Projects of Common Interest 2018 - 2019 Meeting of TEN-E BEMIP 5 March 2019 DG ENER, Networks & Regional Initiatives https://ec.europa.eu/eusurvey/runner/PCIs_Electricity_05March19

Agenda 1. Welcome and general introduction 2. Identification of system needs per region methodology 3. Regional needs identification and validation 4. First insight in the PCI assessment methodology 5. Conclusions 6. Next steps

Identification of system needs per region methodology [Presentation on the draft final methodology for the identification of system needs that can be addressed through infrastructure in the context of the identification of PCI projects for the 4th PCI-list: purpose, use of indicators and proposed thresholds for indicators]

Needs identification process We are here Written comment received from: AT [TSO, MS]; DE [TSOs]; DK [MS]; ES [MS, TSO]; FR [NRA,MS, TSO]; IT [NRA,TSO]; LV [MS]; NO [MS]; NGO [RGI]; non-TSO Promoters [Aquind, Iland, Greenconnector]; PL [MS]; PT [TSO]; SI [TSO]; SK [TSO]; UK [TSO, MS]

Principle The PCI needs identification is to reflect the objectives of Regulation (EU) 347/2013, along the three energy pillars of the Energy Union: market integration, security of supply and sustainability The Regional Groups are to use the same methodology for the needs identification; The thresholds used to frame the needs are to be identical along all the Regional Groups The timeframe to be considered for the PCI needs analysis is to be 2030 in line with the EU 2030 targets; This PCI exercise is to be primarily based on the “Distributed Generation” scenario;

Use of indicators and thresholds Indicators framing Consistent: Indicators must be based on consistently defined and calculated data available for all relevant countries Meaningful: An indicator/threshold that results in all countries or no country being impacted is not well defined Fit for purpose: Within the PCI process indicators and thresholds are used to identify critical European needs/problems Use of indicators and thresholds

Indicators Market integration Security of supply Sustainability Yearly average of the absolute hourly marginal cost spreads at the borders Security of supply Adequacy Significant changes in generation protfolio Residual Load Ramp Sustainability Renewables curtailment

Market integration 𝐘𝐞𝐚𝐫𝐥𝐲 𝐚𝐯𝒈. 𝐦𝐚𝐠𝐢𝐧𝐚𝐥 𝐩𝐫𝐢𝐜𝐞 𝐝𝐢𝐟𝐟𝐞𝐫𝐞𝐧𝐜𝐞𝐬 𝐢𝐧 𝟐𝟎𝟑𝟎 𝐜𝐨𝐮𝐧𝐭𝐫𝐲 𝐀−𝐜𝐨𝐮𝐧𝐭𝐫𝐲 𝐁 Where: country A and B are interconnected countries Need identification steps: Identify all the relevant borders and compare the cost spreads at the borders between those countries in 2030 For each of the TEN-E region separately- select the countries in the upper 30 percentile [threshold] of the price difference. Analyse the results in corroboration with the Member States input and the overall regional discussion.

Security of supply (SoS) - Adequacy Measured by: Loss of load expectation [LOLE] Source of data: ENTSO-E Mid-term Adequacy Forecast [MAF], scenario for 2025, sever conditions Need identification steps: Extract the LOLE data, from ENTSO-E 2018 Mid-term adequacy Forecast report, for each of the EU Member States. Apply to the collected LOLE data, a threshold of 3h. This threshold is common for all the TEN-E priority corridors. Analyse the results in corroboration with the Member States input and the overall regional discussion.

Security of supply (SoS) – Significant changes in generation portfolio   [ RES variable installed 2030 Peak demand 2030 − RES variable installed 2020 Peak demand 2020 ] ∗100 𝐴𝑁𝐷/𝑂𝑅 Conventional installed2030−Conventional installed 2020 Conventional installed 2020 ∗100 RES capacity increase Conventional capacity decrease Where: RES variable = wind, solar, tidal and run of river and Conventional = coal, lignite, nuclear, biomass, gas and oil Need identification steps: Compute the formulas above for each of the EU Member State. Apply the threshold of 50% [for RES increase] and -30% [decrease of conventional generation]. This threshold is common for all the TEN-E regional groups. Analyse the results in corroboration with the Member States input and the overall regional discussion.

Security of supply (SoS) -Residual Load Ramp Need identification steps: Derive for each of the EU Member State the ramp curves. Identify the affected countries. For this indicator no threshold is necessary. Analyse the results in corroboration with the Member States input and the overall regional discussion.

