Cost-Benefit Analysis methodology Overview of the adaptation process. Olivier Lebois, ENTSOG System Development Business Area manager

Transcription

1 Cost-Benefit Analysis methodology Overview of the adaptation process Olivier Lebois, ENTSOG System Development Business Area manager Cross Regional Group meeting 24 March 2014

2 Drivers of the methodology published in November 2013 > Informing in a pragmatic and transparent way: Regional Groups for the selection of PCIs NRAs and ACER for projects requiring a cross-border cost allocation Commission for projects requiring financial assistance > Highlighting the dependence of assessment results on input data and assumptions in an uncertain future > Ensuring the applicability of the methodology by ENTSOG and promoters within the selection timeline (between March and September of odd years) A dual structure The structure of the methodology > The Energy System Wide CBA is carried out by ENTSOG and is part of TYNDP, it provides: The framework of the individual assessments of each project A feedback loop on the impact of the previous selected list > The Project Specific CBA is carried out by each promoter being candidate to PCI status to measure the marginal impact of its project on the union-wide gas system 2

3 ESW/PS-CBA: an efficient division of labour 1 ESW-CBA / ENTSOG Common data: - Capacity - Demand - Supply Low Infra. scenario High Infra. scenario PS-CBA / candidate Low - FID Candidate Low + Non-FID Candidate High - FID Candidate High - Non-FID Candidate Candidate description Marginal impact of the Candidate on: -Quantitative indicators -Monetization - Prices PCI Infra. scenario Candidate cost data Financial & Economic Performance Indicators Indicators Quantitative analysis 3

4 Project cost data Financial Analysis Financial Performance Indicators Qualitative Analysis ESW-CBA output data Economic Analysis Content of the PS-CBA Project description Network & Market Modelling Monetization Economic Performance Indicators Modellingbased indicators Capacitybased indicators Sensitivity-Analysis Qualitative Analysis 4

5 Economic Analysis Width of the assessment The different cases and scenarios > The magnitude of project benefits strongly depends on the situation under which it operates. It is therefore very important to carry out the assessment under wide range of possible situations > This approach aims at ensuring the measurement of the social welfare under the framework of the New TEN-E Regulation > Each PS-CBA will use the same input data in order to ensure comparability Climatic Average Summer Average Winter 14-day peak 1-day peak Infrastructure scenarios Low: Existing + FID High: Existing + FID + Non-FID Gas demand High* Low* (*) using some elements of ENTSO-E visions for power generation Global context Gas/Coal/CO2 Green (e.g. National Grid green scenarios) Business as usual (e.g. WEO Current Policies) Gas source price All sources same price Each source cheaper one-byone Each source more expensive one-by-one Supply stress Infrastructure disruption Transit disruption Supply disruption 5

6 Economic Analysis Combined approach - 1 Quantitative indicators > Indicators are either capacity-based (capacity and demand) or using modelling output (flows) Indicators Specific criteria ENTSOG methodology Regulation SoS Sustain. Compet. Mkt. Int. «N-1» Bi-directional Potential Seasonal Balance Import Rte Diversification Diversification of route Supply Source Diversification and supply Supply Source Dependance Remaining Flexibility Long and short term flexibility of the system Price convergence Infrastructure Environmental Impact (still to be defined) 6

7 Economic Analysis Combined approach - 2 Monetization > The use of cost (e.g. gas supply, Coal and CO2) will both: Shape flow patterns Enable the monetization of a given case Monetized layers Specific criteria SoS Sustain. Comp. Mkt. Int. Gas supply Coal consumption for power generation CO2 emission for power generation Cost of disruption > If from a modelling aspect the monetization of a lost load is possible, its monetization opens many questions: Direct effect is certainly minimizing the impact Approach on GDP and gas intensity results in a wide range of cost per country Occurrence and magnitude of disruption is highly uncertain 7

8 Financial analysis > Recommendations are provided to ensure comparability of results, the evaluation of the level of a potential investment gap can occur only after a cross-border cost allocation Economic analysis > Monetization and quantitative indicators are to be seen as different perspectives of the same assessment of regulation specific criteria. Therefore they should not be combined as it would results in some double counting > The Economic Performance Indicators provide an aggregated view of project net benefits > Decision-makers should pay special attention to the sensitivity-analysis and results under the various cases in order to well appreciate the robustness of the benefits Project interaction Interpretation of PS-CBA results > Comparison of PS-CBA results under the Low and High Infra. scenarios will support the identification of potential interaction > Regional Groups may ask promoters of concerned projects to re-run a PS-CBA on the cluster Results will be provided by country and year together with a project perspective 8

9 Time schedule for TYNDP and PS-CBA Proposed planning > Submission of infrastructure projects by promoter during Summer 2014 > The list of projects will then be communicated to Commission in order to facilitate the call for candidates using TYNDP as a basis > ESW-CBA published in February 2015 including all data and assessment results to be factored in their PS-CBA 9

10 Overall positive feedback Feedback from stakeholders > Stakeholders involvement during CBA development process and SJWS on TYNDP/CBA help to better explain the methodology and build trust > Better understanding of the structure of the methodology and obtained results Main challenges and expectations > Stakeholders need to see a case-study to better understand the link between each step, their applicability and the type of results 2 SJWS are scheduled on that topic (27 March & 13 May) > What will be the process for the modelling part of the PS-CBA (which tool, run by whom and necessary transparency of results) Decision to be communicated by June > As for previous TYNDP there are a lot of questions about the meaningfulness of input data but stakeholders ability to provide alternative dataset is very low A certain consensus is building and remaining challenge is the variation of Russian prices to different countries 10

11 Thank You for Your Attention Olivier Lebois Business Area Manager, System Development ENTSOG -- European Network of Transmission System Operators for Gas Avenue de Cortenbergh 100, B-1000 Brussels EML: WWW: