Presentation at the 17th German Norwegian Energy Forum in Berlin 2013

1. NORD.LINK
Status of a transnational project
Foto:
TennetT
German Norwegian Energy Forum
Berlin 24. October 2013

2. Content
• Partners
• The rationale
• The project
– Key figures
– Status progress
• Economics – the investor perspective

3. Connecting
renewables

4. The NORD.LINK Partners
• Norwegian TSO
• Owner and operator of the Norwegian
grid, including interconnectors
• 50% project ownership
• Dutch and German TSO
• Owner and operator of the grid at the
connection points in Germany
• 25% project ownership
• German government owned financial
institution
• Active in financing Energiewende projects
• 25% project ownership
DC Nordseekabel GmbH & Co.KG

5. Strategic fit
•
•
•
•
Increase security of supply
Market integration in Europe
Create value for stakeholders and society
Facilitate integration of renewable
Connecting hydro to wind
• Reduce CO2 emissions
5

6. Key figures
• Tonstad – Wilster
• 514 km submarine cable
• 53 km overhead line, Norway
• 55 km underground cable,
Germany
• In operation 2018
• 1400 MW
• VSC converter technology
• Investment 1.5 – 2.0 billion
EUR

7. Status progress – NORD.LINK

8. Required licenses
License
according
to the
Offshore
Energy Act
Technical
license
Norwegian Water
Resources and
Energy
Directorate
Ministry of
Petroleum
and Energy
Interconnector
license
Offshore
license
Ministry of
Petroleum and
Energy
Danish Energy
Agency
Exclusive
Economic
Zone
(EEZ)
Federal Maritime
and
Hydrographic
Agency (BSH)
State Mining
Authority
(LBEG)
Regional
Planning
Procedure
Amt für
Plannfeststellung
Energie (AfPE)
Stadt und Kreis
- Wegennutzung
- Wasserung
- Private

9. Socio-economic business case
Overall economic benefit
> (Investment + increased variable cost)
=> Profitable
NPV (2013 MEUR)
|
Congestion rent interconnector
Revenue from trade with reserves
Compensation from capacity mechanisms
Investment cost cable and converter
Operation‐ and maintenance costs
"Interconnector" profitability
Producer‐ and consumer surplus
Reduced congestion rent other interconnectors
Transit costs
System operations costs
Losses in the Norwegian grid
Norwegian grid reinforcements (net)
Residual value
Socio‐economic profitability, Norway
IRR
Repaid in year
1 325
100
240
700
‐40
925
1 350
‐340
‐20
‐250
‐200
‐220
20
1 260
11 %
2029
Wider
benefits
10 %
2031
Approximate numbers from the Norwegian Interconnector License application
Flat exchange rate 1 EUR = 8 NOK used for conversion

10. Investments in the electricity sector,
- complex decisions, high uncertainty
ELECTRICITY PRICE DRIVERS
• Fuel prices
• New renewable generation
• CO2-price
• New nuclear /
dismantling of old nuclear
• Interconnector capacity
• Energy efficiency
• Development of demand
and demand response
… regulatory intervention in the markets increase
uncertainty for investors

11. Capacity Mechanisms –
a challenge for the European EM integration

12. Capacity Markets
– important for the business case for our planned interconnectors
• UK
Authorities have published a draft solution for a
national capacity market
(27. June and 11. October)
• Germany
Has not concluded yet – have strategic reserves for
the coming winter
• Norway
In the interconnector license applications,
we have estimated that each interconnector
could earn 30 MEUR/year from CM participation
• Our view
As a general principle market developments should
facilitate trade and follow the principles behind
the Internal Energy Market

13. Closing remarks
 We support market coupling and the development of
an integrated European electricity market. It will:
 Facilitate competition and provide effective resource utilization
 Provide cost efficient security of supply
 Our planned interconnectors will contribute to the same by:
 Allowing Norwegian flexible hydropower capacity
to play along with other production capacity
to the common benefit of the systems on both sides, thus
 providing a contribution to the transformation of the European
electricity system
 If the introduction of capacity markets is deemed necessary, they must
be designed so that all market players, also interconnectors, are allowed
to participate

14. BACKUP

15. Market Coupling – a success story
Percentage of the hours of the
day
Market coupling of Germany and The Netherlands
100%
80%
Flow from high price
to low price
60%
No flow from high
price to low price
40%
20%
0%
1 3 5 7 9 11 13 15 17 19 21 23 25 27 29 31 1 3 5 7 9 November 21 23 25 27 29 2 4 6 8 10 December 22 24 26 28 30
11 13 15 17 19
12 14 16 18 20
October
Okt
Before market coupling
Nov
Des
After market coupling
Benefits of the integration due to market coupling, implemented across EU, is
estimated to be between €2.5bn to €4bn per year (booz&co, 2013)

16. Interconnectors contribute to
security of supply

17. Capacity availability of
nuclear power and interconnectors
Capacity availability [%]
for 35 HVDC interconnectors
around the world (2010)
Capacity availability [%]
for 29 countries with commercial
nuclear reactors (2010)
100
100
100
90
90
90
80
80
80
70
70
70
70
60
60
60
60
50
50
50
50
40
40
40
40
30
30
30
30
20
20
20
20
10
10
10
10
0
0
0
0
90
80
AVERAGE
Countries 1 - 29
AVERAGE
HVDC interconnectors 1 - 35
Sources: IAEA (2013) and CIGRE (2012)
100