Regional Energy Integration Lesson from Regional Energy Integration in Europe and Challenge / Opportunity for South East Asia 25 th March 2016 Funded by the European Union and implemented by a Consortium led by GOPA Consultants

Agenda Funded by the European Union and implemented by a Consortium led by GOPA Consultants Geographical focus, regulatory background Lessons learnt Benefits / opportunities Future challenges Conclusions for the South East Asia power network

Geographical context Funded by the European Union and implemented by a Consortium led by GOPA Consultants Sources: Entso-E (2013), EWEA (2016), EPIA (2016), ASEAN (2016), German Federal Network Germany km of lines GW (2013) net generation3.489 MW ( MW) Europe Energy Market (EU28)ASEAN 41 TSO TWh (2013) el consumption 11 cross borders (+10 ongoing) 821 TWh (213) el generation 90 GW (2015) photovoltaic 142 GW (2015) wind Population: 508 millionPopulation: 615 million Total area Km2: Total area km2: GW (2013) total RES 21 GW (2013) varRES

EU objectives Funded by the European Union and implemented by a Consortium led by GOPA Consultants

It takes time to harmonise the market Funded by the European Union and implemented by a Consortium led by GOPA Consultants

EU market liberalisation Funded by the European Union and implemented by a Consortium led by GOPA Consultants Degree of Market Concentration in the EU Power Sector HHI is the Herfindahl- Hirschman Index which measures market concentration by capacity. It is calculated as the sum of the square market shares of individual companies

EU targets & Climate and Energy Policy 2030 Funded by the European Union and implemented by a Consortium led by GOPA Consultants Source: Greenhouse Gas Emissions Renewable Energy Energy Efficiency - 20% 20% <= - 40% >= 27% Interconnection 10%>= 15 %

10% power interconnection target Funded by the European Union and implemented by a Consortium led by GOPA Consultants Source: Security of supply Costs savings on capacity Reduce power prices Increase RE penetration EU employed rd 1.2m people in REs in 2012 Defined on October 2014

Ex-course Funded by the European Union and implemented by a Consortium led by GOPA Consultants Merit Order Effect on the spot market Source: EWEA

Lesson 1 Funded by the European Union and implemented by a Consortium led by GOPA Consultants Transmission capacity calculation and allocation methods Dispatch optimisation decisions Redirect el flows between congested areas either by direct trading or Splitting same priced congested areas into two or more areas Curtailing electricity flows Improved congestion management across borders

Lesson 2 Funded by the European Union and implemented by a Consortium led by GOPA Consultants TSOs incure in costs for procuring reserves and/or for energy used to cover imbalances (penalties) Balancing is limited to national or close control zones Transmission losses are kept low National design Complexity of predicting such flows in the EU grid Aggregation of control zones into larger geographical areas for trading The more variable REs in operation over a larger geographical area, the smaller the impact of variability on system operation

Lesson 3 Funded by the European Union and implemented by a Consortium led by GOPA Consultants The European Transmission Model (TM) foresees “continuous-trading” rather than fixed auctions with gate closures Trading closer to real-time delivery

Lesson 4 Funded by the European Union and implemented by a Consortium led by GOPA Consultants Market coupling mechanisms used in the EU “ongoing initiative” Larger market place in general 2010: CWE (market coupling BE, NL, LX, FR & DE) 2010: CWE (market coupling BE, NL, LX, FR & DE)

Lesson 4 Funded by the European Union and implemented by a Consortium led by GOPA Consultants Larger market place in general

Lesson 5 Funded by the European Union and implemented by a Consortium led by GOPA Consultants Common European Grid Model (CGM), in which the Flow-Based transmission capacity Allocation (FBA) Common set of market rules All relationships between all interconnectors of a network Reduces balancing costs if high variable RES penetration and reduces unscheduled power flows (loop flows) FBA + CGM: open the possibility of linking dynamic grid management with the market to maximize the use of new and existing assets Costs savings Costs savings

