JOINT REPORT ON THE CASE FOR A SECOND NORTH SOUTH INTERCONNECTOR

Transcription

1 Reprt n the Case fr Cnstructin f a Secnd Nrth-Suth intercnnectr. JOINT REPORT ON THE CASE FOR A SECOND NORTH SOUTH INTERCONNECTOR EXECUTIVE SUMMARY This reprt prvides the assessment and evaluatin carried ut by the Cmmissin fr Energy Regulatin (CER) and Nrthern Ireland Authrity fr Energy Regulatin (NIAER), ( the Regulatrs ), t arrive at their cnclusins t determine the case fr a secnd Nrth Suth intercnnectr. In arriving at their cnclusin, the Regulatrs have jintly cnsidered the reprts and feedback n the technical, ecnmic and stakehlder analysis carried ut by ESB Natinal Grid and SONI ( the TSOs ). In additin, the Regulatrs have als applied specific evaluatin criteria t assess the case fr a secnd Nrth Suth intercnnectr. Arising frm the varius assessments and cnsideratins, the Regulatrs are f the view that the strategic benefits gained as a result f increased intercnnectin, supprt the case fr a secnd Nrth Suth intercnnectr and the assciated transmissin netwrk reinfrcement. The Regulatrs are f the view that a secnd Nrth Suth intercnnectr will prvide further system security and reliability, will be a psitive step tward further develping cmpetitin and will prmte the develpment f a single electricity market. The rest f this reprt prvides a summary f the findings f the technical, ecnmic and stakehlder analysis carried ut by the TSOs. This reprt als utlines the Regulatrs evaluatin prcedure in arriving at their decisin. BACKGROUND Currently, the main intercnnectin is between Luth and Tandragee, which cmprises f a duble circuit 220/275kV line. Tw additinal 110kV intercnnectrs als exist between Letterkenny and Strabane and Swanlinbar and Enniskillen. As these tw 110kV circuits link weak areas f the tw systems they cannt perate t intercnnect the tw systems in the absence f the 220/275kV intercnnectr. The Luth-Tandragee line is used mstly fr emergency supprt, sme spt trading and spinning reserve requirements. Mst trade is thrugh super psitining (paper trades). The Luth-Tandragee Intercnnectr is used fr market trading, marginal trading between the TSOs, rescue flws and emergency supprt. 330MW f Nrth t Suth capacity was ffered t market traders thrugh an auctin fr 2004/05. A net flw f 1,368GWh was transferred frm Nrthern Ireland (NI) t the Republic f Ireland (RI), sme 5.6% f the RI demand. T facilitate market trading frm Suth t Nrth where the capacity available t the market was zer fr the majrity f time super psitining (paper trades) was intrduced. Rescue flws arise when a large generating unit suddenly trips 1

2 Reprt n the Case fr Cnstructin f a Secnd Nrth-Suth intercnnectr. ut f service and this sharing arrangement reduces generating csts n the island. In August 2004, the TSOs cmpleted their technical, ecnmic and stakehlder studies t examine the case fr a secnd Intercnnectr between NI and the RI. The initial bjectives f the study were t investigate: hw culd additinal Intercnnectr capacity fr trading be prvided?; is the prvisin f additinal Intercnnectr capacity justifiable? TECHNICAL STUDIES In view f the limitatins f the current Intercnnectr, the technical studies sught t investigate, hw additinal Intercnnectr capacity fr trading culd be prvided and if the prvisin f such capacity culd be justified. In carrying ut their studies, the TSOs tk int cnsideratin the factrs that can limit ttal transfer capability. The technical studies cnfirmed that ne f the fllwing culd technically limit the pwer flws in each directin: 1. The capacity f the system equipment - the level f Pwer Transfer is limited by the risk f circuit verlad r lw-vltage fr the transmissin system in bth jurisdictins and the intercnnectr. 2. System separatin - the level f Pwer Transfer after which system separatin wuld be unacceptable fr the transmissin netwrks in bth jurisdictins is limited by the ability f the system and, in particular generatr units, in either jurisdictin t manage the impact f system separatin. 3. Stability - the level f Pwer Transfer that wuld be limited by the risk f the steady state scillatin r f a transient stability prblem n the cmbined netwrk system. Shuld ne r a cmbinatin f the abve factrs ccur then this supprts the case fr additinal intercnnectin. The initial views held with regard t the limiting factr fr pwer transfers acrss the current 220/275kV Intercnnectr is that there are transmissin system cnstraints in the RI (1) and system separatin limits (2). RESULT OF TECHNICAL STUDIES An imprtant pint the technical studies revealed is that even if present netwrk system cnstraints were alleviated thrugh additinal reinfrcements, pwer transfer culd still be limited due t the pssibility f system separatin. Currently there is a risk that if the Luth Tandragee 220/275kV duble circuit intercnnectr tripped r was lst, then the tw ther 110kV Intercnnectrs wuld autmatically trip as these alne are nt adequate fr intercnnectin between the tw transmissin systems. This wuld mean that the tw transmissin systems wuld separate entirely. Therefre if there is a 2

