OECD-IEA: Unlocking transmission grid finance and investment for the clean energy transition in emerging markets and developing economies, 17 January 2024, Virtual meeting

1. Sound
Investment
Climate
/Knud Johansen
OECD workshop – investment in transmission and distribution infrastructure

2. 1. Brief introduction
2. What is a sound investment climate
3. Characteristics of a sound investment climate
4. Example of how to create a sound investment climate
5. Examples of investment climates with high risks
6. Ea Energi Analysis – services to support a sound investment climate
7. Q&A
Agenda
OECD Workshop - Tx and Dx grid finance and investment for the clean energy transition

3. What is a sound investment climate?
OECD Workshop - Tx and Dx grid finance and investment for the clean energy transition
All over the globe are talking about the climate
- a lot of product ideas, project proposals are trying to find investors to realized their proposals to support the green transition
- a lot of countries / institutions around the globe are trying to attract investors without success
- many countries with the best RE resources and potential have the most difficult and complicated framework conditions
What are the characteristics of a sound investment climate?
- transparent and observable set of risk factors in all aspects
- Measurable risk, what you can’t measure you can’t control or mitigate
How can the various parties add value to create a sound investment climate?
- minimize risk factors where possible
How can various AI tools add value to create a sound investment climate?
- identify risk factors and propose mitigation means
- potentially provide an unbiased assessment of risk factors

4. OECD Workshop - Tx and Dx grid finance and investment for the clean energy transition
Lower the risk margins all over
• Stable economic and political environment – in general stable and transparent environments provides
lower risks
• Macroeconomic factors have serious impacts and should be mitigated. These have proven to be serious
roadblocks for many countries
• Predictability and transparency in economic, technical and regulatory framework – depressing risks for
stranded investments
• Transparency in the conditions for the investments is required to minimize risks – low level of
transparency equals higher risk margins
• Flexibility in the investment conditions is required - risks and opportunities changes rapidly
• Power flows from Transmission to Distribution as well as reverse are impacting conditions for operation
(PPAs), supplier guarantees and markets conditions – more flexibility must be included in PPAs
Characteristics of a sound investment climate

5. A transparent and harmonized set of regulations
— investors must be able to manage their business risks – requirements must be reasonable and stable
— manufactures must be able to follow the evolution of the technical requirements in their product developments
Transparency to all parties
— investors must be able to quantify the involved risks – technical and economical
— Investors must be able to follow the evolution and mitigate the risks – technical, product as well as process wise
Harmonized so the market competition is fair and based on equal conditions for all parties
— investors must be able to estimate the involved business risks – unfair competition from state-owned facilities
— regulatory measures to secure a fair competition – a regulatory authority on market level – EU ACER
Technical reasonable and justified based on security of supply aspects
— All new and enhanced technical requirements must be justified – economical and technical impact
— Involve all stakeholders in all steps of the regulation development and maintenance – common interest in a clean world
Characteristics of a sound investment climate
OECD Workshop - Tx and Dx grid finance and investment for the clean energy transition

6. Example of a sound investment climate is observed in Denmark - focusing the Tx grid
❑ Energinet (TSO) are combining the electricity and gas sectors and working with long-term development plans
for both sectors. Sector coupling is essential in long term plans
❑ Energinet is providing a long-term plan for investing in the energy system and transmissions system
extensions – covering the lifetime of the investments
❑ Energinet is setting up a transparent decision process on environmental assessment, how to obtain building
permissions, purchase of land and allowance to build offshore - especially the transparency in the political
decision process is essential
❑ Transparent set of investment conditions for financing the various grid extensions – in EU it’s based on tariffs
and bottleneck profit
❑ A transparent and harmonized set of technical regulations for grid connection, grid system operation and
markets – in the EU Integrated Electricity Market
Example of a sound investment climate
OECD Workshop - Tx and Dx grid finance and investment for the clean energy transition

7. A transparent and harmonized set of regulations - e.g. the EU network codes and guidelines for the
European Integrated Electricity Market (IEM):
— Network Code - Requirements for all Generators (NC RfG) – one set of requirements for all new Generation Facilities connected in
the IEM
— Network Code for Demand Connections (NC DC) – one set of requirements for all new Demand Facilities in the IEM
— Network Code for High Voltage DC systems (NC HVDC) – one set of requirements for all new HVDC systems connected in the IEM
— Guideline for transmission systems operation (GL SO) – one set of requirements for operation of all connected facilities in the IEM
— Network Code for Emergency and Restoration (NC ER) – one set of requirements for operation in emergency and system restoration
states
— Guideline for Capacity Allocation and Contingency Management (GL CACM) – one set of requirements for the IEM market concept
— Guideline for Forward Capacity Allocation (GL FCA) – one set of requirements for the IEM capacity calculation and allocation
— Guideline for Electricity Balancing (GL EB) – one set of requirements for the electricity balancing in the IEM
OECD Workshop - Tx and Dx grid finance and investment for the clean energy transition
Characteristics of a sound investment climate

8. Examples of investment obstructions observed in various countries:
❑ South Africa
– technical regulations for renewables changed more than once a year – product development becomes a risky business
– very unstable set of technical requirements – increased risks in the grid integration process → increased CAPEX
– complicated monitoring requirement on renewables → increased OPEX
❑ Egypt
– technical regulations get more and more complex without a real justification for the increased complexity (CAPEX/OPEX)
❑ Vietnam
– discrimination of renewables by increasing the technical requirements for the renewables (CAPEX and OPEX)
❑ Indonesia
– Several local sets of technical requirements for renewables with a limited technical and economical justification for the
difference (CAPEX and OPEX)
Examples of investment climate with high risks
OECD Workshop - Tx and Dx grid finance and investment for the clean energy transition

9. Ea Energi Analysis - services to create a
sound investment climate
Analysis and clarification of technical requirements for grid codes in
general – essential for minimizing risks and process delays
Analysis and clarification of technical requirements for grid codes in
general – essential for minimizing risks and process delays
Feasibility studies - analysis of opportunities for grid connection in
specifict areas – essential for optimizing business (wind perspectives,
close to demand centres etc.) and minimize risks for process delays
Feasibility studies - analysis of opportunities for grid connection in
specifict areas – essential for optimizing business (wind perspectives,
close to demand centres etc.) and minimize risks for process delays
Project planning - support and recommendations for an optimal
project organization – technical as well as economical – essential for
fitting into a specific time schedule and budget
Project planning - support and recommendations for an optimal
project organization – technical as well as economical – essential for
fitting into a specific time schedule and budget
Support to a project team with advices on regulations and policy
from global experience – essential for securing a project on time as
well as on budget
Support to a project team with advices on regulations and policy
from global experience – essential for securing a project on time as
well as on budget
OECD Workshop - Tx and Dx grid finance and investment for the clean energy transition

10. OECD Workshop - Tx and Dx grid finance and investment for the clean energy transition

11. Additonal slides
OECD Workshop - Tx and Dx grid finance and investment for the clean energy transition

12. Contact:
kjo@eaea.dk
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