REALISEGRID: a FP7 project for assessing the REALISEGRID: a FP7 project for assessing the benefits provided by infrastructure development in benefits provided by infrastructure development in a pan- -European power system European power system a pan Gianluigi Migliavacca CESI RICERCA S.p.A. Project Coordinator IEA ENARD Annex IV Kick-off – 28 April 2009 – Milano, Italy
Presentation outline Presentation outline � Motivation of the project REALISEGRID � Description of research activities and expected results: new methodological perspectives and possible operative impact � Cost-benefit analysis of transmission grid investments: present approaches and the new methodology proposed by REALISEGRID 2 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
The EU Energy Policy The EU Energy Policy Promoting competition: • Green Paper “A European Strategy • eliminating cross-border Climate change mitigation: for competitive, sustainable and bottlenecks; secure energy” (2006) • reducing CO 2 emissions; • Communication “An Energy Policy • harmonizing market • promoting green generation; for Europe” (2007) regulation throughout • boosting efficiency in the • Third Liberalization Package (2007) Europe; consumption (energy saving) • Communication on Strategic Energy • promoting the creation of a Technology Plan (SET-Plan, 2007) common Internal Energy • Climate and Energy Package (2008) Market Increasing security of supply � Necessity to invest in the grid: the PIP (Jan.2007) underlined that electricity and gas networks are the “heart” of • a well-functioning energy market; The Second Strategic Energy Review (Nov.2008) clarified that EU will never • realize its objectives unless the grid will be soon significantly expanded. Green Paper “Towards a secure, sustainable and competitive European energy • network” (Nov.2008) TEN-E Guidelines: 32 projects labeled as “of European interest”: only 5 • completed, 13 in the authorization path, 14 in the study phase. 3 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
Need to invest in the transmission grid Need to invest in the transmission grid � The last years: strong demand increase vs reduced grid development � It is generally agreed that new investments are needed, motivated on the basis of a technical-economical evaluation comparing costs with benefits for the system (market competitiveness, interests of consumers and other market players) 4 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
Congestion and social welfare Congestion and social welfare NC NG � � SW Q P Q P = − Ci offCi Gj offGj i 1 j 1 = = Load offer prices are indicative of the value of the goods produced Generators bid prices should be indicative of the costs for producing energy • The merchandise surplus corresponds to the congestion rent extracted by the TSO. • The dead-weight loss is an indicator of efficiency loss in the market due to congestion. Congestion means lower market efficiency 5 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
Effects of increasing interconnection capacity Effects of increasing interconnection capacity • Increasing the capacity of congested tie-lines decreases the dead-weight loss and increases the social welfare. The market solution is more efficient. • However, the increase of social welfare (A>B) is not necessarily matched with a reduction of loads payments. In this example: – if pure zonal market: loads in the export zone pay price p 2 >p 1 , those in import zone pay the same; – if a Uniform Purchase Price is introduced (Italy): all the loads pay more (the weighed average grows). 6 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
Cost- -benefit analysis of new investments benefit analysis of new investments Cost � A realistic cost-benefit analysis should take into account the improvements in terms of both reliability and market competitiveness, as well as the interests of consumers and other market players. � Unlike what happened in old vertical integrated markets, grid expansions are now a controversial issue: They can advantage some stakeholder on others, enhancing or • reducing producers’ possibility to exercise market power; They can advantage a zone on another (especially for cross-border • investments) and provide diversified incentives to new generation. � Therefore a valuable cost-benefit analysis should be able to evaluate the advantages of new investments both system-wide and locally, considering both the point of view of the consumers, the producers and the TSOs. � Finally, a thorough evaluation of all grid investment options cannot neglect the opportunities offered by the new grid technologies (including WAMS, FACTS, HVDC), allowing to better control the grid and to optimize its exploitation. 7 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
Goals of REALISEGRID Goals of REALISEGRID � REALISEGRID stands for “ REseArch, methodoLogIes and technologieS for the effective development of pan-European key GRID infrastructures to support the achievement of a reliable, competitive and sustainable electricity supply ” � The ultimate objective of REALISEGRID is to develop a set of criteria, metrics, methods and tools to assess how the transmission infrastructure should be optimally developed to support the achievement of a reliable, competitive and sustainable electricity supply in the EU 8 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
Activities of REALISEGRID Activities of REALISEGRID � Identification of technical performances, economic benefits and costs of novel technologies aimed at increasing capacity, reliability and flexibility of the transmission infrastructure � Definition of long term scenarios for the EU power sector, characterized by different evolutions of demand and supply, such as the integration of a large amount of intermittent renewable energy sources (e.g. wind power), meeting specific targets concerning security of supply and sustainability � Implementation of a framework to facilitate harmonisation of pan-European approaches to electricity infrastructure evolution and to evaluate benefits of transmission investments 9 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
Structure of REALISEGRID Structure of REALISEGRID WP4 Coordination and dissemination WP4 Coordination and dissemination WP5 Admin. management WP5 Admin. management WP1 Performances and costs WP1 Performances and costs of innovative grid technologies of innovative grid technologies WP2 Long term scenarios WP2 Long term scenarios for European power systems for European power systems WP3 Transmission WP3 Transmission WP3.5 WP3.5 Investments Investments Application Application benefits tool benefits tool WP3.1 WP3.1 WP3.2 WP3.2 Reliability Reliability Investment Investment signals signals WP3.6 WP3.6 Investment Investment incentives incentives WP3.3 WP3.3 WP3.4 WP3.4 Implement. Implement. coordination coordination benefits tool benefits tool gas&power gas&power WP3.7 WP3.7 Consensus Consensus 10 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
Work Package 1 “ “Innovative grid technologies Innovative grid technologies” ” Work Package 1 � scanning the technology options, including WAMS, FACTS, HVDC, that will be available to the European TSOs, identifying their effectiveness and efficiency at guaranteeing reliability and controllability of the increasingly interconnected European transmission system � assessing the possible impact of such new technologies on the power system (cost/benefit analysis) � developing a roadmap for the incorporation of new transmission technologies in the electricity grids � analyzing perspectives of interconnecting the IPS/UPS system to the UCTE system, for improving stability and reliability of the pan-European power system 11 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
Work Package 2 “ “Long term energy scenarios Long term energy scenarios” ” Work Package 2 � developing quantitative long term pan-European scenarios based on the tool TIMES-MARKAL (ETSAP, Implementing Agreement of IEA). Considered countries: EU27 plus Norway, Switzerland, Iceland and Balkan Countries. The latter are important since interested by important pan-European energy infrastructure extensions. � adapting the modelling tool so as to perform scenario analyses considering both electricity and natural gas infrastructures � analyzing impacts of different scenarios on future electricity and gas exchanges between European countries, with a particular eye to system reliability 12 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
Work Package 3 “ “Transmission investments Transmission investments” ” Work Package 3 � developing a robust set of criteria for improved transmission planning in presence of a large penetration of RES-E generation. � analyzing the impact of regulation and incentive mechanisms on transmission investment. � providing policy recommendations to allow TSOs to address more efficiently the challenges related to interconnection development � deriving a benefit-based approach to improve consensus on new infrastructures 13 28-04-2009 TREN/FP7/EN/219123/REALISEGRID
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