Lesson 5 Funded by the European Union and implemented by a Consortium led by GOPA Consultants CORESO BE, FR, Italy, GB, North and East Germany CORESO BE, FR, Italy, GB, North and East Germany Examples of Regional Control Centers CECRE Spain CECRE Spain

Lesson 5 Funded by the European Union and implemented by a Consortium led by GOPA Consultants Functions of Regional Centers Source: European Commission “Options for future European Electricity System Operation”, December 2015

Benefits Funded by the European Union and implemented by a Consortium led by GOPA Consultants Source: Security of supply Costs savings on capacity Reduce power prices Increase RE penetration EU employed rd 1.2m people in REs in 2012

Benefit: security of supply Funded by the European Union and implemented by a Consortium led by GOPA Consultants 4 th November 2006

Benefit: security of supply Funded by the European Union and implemented by a Consortium led by GOPA Consultants 20th March 2015 Source: EEX-data and Agora “Some views on integrating renewable energies”, September 21st, 2015, Luxemburg

Benefit: cost savings on capacity Funded by the European Union and implemented by a Consortium led by GOPA Consultants Coordinating new wind and PV deployment, generates savings of 146 GW of new capacity Source: Booz&Co “Benefits of Integrated European Energy Market”; prepared for Directorate-General Energy EC, July 20, 2013

Benefit: reduced power prices Funded by the European Union and implemented by a Consortium led by GOPA Consultants Source: Booz&Co “Benefits of Integrated European Energy Market”; prepared for Directorate-General Energy EC, July 20, 2013 Well-connected European energy grids will translate into direct savings for the consumer. EU consumers could, each year, save €12-40 billion if energy markets are fully integrated Well-connected European energy grids will translate into direct savings for the consumer. EU consumers could, each year, save €12-40 billion if energy markets are fully integrated

Benefit: reduced power prices Funded by the European Union and implemented by a Consortium led by GOPA Consultants Wholese Price changes with cross-boarder trading

View into the future Funded by the European Union and implemented by a Consortium led by GOPA Consultants

View in the future Funded by the European Union and implemented by a Consortium led by GOPA Consultants Increased need to control smart grids with the proliferation of electric vehicles

Needs for the future… Funded by the European Union and implemented by a Consortium led by GOPA Consultants Communication moves down to the customer Decentralised energy management Distribution automation Common data models and services Plug & play Use of existing infrastructure Smart metering Efficient engineering Interoperbility Telecommunication provider WEB services Distribution line carrier

Conclusion for EU & South East Asia Funded by the European Union and implemented by a Consortium led by GOPA Consultants “get the grid right” “RES for balancing” “new deal for consumers” clever DSOs Six cross-border power grid interconnections are currently in operation with many more under construction (EIA; 2015); More interconnections will allow for a smoothing effect between weather patterns in differenct countries Retail market priorities: consumer empowerment, smart homes & networks and data management; Dynamic pricing linked to wholesale prices Retail market priorities: consumer empowerment, smart homes & networks and data management; Dynamic pricing linked to wholesale prices DSOs will not only hasve to make grids smarter, but actively operate and balance them Spatial planning better spatial distribution of renewables

Conclusion for South East Asia Funded by the European Union and implemented by a Consortium led by GOPA Consultants Six cross-border power grid interconnections are currently in operation with many more under construction (EIA; 2015); 120 million people lack access to electrity (EIA; 2015) USD36b in 2014 in fossil-fuel subsidies (EIA; 2015) It is not the EU28: manageable? It is not the EU28: manageable? DG Innovate equipment for TSO DG Innovate equipment for TSO Price distortions as in EU? Late 2015: prosed ASEAN Economic Community (AEC) Harmonisation takes time…

Sincere thanks for your attention Lesson from Regional Energy Integration in Europe and Challenge / Opportunity for South East Asia 25 th March 2016 Funded by the European Union and implemented by a Consortium led by GOPA Consultants