1. Increasing integration of variable RES-E: Policy and regulatory measures for T&D networks Luis Olmos Pontificia Comillas University Madrid / Spain olmos@iit.upcomillas.es Final RESPOND project Workshop· Leuven · 2009-05-27

2. 27/05/2009 2 Introduction WP3: market responses to increase the penetration of RES/E WP4: barriers to the implementation of identified market responses –Drawn from national questionnaires WP5 : Policy & regulatory recommendations for allowing higher variable DG/RES penetration rates –Demand and trade –Generation –T&D networks

3. 27/05/2009 3 Index of the presentation Regional markets –Market responses  Barriers to this responses  Recommendations to increase DG/RES penetration Transmission networks –Market responses  Barriers to this responses  Recommendations to increase DG/RES penetration Distribution networks –Market responses  Barriers to this responses  Recommendations to increase DG/RES penetration

4. 27/05/2009 4 Electricity flows in the grid of a regional market D CH NL B A F I AY 100 22 14 29 18 46 9 9 7 53

5. 27/05/2009 5 Regional markets: Increase of interconnection capacity, i To avoid concerns about the impact of new lines on the environment  Inform on the benefits of cross-border lines  Bury new interconnection lines (CN) To efficiently allocate the cost of these lines  Use of an efficient ITC scheme (CN) To overcome opposition by countries not benefited by them  1) Use of an efficient ITC scheme (CN) and 2) Side compensations paid to countries  Creation of strong regional regulatory bodies (CN)

6. 27/05/2009 6 Regional markets: Increase of interconnection capacity, ii To reduce the complexity of the process aimed at obtaining permits  Nationally, centralize decision making  Regional bodies have the last word over investments (CN) To increase benefits from new lines  Efficient allocation of interconnection capacity (CN)

7. 27/05/2009 7 Regional markets: Coordination of the operation of national markets Efficiently allocate interconnection capacity in the short and the long terms (all countries)  Efficiently coordinated short term implicit auctions: iterative process or central auctioneer (CN)  Centrally coordinated long term explicit auction (CN)  Firm transmission rights given to firm supply contracts (CN)

8. 27/05/2009 8 Index of the presentation Regional markets –Market responses  Barriers to this responses  Recommendations to increase DG/RES penetration Transmission networks –Market responses  Barriers to this responses  Recommendations to increase DG/RES penetration Distribution networks –Market responses  Barriers to this responses  Recommendations to increase DG/RES penetration

9. 27/05/2009 9 Transmission networks: Locationally and temporally differentiated network charges To reduce the volatility of charges  1) Implementing zonal tariffs (CN) computed according to expected operation profiles To fight discrimination claims  Demonstration projects  Social transmission charges Compatibility with DG/RES production incentives  1) Reasonable premiums instead of FITs (CN) or 2) RES obligation scheme Reducing the impact on complexity of network regulation  1) Simple methods to compute tariffs for a reduced number of zones and operation profiles

10. 27/05/2009 10 Transmission networks: Building new grid reinforcements To reduce the impact of lines on health and the environment  1) developing efficient methods to bury them and 2) sharing rights of way with other infrastructures To allocate more efficiently the cost of new lines  Implementing efficient cost allocation methods (beneficiaries) To increase the efficiency of the use of transmission capacity  Implementing coordinated market based methods (CN) To ensure the profitability of proposed new reinforcements  Central planning by the TSO subject to moderate incentives

11. 27/05/2009 11 Transmission networks: managing congestion efficiently To make the proposed schemes compatible with national regulation  Social energy tariffs  Differentiated prices only for generators (CN) To reduce incentives from nodal/zonal prices to exercise MP  Differentiated prices only for systematic main congestion (CN)  Application of zonal energy prices (CN) To reduce the complexity of the resulting market clearing process  Fixed zonal factors for systematic congestion at local level (CN)  Central auctioneer allocates grid capacity at regional level (CN)

12. 27/05/2009 12 Index of the presentation Regional markets –Market responses  Barriers to this responses  Recommendations to increase DG/RES penetration Transmission networks –Market responses  Barriers to this responses  Recommendations to increase DG/RES penetration Distribution networks –Market responses  Barriers to this responses  Recommendations to increase DG/RES penetration

13. 27/05/2009 13 Distribution networks: Shallow connection Charges + differentiated UoS charges To make them compatible with national regulation  Produce same effect through differentiated support payments To reduce volatility of charges  Computing zonal charges updated periodically

14. 27/05/2009 14 Distribution networks: Incentives to the DSO for ANM To consider the effect of RES/DG on quality of service and losses  Use of reference network models that consider main performance drivers To encourage DSOs to develop the required technology  1) Research costs included in asset base or 2) extension of period before passing on efficiency gains to tariffs

15. 27/05/2009 15 Distribution networks: Incentives for DSOs to consider DG in network planning To compute the allowed capex revenues and X factor considering DG  1) Include extra DSOs’ costs in allowed revenue but allow them to keep part of revenues from efficiency gains To make support schemes compatible with controllability of DG/RES  Use of Premiums with temporal differentiation

16. 27/05/2009 16 Distribution networks: Provision of DSO AASS by DG To increase the market liquidity of AASS markets  Allowing bilateral markets, centralized markets or regulated payments for AASS To create incentives for DG to provide AASS  Use of Premiums with temporal differentiation To change the network operation paradigm  Incentives previously explained

17. 27/05/2009 17 Conclusions, i Changing policy and regulation in EU countries could significantly increase the system flexibility and network controllability  Hence, shares/amount of variable DG/RES could also increase Implementing these changes may face barriers related to: –lack of efficiency of current pricing mechanisms –lack of efficiency incentives to push the necessary changes –Bad public image of some required measures

18. 27/05/2009 18 Conclusions, ii Key recommendations related to T&D are: –Use locationally and temporally differentiated charges –Use efficient congestion management methods that result in efficient prices –Centralize decision making regarding the construction of lines both at national and regional level –Provide incentives for implementing ANM and planning both to DSOs and DG/RES operators Different countries require different implementation schemes