CorkJune 2011

1

Dynamic modelling of transmission systems: costs of seasonal-zonal transmission loss factor charging

and the impact of large-scale offshore wind

Presentation to 2nd forum on

Economics of Marine Renewable EnergyHMRC UCC

Dr Greg SwinandLondon Economics/Indecon

London Economicswww.londecon.co.uk

2

Agenda

Review of studies done Methods used Results Conclusions

CorkJune 2011

3

Review of LE/Ventyx study

London Economics/Ventyx commissioned by Elexon (UK market operator) to study CBA of seasonal-zonal charging for variable transmission losses• 2009 study with updates

A number of scenarios for different offshore wind levels modelled

Subsequently Ofgem also commissioned separate independent study (2010 Redpoint) to cross check LE/Ventyx results and also model further (30+GW installed capacity offshore wind)

CorkJune 2011

4

Methods used

Ventyx ProMod™ nodal dispatch model of UK generation and transmission system used with full UK injection/offtake nodal model of transmission system

Model generates prediction of Transmission loss factors (TLFs) which scale up (demand) or down (generation) actual quantity• Optimization over dispatch given the predicted TLFs in each year to 2021• Load weighted averages across seasons and zone applied ex ante based on previous

year’s run• Process repeated every year with forecasts of

− Fuel and CO2 prices− Entry and exit− Transmission system changes, etc

Base and change case total production costs compared CBA analysis done on DCF basis from fuel cost savings due to lower

transmission losses

CorkJune 2011

5

Methods used

Wind unit modelling Wind units modelled with explicit hourly profiles that reflect the

best available data for diurnal profiles and annual capacity factors based on wind location

Wind generation was not reduced to manage congestion or to lower transmission losses

Existing and known planned wind units are located on the appropriate injection buses in the powerflow data

Added future offshore wind capacity is added by increasing wind capacity proportionally at existing sites

Circa +1,200MW more wind than planned in 2009 (circa 7GW by 2021).

CorkJune 2011

6

Results

Table 6‑28: Aggressive Offshore Wind Sensitivity

Reference Base

Reference Change

Change - Base

Change - Base

Reference BaseReference

ChangeChange -

BaseChange -

Base

Production Cost (Billion

Pounds Sterling)

Production Cost (Billion

Pounds Sterling)

Diff % DiffTransmission Losses (TWh)

Transmission Losses (TWh)

Diff (TWh) % Diff

2011 6.96 6.95 -0.010 -0.14% 3.83 3.56 -0.274 -7.16%

2012 7.07 7.06 -0.007 -0.10% 3.76 3.45 -0.306 -8.16%

2013 7.30 7.29 -0.007 -0.09% 3.71 3.50 -0.204 -5.50%

2014 7.57 7.56 -0.006 -0.08% 3.66 3.44 -0.216 -5.90%

2015 8.22 8.21 -0.006 -0.07% 3.43 3.26 -0.171 -5.00%

2016 8.43 8.43 -0.005 -0.06% 3.57 3.45 -0.126 -3.54%

2017 8.69 8.69 -0.005 -0.05% 3.90 3.75 -0.151 -3.87%

2018 8.90 8.89 -0.010 -0.12% 3.99 3.74 -0.247 -6.20%

2019 9.29 9.28 -0.010 -0.11% 4.04 3.78 -0.262 -6.49%

2020 9.41 9.39 -0.012 -0.12% 4.14 3.87 -0.278 -6.71%

Source: LE/Ventyx

CorkJune 2011

7

Results

CorkJune 2011

Table 6‑29: CBA - Wind Development Scenario with NOx and SOx (£ millions)

Year NOx Costs SOx Costs

Production Cost

Savings Imp. CostsOngoing

CostsAnnual Net-Cost Benefit

Discounted Net-Cost Benefit

2011 £4.88 £11.62 £7.41 -£3.85 -£0.16 £19.90 £19.04

2012 £19.31 £38.01 £7.32 £0 -£0.16 £64.48 £59.03

2013 £10.28 £17.16 £6.75 £0 -£0.16 £34.03 £29.81

2014 £8.41 £17.02 £6.88 £0 -£0.16 £32.16 £26.95

2015 £10.79 £22.56 £5.30 £0 -£0.16 £38.49 £30.86

2016 £7.86 £13.97 £4.55 £0 -£0.16 £26.22 £20.11

2017 £8.33 £11.64 £4.45 £0 -£0.16 £24.26 £17.81

2018 £8.17 £17.83 £8.59 £0 -£0.16 £34.43 £24.17

2019 £6.69 £13.42 £10.63 £0 -£0.16 £30.58 £20.54

2020 £6.89 £9.15 £11.54 £0 -£0.16 £27.43 £17.63

Totals £331.98 £265.94

Discounted Demand Side-Benefits

£1.82

Total (including Discounted Demand-Side Benefits) £267.76

Source: LE analysis of Ventyx Data

8

Results

CorkJune 2011

Table 6‑34: Annual Hours with Congestion - Offshore Wind

Year Base Change Diff Diff (%)

2011 260 169 -91 -35.00%

2012 1,066 922 -144 -13.51%

2013 1,504 1,430 -74 -4.92%

2014 2,067 1,945 -122 -5.90%

2015 2,779 2,814 35 1.26%

2016 4,556 4,556 0 0.00%

2017 1,518 1,598 80 5.27%

2018 1,671 1,746 75 4.49%

2019 1,558 1,572 14 0.90%

2020 1,186 1,201 15 1.26%

Source: LE/Ventyx

9

Conclusions

Studies showed significant costs exceeding benefits from seasonal-zonal tariffs

Levels of offshore wind did not materially impact the overall conclusion of benefits exceeding costs for seasonal zonal tariffs• Levels of congestion not largely impacted either

Some of the major benefits from seasonal-zonal tariffs from reduced emissions and reduced fuel cost; these reduce under largest offshore wind capacity scenarios

CorkJune 2011

10

Annex slides: Offshore wind scenario

CorkJune 2011

Table 6‑5: Aggressive Off-shore Wind Sensitivity - Installed Wind Capacity MW

  2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

GB Off-Shore Wind

404 614 773 1,621 2,0762,59

63,11

63,79

24,33

24,83

75,33

25,82

76,32

26,87

2

growth off-shore (MW)

211 159 848 455 520 520 676 540 505 495 495 495 550

growth rate (%)

52% 26% 110% 28% 25% 20% 22% 14% 12% 10% 9% 8% 9%

Source: LE/Ventyx

11

Annex slides: Base case wind scenario

CorkJune 2011

Table 6‑4: Spring 09 Ref Case - Installed Wind Capacity MW

 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021

GB Off-Shore Wind

404 566 688 1,340 1,690 2,090 2,490 3,010 3,460 3,910 4,360 4,810 5,260 5,760

growth off-shore (MW)

162 122 652 350 400 400 520 450 450 450 450 450 500

growth rate (%)

40% 22% 95% 26% 24% 19% 21% 15% 13% 12% 10% 9% 10%

Source: LE/Ventyx