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ENTSO-E Public Workshop: Presentation of 3rd CBA
Guideline 8 November 2019
ENTSO-E premises, Avenue de Cortenbergh 100 1000 BrusselsGround Floor
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Agenda
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1. CBA Process
How to improve the CBA guideline …
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… only following Reg. 347 (2013)
3 Month 3 Month 3 Month 2 weeks
Public consultation
ACER opinion
EC/MS opinion
ENTSO-E adoption ofcomments
EC approval Publication
How to improve the CBA guideline …
5
… as applied for CBA 2
3 Month 3 Month 3 Month2 Month 2 weeks
Public consultation
ACER opinion
EC/MS opinion
ENTSO-E adoption ofcomments
EC approval Publicationintensediscussion
AC
ER
EC
inte
rnal
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rova
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rnal
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rova
l
inte
rnal
app
rova
l
discussion with EC
CBA 2.0 CBA 2.1
discussion with EC
How to improve the CBA guideline …
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… and for CBA 3
3 Month 3 Month 3 Month6 Weeks from 2 weeks
Public consultationACER opinion
EC/MS opinion
ENTSO-E adoption ofcomments
EC approval Publicationintense discussionACER and EC
inte
rnal
app
rova
l
inte
rnal
app
rova
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inte
rnal
app
rova
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discussion with EC discussion with EC
experiencefrom CBA 2
ideas forimprovement
publicworkshop
publicwork-streams
07.11.2017 ~6 Month
CBA 3 drafting
continous discussion with EC and ACER
publicworkshop
inclusion ofACER
comments
18.12.2018
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Workstreams
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Workstreams: who was involved? External Stakeholders: all ENTSO-E non-direct stakeholders
- Consultants
- Academia
- Utilities
- Manufacturers
- Investors
… mainly all industry professionals were involved
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Workstreams: why?
• Good experience including „external“ parties in the
CBA 2 process
• For CBA 3: starting from the very beginning with
help of external experts
• Defining together the core issues
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Workstreams: the starting point
Common Framework for improving the CBA:
• Comments from the public consultation
• Direct observations from ACER
• Direct observations from EC
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Workstreams: the scope
• to maximize external stakeholder
input
• content mainly drafted by the
external stakeholders
• to give sufficient time to mature how
to contribute
Anticipate and go beyond consultation
The workstreams: how
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Storage
SoS
SEW
Kick-off
The workstreams: how
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Storage
SoS
SEW
Kick-off
Physical meetings
Draft by participants
CommentsReviews
Weekly webco
The workstreams: how
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Storage
SoS
SEW3 deliverables drafted by the workstream participants
The workstreams: how
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Storage
SoS
SEWGood
starting point for
CBA3 in 1 merged
document
The workstreams: outcomes
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SoS
Adequacy:- Adequacy
- ENS from Monte Carlo
simulations
- Sanity check
Ancillary Services: Balancing Energy- Focus on exchanging Balancing
Energy
- Drawn upon projects/studies like
TERRE, iGCC, PICASSO, MARI
- Drawbacks
- Next steps
The workstreams: outcomes
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SEW
No proposed methodology but recommendations:
- Retain current SEW definition
- Include more formal and thorough explanations of the
indicators
- Provide context
- The indicator should be clearly delineated
The workstreams: outcomes
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No proposal for a dedicated methodology but a comprehensive overview of storage project benefits*
*Benefits that are described here might also apply for other types of projects
Storage
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Next Steps
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Next Steps
• Since 09. November 2019: 3rd CBA Guideline out for consultation until 9 December 2019
• In parallel: inclusion of additional ACER and EC comments
• Official Submission to ACER end of 2019• Application in TYNDP2020 planned
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3. Changes from CBA 2 toCBA 3
A modular approach
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CBA 3.0 officially
approved
implementationTYNDP2020
CBA 3.1
CBA 4.0 officially
approved
implementationTYNDP2022
CBA 3.2
• Preparing and publishing the CBA 3 as described (following Reg. 347/2013)• Additionally for each TYNDP publishing the implementation guideline
• Gives more flexibility and possibilities for improvement, tests of new methodologies
Example:
ACER
EC
ACER
EC
Improvements:• more flexible• more time for improvements• time for testing methods
Idea:• leaving the main document
more general• details in implementation
Project benefits based on promoters’ input• B7.1: Balancing Energy Exchange
• B9: Avoidance of the renewal/replacement costs of infrastructure
• B10: Synchronisation with Continental Europe (for Baltic States)
• B11: Reduction of necessary reserve for re-dispatch power plants
NTC calculation
• Introduction of seasonal NTCs
Storage Projects
• In principle no special treatment• Improvements will come along
with general CBA 3 improvements (e.g. on flexibility)
Indicator Overview
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B1: SEW
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SEW – main changes
• Indicator delimited to the economic
benefits that stem from wholesale
energy market integration
• Total generation costs considered
updated
Cost Terms in Market Simulations Description
Fuel costsCosts for fuel of thermal power plants (e.g. lignite, hard coal, natural gas etc.)
