Regional Transmission Network Development: Implications for Trade and Investment

1. Regional Transmission Network Development: Implications for Trade and Investment Key Regulatory Issues for the Future DamjanMedimorec Member of the Board European Network of Transmission System Operators for Electricity (ENTSO-E) November 11-12, 2009

3. USEA/USAID Regional TND Workshop, Istanbul, November 2009 Key Regulatory Issues for the FutureTSO Contribution to the Panel #2 Damjan Međimorec Member of the Board European Network of Transmission System Operators for Electricity (ENTSO-E)

4. Overview of ENTSO-EENTSO-E & The Third EC Energy Package European Network of Transmission System Operators for Electricity EC Third Energy Package ENTSO-E is now fully operational prior to the package being in force Purpose of the Association Pursue cooperation of the European TSOs - pan-European and regional Promote the TSOs’ interests Active, important role in European rule setting process - EU legislation 4

5. Associations of European TSOs(starting point of ENTSO-E at the end of 2008)

6. 42 members / 34 countries,8 regional markets,5 synchronous regions The Association - Members Transferred activities from 6 previous associations finalised with 1st July 2009(including legal agreements /CTA’s/– e.g. ETSO, UCTE) • On-going work continuing without interruption • Building on existingstrenghs

7. ENTSO-E Responsibilities • Cooperation among TSOs, and also external communication on: • Meeting the needs of the IEM / facilitating market integration • Reliable operation • Optimal management / Security of supply • Sound technical evolution • Develop and monitor network plans (Commission, ACER roles) • Develop and monitor network codes (Commission, ACER, Comitology roles) • Promoting R&D and public acceptability of transmission infrastructure • Positions, consultation • reflecting on EU energy policy objectives (such as RES) • Other requirements • binding rules for TSOs and grid users crucial for maintaining system reliability and a well functional electricity market • pan-European 10-Year Network Development Plan

8. Assembly Board Secretariat Legal & Regulatory Group Expert Groups Working Groups Regional Groups System Development Committee • European Planning Standards • Network Modeling and Data • 10 Year Network Develop. Plan • Research and Development • S. Adequacy & Market Develop. • Asset Implem. & Management • EWIS Project • North Sea • Baltic Sea • Continental CE • Continental CS • Continental SE • Continental SW Voluntary Regional Groups System Operations Committee • European Operational Standards • Critical Systems Protection • Northern Europe • Isolated Systems • Continental Europe • Nordic • Baltic • Great Britain • Ireland - N. Ireland Market Committee • Market Integration • Ancillary Services • Market Information • Economic Framework • RES • EDI • Baltic Sea • North West Europe • South East Europe

9. ENTSO-E Envisaged 2009-2010 Work Program Network code development priority areas: Pilot Code (under development) The EC and ENTSO-E are to focus initially on the following: Transparency Design for market integration General generation connection conditions Key Work Areas Ten year network development plan R&D Plan for TSO needs Common operational tools Position papers on future transmission technology, EMF and licensing procedures Long term strategy for system development Renewable energy sources Technical documents on operational reserves, and on determination of incident classification Ancillary services TSOs’ economic framework Congestion Management

10. 10-year network development planBuilding scenarios is a 2-way process Top down Community-wide N+15 20/20/20 N+10 20/20/20 ? Business as usual N+5 conservative Bottom up Gen. data National plans

11. Challenges for the ENTSO-E 10-year network development plan: Sustainability driver renewables integration • EU renewables targets (20% of energy demand by 2020; even more as % of electricity demand) • Renewable resource availability and support schemes often lead to investments far from load centers • Resource variability • Europe’s electricity transmission networks • provide the route for the efficient transport of renewable energy to consumers • provide the means for efficiently managing infeed variability by harnessing diversity and backup energy sources • In ENTSO-E’s work, not only system development but also system operations, market issues affected significantly

12. Integration of Renewable Energy • EC Climate Change package & Targets – urgency ! • Recommendations and other results from EWIS (“European Wind Integration Study”) Project (TSO consortium under ETSO & UCTE with EC co-financing) will be embedded into broader ENTSO-E activites • For the pilot code topic, wind generation connection conditions were chosen by ENTSO-E and ERGEG, with support from EC • This pilot code will relate to a planned ERGE framework guideline which will cover network connection issue as a whole

13. Capacity Allocation and Congestion Management • Regulation 1228/2003 and its CM Guideline Intentions • Lots of work in this area completed collectively within ENTSO-E and formerly ETSO • Recent EC Infringement Case • Market Integration Design Project – Establishment of models towards collaboration of regional markets • Endorsed by the Florence Forum • Participation by all key stakeholders Conclusions by the EuroPEX-ENTSO-E project • Regional Initiatives have made significant progress  but overlapping regions are becoming a barrier to market coupling solutions; • Few examples of initiatives between regions so far • Little evidence of a coordinated approach  “Target Model” presented at the Regulators Forum

14. Next step: a Target Model to ensure compatibility between regional initiatives • Addresses all timeframes in a logical and sequential way • Developed in parallel with the regional initiatives • Act as a benchmark for consistency and essential cross border harmonisation and compatibility. A consensus view amongst stakeholders of a model for cross border congestion and market integration A medium term view for progressive implementation at the latest by 2015

15. Monitoring Market Power • The importance of making investment decisions to help improve and facilitate the functioning of the market • The TYNDP is no guarantee that investments will be made but it will keep the focus on this very crucial issues • Monitoring competition is not a task of TSOs but for competition authorities and regulators • TSOs are considered to be primary source of (market) information for such monitoring – existing legal framework was so far not sufficently enforceable to accomplish this task towards other stakeholders ! • First priority after pilot code is given to transparency code • In paralell ETSO Vista (under new name) will be further developed to ensure high quality and easy accessibility of data, potentialy as a official compliance tool !

16. Conclusions • The ENTSO-E tasks and challenges to achieve goals on climate change, reliability, security of supply and economics • ENTSO-E is now up and running, as per the EC Third package provisions • ENTSO-E Work Program to be finalised following closure of consultation • Key focus areas include: • 10-year network development plan process - with a first draft available mid 2010 • Supporting renewables integration • Improving capacity allocation and congestion management • Development of such initatives as the Market Integration Design Project • Supporting monitoring market power through transparency facilitation • The importance of making investment decisions to help improve and facilitate the functioning of the market

17. Questions?Thank-you for your attention