Modelling the Impact of Transmission Charging Options Project TransmiT Stakeholder Event 11 th August 2011 Date: 11 August 2011 Client : Ofgem
Contents • Background • Objectives of the study • Modelling methodology • Key assumptions and data sources • Project timelines • Questions Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 2
Background • On 27 May 2011 Ofgem outlined its proposed approach for Project TransmiT • Ofgem issued tender for analytical support for Project TransmiT on 3 June 2011 • Project kicked off on 23 June 2011 • On 7 July 2011, Ofgem launched a Significant Code Review of electricity transmission charging • Redpoint has been working with NGET and Ofgem on constraint forecasting using PLEXOS since October 2010 Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 3
Objectives Three T wo Timeframes Outputs options methodologies • Impact on consumer bills • Impact on power sector cost Status Quo • Detailed outputs Perfect - wholesale electricity prices foresight - capacity margins - generation mix Improved ICRP 2011-2020 2021-2030 - costs of constraints Imperfect - incremental transmission foresight cost levels Specific – mainly based General – based on (agent on known projects generic projects - amount of renewable Socialised simulation) generation (by region) - total carbon emissions from generation Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 4
Policy levers Wide set of policy levers to be covered by modelling framework Only one definition of each option can be fully modelled within Project TransmiT timelines – required by beginning of September Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 5
Based on Model components functionality in Redpoint’s Investment Decision Model Based on TEC register Generation Potential NGET’s ELSI Projects Plan model Cost Unconstrained Data Generation generation Decision Rules ‘stack’ Ofgem’s Constrained Explorer Model ‘stack’/ zonal Generation Transmission supply/demand background Plan Potential Transmission Projects background Data from TOs TransmiT Cost Transmission Decision Data Decision Rules Model Based on Detailed expansion of system functionality in Transmission dispatch NGET’s ELSI charging model PLEXOS NGET’s Transport Full results Model Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 6
Simulation steps Expected Generation Generation generation retirement investment gross Run and build decisions Run margins TNUoS unconstrained decisions Transport charges and constrained Model Transmission Transmission stacks Constrained reinforcement reinforcement boundaries decisions decisions Step forward 1 year Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 7
Agent simulation/non-perfect foresight Generation plan Yr1 5 yr forward view 1 Existing plant Unseen 3 Fix Generation 2 Decision Cross-visibility of Rules Roll Generation and 4 forward to Transmission Transmission plans next year Fix 3 Decision 2 Rules 5 yr forward view 1 boundary capacities Existing Unseen Yr1 Transmission plan Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 8
Perfect foresight Iterate to converge Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 9
Generation Decision Rules – New Build Capital and Forward Compare fixed O&M looking stack + costs prices Expected Expected gross levelised non- margin fuel costs Expected Anticipated low transmission carbon support charges Trigger 1 Trigger 2 Planning Commit Under Construction Operational Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 10
Generation Decision Rules – Retirements Fixed O&M Compare costs Forward Expected fixed Expected gross looking stack + costs margin prices Expected transmission charges Trigger 1 Trigger 2 Plan closure Close Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 11
Transmission Decision Rules 1. Identify constrained boundaries 2. Assume independence or simple dependencies Evaluate 3. T est reinforcements on each different constrained boundary reinforcement options Capital and Forward looking Expected Expected fixed O&M constrained reinforcement constraint costs costs stack costs Trigger Commit Under Construction Operational Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 12
Key assumptions • Treatment of renewables – Aim to equate renewables volumes across options by adjusting (implied) support levels • Treatment of nuclear – Assume same nuclear build programme under all options • Treatment of other EMR policy options – Assume 450 g/kWh Emissions Performance Standard throughout – Assume Strategic Reserve for capacity mechanism • Choice of boundaries – Assuming fixed boundaries throughout modelling time horizon – Unique mapping between TNUoS and system zones • Status Quo policy decisions – HVDC bootstraps: awaiting policy decision on charging – Offshore: assuming radial connections – Island connections: new TNUoS zones? Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 13
Key data sources Data Main source Fuel and carbon price assumptions Ofgem Explorer scenarios Demand profile and growth Ofgem Explorer scenarios Future interconnection Ofgem Explorer scenarios Existing plant data and costs NGET constraints model Target generation mix NGET Gone Green scenario Renewables resource availability and maximum build rates NGET Gone Green scenario/ARUP Regional wind output profiles NGET Balancing Mechanism bid-offer pricing assumptions NGET constraints model Gas transport charges by zone/region National Grid Gas Generation investment data (capital costs, O&M costs, PB Power/Mott MacDonald /Arup technical parameters, cost of capital etc) studies for DECC Onshore transmission investment data (known projects with Transmission Operators capital costs, O&M costs, cost of capital, construction time etc) Offshore transmission investment data (capital costs, O&M Offshore Transmission Review costs, cost of capital, construction time etc) Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 14
Overall project plan Project kick-off Detailed model design Proof of concept Dataset collation Model development End-to-end testing Policy option modelling Reporting Model handover June 2011 July 2011 August 2011 September 2011 October 2011 Stakeholder meetings: Possible further meetings Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 15
QUESTIONS? Date: 11 August 2011 Title : Modelling the Impact of Transmission Charging Options 16
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