Sustainability – RES curtailment 𝐑𝐄𝐒 𝐜𝐮𝐫𝐭𝐚𝐢𝐦𝐞𝐧𝐭 𝟐𝟎𝟑𝟎 𝐆𝐖𝐡 𝐲𝐞𝐚𝐫 𝐑𝐄𝐒 𝐩𝐫𝐨𝐝𝐮𝐜𝐭𝐢𝐨𝐧 𝟐𝟎𝟑𝟎 𝐆𝐖𝐡 𝐲𝐞𝐚𝐫 ∗𝟏𝟎𝟎 Need identification steps: Compute the formulas above for each of the EU Member State. Apply the threshold of 2% to identify the countries which are most impacted by the RES curtailment. This threshold is common for all the TEN-E regional groups. Analyse the results in corroboration with the Member States input and the overall regional discussion.

Baltic synchronization Estonia, Latvia and Lithuania are the only Member States within continental Europe part the European Union whose electricity networks are still not operated in a synchronous mode within the continental European system. This need is representative only for the Regional Group BEMIP and will only be used for this region.

Regional needs BEMIP identification and validation [In this part of the meeting we will: identify which market, security of supply or sustainability problems/bottlenecks/needs are having a significant impact on the countries in the TEN-E priority corridor consider which of the needs identified in the previous step are to be included in the agreed list of needs for the TEN-E priority corridor (based on impact and relevance for each region) validate the methodology for the identification of system needs that can be addressed through infrastructure agree the list of system needs that can be addressed by infrastructure in the TEN-E priority corridor.]

Needs identified by the Member State Outcomes of the needs methodology Finland needs Not enough capacity to cover demand in peak loads (acknowledged by the Mid-Term Adequacy Forecast 2018) Dependent on imports Needs identified by the Member State SOS Adequacy Market integration SOS residual load ramps Outcomes of the needs methodology

Needs identified by the Member State Outcomes of the needs methodology Sweden needs Price differentials Balancing and changes in generation portfolio (nuclear phase-out) RES curtailment Needs identified by the Member State Market integration SOS – significant changes in generation portfolio SOS - Residual load ramps Outcomes of the needs methodology

Needs identified by the Member State Outcome of the needs methodology Denmark – needs Price difference RES curtailments Internal bottlenecks Needs identified by the Member State Market integration SOS – significant changes in generation portfolio Outcome of the needs methodology

Needs identified by the Member State Outcomes of the needs methodology Poland needs Changes in generation portfolio (decommissioning thermal power plants, diversification in generation with a higher RES penetration) Adequacy, confirmed by the Mid-Term Adequacy Forecast 2018 Challenge in meeting flexibility needs Loop flows Price differentials Needs identified by the Member State - SOS – significant changes in generation portfolio - SOS: Adequacy - SOS - Residual load ramps Market integration Outcomes of the needs methodology

Needs identified by the Member State Outcome of the needs methodology Germany needs Price differentials SOS – significant changes in generation portfolio RES curtailments + Internal bottlenecks Needs identified by the Member State Market integration SOS – significant changes in generation portfolio RES curtailments SOS – Residual load ramps Outcome of the needs methodology

Needs identified by the Member State Outcomes of the needs methodology Estonia needs Maintain SoS and reliable operation (related to the synchronization) RES integration Price differentials Upcoming change in energy mix and increase in offshore RES Needs identified by the Member State Synchronisation Market integration SOS – significant changes in generation portfolio Outcomes of the needs methodology

Needs identified by the Member State Outcomes of the needs methodology Latvia needs Maintain SoS and reliable operation (related to the synchronization) Maintaining generation adequacy due to changes in generation portfolio RES integration (wind energy in the Baltic Sea region) Price differentials Needs identified by the Member State Synchronisation SOS – significant changes in generation portfolio Outcomes of the needs methodology

Needs identified by the Member State Outcomes of the needs methodology Lithuania needs Maintain SoS and reliable operation (related to the synchronization) Import dependency Changes in generation portfolio/ RES integration Needs identified by the Member State Synchronisation - Market integration - SOS – significant changes in generation portfolio Outcomes of the needs methodology

