EirGrid Group Customer Conference 2009

Key Industry ChangesA new entrant’s perspective

13th October 2009

Miguel GonzalezEngineering Manager

Endesa Ireland

Note: YE08 proforma figures (considering asset disposals to Acciona and including ESB)

Presence in 10 countriesPresence in 10 countries

Installed capacity: 39 GW Installed capacity: 39 GW

Output: 147 TWhOutput: 147 TWh

Customers: 24 millionCustomers: 24 million

Employees: 27 thousandEmployees: 27 thousand

Core business: energy

No.1 in Spanish electricity sector. Leading private electric utility in Latin

America

Present throughout the entire electricity and natural gas value chain

A global dual power operatorA global dual power operator

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~ 40% Endesa ~ 60% Endesa

Latin America

15 GW of installed capacity

Output of 61 TWh

12 million customers

Europe

24 GW of installed capacity

Output of 86 TWh

12 million customers

Note: YE08 proforma figures (considering asset disposals to Acciona and including ESB)

A geographically diverse asset baseA geographically diverse asset base

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Endesa installed capacity: 39GW

Breakdown by technology 49% of the generation mix is carbon-free

49% carbon-free

51% fossil fuelsRenewables 3%

Nuclear 17%

CCGTs 17%

Hydro 29%

Fuel gas 13%

Coal 21%

Note: YE08 proforma figures (considering asset disposals to Acciona and including Endesa Ireland)

A diversified energy mixA diversified energy mix

4

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

Fin

lan

d

Lu

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bu

rg

Sw

eden

Bel

giu

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Au

stri

a

Fra

nce

Ger

man

y

Ave

rag

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Net

her

lan

ds

Den

mar

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UK

Irel

and

Sp

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Ital

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Gre

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Po

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Ireland in the context of European gas and electricity markets Ireland in the context of European gas and electricity markets (i)(i)

In the European context, Ireland is a small market:

Total installed capacity: 7,000 MW

Peak load: 4,800 MW

Total annual consumption: 27,000 GWh

Around 2 million customers

Demand growth in the last 10 years > 4% annual

2009 demand has decreased and it is expected to take 4 years to return to 2008 demand levels.

Electricity demand 1997 - 09

Demand per-capita EU 15

> 20 GWGermanySpainFranceUKItalyNetherlandsSwedenNorwayPoland

10-20 GWAustriaBelgiumDenmarkFinlandGreecePortugalCzech Rep.RomaniaSwitzerland

< 3 GWLuxemburgCyprusEstoniaLatviaSlovenia

Installed capacity by country

-6.0%

-4.0%

-2.0%

0.0%

2.0%

4.0%

6.0%

8.0%

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 20082009e

GW

h

Total Electricity Requirement Growth rate

Source: Eurelectric, EirGrid, International Energy Agency 5

Ireland in the context of European gas and electricity markets (ii)Ireland in the context of European gas and electricity markets (ii)

Ireland prices are still sensitive to Oil prices during winter peak, while NBP gas prices seem to be ruling during summer

New CCGT capacity will also link Irish electricity prices to NBP gas during winter time

Italy still shows the influence of Brent prices, as piped gas is mainly indexed to Brent

Spain enjoys low prices due to increasing levels of wind energy, in addition to a well diversified piped gas and LNG supplies

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Ireland regulatory frameworkIreland regulatory framework

In summary, a relatively well balanced framework, with room for some improvements...In summary, a relatively well balanced framework, with room for some improvements...

• Reasonably covers Capital Cost of Marginal Units (Distillate GT BNE)

• Needs to develop stability and predictability

• Tariff based, but this tariff doesn’t reflect real costs

• Market bids would better represent costs and would optimize total system cost (mainly for operative reserves)

• Needs improving to incentivize the most flexible(and expensive)

technologies

• SMP based on Short-Run Marginal Cost• Merit Order dispatch is an incentive for efficient technologies

• Variable costs naturally hedged• Some costs not included (gas transmission costs)

... but any change has to take into account the whole picture to avoid instability.... but any change has to take into account the whole picture to avoid instability.

