TradeWind Favourable distribution Reinforcing interconnections

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1 TradeWind Europe s dependency on imported fossil fuel has become a threat to economic stability, and enhances energy price development uncertainties. Simultaneously, European utilities face huge challenges regarding new power generation capacity investments required within the next years. Surplus capacity in some individual countries prior to electricity market liberalisation is now diminishing, and many existing power plants are getting close to their decommissioning dates. For these combined reasons, a larger share of electricity demand covered by renewable energy sources has become a key issue at the European energy policy agenda. The current European Commission s target states that 20% of cumulative energy demand will by 2020 be covered by renewable sources. The measure simultaneously aims at a substantial reduction in greenhouse gas emissions and reducing current EU energy import dependency. The Commission further estimates that 20% renewable energy translates into approximately 34% of the EU s electricity demand (up from 16% in 2006). Finally wind power is envisaged to meet 12 % of the world s electricity demand by 2020, as compared to only approximately 4% in Favourable distribution Wind power is regarded a highly promising mature renewable technology, and a resource that is favourably distributed among EU Member States, both onshore and offshore. Wind power is further believed capable of contributing substantially towards European energy independence and in meeting the EU s future environment and climate protection goals. As a sustainable power source wind can also contribute substantially into turning a potentially serious energy security issue into fresh opportunities for Europe. These envisaged economic and additional opportunities include the creation of new employment, technology development and R&D leadership as some. The recent rapid growth in wind power generation is being triggered by technological and industrial development, as well as increased emphasis at developing a more sustainable European economy. However, with ever-increasing wind power volumes integrated into the network, challenges have arisen with regard to interconnected grids total functioning. The latter especially focuses at grid balancing, grid security, planning, cross-border transmission and market design issues. In order to safeguard an efficient and economically sound integration of large variable output source volumes like wind power within the network, changes must be introduced to power system design and operation. The main focus is thereby at power generation, transmission and distribution. With envisaged 20% or even higher wind power grid penetration levels, new inroads need to be explored concerning both power system, and electricity markets design and operation. A critical aspect thereby is whether careful decision-making processes in main areas like necessary grid reinforcement, technical standards, and harmonious (internal) market rulings, will ultimately result in more consistent policy decisions. Reinforcing interconnections By assuming a single European grid network and electricity market system, TradeWind has explored to what extent large-scale wind power integration challenges can be addressed by strengthening interconnections between EU

2 Member States. In addition, the project looked into all preconditions required for ensuring a sound well-functioning power market that enables reliable costeffective wind power integration at EU level. The study further addressed two key issues linked to high-volume future renewable power integration: the current weak interconnectivity levels between control zones and an inflexible fragmented European power market. Working amidst multiple mostly critical transmission paths and interconnectors is a slow painstaking process for a variety of reasons. Constraints include planning and administrative barriers, lack of public acceptance, insufficient economic incentives for Transmission System Operators (TSOs), and a lacking European joint key stakeholder approach. At EU level, there are various active ongoing political processes each involving a focus at grid improvement. Key examples include the Third Liberalisation Package, a Strategic Energy Technology Review, a Commission Green Paper on European Energy Networks, a Blueprint development for a North Sea offshore grid, and a Priority Interconnection Plan. Within the latter context, the concept of a truly European transmission network supplemented by an efficient power market capable aimed at integrating a huge renewable energy capacity makes full sense. However, in order to make such a far-reaching concept to succeed a full backing by sound technical and economic analysis is essential. This is a specific area where TradeWind hopes to contribute. Electric power flow simulation In order to analyse interconnection and power market rules in Europe, TradeWind simulated electric power flows within the EU s high-voltage grid with the aid of a simplified DC-flow based market model. That in turn represents the European power system as a single perfectly functioning market model. As part of the exercise multiple wind power growth scenarios were assumed and anchored to calendar the years 2010, 2015, 2020 and A Europe-wide wind model was further employed to analyse the combined effects linked to potential grid dimensioning issues due to meteorological events. As an example, the passing of a strong low-pressure system might cause large variations in wind power output and hence result into measurable cross border electricity transport flow variations. In parallel, main transmission bottlenecks have been identified, together with a prioritising of most obvious network upgrades aimed at relieving existing structural congestion points. The methodology further enabled quantifying associated implementation costs as well as power flow effects within the network. Equivalent network representations were applied for different synchronous zones: UCTE (all Europe except Nordic countries, Nordel (Nordic countries), and GB - Ireland. Due to the limited data that could be made available to the TradeWind consortium especially regarding the UCTE area, intra-zoned transmission constraints were only to a limited extent taken into consideration. These as a phenomenon restrict cross-border flow largely by individual tie-line capacities and net transfer capacity (NTC) values. In order to provide some degree of validation, simulation results were compared with current cross-border exchanges and outcomes from a more detailed and recently obtained model. The latter approach strengthened the TradeWind consortium s confidence in the obtained results. However, the

