Energy Transmission Networks: challenges and prospects in the EU THE CASE OF ELECTRICITY AND NATURAL GAS
Kostis Perrakis Katerina Sardi 15o ΠΑΝΕΛΛΗΥΝΙΟ ΣΥΝΕΔΡΙΟ LOGISTICS +1ST SOUTHEAST EUROPEAN CONGRESS ON SUPPLY CHAIN MANAGEMENT,
THESSALONIKI 11-12.11.2011
Contents 1. 2. 3. 4. 5.
Introduction & objective The significance of energy networks Energy networks: a monopoly to regulate‌ Challenges in the EU Prospective projects
1. Introduction : Energy and logistics The electricity and the natural gas chain
transmission production
distribution
supply
consumption Energy in various forms (electricity, n.gas, etc.) has to be transported to consumption centers
1. Introduction : Energy and logistics • Wikipedia definition • “Logistics is the management of the flow of goods between the point of origin and the point of destination in order to meet the requirements of customers or corporations. [….]. Logistics is a channel of the supply chain […]
• For the purposes of this presentation ▫ “good” = energy e.g. electricity or natural gas ▫ “supply chain” : ▫ From energy production to energy consumption ▫ From the point of entry to a transmission system to the point of exit from a transmission system;
1. Introduction : Energy and logistics • A number of “products” (goods) are related to a transmission system such as ▫ Reserved and available Capacity ▫ Commodity (energy flow over a period of time) ▫ Losses
• Logistics for a transmission system are inherently related to the regulation of transmission systems for both existing and new infrastructure
The presentation objective • Discuss the regulatory principles related to the operation of energy transmission networks • Present the drivers and challenges for network expansion including most recent EU policies, key EU priorities and projects
2. The Importance of networks..
2. The Importance of networks • Why focus on energy networks ?
▫ Energy: a ‘sine qua non’ for economic development and prosperity
2. The Importance of networks • Networks in the core of the EU Energy priorities Security of supply Sustainability (20-20-20 targets by year 2020) Competitiveness (Internal Energy Market)
▫ To fulfill these targets efficient operation of existing infrastructure and development of new infrastructure is a must.
Some facts for EU a) security of supply
growing dependency on energy imports several Member States rely on a single supplier for gas
Some facts for EU a) security of supply
New suppliers of energy (oil, n.gas) Need to diversify energy sources and routes
Some facts for EU a) security of supply
The energy 2009 crisis of natural gas supply
Some facts for EU b) the 20-20-20 targets
Some facts for EU c) The internal energy market • he internal energy market must be completed by 2014
competition in electricity Transmission is a meeting point for the market imports
...
Generator 1
Generator n
Transmission System Price
Demand
Supply
Centralized market
Market clearing price
Market clearing volume
‘Προμηθευτή ς’
Volume (MW)
Distribution Company 1 exports
consumers Wholesale retail
Distribution Company n consumers
Electricity and natural gas networks rucial role for: • ecurity of supply ▫ Diversification of routes / suppliers
• enewable energy ▫ Usually vast resources of renewable energy (wind) are located far away from consumption centers
• ompetitiveness ▫ The ‘market’ point Facilitate cross border trade (EU internal energy
3. ENERGY NETWORKS: MONOPOLIES TO REGULATE..
3. Transmission networks : a monopoly to regulate • Amidst the liberalisation of the energy sector (production, supply and in many cases also distribution), transmission systems are separated entities, being natural monopolies
Traditional Regulation G
G
G G
S
S
S S
NETWORK D
D
Market Regulation G
G
G G
S
S
S S
NETWORK D
D
Secondary attention
D
D
D D
Critical importance
Network monopolies: the case of electricity and gas • A natural monopoly arises where the largest supplier in an industry, has an overwhelming cost advantage over other actual and potential competitors. This tends to be the case in industries where capital costs predominate, creating economies of scale that are large in relation to the size of the market, and hence high barriers to entry; • examples include public utilities such as water services and electricity & gas. ▍ It is very expensive to build transmission networks (water/gas pipelines, electricity and telephone lines); therefore, it is unlikely that a potential competitor would be willing to make the capital investment needed to even enter the monopolist's market
Regulation of networks • Like all monopolies that provide an essential service, electricity and gas networks are regulated to ensure they deliver an economically optimal combination of service and price. • Regulation mainly focuses on: ▫ ▫ ▫ ▫
Investments Access to networks Tariffs for use of the networks Management of congestion on networks
The questions.. Producers & consumers have the right to buy & sell electricity freely ... ▫ ▫ ▫ ▫
How much to charge for the use of the network? Who pays for network losses? What to do if the network is congested? Who upgrades the network when needed?
and, how to address these same issues in a regional / EU market?
4. The challenges in the EU
EU Electricity and gas networks
400kV Interconnections in the Balcans Existing Under construction /commissioning Contracted Under design / study
The latest EU position (10 November 2010) • “The Energy 2020 Communication called for a step change in the way we plan, construct and operate our energy infrastructures and networks. • Adequate, integrated and reliable energy networks are a crucial prerequisite not only for EU energy policy goals, but also for the EU’s economic strategy. • Developing our energy infrastructure will not only enable the EU to deliver a properly functioning internal energy market, it will also enhance security of supply, enable the integration of renewable energy sources, increase energy efficiency and enable consumers to benefit from new technologies and intelligent energy use.”
