2 nd ENTSO-E Guideline for Cost-Benefit analysis of Grid Development Projects

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1 2 nd ENTSO-E Guideline for Cost-Benefit analysis of Grid Development Projects Irina Minciuna Martti van Blijswijk Nils Schindzielorz Cross-RG meeting electricity Brussels, 5 April All rights reserved 1

4 CBA general introduction Today 2019 TYNDP 2016 PCI 2017 CBA 1.0 CBA 2.0 TYNDP 2018 PCI 2019 CBA methodology Legal requirement Regulation (EU) 347/2013 Used to transparently assess and present the benefits and costs of the TYNDP and PCI All rights reserved 4

8 Scenarios and time horizon ENTSO-E assesses projects against different scenarios of the future there is no leading scenario Changes since 1st CBA methodology Explicit requirement to use two mid-term time horizons Rounded years to full 5 All rights reserved 8

9 Modelling framework Project assessment Project definition and technical capacity Project costs Scenario Market simulation CBA market indicators Generation, consumption and exchange patterns Residual impact indicators Grid model Network simulation CBA network All rights reserved 9

11 Baseline/reference network Project assessment requires a reference situation built up from starting grid by successively adding project should represent the assumptions made by the scenarios Changes since 1st CBA methodology: included in the guideline scenario 1 scenario 2 reference grid P3 reference grid reference grid starting grid P2 P1 reference grid starting grid P2 All rights reserved 11

PINT and TOOT TOOT and PINT: Changes since 1st CBA methodology: more

Clustering of investments Strict eligibility criteria for clustering. Investments must: be complementary (competing investments are thus ruled out by definition!

13 Clustering of investments Strict eligibility criteria for clustering. Investments must: be complementary (competing investments are thus ruled out by definition!) contribute to realizing the potential of another investment (investments that contribute only marginally cannot be clustered!) be in a similar or close stage of development Procedure 1. Pick a main investment 2. Determine the required supporting investment(s) and check whether clustering is allowed Changes since 1st CBA methodology: Improved clarity of rules, although maintaining the same objective: cluster when necessary, but don t allow for excessive clustering! Ongoing improvements: consideration of delayed investments investments that only marginally contribute must not be All rights reserved 13

Transfer capability calculation Different ways to express capacity exist: Thermal line ratings [in MVA] Grid Transfer Capacity (GTC) [physical flows in MW] Net Transfer Capacity (NTC) [market flows

14 Transfer capability calculation Different ways to express capacity exist: Thermal line ratings [in MVA] Grid Transfer Capacity (GTC) [physical flows in MW] Net Transfer Capacity (NTC) [market flows in MW] Goal for CBA: report how much electricity transfers can be accommodated (i.e., commercially available capacity) Image source: Elia, 2017 Changes since 1st CBA methodology: Report NTC values, instead of GTC Further thoughts for the future: - Flow-based assessment of market flows, i.e., making a direct link between physical and market All rights reserved 14

15 Storage projects Storage is a main part of CBA Principle: no discrimination between storage and transmission Changes since 1st CBA methodology: Storage is moved from annex to chapter Improved consistency in computation of storage/transmission System flexibility indicator: tailor-made computation for storage All rights reserved 15

16 Internal projects Challanges: benefits of internal projects with small impact on cross-border flows are underestimated, because internal congestions are not taken into account Changes since 1st CBA methodology included a separate section on internal projects considering internal congestions using redispatch simulations using fictive market areas (for modelling purpose All rights reserved 16

18 B1. Socio-economic welfare Variation in variable cost of generation (generation cost savings) cheaper units are made available by transmission projects reduction of marginal cost (prices) differences decreasing overall system costs Partly included in B1 (SEW): reduced generation costs due to renewables with zero marginal costs reduced generaton costs due to avioded CO 2 emissions Indicator directly given as monetary All rights reserved 18

19 B2. RES integration separatley reported as on of the EU targets monetary value partly included in B1 reduced costs due to RES integration additional value (no double counting) RES integration benefits included in B1 additional value Ongiong improvements development of concepts for monetising the additional vlaue given in under B1 as generation cost savings qualitative All rights reserved 19

20 B3. Variation in CO 2 emissions separatley reported as on of the EU targets monetary value partly included in B1 reduced costs due to emission costs additional value (no double counting) CO 2 variation benefits included in B1 additional value Ongiong improvements development of concepts for monetising the additional vlaue given in under B1 as generation cost savings (due to emission-cost component in generation costs) qualitative All rights reserved 20

B4. Variation in losses New projects change the network topology and flows, resulting in a change in losses Projects may decrease or increase losses!

