eu ipa13/cs-02.a 2013 energy sector program phase-2 …€¦ · plans and on guidelines for...

EU IPA13/CS-02.a2013 ENERGY SECTOR PROGRAM

PHASE-2 PROJECT

Energy Market Development

Network Development Plan Training

6-8 August 2019

Mr. Arnaldo Orlandini

MRC Consultants and Transaction Advisers

Day 1Module 2. Essentials of TSO Network Development Plans

6 August 2019

Module 2. Essentials of TSO Network Development Plans

Typical content and sections of TSO’s Network Development Plan

EU Regulatory Framework

Overview of ENTSO-G TYNDP

Review of TSO plans and consistency with ENTSOG TYNDP

A Guided Reading of Selected TSO Plans

TYNDPs: objective and scope

◼ TYNDPs are prepared on a rolling basis (usually yearly or bi annually)

◼ European national TYNDPs are designed in accordance with:• Legislative and regulatory frameworks;

• National Energy Strategy;

• ENTSOG Ten-Year Network Development Plan;

• Previous TYNDP;

• Demand projections;

• information submitted by 3rd parties (i.e. project developers and shippers);

• general strategy of the TSO as company.

TYNDPs present the planned development, at national level, of gas transmission networks and ancillary infrastructure

with a time horizon of 10 years.

TYNDP reference structure

1. Objectives and Scope of the Plan

2. Legal and Regulatory Framework (EU and national)

3. National Gas Demand and Supply Scenarios

4. Gas Infrastructure (existing)

5. Gas Infrastructure Development (foreseen/planned)

6. Technical and methodological Annexes

a) Gas demand and supply forecasts (details)

b) Transmission capacity calculations

c) Cost/benefit Analysis

d) Planning process (and project-related documents)

e) List of development and upgrade projects

f) Review of economic and technical indicators

g) Others…

EU Regulatory Framework I

Directive 73/2009/EC, Art. 22, “Network development and powers to make investment decisions” establishes that every year, TSOs shall submit to the NRA a TYNDP after having consulted all the relevant stakeholders that:

a) indicates main transmission infrastructure to be built orupgraded over the next 10 years;

b) contains investments already decided and identifies newinvestments to be executed in the next three years; and

c) provides for a time frame for all investment projects.

EU Regulatory Framework II

Directive 73/2009/EC, Role of the Regulator.

◼ The regulatory authority is required to consult all system user,present or potential, on the TYNDP.

◼ NRA should examine whether the TYND covers allinvestments needs identified during the consultation process.

◼ NRA should examine if it is consistent with the non-binding Community-wide TYNDP (ENTSOG).

◼ Lastly, NRA should monitor and evaluate the implementationof TYNDP.

EU Regulatory Framework III

Directive 73/2009, Art. 22, is complemented by:

Regulation 715/2009 (and amendments: ENTSO-G adopts a non-binding EUwide TYNDP based on national development plans and on guidelines fortrans-European energy networks. A Cost Benefit Analysis (CBA) is required.

Regulation 994/2010, Art. 6: establishes that Member States shall ensurethat the necessary measures are taken so that by Dec 2014 in the event of adisruption of the single largest infrastructure, the capacity of the remaininginfrastructure is able to satisfy demand.

By Dec. 2013, TSOs have to adapt the functioning of the transmission systemsto enable physical gas flows in both directions on cross-borderinterconnection points.

Regulation 347/2013, Art. 3: Projects of Common Interest (PCIs) become an integral part of the relevant regional investment plans and TYNDPs.

ENTSOG TYNDP I

Regulation 715/2009 (and amendments): ENTSO-G adopts anonbinding EU-wide TYNDP based on national developmentplans and on guidelines for trans-European energy networks.CBA analysis is required.

◼ Main objective: to overview of existing and planned gasinfrastructure and to highlight any gaps in the futureinvestments.

◼ Publication of TYNDP is followed by a process of publicconsultation (3 months). After consultation, ENTSOG submitsthe TYNDP (ACER), which expresses its opinion.

ENTSOG TYNDP II

Regulation 347/2013: sets forth the regulatory reference for theEnergy-System Wide CBA methodology.