CO2-Costs
Costs for CO2-emissions caused by thermal fired power plants (ETS). Depends on the power generation of thermal power plants and CO2-Price.
Start-up-costs / Shut-down costs
These terms reflects the quasi-fixed costs for starting up a thermal power plant to at least a minimum power level.
Operation and maintenance costs Costs for operation and maintenance of power plants.
DSR-Costs
Costs for Demand Side Response (DSR). DSR is load demand that can be actively changed by a certain trigger.
Better framed in its scope:
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B2: Societal benefit due to CO2 variation
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CO2 – main changes
• Indicator extended by inclusion of the effect of societal costs (formerly
part of the B4 Societal well-being indicator)
• Impact of losses to be considered
Better framed in its scope:
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BackgroundCOP 21 Paris agreement, Article 6, 20152050 European long term strategyGoal : zero net emission by 2050
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CO2 management in CBA 2Implicitly taken into account via EU ETS CO2 price
Within SEWWithin losses prices
Fuel cost
EU ETS CO2price
Marginal costfor each plant Hourly
marginal priceper bidding
zone
Lossescost
Merit order SEW
Scenario V1 V2 V3 V4 BE 2025
ST 2030
DG 2030
EUCO 2030
EU ETS CO2 price
(€/ton)17 17 71 76 25,7 84,3 50 27
BUT : The EU ETS price does not capture the full societal impact of CO2
CCGT new = Fuel cost + EU ETS CO2price
86 €/MWh = 56,2 + 29,8
Example on ST 2030 :0,3538
ton/MWh* 84,3 €/ton
New methodologyAdditional ex-post consideration through a CO2 societal cost
SEWValue CO2 emission variation resulting from change of generation plans to thedifference between societal cost and EU ETS price
LossesValue CO2 emission variation resulting from change of losses volumes to thedifference between societal cost and EU ETS price
Note: using the difference between societal cost and EU ETS cost avoiding double accountingwith what was already implicitly taken in the SEW and the losses
Guide investments toward a reduction of CO2 emissionIncrease NPV for investments that lower CO2 emission and decrease NPV for the other.
No other simulations needed (ex post computation)
ExampleA
B Fictious exampleETS price = 27 €/tonSocietal cost = 100 €/ton
Impact of the interconnecor A B
Nuclear @ 14€/MWh + 1000 GWh/yr
Gas @ 85 €/MWh - 300 GWh/yr
Coal @ 100€/MWh - 900 GWh/yr
Spillage avoided + 100 GWh/yr + 100 GWh/yr
CO2 0 - 0,8 Mton/yr
SEW = 56,5 M€/yrin which 0,8*27 = 21,6 implicit CO2 price
Complete CO2 societal cost <SEW> = 100*0,8 = 80 M€/yr
Additional CO2 societal cost <SEW> = 80 – 26,6 = 58,4 M€/yr
Conclusion SEW Losses Additionnal societal CO2indicator
+ 58,4M€/yr
- 14,6 M€/yr + 43,8 M€/yr
Market substitution Losses
+ 0,20 Mton CO2/yr
Additional CO2 societal cost <Losses> = 0,20 * (100 – 27 )= 14,6 M€/yr
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B3: RES integration
RES - main changes
• No methodological changes
• No monetisation - as already fully captured under CO2
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B4: Non-direct greenhouse
emissions
Non-CO2 – main changes
• New indicator • Introduced new methodological based on post-processing
the market simulations output
From CBA 3: “The non-CO2 indicator/s can be calculated per fuel type by multiplying the specific emission factor (for all emission types) in [t/MWh] by the respective generation in [MWh].”