3 intention was neither to conduct an in-depth grid dimensioning study nor to look into dynamic grid behaviour and reliability aspects such as N-1 considerations. Power market efficiency TradeWind was the first study of its kind explicitly dedicated to large-scale cross-border wind power transmission and market design at European level. Besides a Europe-wide transmission networks assessment, TradeWind analysed power market efficiency with a main focus at its capability to handle large wind power volumes. Within that context two simulation tools PROSYM and WILMAR Planning Tool were applied for analysing a number of fundamental scenarios. These in turn were defined by the installed wind power capacity, electricity demand, and an energy-economic scenario for a given target year. Furthermore, selected parameters include interconnector capacity values (NTC), market gate closure time (or deadline for rescheduling dispatch decisions), and overall market area extension. From both simulations and the analysis performed, a number of conclusions could be drawn. First, expanding wind power capacity in Europe will inevitably result into increased cross-border power exchange traffic, which simultaneously implies that current cross-border transmission bottlenecks will worsen. Especially considering the wind power capacity growth expected between serious congestion is inevitable at the French borders, between GB and Ireland, and at some Swedish, German and Greek borders. The fact that wind power cannot be predicted with 100% accuracy will nodoubt result in deviations between expected and actual cross-border power flow. That in turn will affect a majority of all interconnectors involved during a substantial period, and thus worsen the congestion issue further. An economic consequence linked to these transmission constraints is restricted access to cheaper generation resources. Diminishing transmission capacity margins can also introduce reliability issues, but such an analysis is outside of this project scope. Cross-border transmission With regard to meteorological events linked to installed wind capacity scenarios for European countries covering the period to 2015, cross-border transmission does not seem to be significantly affected by wind power output fluctuations. This remains true at European scale even if multiple wind power plants are shut down during incidents like a rare storm, and/or a dramatic generation drop that might occur within a single country. TradeWind suggests that this particular issue needs to be studied more closely backed by precise higher resolution wind data, especially with wind power penetration levels of 10% and up. Due to their limited temporal resolution, wind data applied within the TradeWind project can result into short-term local wind power variations being underestimated. It has further become clear that future transmission reinforcements as part of current TSO planning will prove insufficient for preventing bottlenecks being aggravated, and for effectively alleviating potential congestion issues. By assuming no additional transmission upgrades beyond those currently planned, even a moderate wind capacity increase will as a consequence cause an unnecessarily operational power generating cost increase during