21 B4. Variation in losses New projects change the network topology and flows, resulting in a change in losses Projects may decrease or increase losses! Changes since 1st CBA methodology: Mandatory monetization of losses Calculation of losses should be representative for pan-european All rights reserved 21

22 B5/B6/B7: Security of supply 2 nd CBA methodology introduces a new indicator structure for security of supply Old security of supply-related indicators: B1: security of supply B6: technical resilience B7: All rights reserved 22

25 B6. System flexibility (continued) The maximum hourly ramp of residual load (maximum absolute value in MW at the 99.9 percentile in respective time series) R 0,max ; The existing GTC value in MW given as GTC old ; The remaining maximum hourly ramp of residual load (equal to maximum hourly ramp of residual load existing GTC) defined as R r,max = R 0,max GTC old GTC for the new All rights reserved 25

B7. System stability Ongoing improvements: - Towards a

27 C1. Capital expenditure (CAPEX) Capital expenditure (CAPEX) [ ] Mature projects: actual cost data Non-mature projects: standard investment costs, multiplied by project-specific complexity factor ( ) terrain, routing, presence of historical landmarks, presence of other infrastructure, population density, special materials and designs, protected areas, etc. (CBA methodology, p. 48) Non-mature Mature Under consideration Planned, but not yet in permitting Permitting Cancelled Under construction Completed Changes since 1st CBA methodology: Project-specific complexity factor for non-mature projects (to be transparently All rights reserved 27

28 C2. Operating expenditure (OPEX) Report expected operational costs In non-mature project stages: annual percentage of capital expenditure Changes since 1st CBA methodology: Explicit requirement to report OPEX separately in 2nd CBA All rights reserved 28

29 S1/S2/S3. Residual impacts Assessment system for residual environmental/social impact Stage: Indicate the stage of project development. This is an important indication for the extent to which environmental/social impact can be measured at a particular moment. Basic notion: amount of km that might have to run in sensitive areas. An area can be sensitive to (nearby) infrastructure (S1) because of the potential effects this infrastructure will have on nature and biodiversity (S2) if it is densely populated or protected for its landscape value Type of sensitivity: Define why this area is considered sensitive. Example table: (for environmental impact) Project Stage Impact: potentially crosses environmentally sensitive area (# of km) Typology of sensitivity Link to further information A Planned Yes (a. 50 to 75 km; b. 30 to 40 km) a. Birds Directive; b. Habitats Directive B Permitting No www. C Planned Yes (20 km) Habitats Directive www. D Under consideration N.A N.A www. e.g. Big Hill SPA; www. Changes since 1st CBA methodology: S3 Other All rights reserved 29

30 CBA next steps ACER opinion EC and MS opinion ENTSO-E update of the methodology Action: EC approves and publishes the final CBA methodology By 25 April all the MSs are invited to send their comments to the EC and MSs s: and All rights reserved 30

34 Benefit Guidelines for project NPV calculation General guidelines if NPV calculation is required Parameters as agreed with ACER: commiss Common (social) discount rate: 4% Assumed economic lifetime: 25 years Residual value: 0 For years from year of commissioning (start of benefits )to the first mid-term: extend the first midterm benefits backwards. For years between different mid-term, long term, and very long term (if any): linearly interpolate benefits between the time horizons. For years beyond the farthest time horizon: maintain benefits of this farthest time horizon All rights reserved 34

Introduction to transmission network assessment methodology: the ENTSO-E CBA methodology and the PCI selection process.

Introduction to transmission network assessment methodology: the ENTSO-E CBA methodology and the PCI selection process Péter Kaderják SEERMAP training March 7, 2017 Athens, Greece Overview The policy context