e-Highway2050: Costs benefit analysis of the selected 2050 pan- European grid architectures for each of the five scenarios

Challenge
To which extent and under which assumptions benefits of the identified grid reinforcement architectures at the 2050 time horizon exceed the costs for each of the considered Scenario?

Background and assumptions 
The CBA approach developed for e-Highway2050 aims at assessing the relevance of alternative options relative to long-distance trans-national transmission infrastructures. This is achieved through a scoring by comparing simulation cases with and without network reinforcements, the scoring being obtained by assessing benefits and costs of components. 

Among all the CBA indicators, the ones where a consolidated background is available are called Core indicators. They include Life cycle costs (LCC), Change in System Social Welfare, Change of inter-zonal transmission losses, Change of CO2 emissions, System reliability costs, DSM costs. In addition, some experimental indicators were tested and sensitivity parameters were checked in order to provide a more expanded sight on the technical economic factors influencing network investments.

A CBA toolbox has been developed to assess core as well as experimental benefits and life cycle costs for each of the five scenarios. Additional results including sensitivity analysis to critical parameters are also available from the toolbox. All the results for 2050 and for the intermediate year 2040 are collected in D6.3 [6] which the main assumptions of the CBA are also detailed. The key assumptions are summarized hereafter:
- The CBA methodology is applied for on the average of all the Monte Carlo years given by ANTARES simulations;
- CO2 reduction is monetized taking into account a CO2 emission tax value of 270 €/t for all the scenarios;
- For assessing the benefits for all the scenarios, it is assumed that the “without reinforcement” case is represented by the “starting grid” ANTARES case, while the “with reinforcement” case is represented by the final step identified in WP2 (see D2.3 [3] );
- the Social Welfare variation split is described in terms of sum of variation of Consumers and Producers Surpluses and the variation of Merchandise Surplus/Congestion Rent;
- In life cycle costs (LCC), according to the hypotheses from WP2, only CAPEX have been considered;
- In the reduction of reliability costs, the reduced ENS (Energy Not Served) has been estimated by a unique European level of VoLL (Value of Lost Load) equal to 10000 [€/MWh];

Three strategies of reinforcement are considered in each scenario corresponding to different requirements of investment resulting from public acceptance constraints.
- “Status Quo”: the public opposition against new infrastructure prevents any new OHLs. Only refurbishment of existing lines or new DC cables can be implemented.
- “Re-Use of Corridors”: the public accepts new OHL as long as they are close to existing lines. Therefore new AC or DC Overhead-lines can be implemented when they are in the existing corridors.
- “New Grid Acceptance”: the public accepts new OHL and also the development of new corridors. DC cables are also possible but OHL are preferred when possible due to their lower costs.

1. Core benefits assessment per scenario
Three core benefit indicators are appraised for the three different reinforcement strategies.

Table 1 shows the annual values for each scenario. For all scenarios, it is first observed that there is no effect of the strategy in these benefits since directly derived from the ANTARES system simulations results where the expansion path was determined independently from the choice on technological solutions, while reinforcement strategies have an influence on life-cycle costs. 

A second feature of the results is the significant reduction of variable costs of generation thanks to transmission network reinforcement:
- An increase of Social Welfare (reduction of fuel and O&M costs) which can reach up to 27 [b€/a] for the “large scale RES” scenario (and a minimum of 3 [b€/a] for the “small and local” scenario;
- An economic value corresponding to the reduction of CO2 emissions ranging from 6 to 52 [b€/a];

A third conclusion has to be drawn in direct relation to the level of valorisation of ENS (energy not served). Assuming a unique costs for unsupplied demand on the level of 10,000 [€/MWh] for the whole Europe, that corresponds to an average of the values assessed by the e-Highway2050 project for the EU countries, the reduction of reliability costs is the most impacting core benefit indicator for all Scenarios. Under such assumption, transmission network reinforcements are able to cover ENS costs over an amount varying from 45 to 234 [b€/a] according to the Scenario.