4 Both wind power and transmission system upgrades contribute towards reducing these power generating linked operational costs. It is therefore considered essential to bring cumulative investment costs plus all additional costs for balancing, incentives and the like in line with total envisaged benefits. TradeWind has identified 42 onshore interconnectors and an interlinked upgrading time schedule that would benefit the entire European power system and its ability to absorb and integrate wind power. Reinforcing operations along these lines should therefore result into substantial power system operational cost savings. Especially for the period , overall benefits linked to these transmission upgrades become significant and may amount to annual operational system cost savings in the M 1,500 range. This in turn fully justifies cumulative system investments in the order of 20 billion. Meshed offshore grid An interlinked (meshed) future offshore grid could further link future offshore wind farms in the North Sea, Baltic Sea, with an onshore transmission grid. A preliminary economic analysis based upon 120 GW installed wind capacity indicates that such a system compares favourably to a conventional solution whereby individual wind plants are directly linked to an onshore grid. Among some envisaged benefits are optimised cable utilisation and improved access to Norways flexible hydropower capacity, plus greater flexibility in transporting offshore wind power to areas characterised by high electricity prices. An interlinked offshore grid might in addition promote power trade between Sweden, the eastern part of Denmark and Germany. It is therefore recommended to consider necessary onshore reinforcements once a decision on a further analysis is made. However, this latter analysis could not be performed under the TradeWind project umbrella due too network data availability limitations. In order to effectively integrate large offshore wind volumes into the power system, it will be necessary to further upgrade the onshore network. Highly congested mainland network connections were observed inland in Germany and Sweden, and at interconnectors between Belgium and the Netherlands, and Belgium and France. Besides mainland connection reinforcements within these areas for the period beyond 2015, high capacity offshore super grids with direct extensions to major load centres inland might be built too as a contributing solution. However, such an offshore super grid should not be built as a substitute for necessary onshore grid reinforcements, which are either already in the pipeline or under construction. Furthermore, a combination of reluctance among stakeholders and the general public, reinforced by long implementation periods normally associated with transmission systems reinforcement, should both be taken into consideration. It is therefore crucial to utilise existing transmission lines at their maximum capacity by implementing advanced power flow control technologies. Transmission line development Investments in both new wind power capacity and power transmission line reinforcement are to a large extent the responsibility of individual Member

5 States. That in turn adds to difficulties for transmission system companies involved at identifying profitable transmission line development projects, especially when cross-border issues are involved. A European dimension linked to these transmission systems is beyond doubt and thus justifies a dedicated EU approach for developing financing schemes aimed at Pan- European transmission grid reinforcement. In parallel an urgent need remains in place for harmonising planning and authorisation processes, which to succeed requires full TEN-E and related process support. Apart from providing large electricity volumes of that would otherwise have to be generated by fossil fuel fired power plants, wind power offers a high degree of reliability. The combined, or aggregated production from several individual countries further strongly reinforces wind power s contribution to a firm capacity within the system. The larger a geographical area represented by these cooperating countries group, the higher cumulative capacity credit gain. Assume for instance 200 GW installed wind capacity by Than the cumulative effect linked to aggregating wind power across multiple countries almost doubles the average capacity credit compared with a similar but non-aggregated capacity spread. With the aid of a probabilistic method, the capacity credit for 200 GW wind power is calculated rising at a 14% level, which approximately corresponds to 27 GW firm generation capacity. The provision of sufficient transmission capacity between Member States contributes towards maximising this effect. Intra-day cross-border trade Intra-day cross-border trade market establishment is of crucial importance for achieving necessary market efficiency within Europe. Allowing for intra-day cross-border exchange rescheduling also offers annual system costs savings within a 1-2 billion range, as compared to cross-border power exchange traditionally scheduled on a day-ahead basis. In order to ensure efficient interconnector allocation, these lines should be allocated directly to the trading market via implicit auction procedures. Intra-day portfolio rescheduling - assuming wind power forecasting up to three hours ahead before delivery - results into an annual 260 million system costs reduction. Compared to day-a-head scheduling and thanks to an additional reduction in system reserve capacity demand this gain could be achieved. This cost reduction figure does assume a perfect market situation, and would be even higher under the current distorted market conditions. The European electricity market requires the following major design characteristics as a precondition enabling effective and efficient wind power integration: Providing features for intra-day power generators and power trading rescheduling at an EU level focused at low system costs and stable prices; Implicit and widespread auctioning application to allocate cross-border capacity (i.e. market coupling and market splitting); Enabling sufficient interconnection capacity to be made available from Congested mainland connections Based upon a simulation results analysis, TradeWind has developed a series