CBA is currently based a Network Modelling tool ("NeMo tool”),which assesses the contribution of the projects to achieving:

➢ supply security,

➢ increased competitiveness, and

➢ market integration

NeMo identifies potential gaps in the development of theEuropean transmission network and supply constraints

ENTSOG TYNDP IIIScope of CBA

Source: adapted from ENTSOG workshop, 2017.

Areas of improvement: 1) Simplification; 2) More focus on project-specific CBA;3) Monetization and complementary benefits.

2nd ENTSO-G CBA methodology (October 2018)

ENTSOG TYNDP IV

Review of EU TSOs NDP

Comparative reviews are prediodically carried out by ACER(2016-178), focused on the following aspects:

1. NDP Legal Nature.

2. Number of NDP by State.

3. NDP Development Process. Role of National Regulators.

4. Common/Standard Inputs and Outputs

Source: ACER, 2016

1. NDP Legal Nature (1/2)

Source: ACER, 2016

1. NDP Legal Nature (2/2)

* NDP developed by other entities, apart from TSO

2. Number of NDP by State (1/2)

Source: ACER, 2016

2. Number of NDP by State (2/2)

Source: ACER, 2016

3. Role of NRAs

Source: ACER 2018

Consistency with ENTSOG TYNDP

According to comparative Reviews carried out by ACER (2016-18), common/standard inputs and outputs of national TSO TYNDP are:

Inputs• Stakeholder consultations• Gas scenarios:

• Demand• Supply• Price• Infrastructure Capacity

Outputs• Estimated target capacity• Investment Gaps• List of planned projects

Common/Standard Inputs and Outputs

Analytical methodologies employed by TSOs can be assessed and compared under the following criteria:1. Market and network studies.2. Availability of cost data.3. Use of CBA and monetization.4. Economic evaluation of Security of Supply (SoS) and other qualitative variables.

Market Studies (projections of market fundamental data)

Network Studies (hydraulic simulations)

Source: ACER, 2018

1. Market and Network Studies

2. Availability of Costs and Benefits (1/2)

Source: ACER, 2016

2. Availability of Costs and Benefits (2/2)

* e.g. National Grid (GB) uses a complex matrix

3. Use of CBA and Monetization (1/2)

Source: ACER, 2016

3. Use of CBA and Monetization (2/2)

Source: ACER, 2016

4. Economic Evaluation of Security of Supply

◼ Gas Demand Scenarios (multiple, sensitivity analysis) seen

as very relevant at EU level, not given the same

importance at national level;

◼ Gas Demand Disaggregation included in the majority of

NDPs with sufficient details;

◼ Infrastructure Capacity Demand (i.e. capacity to serve

domestic demand and transit under peak situations)

usually identified as the key parameter for network

development.

Summary Remarks (1/2)

◼ CBA carried out in approx. 1/3 of the cases;

◼ Various categories of benefits (e.g. SoS, market integration, competition, etc.) generally not monetized;

◼ Other circumstances:

➢ CBA not used systematically, but before deciding on specific investments requests (F, LT, SK) or only for specific asset investment (GR);

➢ National Grid Gas (GB) uses a “Whole Life Prioritisation” matrix which take into account the cost, benefits and sustainability of the considered options.

Summary Remarks (2/2)

Main Reference Sources Considered (TSO Plans)

Snam Rete Gas (Italy)National Grid (UK)GRTgaz (France)Enagás (Spain)

Assumptions and Reference Scenarios

Typically, assumptions and scenarios of TYNDPs are in accordance with:

▪ European and national legal and regulatory frameworks;

▪ National Energy Strategy (if applicable);

▪ ENTSOG Ten-Year Network Development Plan;

▪ Information submitted by 3rd parties (i.e. project developers, shippers, open seasons);

▪ General strategy of the TSO.

Typical TYNDP structure:*

1) Objectives and Scope of the Plan

2) Legal and Regulatory Framework (EU and national)

3) National Gas Demand and Supply Scenarios

4) Gas Infrastructure (existing)

5) Gas Infrastructure Development (foreseen/planned)

6) Technical and methodological Annexes

* Snam, GRTgaz, National Grid, Enagás.

