PowerPoint-Präsentation

European Energy
Infrastructure
Georg Zachmann
27 May 2013
Agenda
1.
Assessing the value of cross-border energy exchanges
a)
b)
c)
d)
2.
3.
4.
Background
Literature survey
Simulation
Empirical analysis
Quantifying infrastructure need
Insufficiency of current approach
Proposals
Market integration is a continous process with incremental
benefits
1949
AT
IT
FR
NL
NO
CH
2x60kV
1x70kV
1x125kV
4x150kV
1x130kV
1x140kV
1x150kV
1x70kV
1x150kV
1x130kV
NL
SE
DE
1x220kV
1x50kV
2x220kV
9x110kV
2011
AT
1x110kV
1x150kV
2x220kV
1x220kV
BE
1x80kV
DK
FR
3x110kV
1x220kV
1x220kV
NL
NO
3x380kV
3x220kV
FR
CH
5x220kV
6x380kV
1x110kV
1x220kV
3x380kV
1x220kV
NL
SE
DE
DK
1x65kV
1x70kV
FR
IT
BE
1x110kV
5x220kV
5x380kV
4x380kV
2x110kV
2x380kV
20x110kV
11x220kV
2x380kV
1x110kV
2x220kV
3x380kV
2x110kV
1x220kV
4x380kV
2x220kV
3x380kV
6x380kV
5x220kV
7x380kV
Growth in exchanges exceeded growth in production
Note: West - Austria Belgium France Luxembourg Netherlands; East - Czech Republic Estonia Hungary Poland Romania Slovak Republic Slovenia; South -Greece Italy
Portugal Spain; North -Denmark Finland Norway Sweden; British Islands - United Kingdom Ireland
Annual net positions increased
1b Literature survey
1.
Assessing the value of cross-border energy exchanges
a)
b)
c)
d)
2.
3.
4.
Background
Literature survey
Simulation
Empirical analysis
Quantifying infrastructure need
Insufficiency of current approach
Proposals
Benefits of competition and integration
Competition
Integration
Static
• Reduced mark-ups
• Improved operation
• Cross-border optimisation of operation
Dynamic
• Improved investment decisions
• Cross-border optimisation of investment
decisions
• Cross-border optimisation of company structures
(M&A)
Integration increases competition in the European electricity market
Source: own calculation based on individual companies capacities reported in their 2012 annual reports as well as total capacities reported by the national
regulators
Noe: the reported HHI is the sum of the squared market shares of all major electricity producers in the covered countries. In US competition law an HHI
below 1500 indicates an unconcentrated market, an HHI between 1500 and 2500 indicates a moderately concentrated market and an HHI above 2500
indicates a highly concentrated market.
Literature Survey
In summary the reviewed literature points to the result that integration and competition can in
the analysed cases
 reduced the cost of balancing by 44%,
 the cost of redispatch by more than 50%,
 the labour cost by 32.3%
 generation costs decreased by 13.5% in states affected by restructuring, and nonfuel
expenses declined by roughly 9% in those states
1c Simulation
1.
Assessing the value of cross-border energy exchanges
a)
b)
c)
d)
2.
3.
4.
Background
Literature survey
Simulation
Empirical analysis
Quantifying infrastructure need
Insufficiency of current approach
Proposals
Simulation exercise
 Two countries
 Four technologies
 Four scenarios:
1.
2.
3.
4.
No trade
Limited trade
Full trade
Reoptimisation of power plant park (excl. RES and nuclear)
Assumptions