6 of recommendation specifically addressed to policy makers, TSOs, energy regulators, wind power producers, and energy traders with regard to: Necessary technology developments; European-wide transmission planning; Electricity market regulation; National and EU policies; Additional research. Staged network reinforcements as considered by TradeWind should be further analysed and promoted as a key priority because of higher power demand and expected wind power generation expansion from Network planning and other (related) measures should all aim at relieving expected congestions from Most serious bottlenecks are expected to emerge at the borders between France and its neighbours (Spain, Switzerland, Belgium, and the UK). But also between the UK and Ireland, Germany and Sweden, Sweden, Poland and Finland, and Greece and Bulgaria. The initial TradeWind assessment indicated that meshed offshore grids offer an economically optimized interconnection solution, and secondly that HVDC meshed grid technologies do offer important added advantages for this specific application. It therefore recommended that R&D efforts into meshed HVDC type cable technologies should speed up substantially in order to ensure that the technology is ready in time for future North Sea network expansion. These HVDC type meshed grids might also form a basis for developing a EU Blueprint for a genuine offshore North Sea grid. However, in order to effectively integrate large offshore wind power volumes into the system, it will also become necessary to further upgrade the onshore network. Highly congested mainland connections were observed internally in Germany and Sweden, and at interconnections between Belgium and the Netherlands, Belgium and France. In addition to further reinforcements of mainland connections in these areas beyond 2015, the building of highcapacity offshore grid systems with direct extensions towards major load centres inland should be considered too. Transmission system upgrades A key conclusion is that transmission system upgrade requirements would hardly differ in case only little new wind power capacity is added. On the contrary, European power consumers would still economically benefit from these proposed system upgrades and operational improvements, even if total wind power capacity were not to increase substantially. It is therefore crucial to incorporate these combined overall benefits when wind power investment costs and additional related costs are being assessed. Financing schemes for pan-european transmission grid reinforcements require development at EU level. The same applies for harmonised planning (including spatial planning) and authorisation processes in full support of TEN- E and related processes. Strategies for handling regional wind power concentration and moving storm fronts should also be advanced further in order to avoid any negative impact on overall system security. Such strategies must involve a more comprehensive wind forecasting capability, and an option for system operators to safely control wind power generation during critical situations. In this manner, an otherwise rapidly occurring output loss caused by storm fronts

7 might be limited to a more manageable gradient by reducing wind turbine production in advance of an approaching storm front. Contractual arrangements grid codes, connection agreements and alike - should further contain system operator provisions for well-controlled wind power generation. This strategy may in turn and under certain circumstances prove to be an optimised solution for specific problems. Furthermore, all necessary means for allocating curtailment and any compensation arrangements should be transparent and equitable between different power generating technology alternatives. Visualising capability All grid operators need to be provided with a visualising capability for assessing real-time output of all power generation modes within their networks. In addition, at least the summed output of all generators connected to distribution systems operating under the TSO grid umbrellas should be made available to them. Perhaps one exception should be allowed for the smallest generators connected to the system at domestic household level. Associated costs - for example those linked to communication and control - are further minor compared to the overall benefits for all system operators involved. Power market design should allow intra-day EU-wide transmission line based rescheduling. In parallel, establishing cross-border intra-day markets is of key importance for achieving the highest possible power market efficiency within Europe. Furthermore, for maximising economic benefits linked to interconnections, market s capacities should be allocated via implicit auctions. One such example is market coupling or splitting algorithms. In their most optimal form, these algorithms should be flow-based. Continued power market integration within Europe such as regional market initiatives has to be pushed too. Power systems incorporating wind energy penetration levels in the 10-12% gross electricity demand range require besides more flexible units also slower reacting power plants to participate in this intra-day rescheduling process. Slower reacting in the above context itself means a starting-up time in excess of one hour. EU-wide power reserves exchange potentially offers additional added advantages. Within this combined picture the trade-off between investments savings for flexible power plants, and cross border power reserves sharing should be investigated further with the aid of dedicated models as a well- suited instrument. Reserve capacity For enabling large-scale offshore wind deployment, a careful site selection process should ensure an optimised geographical spreading in order to curb overall wind power output variations. For the same reason, offshore wind farms in larger scale deployment should be connected to meshed offshore grids. A controllable power output flow is thereby regarded superior compared to single radial cable connections from individual wind farms to shore. Active wind power plant control as an option should be explored too, both from technical and commercial points of view. In some operational situations, it might be more useful to keep a percentage of this wind power capacity as a reserve rather than to utilise it directly for generation purpose. A representative example of such a situation is low power demand combined