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B5: Losses
Losses – main changes
• Streamlined the description• Double counting issues with respect to the monetisation
solved
Issues identified in TYNDP 2018Potential for partial double-counting with SEW
• Demand curves used in the market studies contain losses (built using historical time series)
• This part of the demand is already monetized in B1: SEW (consumer surplus)o Change in consumer surplus = change in prices multiplies by demand
• Compensation has to be made in losses results
• In TYNDP 2018, ”quick mitigation” was done due to process timeline constraints:o Assumption: fixed losses part is 2% of the demand in all market areaso Compensation (subtracted from monetized results) per hour for each market area:
0.02*Demand*[MarginalCost(WithProject)-MarginalCost(WithoutProject)]
• In the 3rd CBA Guideline, the problem had to be handled in a detailed way
Issues identified in TYNDP 2018 (2)High loss increases for several projects
• TYNDP Study Team performed analysis to see the effects of:o Different climate years (3 instead of only 1 used in TYNDP 2018)o Different market toolso Different hurdle cost values
• Result: potentially significant effects on losses results
• Usage of 3 climate years on all available market tool outputs to be usedo Will be part of the Implementation Guidelineso More robust and aligned results are expected
Improvements in 3rd CBA Guideline (1)Partial double-counting with SEW
1) Basic formula for losses monetization (for a given market area and hour):
2) Two possible assumptions can be made for compensation:a) Compensation with assuming a given proportion of the demand as losses:
o Similar to TYNDP 2018 approach, but country-specific values instead of uniform European value
o Compensation term:
K*Demand*[MarginalCost(WithProject)-MarginalCost(WithoutProject)]
o Data collection for country-specific assumptions needed from TSOs
DeltaLosses(monetized)=Losses(WithProject)*MarginalCost(WithProject)-Losses(WithoutProject)*MarginalCost(WithoutProject)
Improvements in 3rd CBA Guideline (1)Partial double-counting with SEW
b) Compensation with the computed losses:• Assumption: losses computed in the reference case are included in the demand• The formula for the monetized delta losses simplifies to:
o For PINT projects:
o For TOOT projects:
• Advantage: no additional data collection needed, simpler formulas (one single price times delta losses)
DeltaLosses(monetized)=MarginalCost(WithProject)*[Losses(WithProject)-Losses(WithoutProject)]
DeltaLosses(monetized)=MarginalCost(WithoutProject)*[Losses(WithProject)-Losses(WithoutProject)]
Improvements in 3rd CBA Guideline (2)Other improvements
• Generally streamlined descriptions
• Possible usage of DC load-flow is more detailed. Formula added to estimate losses on a given branch basedon DC load-flow results:
o P: active power flow from the DC calculationo R: resistance of the brancho U: voltage levelo cosφ: assumed power factor to estimate the effect of reactive flows
• Example for explanation of double-counting issue and the two different assumptions, with detailed deductionof the formulas
• More detailed formulas for easier implementation
• Other specific details (climate years, market tool outputs, general instruction for network simulations) to be included in the Implementation Guidelines
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B6: SoS Adequacy
Adequacy – main changes
• New indicator• Introduced new methodological
SoS : adequacyAdequacy: Ability of a power system to provide an adequate supply of electricity in order to meet the demand at any moment in time. An interconnector can bring an adequacy benefit if the two countries it links are not facing adequacy stressed event at the same time.