Country A = Germany Centre (TenneT Zone)
Country B = Germany West (Amprion Zone)
Hourly wind and solar feed in (n,c,g at 100% availibility)
Hourly demand (vertical load plus RES feed-in)
Capital cost of gas plants = 30,000 €/MW and coal plants = 50,000€ MW
Variable cost of gas = 50 €/MWh and coal = 30€/MWh
Results
 System Cost:
Preliminary!!!
1. No trade = ###
2. Limited trade = ###
3. Full trade = ###
4. Reoptimisation of power plant park = ###
4b. Reoptimisation of power plant park given double RES share = ###
 Interpretation:
1.
2.
3.
4.
Most (static) trade benefits accrue already at limited trade
Full trade has some marginal benefits
Big gain is in Reoptimisation of power plant park
Increasing RES share increases the value of interconnection
1d Empirical analysis
1.
Assessing the value of cross-border energy exchanges
a)
b)
c)
d)
2.
3.
4.
Background
Literature survey
Simulation
Empirical analysis
Quantifying infrastructure need
Insufficiency of current approach
Proposals
Willingness to pay for interconnectors
500000
Annual auction result in 1000EUR
450000
DE CH
CH DE
DE NL
NL DE
DE FR
FR DE
DE D1
D1 DE
BE FR
FR BE
BE NL
NL BE
AT CH
CH AT
IT AT
AT IT
IT CH
CH IT
IT FR
FR IT
IT GR
GR IT
IT SI
SI IT
DE NL
400000
DE NL
350000
300000
CH IT
250000
CH IT
200000
150000
FR IT
FR IT
100000
50000
SI IT
SI IT
2012
2013
0
Quantifying infrastructure need
1.
2.
3.
4.
Assessing the value of cross-border energy exchanges
Quantifying infrastructure need
Insufficiency of current approach
Proposals
Determining optimal infrastructure
 Determining optimal infrastructure need is a challenging exercise that crucially depends on a
number of assumptions.
1.
2.
3.
4.
5.
Which measure should be optimised by the infrastructure investment?
Which development of the energy system in the coming decades is considered?
Which technical options are considered?
What cost assumptions for the different options?
Which market design is assumed?
=> Estimates are largly assumption driven and barely comparable
we provide a survey
Infrastructure cost studies
 Roland Berger’s report (2011)
• distribution and transmission together will require around EUR 400 billion + EUR 200 billion for 20102020 (65% electricity, 35% gas)
 The European Infrastructure Priorities (2010)
• 2011-2020: EUR 70 billion for transmission infrastructure, EUR 32 billion for offshore grid infrastructure
and EUR 40 billion for smart grid infrastructure.
 2013 OECD working paper
• Grid shortage would make renewables deployment 38 billion dollars more expensive
 The Energy Roadmap 2050
• 2011-2050 infrastructure requirements reach EUR 1269 billion in the reference and EUR 2195 billion in
the high RES scenario
Infrastructure cost studies
 Ten Year Network Development Plan 2012
• increasing the total length of the network by 17 % over the coming ten years
 ECF’s study (2011)
80
Billion Euro
60
68
46
62
46
61
46
40
46
30
2020
2030
20
0
Reference
 Hirschhausen et al. (2012)
Cross border coordination
Higher demand response
Higher energy efficiency
• Total investment costs for transmission capacity in Europe 2011-2050 of “80% GHG reduction” scenario:
EUR 57 bn
Market design for reaping benefits of
integration
Expected change in
Importance
European market
National
market
arrangement with an
interface
for
imports/exports
Purely
National
market arrangement
Nationally
administered provision
 Electricity has multiple dimensions that can be individually traded
Frequency and voltage
control
Ancillary services
+
Balancing
Intraday delivery of
electricity
Day-ahead delivery of
electricity
+
+
Capacity
Location
“greenness”
Emissions
+
+
+
-
Nordic
Quotas
 Dimensions interact: => „grand design“ or complex set of interfaces
ETS
Insufficiency of current approach
1.
2.
3.
4.
Assessing the value of cross-border energy exchanges
Quantifying infrastructure need
Insufficiency of current approach
Proposals
Historic investment figures
Figure 14: Length of 400kV circuit in km at the end of the year
Figure 13: Length of 220kV circuit in km at the end of the year
28000
22000
26000
20000
24000
22000
18000
20000
16000
18000
16000
14000
14000
12000
12000
10000
10000
2006
2007
2008
Visegrad4 (-3%)
2009
2010
DE (-10%)
ES (+9%)
2011
2012
2006
2007
Visegrad4 (+5%)
FR (+1%)
2008
2009
DE (+4%)
2010
2011
ES (+18%)
FR (+2%)
Figure 15: Investments in electricity networks by TSOs
1600
1400
Million euro
1200
1000
800
600
400
DE (+8%)
ES (+9%)
200
FR (+86%)
UK(+1%)
0
2006
2007
2008
2009
2010
2011
2012
2012
Insufficiency of infrastructure planing





No joint plan
No binding plan (stakeholder not legally accountable)
Planing by one non-neutral actor (ENTSO)
non-transparent
Complex/unclear target function – certainly not EU social welfare
Insufficiency of infrastructure operation
 Only weakly coordinated operation
 NTC ignores physical network
 FB Market coupling treats domestic and cross-border congestion differently
Insufficiency of infrastructure financing
 Merchant: underbuilds
 CEF: only ~5 bn and politically selected projects
 RAB: lack of int’l CBA
Proposals
1.
2.
3.
4.
Assessing the value of cross-border energy exchanges
Quantifying infrastructure need
Insufficiency of current approach
Proposals
Add a European system management layer




European control centre (See flight control
)
Internalise redistribution
Nodal pricing
Day-to-day responsibility with national fall-back
27
Establish a stringent planning process
 Upgrade the TYNDP: national regulators can only approve projects proposed by European
planning
 Make the TYNDP welfare-maximising: ACER should be requested and enabled to thoroughly
check that the TYNDP maximises the welfare of current and future European citizens.
• Build an European open-source reference energy infrastructure model
• Structure a process in which all relevant stakeholders can contribute to the assumptions and the
modelling
• Make stakeholders liable to claims for damages from other stakeholders if they deviate from their
predictions
 Democratically legitimise the TYNDP : to reach conclusion on distributional consequences
28
Phase in European cost-benefit sharing




Deep connection charges
Harmonized grid tariff structure (distribution between network users)
An approximate beneficiary pays component
A socialization component
29
Discussion: Who should propose a market
design
Different regional settings
 EU 27+ (ENTSO, ACER, EU)
 NWE
 Penta-lateral
• Merger of TSOs
• Merger of PX
• Joint regulator
 Bilateral (FR-DE)
• Merger of TSOs
• Merger of PX (already happened)
• Joint regulator
30

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