Improgres Stakeholders meeting Improgres project results on Active Network Management (Actief Netbeheer) Improgres Stakeholders meeting Amsterdam, January 19th 2010 Frans Nieuwenhout

Active Network Management Definition: DG integrated into network control, with greater coordination of power system operation, rather than connection only Fundamental difference with existing congestion management in eg Westland: a) ANM is permanent not temporarily b) DSO no longer has obligation to relieve congestion as soon as possible Note: DG = Distributed Generation, including demand response

Congestion management in Westland provides example how ANM could work (New) DG units in Westland are required to formulate bids to pay the network operator for not producing the electricity the DG sold already for the coming day When congestion is expected, the network operator pays generators outside the congestion area to produce more and receives (a smaller amount) from some DG in the congestion area for not producing

Wind curtailment (temporarily reduce output of wind turbines) Active Network Management: Options to reduce network costs in Kop Noord Holland Wind curtailment (temporarily reduce output of wind turbines) Shifting CHP generation (reduce during peak generation; increase during peak load) Demand response (shifting greenhouse lighting load to different hours) Others, ……..

Before ANM: scenario assumptions: today (2008) and 2020 (low/high) (Westwoud is the grid supply point connecting to the TSO TenneT) 2 snapshots: a) maximum demand + minimum generation, and b) minimum demand + maximum generation, determine the optimal distribution network In 2020 feeding back into transmission grid becomes dominant

Active Network Management options: Assumptions for the analysis

Investment and maintenance cost [M€] Kop Noord Holland network in 2020, including ANM cost reductions Low DG%: demand dominate network costs High DG%: generation dominate costs; higher demand leads to lower costs

Comparison investment + maintencance costs before and after Active Network Management [M€] (Red points: cost before ANM; blue after ANM) Difference in cost blue-red dots show cost savings due to ANM For low DG %: ANM savings are very small For medium and high DG, lifetime savings are: 120-180 M€ (includes NPV of maintenance)

Annualised incremental network cost (investment+maintenance) (Red points: cost before ANM; blue after ANM) For 2020 demand: maximum potential costs savings due to ANM: 8 €/kW/year (average value over all installed DG)

Break down lifetime cost savings Investment+maintenance [M€] About two-thirds of cost savings are due to HV/MV transformer stations

Network cost savings DSO versus decrease in electricity revenues clients Cost saving DSO: Total potential network cost savings of ANM are substantial (about 11 M€/year for high DG scenario in Kop Noord Holland) Dividing these cost savings equally over the 3 ANM options: 200 MW wind, 265 MW CHP reduction and 100 MW extra load, annual network costs savings for DSO are 20,000 €/MW/year (per MW of ANM) Costs or reduction of electricity revenues for clients: For a 5 MW CHP reducing output to 4 MW for 1500 hours/year during peak generation, loss of net revenues about 45,000 €/MW/year (APX peak hours: 75 €/MWh, generation cost 45 €/MWh with use of heat) Shifting load from night to evening costs about 30 €/MWh due to lower tariffs at night. For 1500 hours/year this implies 45,000 €/MW/year Conclusion: The loss in electricity revenues is higher than the benefits of ANM when ANM is required in the order of 1000 hours/year. It is unlikely that ANM only with agricultural CHP or agricultural load shifting will result in a viable business case

Load duration curve wind Only 15% of time, wind power produced is more than 80% of installed capacity

Wind reduces the number of hours in which ANM is required Only 15% of the time the output of a wind farm is more than 80% of its installed capacity CHP units export about 1500 hours/year CHP and wind combined: maximum at same time: only 225 hours/year Instead of wind curtailment: reduce output of CHP Reducing CHP output 225 hours per year would reduce the net benefits of CHP operator with about 6,750 €/MW/year This compares favourable with network savings of 20,000 €/MW/year (network savings per MW of ANM) But, is this a good business case?

Gaming (strategic behaviour) reduces benefits for the DSO Assumption: congestion management via market mechanism CHP operator breaks even when paying around 45 €/MWh for not having to produce the electricity sold already (mainly saved fuel cost) CHP operators ‘learn’ that DSO is dependent on their contribution Due to limited competition they will offer not to produce for a price below their variable cost savings, thereby increasing the cost for the DSO Some CHP operators might strategically offer to generate more than actually needed, and compensate that later by offering not to generate This increase the congestion volume, and thereby the total congestion cost to the DSO The limited number of ‘players’, operating close to each other and under similar conditions, makes gaming a serious threath The limited predictability of wind farm output creates uncertainty in congestion volume, reducing expected benefits of strategic behaviour A smaller required output reduction leads to more competition and less gaming More contracts, with different players (e.g. flexible household loads) can also reduce gaming Net outcome of these effects is difficult to predict, but DSO should take into account that part of the benefits of reducing grid investment cost will flow to the CHP operators