A great opportunity within reach …A great opportunity within reach …

Wind power installed capacity in Europe in MW (2008)

7,0%

11,8%

1,7%

1,2%

1,8%

21,2%

9,3%

3,4%

1,3%

8,4%

3,3%

3,7%

3,8%

Wind share of demand (2007)

Source: EWEA (European Wind Energy Association), Eurostat

....and also the framework to make it happen:

• REFIT Tariff

• Capacity Payments

Ireland has some of best European wind areas with optimum conditions…

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c. 5400 MW by 2020

……with many challenges ahead, but with technical solutions availablewith many challenges ahead, but with technical solutions available

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……with many challenges ahead, but with technical solutions availablewith many challenges ahead, but with technical solutions available

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In 10 years time the Irish system will show totally different characteristics and performance:

Different Inertia Constant

Different Generation Distribution

Different Frequency Regulation

Different Behaviour Feeding Faults

Small Signal Stability issues may arise

The Transmission Network strength is Key:

Optimum Economical Dispatch (unconstrained)

Optimum Renewable Production (remote areas)

Optimum Secondary Regulation (AGC)

N-1 criteria

Lower System Impedance:

More Effective Voltage Support

Higher Short-Circuit ratios

Improved Stability LimitsSPAIN 2006 2007 2008Wind Cap MW (EWEA) 1595 3508 1609       Circuit km (REE) 2006 2007 2008400 kV 196 130 552220 kV 210 37 101

Graphs from L. Rouco « Wind Power Generation: Generator Technology vs. Grid Integration » Cigre Study Committee A1 Meeting

-2 0 2 4 6 8 10-2

-1.8

-1.6

-1.4

-1.2

-1

-0.8

-0.6

-0.4

-0.2

0

Time (seconds)

Fre

quen

cy d

evia

tion

(%)

SG

SG - DFIG with primary regulation

……with many challenges ahead, but with technical solutions availablewith many challenges ahead, but with technical solutions available

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The development of interconnections:

Improved inertial response

Instantaneous support in emergency conditions

HVDC links can provide additional control features

Interconnection Trading as a source of:

Flexibility

Renewables Production optimization (when excess)

Flexible plants economical feasibility may improve

Long term plan for Regional Market development

Interconnection Trading rules must be revised

Firm capacity must be maintained

Harmonization on Gate Closure with BETTA

Market Rules must be stable, predictable and comprehensive:

Modifications in small steps with overall view

Capacity payments need some adjustments

Ancillary Services should be market based

Develop a Balancing Market for System Operative Reserves

Current Tariffs are not an incentive

……without forgetting the remaining 60% for Security and Flexibilitywithout forgetting the remaining 60% for Security and Flexibility

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Resources available in the country that provide security

Resources providing flexibility

Critical aspect is the performance of the national Gas System

With diversified resources:

Resources from geopolitically stable origins and proved long term reserves

LNG & depleted gas fields used as storage are a valuable sourceof flexibility

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……special mention to the gas systemspecial mention to the gas system

The Gas System will be critical to meet the challenge as a major source of security and flexibility.

Natural Gas is a cleaner fuel than Distillate

Dry Low NOx burners don’t need water injection

The implicit storage in the pipe itself can accommodate sudden peaks of consumption

Ireland has potential storage in depleted fields which are valuable resources to shave market peaks and secure strategic reserves

LNG facilities are a great source of flexibility for the gas system, as well as security of supply

100 MW Aeroderivative GT latest technology needs:

• 220 HL/hour of Distillate

• 68 HL/hour of Demin Water

• 17 T/hour CO2 emissions

higher than natural gas

One typical truck carries 300 HL

• At full load, one truck would

be needed every 1 h 20 min

In the event of a extended

period of calm weather, the

replacement of, i.e. 1.000 MW

with this units would make

circa 80 Distillate trucks on

the roads per day.

Distillate GT’s as BNE?

……and with the right technologies.and with the right technologies.

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With attention to:

Electric Vehicles

Domestic Fuel Cells

Microgeneration

Smart Metering

Efficient Demand

As potential sources of:

• Flexibility

• Network Optimization

• Peak/valley shaving

kip

Smartenergybyendesa

kip

Smartenergybyendesa

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The target is getting a balanced and competitive mixThe target is getting a balanced and competitive mix

Thanks for your attention

Miguel GonzalezEngineering Manager

Endesa Ireland

miguel.gonzalez@endesaireland.ie