8 with high wind speeds (strong output). But as long as the power market does not come near perfect market conditions, both priority access and wind power dispatch remain essential. These two measures might prove a main contributing factor towards keeping wholesale power prices low, and within a wider context in meeting Europe s renewable energy and environmental targets. Wind power capacity credit issue should be assessed within TSO system planning (such as system adequacy forecasting) in large size geographical areas, preferred to only at single country level or smaller balancing areas. The methodology applied for estimating wind power capacity credit should also be further developed and harmonised, this time across Europe. Boosting energy efficiency aimed at significantly reducing electricity demand is an essential complementary measure. Energy storage Other effects linked to demand-side measures upon anticipated system cost reductions within future power systems comprising large-scale wind power capacities should be investigated too. Some of these areas include electrical vehicles, heat/cold storage, and heat systems integration. Moreover energy storage can contribute towards avoiding wind power curtailment in situations with low power demand combined with high volume wind power generation. For any future transmission studies at a European scale, wind data accumulated for TradeWind purpose can be reapplied. These data comprise a geographically and time consistent package with a temporal six-hourly resolution. Linear interpolation of these six-hourly data into hourly values indicated a high correlation with hourly measured data during validation checks at specific locations. This also made it possible to transform these data into hourly data by adding a hourly variability as found in historical wind power series for use in the power market models. However, for studies on generation adequacy, balancing and comparable issues, European wind data with superior temporal resolution - ideally on hourly basis - is recommended. Shorter intervals cannot be justified, as the spatial effect in averaging peaky values over large areas will show minor change at this specific timescale. A number of TradeWind simulation toolbox sections should be further developed when reused in future European power system studies: Wind data series measured at hourly basis; Conventional power generation data with superior detailing; Studying effects linked to energy efficiency measures and demand-side management on wind power integration with different power demand scenarios; Wind power capacity geographical modelling with a higher degree of detail; Studying weather system related effects at higher wind power penetration levels, by using more accurate data with higher resolution for short-term studies (i.e. up to five years ahead). Beyond that timescale, uncertainties in wind power generation installation rates and locations do not anymore justify a higher detailed geographical resolution;

9 Simulate integrated power flow control operational options within the power system simulation tool, aimed at studying potential market related benefits; Further development and harmonisation of existing wind power capacity with credit estimation methodology. Finally, in order to facilitate Europe-wide transmission studies data on European power system networks for study purpose should be made more easily available. TradeWind is a European project funded under the EU s Intelligent Energy-Europe Programme. The project addresses one of the most challenging issues facing wind energy today: a maximised reliable integration into Trans-European power markets. Recent studies indicate that large-scale wind power contribution into the Europe-wide power generation network is both technically and economically feasible. This contribution also lies in the same order of magnitude as individual system contributions by conventional technologies, and with a similar high degree of system security and modest additional costs. Wind power penetration is not constrained by technical problems linked to wind technology, but is instead hampered by regulatory, institutional and market barriers. TradeWind aims at facilitating the dismantling of barriers that may otherwise prevent or slow down large-scale wind power integration within European power systems. This challenge is tackled at transnational as well as European levels. It encompasses the formulation of recommendations for future policy development, market rules and interconnector allocation methods all in support of wind power integration.