Benefit materialized through two concepts:• Decrease the need of generation capacity (while keeping the SoS level constant)• Decrease the Energy Not Supplied (ENS) in the countries (i.e. improving the SoS of the area)
Prerequisites• Refined model of hazards (climate, plant and grid outages)
o LOLE is a very scarce phenomenono Need to model deepness of such events and their simultaneity between countries
• Realistic SoS level starting point
SoS : adequacyModeling adequacy benefit
Approach MonetizationCompute the capacity that is no longer needed to reachthe same SoS capacity when the project is added
Cost of best new entrant
Compute the amount (MWh) of avoided ENS thanks to the projetct
Value of Loss Load(VoLL)
Workstream output Methodology based on the second approach (avoided ENS )
Be careful to have realistic SoS starting point
Add a cap value based on a simplified generation capacity savings approach ( )
1
2
2
1
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B7: SoS Flexibilty
Flexibility – main changes
• Restructured and reworded• Divided into “energy” and “capacity” part• Methodology for balancing energy exchange• Main principles for balancing capacity exchange/share
SoS – Flexibility (balancing energyexchange)
Step 1: Common platform • Assumption that such a common plattform will be in service in the
future
Step 2: Balancing needs• Definition of the balancing needs as Upward and Downward Demand
Step 3: Available cross border exchange capacity for balancing energy
• Using Market simulations to determine the actual utilization of the respective border
Direct outcome form public work-streamMain
Idea
SoS – Flexibility (balancing energyexchange)
Step 4: Imbalance netting• Netting out the imbalance between the countries (e.g. upward vs.
downward demand)
Step 5: Balancing bids and offers• The match between supply and demand will be made by the cheapest
cost under constraints of limited capacity on the interconnector
Note:• The method will become very complex when considering more than 2
countries• What balancing bids and offers to use?
Direct outcome form public work-streamMain
Idea
SoS – Flexibility (balancing energyexchange)The full assessment of balancing energy exchanges can only be realised when platforms for
exchanging balancing energy exist. There is a challenge around the choosing the right balance between complexity and feasibility of completing assessments timescales and
resource level. On the other hand, producing full models for balancing energy markets may be too time consuming. For these reasons, this benefit is addressed by qualitative assessment
indicated in the table below
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B8: SoS Stability
Stability – main changes
Reworded, restructured and divided into:
• B8.0: Qualitative indicator (kept from CBA 2)• B8.1: Stability• B8.2: Blackstart service• B8.3: Voltage/reactive power service
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B9: Avoidance of renewal/replacement
of infrastructure
Renewal/Replacement – main changes
New methodology introduced
Methodology:
• Prerequisite: The new project eliminates the need for replacing or upgrading existent infrastructure
• In such a case, the new project enables the TSO to avoid the investment costs required by the existing transmission grid to maintain the existing level of grid reliability and security.
• Indicator given in M€
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B10: Synchronisation with continental
Europe
Synchronisation – main changes
• New methodology introduced
Methodology:• This indicator applies only for smaller energy systems („energy islands“)• Assumption: higher risk of blackouts• Monetisation:
Energy not supplied cost (EUR)=VOLL (EUR/MWh)*Consumption (MWh/h)*Duration (h)
Note: Although displayed as single indicator, this benefit will be internalised under “system security”
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Redispatch
Redispatch for all projects
RD1
MS1
RD2
MS2
SEW
∆RD
SEW
∆MS
• In CBA 2: Introduction of redispatch method for internal projects only• Basically the same method can also be used for cross-border projects
MS: Market SimulationRD: Redispatch Simulation
with project without projectImprovements in CBA 3:• More detailed description
giving better guidance• Also for cross-border projects
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• Indicator taken from the “missing benefits” from TYNDP18.• Main idea:
• There are power plants contracted for re-dispatch• The maximum power of re-dispatch is a direct indication for the need of contracting
power plants• A reduction in maximum re-dispatch power denotes that less power plants need to
be contracted.
