european energy infrastructure

30
European Energy Infrastructure Georg Zachmann 27 May 2013

Upload: colt-turner

Post on 02-Jan-2016

32 views

Category:

Documents


1 download

DESCRIPTION

European Energy Infrastructure. Geor g Zachmann. 27 May 2013. Assessing the value of cross-border energy exchanges Background Literature survey Simulation Empirical analysis Quantifying infrastructure need Insufficiency of current approach Proposals. Agenda. - PowerPoint PPT Presentation

TRANSCRIPT

European Energy InfrastructureGeorg Zachmann27 May 2013

1. Assessing the value of cross-border energy exchangesa) Backgroundb) Literature surveyc) Simulationd) Empirical analysis

2. Quantifying infrastructure need3. Insufficiency of current approach4. Proposals

Agenda

Market integration is a continous process with incremental benefits

1949 AT BE DK FR NL NO CH

FR   1x65kV1x70kV

 

        2x60kV1x70kV

1x125kV4x150kV

IT 1x130kV     1x70kV1x150kV  

  1x130kV1x140kV1x150kV

NL   1x220kV          SE     1x50kV     1x80kV  DE 2x220kV

9x110kV1x220kV   1x110kV

1x150kV2x220kV

1x220kV   3x110kV1x220kV

2011 AT BE DK FR NL NO CH

FR   3x380kV3x220kV

 

        5x220kV6x380kV

IT 1x220kV     1x110kV1x220kV3x380kV

   1x110kV

5x220kV5x380kV

NL   4x380kV          SE     2x110kV

2x380kV    2x110kV

1x220kV4x380kV

 

DE 20x110kV11x220kV2x380kV

  1x110kV2x220kV3x380kV

 

2x220kV3x380kV

6x380kV   5x220kV7x380kV

 

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

1. Assessing the value of cross-border energy exchangesa) Backgroundb) Literature surveyc) Simulationd) Empirical analysis

2. Quantifying infrastructure need3. Insufficiency of current approach4. Proposals

1b Literature survey

Integration increases competition in the European electricity market

Benefits of competition and integration

  Static DynamicCompetition • Reduced mark-ups

• Improved operation• Improved investment

decisions

Integration • Cross-border optimisation of operation

• Cross-border optimisation of investment decisions

• Cross-border optimisation of company structures (M&A)

Source: own calculation based on individual companies capacities reported in their 2012 annual reports as well as total capacities reported by the national regulatorsNoe: 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.

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

Literature Survey

1. Assessing the value of cross-border energy exchangesa) Backgroundb) Literature surveyc) Simulationd) Empirical analysis

2. Quantifying infrastructure need3. Insufficiency of current approach4. Proposals

1c Simulation

Two countries Four technologies Four scenarios:

1. No trade2. Limited trade3. Full trade4. Reoptimisation of power plant park (excl. RES and nuclear)

Simulation exercise

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

Assumptions

System Cost: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 = ###

Results

Preliminary!!!

Interpretation:1. Most (static) trade benefits accrue already at limited trade2. Full trade has some marginal benefits3. Big gain is in Reoptimisation of power plant park 4. Increasing RES share increases the value of interconnection

1. Assessing the value of cross-border energy exchangesa) Backgroundb) Literature surveyc) Simulationd) Empirical analysis

2. Quantifying infrastructure need3. Insufficiency of current approach4. Proposals

1d Empirical analysis

Willingness to pay for interconnectors

2012 20130

50000

100000

150000

200000

250000

300000

350000

400000

450000

500000

SI IT SI IT

FR IT

FR IT

CH IT

CH IT

DE NL

DE NLDE 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

Annual auction result in 1000EUR

1. Assessing the value of cross-border energy exchanges

2. Quantifying infrastructure need3. Insufficiency of current approach4. Proposals

Quantifying infrastructure need

Determining optimal infrastructure need is a challenging exercise that crucially depends on a number of assumptions. 1. Which measure should be optimised by the infrastructure

investment?2. Which development of the energy system in the coming

decades is considered? 3. Which technical options are considered?4. What cost assumptions for the different options?5. Which market design is assumed?

=> Estimates are largly assumption driven and barely comparablewe provide a survey

Determining optimal infrastructure

Roland Berger’s report (2011) • distribution and transmission together will require around EUR

400 billion + EUR 200 billion for 2010-2020 (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)

Hirschhausen et al. (2012)• Total investment costs for transmission capacity in Europe

2011-2050 of “80% GHG reduction” scenario: EUR 57 bn

Infrastructure cost studies

0

30

60 46 46 46 4668 62 61

30

20202030

Billion E

uro

Electricity has multiple dimensions that can be individually traded

Dimensions interact: => „grand design“ or complex set of interfaces

Market design for reaping benefits of integration

  Nationally administered provision

Purely National market arrangement

National market arrangement with an interface for imports/exports 

European market 

  Expected change in Importance

Frequency and voltage control

          +

Ancillary services

           

Balancing           +Intraday delivery of electricity

          +

Day-ahead delivery of electricity

          -

Capacity           +Location     Nordic     +“greenness”   Quotas       +Emissions       ETS    

1. Assessing the value of cross-border energy exchanges

2. Quantifying infrastructure need3. Insufficiency of current approach4. Proposals

Insufficiency of current approach

Historic investment figures

2006 2007 2008 2009 2010 2011 201210000

12000

14000

16000

18000

20000

22000

24000

26000

28000

Visegrad4 (-3%) DE (-10%) ES (+9%) FR (+1%)

2006 2007 2008 2009 2010 2011 201210000

12000

14000

16000

18000

20000

22000

Visegrad4 (+5%) DE (+4%) ES (+18%)

FR (+2%)

2006 2007 2008 2009 2010 2011 20120

200

400

600

800

1000

1200

1400

1600

DE (+8%)ES (+9%)FR (+86%)UK(+1%)

Million e

uro

Figure 13: Length of 220kV circuit in km at the end of the year

Figure 14: Length of 400kV circuit in km at the end of the year

Figure 15: Investments in electricity networks by TSOs

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 planing

Only weakly coordinated operation NTC ignores physical network FB Market coupling treats domestic and cross-border

congestion differently

Insufficiency of infrastructure operation

Merchant: underbuilds CEF: only ~5 bn and politically selected projects RAB: lack of int’l CBA

Insufficiency of infrastructure financing

1. Assessing the value of cross-border energy exchanges

2. Quantifying infrastructure need3. Insufficiency of current approach4. Proposals

Proposals

27

European control centre (See flight control ) Internalise redistribution Nodal pricing Day-to-day responsibility with national fall-back

Add a European system management layer

28

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

Establish a stringent planning process

29

Deep connection charges Harmonized grid tariff structure (distribution

between network users) An approximate beneficiary pays component A socialization component

Phase in European cost-benefit sharing

30

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

Discussion: Who should propose a market design