Value of the interconnectors in the Nordic countries

1. Value of the interconnectors in the
Nordic countries
Jacopo Tattini
PhD Student at Energy System Analysis Group
System Analysis Division
DTU Management Engineering
Maurizio Gargiulo
E4SMA

2. DTU Management Engineering, Technical University of Denmark
Agenda
• Background
• TIMES-NordPool
• Analysis of power trade in the Nordic countries
• Analysis of grid expansion possibilities
• Sensitivity analysis on effect of no grid expansion
• Conclusions
2 19
November

3. DTU Management Engineering, Technical University of Denmark
Agenda
• Background
• TIMES-NordPool
• Analysis of power trade in the Nordic countries
• Analysis of grid expansion possibilities
• Sensitivity analysis on effect of no grid expansion
• Conclusions
3 19
November

4. DTU Management Engineering, Technical University of Denmark
Background: Nord Pool market
4 19
November
Nord Pool: power trading market of
Nordic and Baltic countries.
The auctioning countries are divided into
bidding areas linked with interconnectors
controlled by the TSOs.
If the power flows between the bidding
areas exceed the interconnectors
transmission limit, grid congestion
occurs.
Bottlenecks in the interconnectors lead
to different prices in the various areas
composing the Nordic electric system.

5. DTU Management Engineering, Technical University of Denmark
Benefits of interconnectors capacity
expansion
Interconnectors are one of the main power price drivers in the Nordic countries
Interconnectors are essential for the integration of variable power sources
Interesting to assess their role and their influence on the power trade
5 19
November
Source: L’ Abbate et al. (2011)

6. DTU Management Engineering, Technical University of Denmark
Agenda
• Background
• TIMES-NordPool
• Analysis of power trade in the Nordic countries
• Analysis of grid expansion possibilities
• Sensitivity analysis on effect of no grid expansion
• Conclusions
6 19
November

7. DTU Management Engineering, Technical University of Denmark
TIMES-NordPool
TIMES-NordPool: represents the
Norwegian, Swedish and Finnish power and
thermal systems.
Purposes:
• To be run together with TIMES-DK to
better simulate power trade processes
• Exploring the future power exchange
between the Nordic countries under
different assumptions
• Assessing transmission capacity expansion
under different scenarios
7 19
November

8. DTU Management Engineering, Technical University of Denmark
TIMES-NordPool: Spatial resolution
• Multiregional model: Each country =
One region
• Interconnectors between Norway,
Finland and Sweden implemented as
endogenous trade processes
• Interconnectors between Nordic
countries and neighboring countries
implemented as exogenous trade
processes
8 19
November
Power prices and volumes endogenously
optimized
Power volumes calculated according to
price related criteria

9. DTU Management Engineering, Technical University of Denmark
TIMES-NordPool: Hard-linking with TIMES-DK
9 19
November
TRADE
TIMES-NordPool TIMES-DK
All interconnections between Nordic countries as endogenous processes

10. DTU Management Engineering, Technical University of Denmark
TIMES-NordPool: Time structure
• Same 32 time slices as TIMES-DK The models are consistent
• Base Year: 2010
• Time horizon: 2010-2050
10 19
November

11. DTU Management Engineering, Technical University of Denmark
Agenda
• Background
• TIMES-NordPool
• Analysis of power trade in the Nordic countries
• Analysis of grid expansion possibilities
• Sensitivity analysis oneffect of no grid expansion
• Conclusions
11 19
November

12. DTU Management Engineering, Technical University of Denmark
Assumptions for the analysis
All analyses on the power trade between the Nordic countries have been performed
using TIMES-NordPool hard-linked to TIMES-DK.
Baseline scenario considers:
• DKW and DKE: power and thermal system fossil free by 2035, entire energy system
fossil free by 2050
• NOR, FIN, SWE: no environmental constraints (NETP Carbon Neutral scenario is
implemented but not activated)
12 19
November

13. DTU Management Engineering, Technical University of Denmark
Transmission grid in the base year
13 19
November
Base year
Source: ENTSO-E (2012)
High integration of
power systems

14. DTU Management Engineering, Technical University of Denmark
Transmission grid expansion
14 19
November
Exogenous grid expansion
Source: ENTSO-E (2014)
Starting grid
+

