Energy Transmission Networks: challenges and prospects in the EU

Kostis

PerrakisKaterina

Sardi

THE CASE OF ELECTRICITY AND NATURAL GAS

15o

ΠΑΝΕΛΛΗΥΝΙΟ

ΣΥΝΕΔΡΙΟ

LOGISTICS+1ST

SOUTHEAST EUROPEAN CONGRESS ON SUPPLY CHAIN MANAGEMENT,

THESSALONIKI 11-12.11.2011

Contents

1.

Introduction & objective2.

The significance of energy networks

3.

Energy networks: a monopoly to regulate…4.

Challenges in the EU

5.

Prospective projects

1. Introduction : Energy and logistics The electricity and the natural gas chain

transmission

Energy in various forms (electricity, n.gas, etc.) has

to be transported

to consumption centers

production

supply

distribution

consumption

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

Generator

1

importsGenerator

n. . .

Centralized market

Distribution Company

1

Distribution Company

n

competition in electricity Transmission is a meeting point for the market

consumersconsumers

‘Προμηθευτή ς’

exports

Price SupplyDemand

Marketclearing

price

Market clearingvolume

Volume (MW)

Wholesale

retail

Transmission System

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’

pointFacilitate 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

NETWORK

GG

GG

SS

SS

DD

DD

Traditional Regulation

Secondary attention

NETWORK

GG

GG

SS

SS

DD

DD

Market Regulation

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 BalcansExisting

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 - long- distance 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 issuesMEDIUM 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

Transmission: ~ 200 bn(electricity: ~140 bn / gas: ~70 bn)

Delivered under BAU: ~ 100 bn

Investment gap: ~ 100 bnPermitting gap: ~40bnCommercial viability gap: ~60 bn

NB: DG ENER estimations based on data from PRIMES,

ENTSO-E, KEMA, ECOFYS etc.

RES: ~ 310-370 bn

The commercial viability gap (electricity ~50bn, gas ~10bn) is due to the obstacles identified previously other than permitting.

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 comple- ted 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. ITGI (Interconnector Turkey, Greece, Italy)2. TAP (Transadriatic pipeline, through Greece &

Albania to Italy)3. Nabucco (through Turkey, Bulgaria, Roumania

towards central Europe)4. 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