List of regional needs - BEMIP Baltic Synchronization – facilitate the Baltic states synchronous connection with the continental European system: Lithuania, Latvia, Estonia Market integration [Price difference] - Mitigate high price differentials: Finland, Sweden, Denmark, Poland, Germany, Estonia, Lithuania SoS[Adequacy] – Address system adequacy deficiencies: Finland, Poland SoS[Generation portfolio] – Accommodate significant changes in generation portfolio: Sweden, Denmark, Poland, Germany, Estonia, Latvia, Lithuania SoS[ramps]– Improve system flexibility and stability: Finland, Sweden, Poland, Germany

First insight in the PCI assessment methodology [Introductory presentation and discussion on the next step in the PCI process: methodology for the assessment of candidate PCI projects; update on the ongoing study on storage benefits (Navigant consultancy)]

Principles PCI candidates that are already/will be completed by end 2019, or that do not fulfil the relevant criteria and requirements as set out in this Regulation cannot be on the next Union list. All the PCI candidates [including existing PCIs] are be subject to the same selection process for the establishment of regional lists and for the establishment of the Union list of PCIs. Each individual proposal for a project of common interest requires, in order to be on the Union list, the approval of the Member States, on whose territory the project is build.

PCI technical requirements -I Transmission infrastructure Overhead lines designed for a voltage of 220 kV or more, and underground and submarine transmission cables, if they have been designed for a voltage of 150 kV or more; The project increases the grid transfer capacity, or the capacity available for commercial flows, at the border of that Member State with one or several other Member States, or at any other relevant cross-section of the same transmission corridor having the effect of increasing this cross-border grid transfer capacity, by at least 500 Megawatt compared to the situation without commissioning of the project

PCI technical requirements -II Electricity storage Electricity storage facilities used for storing electricity on a permanent or temporary basis in above-ground or underground infrastructure or geological sites, provided they are directly connected to high-voltage transmission lines designed for a voltage of 110 kV or more The project provides at least 225 MW installed capacity and has a storage capacity that allows a net annual electricity generation of 250 Gigawatt-hours/year;

Criteria for candidate PCIs – art. 4 Necessary for the EU energy pillars The project is necessary for at least one of the energy infrastructure priority corridors and areas The project contributes to at least one of the following specific criteria: market integration, inter alia through lifting the isolation of at least one Member State and reducing energy infrastructure bottlenecks; competition and system flexibility; sustainability, inter alia through the integration of renewable energy into the grid and the transmission of renewable generation to major consumption centers and storage sites; security of supply, inter alia through interoperability, appropriate connections and secure and reliable system operation;

Criteria for candidate PCIs – art. 4 Project benefits outweigh costs the potential overall benefits of the project, assessed according to the respective specific criteria in paragraph 2, outweigh its costs, including in the longer term; Impacts EU Member States meets any of the following: involves at least two Member States by directly crossing the border of two or more Member States; is located on the territory of one Member State and has a significant cross-border impact as set out in Annex IV.1; crosses the border of at least one Member State and a European Economic Area country.

Prioritization 3 EU energy pillars Multi-criteria approach The assessment of the candidate PCIs will take into consideration all the benefits related to market integration, security of supply and sustainability. Multi-criteria approach The candidate PCIs prioritization will be done using a multi-criteria approach, therefore taking into account the monetized and non-monetized benefits along with the projects’ costs. TYNDP 2018 data The data from TYNDP CBA project sheets will be used in the candidate PCIs assessment.

02 01 03 PCIs assessment steps Analyse the candidate Develop PCIs Methodology Analyse the candidate PCIs Prioritize

Methodology development end March’ 19: RGs members will receive the draft methodology for comments End April/early May’ 19: considering the Rgs comments the EC [within the Cooperation Platform frame] will update the methodology and which will be circulated to the RGs -> final PCI assessment methodology

Candidate projects -scrutiny 11-12 April meeting: Project promoters will present their projects and justify how their project satisfies the Regional needs, explain the project status and any delays in the project implementation NRAs will present their point of view on all the candidate PCI project which are to be implemented in their respective MS. Stakeholders: outcomes of the public consultation + direct participation in the meeting EC: view on the projects situation (progress, delays)

Reminder: Overview of roles & responsibilities

Candidate projects - prioritization First half of May’ 19 – application of the PCI assessment methodology. The resulting projects ranking will delivered only to the RGs members [in line with the TEN-E Regulation ] Mid-May – RGs meetings to validate the draft regional lists

Assessment methodology for the benefits of electricity storage projects for the PCI process

Next steps

Overall process – Next steps 11-12 April