1. ISLES II ‘TOWARDS IMPLEMENTATION’ Brussels Seminar : 16 th June 2015 Integrating Offshore Grid, Markets and Renewables Chaired by Chris Stark, Deputy Director, Energy and Climate Change, Head of Electricity, Scottish Government

2. Brussels Seminar PROGRAMME 11:00 Background on ISLES project 11:10 ISLES II Work-Stream Presentations Spatial Plan and Sustainability Appraisal Iain Bell - Aecom Network Regulation & Market Alignment Study Gary Keane - Pöyry Management Consulting Business Plan Cathryn Hooper – Source Low Carbon 11:45 Q&A and Panel Discussion 12:30 LUNCH Integrating Offshore Grid, Markets & Renewables

3. Brussels Seminar Q&A / PANEL DISCUSSION Integrating Offshore Grid, Markets & Renewables Guest Panellists  Nicole Versijp, European Commission, DG Energy  Jonathan Gaventa, e3g  Jan Hensmans, NSCOGI  Supported by ISLES II Consultants ISLES II Project Steering Committee Representatives  Bob Hanna, DCENR, Ireland  John McAreavey, DETI, Northern Ireland  Damon Hewlett, Scottish Government

4. ISLES Feasibility Study Consultants ISLES Feasibility Study 2012 (ISLES Concepts ) Northern ISLES Southern ISLES SCOTLAND N IRELAND WALES IRELAND

5. ISLES concept achieved EU ‘PCI’ status in October 2013 The potential benefits of being a Project of Common Interest include;  accelerated licensing procedures,  improved regulatory conditions, and  access to financial support - €5.85 billion from the Connecting Europe Facility (2014 - 2020)

6. ISLES II “Towards Implementation” seeks to enable further progress by promoting solutions that increase trade in electricity position the ISLES zone concept as an attractive proposition for investment WORK-STREAMS 1 - ISLES Spatial Plan and Sustainability Appraisal 2 - Network Regulation & Market Alignment Study 3 - ISLES II Business Plan ISLES II Study Area ISLES II Work-stream Consultants

7. Importance of ISLES to Scottish Government 1. Competence 2. Renewables 3. Offshore resource and expertise 4. Good neighbours 5. Good Europeans

8. ISLES II - Brussels Seminar Iain Bell Director - Environmental Aecom Spatial Plan and Sustainability Appraisal

9. SPATIAL PLAN AND SUSTAINABILITY APPRAISAL AECOM is a global provider of professional technical and management support services to a broad range of markets, including environmental, energy, water, transportation, facilities and government. AECOM’s purpose is to enhance and sustain the world’s built, natural and social environments for our clients and the communities that we serve. www.aecom.com ABPmer is a leading marine environmental consultancy with particular expertise in offshore renewables and marine cables. We have led and contributed to a wide range of strategic and project level studies within UK waters.

10. SPATIAL PLAN AND SUSTAINABILITY APPRAISAL 1.The ISLES Spatial Plan and Locational Guidance 2.Sustainability Appraisal Strategic Environmental Assessment (SEA) Socio-economic Impact Assessment Appropriate Assessment/ Habitat Regulations Assessment

11. PLAN OBJECTIVES Provide developers with locational guidance on the most suitable areas for development of offshore electricity grid. Identify measures to avoid, minimise or otherwise mitigate adverse effects; Assist developers in reducing consenting risks and give them a head start in planning for an interconnected transmission network. Inform future spatial planning (facilitating future energy developments in the ISLES Zone and more widely within the European Union).

12. SPATIAL PLAN STUDY AREA

13. SUSTAINABILITY APPRAISAL A process for describing the likely significant effects of the Plan. Identifies measures to avoid, reduce of offset adverse effects, and enhance beneficial effects. Allows environmental, social and economic concerns to be addressed as the Plan develops. Through consultation, provides a means for stakeholders to inform the content of the SA and therefore the Plan.