Preliminary conclusions on ANM Noord Holland case study The combination of wind farms with CHP and load shifting might provide a viable business case To limit gaming, the economic potential for ANM is much smaller than the technical potential (e.g. in the high DG case closer to 100 MW compared to 565 MW used for calculating the 180 M€ network savings Potential savings on network cost are estimated in the order of 5% compared to the 30-35% from the network optimization models (about 2 M€/year) To realize this 5% cost reduction, there are substantial uncertainties for the DSO When these uncertainties cannot be reduced beforehand, the DSO is likely to choose for the alternative to strengthen the grid instead of relying on ANM

Alternatives to market based congestion management 1. Reducing the connection obligation of the DSO 2. Reducing transport obligation of the DSO 2a. DSO obliged to offer all producers a uniform offer to contribute to ANM 2b. Customers are obliged to participate in ‘control contracts’ at the choice of the DSO 2c. Customers are obliged to participate, but with negotiable ‘control contracts’ 3. Market based: both DSO and customers are free to decide on ‘negotiable ‘control contracts’

Generalisation of ANM conclusions Active wind curtailment will often not be required due to less costly alternatives Under relatively suitable technical conditions, the potential cost reductions are still relatively small (estimated at 5% for Kop Noord Holland) Most favourable circumstances for ANM occur when only in a small number of hours per year actual ANM will take place The uncertainties in market based congestion management systems are large due to gaming

Preliminary recommendations on ANM: Start pilot projects on ANM, for example a cluster of a wind farm and a group of agricultural CHP under one HV/MV substation These pilots should not only focus on technical aspects but also assess how to cope with gaming

Discussiepunten: 1. Voorwaarden Actief Netbeheer 2. Zekerheid voor netbeheerder 3. Beperken strategisch gedrag 4. Alternatieven voor marktgerichte benadering

1. Voorwaarden Actief Netbeheer Wat zijn de voorwaarden die verbonden zullen worden aan de toepassing van Actief Netbeheer? Hoe kunnen sturingscontracten eruit gaan zien? Welke financiële en niet-financiële voorwaarden zal bijvoorbeeld een WKK eigenaar naar verwachting gaan stellen ter compensatie van het niet produceren van reeds verkochte elektriciteit?

2. Zekerheid voor netbeheerder Netten worden aangelegd voor 40-50 jaar terwijl de economische levensduur van een WKK installatie veel korter is. De kas van de toekomst gaat naar verwachting netto warmte produceren waardoor WKK eenheden dan niet meer nodig zijn. Het gevolg hiervan is grote onzekerheid bij de netbeheerder over de langtermijn bijdrage van WKK eenheden aan het uitstellen van netinvesteringen door toepassing van Actief Netbeheer. Hoe kan de netbeheerder voldoende zekerheid krijgen dat Actief Netbeheer voldoende lang volgehouden kan worden?

3. Beperken strategisch gedrag Als een beperkt aantal nabijgelegen installaties samen een bijdrage moeten leveren om de aan te leggen netcapaciteit te beperken dan doet zich het mogelijke gevaar voor van ‘strategisch gedrag’ (gaming). Hierdoor zouden de kosten van Actief Netbeheer voor de netbeheerder hoger kunnen worden dan verwacht. Hoe zou strategisch gedrag zoveel mogelijk vermeden kunnen worden zodat alle partijen voordeel blijven houden bij Actief Netbeheer?

4. Alternatieven voor marktgerichte benadering Indien het niet mogelijk blijkt te zijn om in het kader van een marktgerichte benadering vrijwillige sturingscontracten op te stellen dan lijken verplichtingen noodzakelijk. Welke van de alternatieve mogelijkheden zou dan de voorkeur hebben? Of is geen van de alternatieven acceptabel. Wij hebben de volgende alternatieven geïdentificeerd: Inperking aansluitplicht Inperking transportplicht algemeen Inperking transportplicht; NB-er verplicht om alle producenten ‘uniforme’ aanbieding te doen Inperking transportplicht dmv verplichte medewerking met ‘sturingscontracten’, indien de NB-er dat noodzakelijk acht. Hierbij wordt de sturingsprikkel ook gereguleerd (basis maatschappelijke afweging). Inperking transportplicht dmv verplichte medewerking met ‘sturingscontracten’, indien de NB-er dat noodzakelijk acht. Onderhandelbare maatwerkcontracten.