Reducing the assumption of the ENS cost to values in the range of 500-1,000 [€/MWh] as explored in other tasks1of the project would lead to a more balanced breakdown between the three components of the core benefit indicators: the reduction of reliability costs remains then at the same order of magnitude than the two other components that are the increase of social welfare and the reduction of CO2 emissions.

Table 1. Core benefit indicators per Scenario (same figures for the three strategies)

Scenario X-5 - Large scale RES and low emissions
Transmission network reinforcements allow a reduction of variable costs of generation and enabling an annual benefit at about 313 [G€/a] with an increase of Social Welfare (mainly reduction of fuel costs) at about 27 [G€/a], while the economic value correspondent to the reduction of CO2 emission is about 52 [G€/a]
The relative importance of the reduction of reliability costs at 234 [G€/a] results directly from the ENS assumption.

Scenario X-7 - 100% RES
Transmission network reinforcements allow a reduction of variable costs of generation and enabling an annual benefit exceeding 538 [G€/a] with an increase of Social Welfare (mainly reduction of fuel costs) at about 14 [G€/a], while the economic value correspondent to the reduction of CO2 emission is higher than 21 [G€/a].
The reduction of reliability costs reaches the highest value of 502 [G€/a], direct consequence of the extreme ENS assumption.

Scenario X-10 - Big and Market
Transmission network reinforcements allow a reduction of variable costs of generation and enabling an annual benefit at about 138 [G€/a] with an increase of Social Welfare (mainly reduction of fuel costs) is about 8 [G€/a], while the economic value correspondent to the reduction of CO2 emission is slightly higher than 14 [G€/a].
Again the reduction of reliability costs at such high levels as 115 [G€/a] results directly from the ENS assumption.

Scenario X-13 - Large fossil fuel with CCS and nuclear
Transmission network reinforcements allow a reduction of variable costs of generation and enabling an annual benefit slightly lower than 79 [G€/a] with an increase of Social Welfare (mainly reduction of fuel costs) is about 1.7 [G€/a], while the economic value correspondent to the reduction of CO2 emission is 9.4 [G€/a].
Under the same assumptions of ENS, a benefit of 68 [G€/a] is obtained for the reduction of reliability costs.

Scenario X-16 - Small and local
Transmission network reinforcements allow a reduction of variable costs of generation and enabling an annual benefit slightly higher than 55 [G€/a] with an increase of Social Welfare (mainly reduction of fuel costs) at about 3.4 [G€/a], while the economic value correspondent to the reduction of CO2 emission is about 6.3 [G€/a].
Similarly, the reduction of reliability costs is estimated at 45 [G€/a], value which should be considered with the same precautions (ENS assumption).

2. LCC assessment per scenario
The annual core cost indicators (LCC) are appraised: the difference between the three Strategies results from the different technologies (e.g. use and acceptance of transmission lines) which are used for the different grid architectures:
- Strategy 1 “New Grid Acceptance” is clearly the cheapest solution since it encompasses a full acceptance of new overhead lines (OHL) at the target year, following the shortest path;
- Strategy 2  “Re-Use of Corridors” is slightly more expensive than Strategy 1, since it is only allowed the re-use of existing OHL corridors, applying a +20% detour factor. Indeed in that strategy there are more constraints on OHL, direct routes cannot thus be followed, resulting in longer distances (re-adaptation of the infrastructure path);
- Strategy 3 “Status Quo” is always the most expensive solution since it assumes that no further OHL lines can be realized.

Table 2. Core cost indicators per Strategy and Scenario at the target year (2050)

Scenario X-5 - Large scale RES and low emissions
Strategy 1 considering the full acceptance of new OHL is slightly lower than 15 [b€/a]). Strategy 2 is slightly more expensive than Strategy 1 (+ 4% with respect to Strategy 1) while Strategy 3 is at + 54% compared with Strategy 1.

Scenario X-7 - 100% RES
Strategy 1 considering the full acceptance of new OHL following the shortest path is at about 14 [b€/a]). Strategy 2 is at comparable level (+ 1% compared with Strategy 1) while Strategy 3 is the most expensive at + 45% compared with            Strategy 1.