3 Reprt n the Case fr Cnstructin f a Secnd Nrth-Suth intercnnectr. need t increase r cntinue transfer capacity in either directin, then additinal intercnnectin is required. The technical studies revealed that in rder t vercme the pssibility f system separatin, a secnd intercnnectr wuld be required. The technical study als revealed that in additin t anther intercnnectr, internal system reinfrcements will be required n bth systems t increase and supprt increased pwer flws. The details n additinal reinfrcements depends n a number f pints including: the amunt f capacity required; the lcatin where generatin is increased in the exprting system; and the lcatin where generatin is reduced in the imprting system. The assessment and selectin f reinfrcements will be a cntinuus prcess. Based n the technical studies, the Regulatrs are f the view that the ptential lss f the Luth-Tandragee intercnnectr supprts the case fr the cnstructin f a secnd Nrth - Suth intercnnectr, predminately frm a system security and system stability pint f view. The Regulatrs als nte that the majrity f respnses t the Departments cnsultatin paper, All-Island Energy Market Develpment Framewrk, highlighted the requirement fr a secnd Nrth Suth intercnnectr t facilitate increased trade and t fully realise the benefits f cmmn whlesale trading arrangements and a single energy market. At this early stage, the Regulatrs are f the view that further planning studies and ecnmic cnsideratins are required t establish the preferred rute f the intercnnectr and the assciated reinfrcements. Ecnmic and Stakehlder Analysis STAKEHOLDER STUDY The Regulatrs als cnsidered the findings f the Ecnmic and Stakehlder Analysis. The emerging views f the Stakehlder analysis are very psitive twards the cnstructin f a secnd intercnnectr. A number f psitive benefits were identified including: increased cmpetitin; cntrl f dminance; increased security f supply; increased dispatch f wind generatin and strengthening benefits f an All-Island system; advantages t participants perating in bth markets; and alleviatin f future bttlenecks n the current intercnnectr as trades increase. 3

4 Reprt n the Case fr Cnstructin f a Secnd Nrth-Suth intercnnectr. ESTIMATED COST AND TIMESCALE OF FURTHER INTERCONNECTION T date the studies have been supprted by funding frm the TENs prgramme supprted by the Eurpean Cmmissin. If it is decided t prceed with an additinal intercnnectr, the funding will be used t cntribute t the detailed rute selectin and design, and the preparatin f an Envirnmental Impact Statement. The TSOs have infrmed the Regulatrs that additinal funding may be available at the cnstructin stage fr 10% t 20% f the cnstructin csts. The Regulatrs have been infrmed by the TSOs that the apprximate cst f a 200/275kV Intercnnectr is in the range f 100 millin t 150 millin. The TSOs have estimated a timescale in the rder f 7 t 10 years fr the cnstructin and cmpletin f such a prject. The timescale includes the preparatin and apprval f planning submissin, cnstructin f the prject and the preparatin f Envirnmental Impact Statements. ECONOMIC STUDY The purpse f the ecnmic study was t carry ut a high level review f the range f pssible flws between the tw systems and the ptential energy benefits available frm additinal intercnnectin capacity and a jint dispatch regime. The study assessed a range f scenaris that culd affect savings gained frm additinal Nrth Suth intercnnectin. These included: Intercnnectin between Ireland and Wales; Additinal generatin cnnected in the Republic; Lwer than expected uptake f wind generatin; and Changes in wrld il and gas prices as reflected since The ecnmic benefits can be estimated frm an assessment f the capacity benefits and the trading benefits gained frm increased intercnnectin. A capacity benefit is the ptential reductin f generatin capacity required as a result f increased intercnnectin. Hwever, the quantificatin f the capacity benefit wuld require generatin adequacy standards frm an All-Island perspective and the value placed n relying n external generatin. Trading prvides the benefit f increased transfer capacity (trades) acrss the intercnnectr. The ecnmic study cnsidered a range f scenaris t determine the savings that culd result frm reduced generatin fuel csts. The analysis suggests that, depending n the scenari, a range f savings frm 2.3 millin t 18.9 millin per annum culd be achieved. N scenari indicates the pssibility f lss r nly break-even results. The ecnmic analysis des reprt that as the tw systems gain mre generatin r additinal intercnnectivity, then the range f savings culd be reduced. Again n lss is indicated. 4