• To be defined in the Implementation guidelines:• What monetisation factor to be used?• Is there a regulatroy framework in the respective country
RD Power [MW] Benefit [MW]
Monetary Benefit [M€] (factor: 20k€/MW)
Without project(reference)
18.000 - -
With project 16.000 2.000 40
B11: REDUCTION OF NECESSARY RESERVE FOR REDISPATCH POWER PLANTS
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Reference Grid
Reference Grid: TYNDP2018 practiceUnder
ConsiderationPlanned, But Not Yet in Permitting
PermittingUnder
Construction
• Projects NOT included in the reference grid
• Assessed as PINT projects
• Projects included in the reference grid
• In TYNDP18: CD <= 2027• Permitting included if properly
documented • Assessed as TOOT projects
Permitting: Starts from the date when the project promoters apply for the first permit regarding the implementation of the project and the application is valid
Reference Grid: the scope
To strengthen the maturity and enhance the likelihood of the
reference grid
Reference Grid: initial ideas
In the NDP Agreements PCI status + commissioning date
Finance, Regulatory framework Technical feasibility Routing feasibility
Public consultation/Public
acceptance
Fulfilling Legal Requirements in the
interested country/ies
Final Investment Decision
Environmental Impact Assessment Permits General Design Public tendering
Year of commissioning wrt
Study horizon
Expert judgement
References: conservative
forecasts like MAF
Reference Grid: initial ideas
In the NDP Agreements PCI status + commissioning date
Finance, Regulatory framework Technical feasibility Routing feasibility
Public consultation/Public
acceptance
Fulfilling Legal Requirements in the
interested country/ies
Final Investment Decision
Environmental Impact Assessment Permits General Design Public tendering
Year of commissioning wrt
Study horizon
Year of commissioning wrt
Study horizon
Expert judgement
References: conservative
forecasts like MAF
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Reference Grid: Changes in CBA 3 more detailed definition of the reference grid base on the maturity of projects
Ref
eren
ce g
rid
existing grid
matureprojects
in national plan
Commissioning year
fulfills legal requirement
Reference to MAF studies
final investment decision
environmental impactassessment
request for permits
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5. Outlook for TYNDP 2020
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TYNDP in the European framework
Scenarios Collection of projects
Identification of system needs
Cost-benefit analysis
Projects of Common Interest process
TYNDP process
Q4 2019Q4 2019
Q2 2020Q3 2020 for consultation
Scenarios• What futures do we chose to describe? • Joint release with ENTSO-G (ENTSO for gas)• Draft 2020 Scenarios planned for release by mid-November 2019
System needs• How to fit the system to the futures described in the scenarios? • Identification of network bottlenecks• Market studies to identify additional investment needs (SoS and market)• System stability analysis (inertia and voltage): is the system ready to deal
with a large amount of RES?
Projects Assessment• How will transmission and storage projects contribute to the
future system?
2019 2021Today
Oct 2020 Apr Jul Oct 2021 Apr
Release of the final
TYNDP2020Jun
ACER opinion on draft TYNDP 2020
MarSubmission of draft TYNDP2020 to ACER
Oct
Release of draft Identification of System Needs 2040 & Opening of submission
window for future projects addressing system needs
Apr
Publication of draft TYNDP 2020 for
consultation (including CBA results)
MidAug
Opening of submission
window22 Oct
Cost-Benefit Analysis of projects
Jan - Jul
Overview of the TYNDP 2020 processRelease of
draft Scenarios
2020Nov
Beginning of PCI process (5th list)
CBA 3.0 and TYNDP
TYNDP 2020 implementation guideline will be based on CBA 3.0
CBA assessment based on indicators of CBA 3.0
Project benefits based on promoters’ input NO more parallel process/Guideline
(No more Missing Benefits)
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CBA related Planned workshops / webinars
January 2020
Workshop/webinar on the project sheets and the project level benefitsObjective: provide all needed information so that promoters can prepare before the submission of additional information (foreseen in April-May 2020)
April 2020 Workshops to further explain the additional information required and the publication of projects information & of CBA results in the project sheets.
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6. Wrap-up session
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7. Conclusion
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8. Back-up slides
SoS – Stability (Frequency Stability)
MARKET SIMULATIONS
QUANTITATIVE INDICATORDEFINITION
MONETISATION SIMULATION WITH AND WITHOUT THE
PROJECT• Hourly dispatched
generation and demand for each synchronous area for different scenarios
• Aggregated dynamic studies
• In each hour, the reference incident is simulated
• ROCOF and frequency excursions are used to quantify the FSI
• Monetization of the indicator is the most challenging issue
For the FSI, only the projects that affect it can be monetized. See the qualitative table already present in the CBA 2 for each project
ONGOING
TEST PHASE
• By comparing the results it is possible to evaluate the benefits of a project