14. LOCATIONAL GUIDANCE – CONTENTS A summary of offshore grid technology A routeing strategy and generic mitigation Potential Landfall Connection locations/constraints and opportunities For each Network Area - Environmental Features, Constraints & Routeing Opportunities –Biodiversity, Flora & Fauna –Population & Human Health e.g. fishing and navigation –Water, Soil, Geology & Coastal Processes –Cultural Heritage –Landscape & Seascape –Material Assets

15. OUTPUTS FROM THE STUDY Locational Guidance and Routeing Strategy which promote the integrated consideration of technical and engineering issues with environmental, social and economic impacts Practical guidance on project level mitigation to address environmental, social & economic impacts – through network development & installation For each Network Area key environmental features, constraints & routeing opportunities have been identified SA concludes - there is potential to develop an interconnected offshore electricity network without significant adverse effects on the environment. This approach gives developers a platform to start considering how to use the information from ISLES to benefit their projects

16. ISLES II - Brussels Seminar Gary Keane Principal Consultant Pöyry Management Consulting Network Regulation & Market Alignment Study

17. INTRODUCTION: CONSULTANTS FOR THE REGULATORY AND MARKET WORKSTREAM Pöyry Management Consulting: Europe’s leading specialist energy practice Offering expert advice from strategy to implementation on policy, regulation, business operations, financing and valuation and sustainability Over 200 energy market experts in 12 offices across Europe Providing in-depth market intelligence across Europe… …with a growing presence in Middle East, Far East; and Central and South America Energy-Link was formed in 2000 and experience in Europe, US and Nigeria 2 Directors have over 50 years experience in the electricity industry Clients include Energy Market Participants, Asset owners, Industry and End user groups, Capital Investors Commercial focus for clients involved in complex energy project structures including due diligence, investment valuations and energy risk analysis Operational Risk Management and corporate governance Solutions orientated Business Applications

18. OVERVIEW: THE ISLES II RECOMMENDATIONS CAN HELP OFFSHORE COORDINATION ACROSS EUROPE Context: Coordination of offshore generation and cross-jurisdictional networks could deliver offshore transmission capacity for multiple users Barriers: There are two main regulatory and market barriers to realising the benefits of offshore coordination Recommendations: Governments should support a pragmatic approach to the development of measures to mitigate coordination risk for individual projects, particularly the generators who are at the heart of offshore coordination. Moving towards implementation: Governments can take practical steps in the near-term to prepare the ground for efficient delivery of coordinated offshore projects after 2020

19. CONTEXT: COORDINATED DEVELOPMENT PROVIDES TRANSMISSION CAPACITY FOR MULTIPLE USERS Multiple generators sharing an offshore link Generation and interconnection sharing an offshore link Generation connected to an ‘offshore bootstrap linking two parts of an onshore system

20. BARRIERS: TWO MAIN REGULATORY BARRIERS TO REALISING BENEFITS OF OFFSHORE COORDINATION Prevents realisation of benefits of shared offshore networks for individual projects onshore energy systems wider policy goals Barrier 1 investment decisions for any particular set of offshore transmission assets do not fully take into account the benefits to other possible users Barrier 2 no arrangements exist to allow coordinated development on a cross-jurisdictional basis

21. RECOMMENDATIONS: PRAGMATIC APPROACH TO RISK MITIGATION LED BY NEEDS OF GENERATORS Mitigate the risks for individual projects of connecting to ‘multiple use’ assets Whole lifetime: Commit to continuity of regulatory regime for particular transmission assets Development: Ensure flexibility in consenting and licensing arrangements to allow for network design changes Development: Implement mechanisms for timely and efficient consumer underwriting of incremental network costs Operation: Provide firm access for generation to offshore network capacity Place the needs of generation rather than transmission at the forefront of the regulatory framework Adopt pragmatic approach to delivering workable regulatory arrangements e.g. ensure consistent treatment of assets with equivalent functions for a jurisdiction