15. DTU Management Engineering, Technical University of Denmark
Power generation in 2050
15 19
November
Solar
35%
Wind
Onshore
65%
DKE
Solar
18%
Wind
Onshore
82%
DKW
Coal
9%
Hydro
57%Natural
Gas
4%
Wind
Offshore
17%
Wind
Onshore
13%
NOR Biomass
4%
Coal
19%
Hydro
56%
Wind
Offshore
11%
Wind
Onshore
6%
Nuclear
4% SWE
Biomass
8%
Coal
42%
Hydro
13%
Wind
Offshore
12%
Wind
Onshore
3%
Nuclear
22%
FIN

16. DTU Management Engineering, Technical University of Denmark
Electricity prices in 2050
16 19
November

17. DTU Management Engineering, Technical University of Denmark
Power trade between Norway and Denmark
in 2050
17 19
November
Trade is ongoing:
• Until marginal costs equal
• Until congestion occurs
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18. DTU Management Engineering, Technical University of Denmark
Price convergence
Between 2010 and 2020 about 7.5 GW of new transmission lines are installed
18 19
November
..less congestions

19. DTU Management Engineering, Technical University of Denmark
Agenda
• Background
• TIMES-NordPool
• Analysis of power trade in the Nordic countries
• Analysis of grid expansion possibilities
• Sensitivity analysis on effect of no grid expansion
• Conclusions
19 19
November

20. DTU Management Engineering, Technical University of Denmark
Analysis of grid expansion
• Uncertainty on grid expansion after
2020
• Endogenous optimization of grid
expansion
• Possible new interconnectors from
ENTSO-E in Ten-Year Network
Development Plan 2014 (TYNDP)
• Constraint on starting year, no on
transmission capacity
20 19
November

21. DTU Management Engineering, Technical University of Denmark
Uncertainty on costs of future interconnectors
Sensitivity analysis with interconnectors costs: under which cost condition the
interconnectors are built?
21 19
November
Low Medium High
k€/MW INVCOST O&M INVCOST O&M INVCOST O&M
NOR-SWE 190 0.4 310 0.7 440 1.0
NOR-FIN 600 1.4 1000 2.3 1400 3.2
SWE-FIN 56 0.1 91 0.2 130 0.3
DKW-DKE 430 1.0 725 1.6 1020 2.3
DKW-SWE 560 1.3 930 2.1 1300 2.9
SWE-GER 260 0.6 429 1.0 600 1.4
SWE-LAT 300 0.7 500 1.1 700 1.6
NOR-HOL 1033 2.3 1721 4.0 2410 5.4
Source: ENTSO-E (2014)

22. DTU Management Engineering, Technical University of Denmark
Endogenous grid expansion: sensitivity
analysis
22 19
November
Low interconnectors costs Medium interconnectors costs High interconnectors costs
Exogenous power prices not consistent

23. DTU Management Engineering, Technical University of Denmark
Agenda
• Background
• TIMES-NordPool
• Analysis of power trade in the Nordic countries
• Analysis of grid expansion possibilities
• Sensitivity analysis on effect of no grid expansion
• Conclusions
23 19
November

24. DTU Management Engineering, Technical University of Denmark
Sensitivity analysis: only existing
interconnectors
How does the Nordic power system react to a changeless transmission grid?
Only interconnectors existing or under construction by 2015 are considered
24 19
November
Region
Average relative price
increase
Average absolute
price increase
(€/MWh)
Price relative
stnrd dev
increase
DKE 7% 3.4 59%
DKW 1% 0.5 64%
FIN 1% 0.5 53%
NOR 9% 3.9 88%
SWE 12% 4.8 87%
Most
penalized
country

25. DTU Management Engineering, Technical University of Denmark
Agenda
• Background
• TIMES-NordPool
• Analysis of power trade in the Nordic countries
• Analysis of grid expansion possibilities
• Sensitivity analysis on effect of no grid expansion
• Conclusions
25 19
November

26. DTU Management Engineering, Technical University of Denmark
Conclusions
TIMES-NPM hard-linked to TIMES-DK allows:
• Calculating endogenously the power prices and volumes between Denmark and the
rest of the Nordic countries  Limiting the risk of the assumptions on the
exogenous trade processess for the Danish interconnectors
• Optimizing endogenously the transmission grid expansion
• Assessing for the Nordic interconnectors the cost thresholds within which they are
feasible
• Assessing for each Nordic country the average increase of power prices if the
planned interconnectors are not built
26 19
November

27. DTU Management Engineering, Technical University of Denmark27 19
November
Jacopo Tattini
jactat@dtu.dk
http://www.sys.man.dtu.dk/Research/Energy-Systems-Analysis/PhD-projects