EU Energy Infrastructure challenges and drivers • Electricity ▫ ▫ ▫ ▫ ▫
Increasing demand Growing share of RES Smart grid applications Large-scale storage Higher voltage - longdistance transmission
• Gas ▫ Stable share, growing import dependency ▫ Role as back-up fuel – need for more flexibility ▫ Single-source dependency in Eastern Europe – need for diversification
EU issues • The EU has to further interconnect and upgrade its electricity transmission infrastructure: ▫ A fully interconnected EU electricity market will improve security of supply and help stabilize consumer prices by ensuring that electricity goes where it is needed
▫ Developing the huge renewables potential North & Southern Europe, North Africa
• Critical issues: ▫ Project authorisation ▫ financing
EU issues MEDIUM TERM • Electricity grids must be upgraded and modernised to meet increasing demand due to ▫ a major shift in the overall energy value chain and mix ▫ the multiplication of applications and technologies relying on electricity as an energy source (heat pumps, electric vehicles, hydrogen and fuel cells, information and communication devices etc.).
• The grids must also be urgently extended and upgraded especially to transport and balance electricity generated from renewable sources, which is expected to more than double in the period 2007-2020
EU issues LONGER TERM • electricity grids will have to enable the shift to a decarbonised electricity system in the 2050 horizon • grids must also become smarter. ▍ Reaching the EU's 2020 energy efficiency and renewable targets will not be possible without more innovation and intelligence in the networks at both transmission and distribution level, in particular through information and communication technologies.
EU - obstacles to energy infrastructure development • •
Huge uncertainties: future technologies, demand, generation and sources Tariff regulation and financing: ▫ ▫ ▫ ▫
• •
Projects with higher regional than national benefit: difficult cost allocation Projects using innovative technologies - higher risks Infrastructure for security of supply: often not justified by market demand Financial crisis: difficult access to capital
Permitting and social acceptance Infrastructures external to the EU: political risks such as unattractive or non-transparent investment framework
EU - Energy infrastructure: the ‘investment gap’ Total investment needs in the electricity and gas sector between 2010-20: over 1 trillion €
Power generation: ~ 500 bn €
Transmission and distribution: ~ 600 bn € Distribution: ~ 400 bn
RES: ~ 310-370 bn Transmission: ~ 200 bn (electricity: ~140 bn / gas: ~70 bn)
NB: DG ENER estimations based on data from PRIMES, ENTSO-E, KEMA, ECOFYS etc. The commercial viability gap (electricity ~50bn, gas ~10bn) is due to the obstacles identified previously other than permitting.
Delivered under BAU: ~ 100 bn Investment gap: ~ 100 bn Permitting gap: ~40bn Commercial viability gap: ~60 bn
Priority EU energy corridors
5. Prospective Projects
Greek islands interconnections: CYCLADES
Project is under development -cost: ~ 400 MEuro -year: ~2015
Greek islands interconnections: the groupings •Cyclades •North Aegean •Crete •Dodecanese islands
EU issues – the Regional dimension: MEDRING Project completed 9/2010
MEDRING: the challenges …
•For high rate cables (1000 MW and above), the current technology allows a maximum depth of 1500- 2000 m. •Higher depths might be reached, provided a reduction of the cable rating is acceptable. This leads to smaller cross-sections, less weight and, therefore, less mechanical stress. •so far no projects have been implemented reaching sea depths below 1600 m
The DESERTEC project
The “Supergrid�
"a pan-European transmission network facilitating the integration of large-scale renewable energy and the balancing and transportation of electricity, with the aim of improving the European market".
For gas : The Southern Gas Corridor - 1
The Southern Gas Corridor is a term used by the European Comission to describe planned infrastructure projects bringing gas from the Caspian and Middle Eastern sources to Europe, aimed at improving security of supply.
• An alternative supply route for 10-20% of the EU gas demand by 2020. • In September 2011, the Commission not only reiterated the EU commitment to the Southern Corridor but also considers it a matter of urgency
For gas : The Southern Gas Corridor - 2 •
A number of alternative (and complementary) routes and pipelines have been proposed to bring natural gas into Europe. 1. 2. 3. 4.
ď‚Ą
ITGI (Interconnector Turkey, Greece, Italy) TAP (Transadriatic pipeline, through Greece & Albania to Italy) Nabucco (through Turkey, Bulgaria, Roumania towards central Europe) The South and the Blue Stream (from Russia via the Black Sea)
Greece well positioned to act as a bridge between the Caspian region and the rest of the EU
The Southern Gas Corridor - 3
The Energy Community Gas Ring in the Balkan region – a regional project related to the Southern Corridor
Summary and Conclusions • Electricity and gas networks are in the core of the EU Energy priorities until 2020: Security of supply Sustainability (20-20-20 targets by year 2020) Competitiveness (Internal Energy Market)
• As is the case of all natural monopolies, networks are regulated, mainly focusing on: ▫ ▫ ▫ ▫
Investments Access Tariffs for use Management of congestion