5 Reprt n the Case fr Cnstructin f a Secnd Nrth-Suth intercnnectr. Based n the findings f the ecnmic analysis, the Regulatrs are f the view that the ecnmic study des nt present a strng case against the cnstructin f a secnd Nrth Suth intercnnectr Additinal Regulatry Criteria The varius studies carried ut by the TSOs did nt take accunt f several less quantifiable benefits such as: The effect f increased cmpetitin; Ancillary services - efficiency savings in investment; Security f supply and system stability; and Benefits t custmers. The evaluatin criteria applied by the Regulatrs are discussed belw: Increased cmpetitin It is generally accepted that intercnnectin pens markets t cmpetitin frm ther markets. Cmpetitive behaviur and bidding will result in dwnward pressure n prices. Intercnnectin will lead t a larger market, thereby mderating the effects f market dminance and reducing market share. In additin it will als help reduce issues assciated with islatin, which currently relate mre t the Republic f Ireland than t Nrthern Ireland. In August 2004, CER and NIAER signed a Memrandum f Understanding (MOU). The MOU prvides a set f agreed principles which will underpin the develpment f a single whlesale electricity market n the island. Under an All-Island arrangement generatrs and suppliers will be able t participate in the whlesale market n the same basis regardless f their physical lcatin. T supprt the implementatin f an efficient whlesale arrangement ther areas f wrk need t be cnsidered n a jint basis. Fr example sectin 13 f the MOU states that: In parallel, we will undertake that transmissin netwrk wners/peratrs will c-perate t carry ut jint transmissin planning including intercnnectin. One f the bjectives f the Regulatrs in this regard is that they will review the investment prgramme n the wider all-island basis s that, as cmpetitive pressures increase thrugh increased pprtunities fr trade, cnstraints d nt pse a limitatin f such benefits. Similar t ther sectrs, investrs in the electricity sectr need the cnfidence and security that trading arrangements and ptential earnings (therefre return n investment) will nt be curtailed due t limitatins f netwrk infrastructures. A secnd intercnnectr will assist in prviding such cnfidence. 5

6 Reprt n the Case fr Cnstructin f a Secnd Nrth-Suth intercnnectr. Anther benefit f intercnnectin ver cnventinal generatin is that it shuld enable greater flexibility in energy purchases in terms f vlumes, duratins and time scales. The Regulatrs are f the view that this criterin supprts the case fr a secnd Intercnnectr Efficiency- Investment Savings Ancillary Services- pprtunities fr savings in the reserve requirements can be achieved. In additin intercnnectin culd imprve the amunt f time available fr plant utages fr maintenance, which in turn minimises the number f frced and unanticipated utages. This has the benefit f delaying the cst f new transmissin investment and transmissin csts assciated with new generatin. A further benefit f intercnnectin is that it can perate as a generatr in the event f the lss f lad frm a generatr in either jurisdictin. Ntwithstanding the fact that it is difficult t predict the psitin f generatin adequacy either in the Nrth r Suth in seven r eight years time, the Regulatrs are f the view that the benefits f ancillary services shared thrugh intercnnectin shuld nt be ignred by either jurisdictin. Additinal intercnnectin wuld deliver the required reinfrcements t the system t facilitate pwer flws in bth directins. In additin, greater intercnnectin wuld deliver a fast respnse t reserve requirements as it can deliver a slutin t pwer shrtages in a shrt time. The Regulatrs are f the view that this criterin supprts the case fr a secnd Intercnnectr Security f supply and System Stability The TSOs technical studies suggest that the lss f the Luth-Tandragee line wuld result in system separatin. This culd result in lss f lad in either r bth systems. This risk increases as an All-Island whlesale electricity market develps and where ver time custmers/suppliers in ne jurisdictin rely n purchases frm generatrs in the ther jurisdictin. Increased intercnnectin prvides additinal system security and stability against a backgrund f grwing demand, tight generatin reserve margins, increasing need fr generatin capacity, increasing reliance n generatin in ne jurisdictin by the ther and the current lw levels f intercnnectin between Ireland and the rest f Eurpe. Given the significance f security f supply t a (virtually) islated market, the Regulatrs are f the view that there is a strng case fr a secnd Nrth Suth intercnnectr. 6

7 Reprt n the Case fr Cnstructin f a Secnd Nrth-Suth intercnnectr. The Regulatrs are f the view that this criterin supprts the case fr a secnd Intercnnectr BENEFITS TO CUSTOMERS A range f benefits wuld accrue t custmers n the island. These include: Access t a larger market and greater cnsumer chice; Cmpetitively priced retail services in electricity; and Greater security f supply. The Regulatrs are f the view that electricity has characteristics similar t a public gd and as such the value placed n the lss f such a gd is nt easily quantifiable. The Regulatrs, in cnsidering their duty tward final custmers, will take this fact int accunt and in assessing if direct regulatry interventin t prtect the interests f final custmers is required. CONCLUSION In the light f all f the abve cnsideratins, the Regulatrs have jintly cme t the cnclusin that there are sund ecnmic and strategic reasns fr the cnstructin f a secnd intercnnectr. While it may be difficult t quantify the full range f benefits likely t result frm a secnd intercnnectr particularly the lnger term dynamic benefits which wuld be seen in the market place nevertheless he varius strategic evaluatin criteria applied by the Regulatrs supprt the case fr a secnd intercnnectr. The Regulatrs cnclude that, similar t existing intercnnectin, the secnd Nrth Suth intercnnectr shuld be part f the regulated asset base and cntrlled jintly by the tw TSOs. The Regulatrs will prceed t take the fllwing steps: request the TSOs t jintly carry ut a study t determine the apprpriate rute, size and cst f the secnd intercnnectr; set ut minimum criteria fr the TSOs fr their evaluatin t ensure principles f efficient investment are met; advise the TSOs t apply fr further funding that may be available and ntify industry f this decisin t avid any uncertainty r risks t investment decisins. ********************************* 7