Essential Content of TYNDP (1/2)

Illustrative list of Annexes:

i. Gas demand and supply forecasts (details)ii. Transmission capacity calculationsiii. CBA (not always with monetization)iv. Planning process (and project-related documents)v. List of development and upgrade projectsvi. List and details of economic and technical

indicators

Essential Content of TYNDP (2/2)

Plan Content: Demand and Supply Scenarios

◼ A number of gas demand and supply scenarios are typically developed (this may vary a lot among TSOs).

◼ Disaggregated demand scenarios (by sector) are also developed. Econometric models are frequently used.

◼ Thermoelectric sector is normally analysed more in depth, also through ad-hoc computational models (which take into account forecasted electricity demand and fuel competition).

Plan Content: Gas infrastructure

Detailed technical description of the transmission network and its ancillary facilities

Plan Content: Gas Infrastructure Development

The Plan is intended to be consistent with EU identified priorities, including PCIs, GRIPs and ENTSO-G TYNDP.

Plan Content: Gas Infrastructure Development I

The planned transmission capacity must be adequate to meet the forecast demand and

exports. This key parameter is analytically estimated for all the years of the Plan and beyond.

………………………..

Total capacity is the aggregated technical firm capacity for all entry points.

Total capacity

Utilization rate

Specific emphasis, in terms of analytical details, is given to projects planned for the first 3 years of the Plan. Frequently, hydraulic simulations are conducted.

1st Phase, completed in 2015

2nd Phase,Expected in 2018

Plan Content: Gas Infrastructure Development II

Plan Content: List of Projects (Annex)

Snam TYNDP 2016-25:

• 14 projects on the national network;

• 140 projects on the regional network

Excerpt from Snam’s TYNP 2017-2026

Economic Analysis of Main Projects

◼ Economic analysis is based on the following indicators:

▪ NPV: Net Present Values

▪ RR: Internal Rate of Return

▪ CBA

◼ Snam (and GRT-Gaz) carry out a (partial) monetization of theexpected benefits deriving from the planned projects, whichinclude: SoS, market integration, competition, sustainability.

◼ Project Costs are the sum of CAPEX and OPEX.

◼ Economic analysis is conducted since the first year of projectexpenditure up to 20 years after the first year of availability ofthe new infrastructure.

Excerpt from Snam’s TYNP 2017-2026

Plan Content: Capacity Calculation (Annex)

• For the determination of transmission capacity, several TSOs use (sophisticated) hydraulic simulation modelling (sometime required by national regulation). Annexes to TYNDP frequently provides a technical description of the models employed and theirs assumptions, equations and parameters.

• Input data are typically daily flow rates and pressures at Entry and Exit points.

Main Equations of Snam simulation model (SIRE2000)

Qualitative Analysis of Main Projects

◼ Of the two categories of indicators developed and used by ENTSO-G:

▪ Capacity based: transport capacity at interconnection points

▪ Modelling based: availability of gas flows (model-computed)

Almost all TSOs use only those of the first category, namely:

– N-1 (disruption of main supply infrastructure)

– IRDI: Import Route Diversification Index

– BPI: Bidirectional Project Index

◼ In addition, Snam uses other capacity indicators:

– IDI: Import Dependence Index

◼ TYNDPs: Across European TSOs, a large variety canbe observed in terms of legal nature, number ofplans per country, publication, approval process,basic content, employed analyses andmethodologies.

◼ However, a growing degree of harmonization can beseen in recent years (after 2014), at least amongmajor TSOs.

Concluding Remarks

Module 2. Key Takeaways

◼ Understanding of TYNDP objective, general structureand contents.

◼ European Regulatory framework requirements, to beconsidered as Best practices.

◼ Detect the differences between European TSOsNDPs.

◼ Identification of common elements in EuropeanTSOs’ NDP based on selected TSOs and ENTSOGTYNDP.

Thanks for your attention

Questions & Answers Time

EU IPA13/CS-02.a2013 ENERGY SECTOR PROGRAM

PHASE-2 PROJECT

Energy Market Development

6-8 August 2019

eu ipa13/cs-02.a 2013 energy sector program phase-2 …€¦ · plans and on guidelines for...

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