22. OVERVIEW: THE ISLES II RECOMMENDATIONS CAN HELP OFFSHORE COORDINATION ACROSS EUROPE Context: Coordination of offshore generation and cross-jurisdictional networks could deliver offshore transmission capacity for multiple users Barriers: There are two main regulatory and market barriers to realising the benefits of offshore coordination Recommendations: Governments should support a pragmatic approach based on the mitigation of coordination risk for individual commercial projects Moving towards implementation: Governments can take practical steps in the near-term to prepare the ground for efficient delivery of coordinated offshore projects after 2020

23. ISLES II - Brussels Seminar Cathryn Hooper Partner Source Low Carbon ISLES Business Plan

24. Energy Advisory >Formed through merger with Redpoint Energy in Spring 2012 >Offering unparalleled combination of energy market expertise and commercial insight >Proud to work with some of Europe’s foremost policymakers, regulators, investors, developers, lenders and energy companies operating across the energy supply chain >Independent partnership providing advisory services to developers, investors in the low carbon sector and to government bodies responsible for renewables programmes >Over a decade of first-hand experience in managing development risks, and dealing with impacts of change to policy and regulation Strategy and commercial optimisation Investment analysis Policy and regulation Development services Programme management Policy advice and market intelligence INTRODUCTION: CONSULTANTS FOR THE BUSINESS PLAN WORKSTREAM

25. OVERVIEW: ISLES II BUSINESS PLAN Outlines the commercial case for coordinated development Emphasis on the complementarity between ISLES objectives and European policy Aims to move the overall vision forward – practical next steps for governments to enable developer-led proposals for coordination to come forward Builds on the Network Regulation and Market Alignment Study Recommendations to propose institutional and decision-making framework: Need for a central consideration and decision-making capacity Maintain discretion of national policy makers Give clarity to developers over regulatory treatment needed for shared network infrastructure Recommendation to introduce the ISLES Coordination Panel (ICP): body to consider coordination opportunities based on individual merits

26. ISLES CO-ORDINATION PANEL ISLES Coordination Panel Governments Regulators Transmission System Operators Developers Network options Licensing requirements Policy interactions CBA coordination option(s) considered Provide views to regulators Regime design and licensing Asset delivery Identification of options Economic assessment Views/ recommendations Representatives from Ireland, N Ireland, Scotland, England, and Wales ISLES II Spatial Plan recommendations ISLES II ‘NRAMAS’ recommendations Present shared infrastructure options relevant to project Integration of ISLES II: Towards Implementation work packages * Despite regulators’ representation on the ICP, the Panel’s views and recommendations would not take precedent over each relevant regulators’ own final consideration and decision-making process

27. NEXT STEPS TO IMPLEMENTATION Unlikely to see ‘big-bang’, fully meshed development by 2030. ICP process allows for incremental approach: pilot projects can come forward to be assessed for initial opportunities - to ‘anchor’ this framework In parallel to setting up ICP it will be important to: Confirm regulatory arrangements needed to underpin coordinated investment in each jurisdiction (in accordance with Network Regulation and Market Alignment Study) Explore options for renewable energy export to other member states Approach developers of potential ‘anchor’ projects Ongoing political commitment will be needed to agree workable, effective terms of reference for the ICP so that individual opportunities can be progressed

28. Brussels Seminar Q&A / PANEL DISCUSSION Integrating Offshore Grid, Markets & Renewables Guest Panellists  Nicole Versijp, European Commission, DG Energy  Jonathan Gaventa, e3g  Jan Hensmans, NSCOGI  Supported by ISLES II Consultants ISLES II Project Steering Committee Representatives  Bob Hanna, DCENR, Ireland  John McAreavey, DETI, Northern Ireland  Damon Hewlett, Scottish Government

29. Brussels Seminar PROGRAMME 11:00 Background on ISLES project 11:10 ISLES II Work-Stream Presentations Spatial Plan and Sustainability Appraisal Network Regulation & Market Alignment Study Business Plan 11:45 Q&A and Panel Discussion 12:30 LUNCH Integrating Offshore Grid, Markets & Renewables