate from Ministry of Trade and Industry. Companies/Identities with InternationalShare Holders “Green Companies/Identities” X% from facilities consumption is required toobtain the Green Companies/IdentitiesCertificate from Ministry of Foreign Affair orMinistry of Finance. Bidding Participants. X% greater than the bidding price isguaranteed for approval with a GoOCertificate from an IB. Upgrading Facilities’ Electricity Supply Contacts. X% of the facility demand can be upgraded if contracted withRE producers.
  42. 42. EgyptEraContents Background on the Egyptian Electric Utility and ConsumerProtection Regulatory Agency “EgyptERA” Electricity Sector Status and Challenges Regulatory Aspects for RE Integration into Grids Supporting Policies for RE Regulatory Measures Types of Contracts Required Technical Aspects for RE Integration into Grids Codes (Grid Code & Wind Code)43
  43. 43. EgyptEra44Grid Code Purpose & Scope44o Sets out the relationship between Generating Companies,Distribution Companies and EHV/HV Customers connected tothe Transmission System (collectively referred to as Users), andthe TSO and applied on all the parties mentioned above.o Imposes obligations on all Parties to ensure safety, efficiency andsecurity of the Transmission System while ensuring that allUsers are treated equally and fairly.o The terms and conditions of this Code also apply to each User ofthe Transmission System that requires to make a new connectionto the Grid or to modify an existing connection to the Grid.
  44. 44. EgyptEra45Sections of the Grid CodeSection 1: Data CodeSection 2: Connection CodeSection 3: Testing CodeSection 4: Protection CodeSection 5: Performance CodeSection 6: Planning CodeSection 7: Operation CodeSection 8: Metering CodeSection 9: Scheduling and Dispatch CodeSection 10: Wind Code
  45. 45. EgyptEra46Section 2: Connection CodeIt includes all technical requirements and limits for interconnectingthe wind farms with the grid. It includes: General requirements Disconnection from the grid (voltage, frequency, ,..etc) Power quality Active power control Startup of the wind farm Conditions for connection Reactive power control Temporary voltage drops Grid protection Real time data processing Verification of electrical Characteristics
  46. 46. EgyptEra47Section 10: Wind CodeThis section provides the requirements for WindGeneration, including the specific requirements forinduction generators used by Wind Generators
  47. 47. EgyptEraThank You48Dr. Walid El-Khattamwalid_el_khattam@hotmail.com

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