Scenario X-10 - Big and Market
Strategy 1 is again the cheapest at less than 8 [b€/a]). Strategy 2 is slightly more expensive than Strategy 1 (+ 3% respect Strategy 1, applying the 20% detour factor) while Strategy 3 is the most expensive at + 60% compared with Strategy 1.

Scenario X-13 - Large fossil fuel with CCS and nuclear 
Strategy 1 is at less than 7 [b€/a]). Strategy 2 is slightly more expensive than Strategy 1 (+ 4% with respect to Strategy 1, applying the 20% detour factor) while Strategy 3 is the most expensive at + 78% compared with Strategy 1.

Scenario X-16 - Small and local
Strategy 1 is the cheapest solution at 6.6 [b€/a]). Strategy 2 is more expensive than Strategy 1 (+ 16% respect Strategy 1, applying the 20% detour factor) while Strategy 3 is the most expensive at + 70% compared with Strategy 1.

The figure below gives an overview of the total investment costs for each scenario as well as their corresponding annuities. For the three scenarios with the lowest needs for reinforcements (Big & market, Fossil & nuclear, Small & local), the total costs range between 120 and 220 b€ depending on the public acceptance of new overhead lines and therefore the available reinforcement technologies. In the scenarios Large Scale RES and 100% RES, the architectures are almost twice as expensive as the three other scenarios with a total cost around 250 b€ in the case of new grid acceptance and around 390 b€ with DC cables in case of status quo.

Fig. 1. Investment costs and annuities of the final architectures for each scenario

The total annual benefits estimated in each scenario can be compared to the annuities of investment.

For all Scenarios the proposed architectures detailed here solve in a great extent the ENS problems of the starting grid. Even in the less favorable situations, i.e. with the strategy “status quo” in which only refurbishment of existing lines or new DC cables can be implemented due to a strong public opposition to new OHL infrastructures and with an ENS cost of 1000 €/MWh, the architectures identified in each Scenario appear as profitable. Higher level of ENS would lead to higher ratios of profitability even for the more costly Scenarios Large Scale RES and 100% RES which require more significant investments when compared to the three other Scenarios.

3. Conclusions
The CBA toolbox developed by the project has been applied to the scenarios and strategies defined by the project  (“Status Quo”, “Re-Use of Corridors”, “New Grid Acceptance”). Calculations are based on a Value of Lost Load equal to 10000 [€/MWh]. Sensitivity analysis on the VoLL is available in D6.3 [6] which also include the appraisal of influence of the Social and Environmental as well as the Financial and Regulatory aspects on the annual LCC in the three different reinforcement Strategies.

References
[1]    B. H. Bakken, M. Paun, R. Pestana, G. Sanchis, “e-Highway2050: A Modular Development Plan on Pan- European Electricity Highways System for 2050”, Cigre Lisbon, April 2013
[2]    G. Sanchis, RTE et alia, “A methodology for the development of the pan-European Electricity Highways System for 2050”, CIGRE Paris, August 2014  
[3]    Thomas Anderski, Amprion et alia, deliverable D2.3 System simulations analysis and overlay-grid development – Digest.
[4]    T. Anderski, Amprion; F. Careri, RSE; N. Grisey, RTE; G.Migliavacca, RSE; D. Orlic, EKC; G. Sanchis, RTE. e-Highway2050: a research project analysing very long term investment needs for the pan-European transmission system. Cigre Paris. Submitted to Cigre Paris, August 2015
[5]    http://www.e-highway2050.eu
[6]    Gianluigi Miglivacca et alia, deliverable D6.3, to be published end of 2015

Notes
(1) The costs of such additional thermal generation capacities would range between 5 and 25 billion Euros per year considering a typical OCGT investment cost of 0.7b€/GW plus fuel and CO2 costs. Based on the results of the numerical simulations for the whole Europe, the capacity of such additional generation would be at least 60 GW in the less severe scenario (Small & local) and at least 140 GW in the most critical one (100% RES).