Proposals for a DG Connection Charging Framework in the EU Richard Knight Rolls-Royce plc
[email protected]
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Summary z Purpose of the ELEP research z Connection charging methodologies z Example European legislation z Research approach z Summary of key findings z Policy recommendations z Conclusions “Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Purpose of the ELEP Research z General recognition of the existence of technical and legislative barriers to DG and RES in the EU z Perception that approaches to connection charging in the EU are inconsistent and discriminatory z ELEP research was aimed at determining: The variations in connection charging approaches across EU Member States Those approaches considered to be “best practice” Practical connection charging policy proposals intended to level the playing field for DG and RES
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Charging Methodologies Charging Method
Summary
Advantages
Disadvantages
“Shallow”
Generator pays only for the cost of equipment needed to make the physical connection to the grid. Costs of reinforcement are borne by DNOs.
• Lowest cost for DG & RES • Transparency & consistency • Reinforcement costs can be recovered via tariff system
• Poor locational signals • DNO reinforcements can add project delays
“Deep”
Generator pays all costs associated with its connection. Includes the cost of physical connection to the grid and any upstream grid reinforcement costs.
• DG & RES generally don’t pay UoS charges • Provides a degree of locational signal
• Cost uncertainty, often prohibitively high for DG/RES • Significant DNO power • One generator can pay for reinforcements caused by others
“Mixed”
Generator pays for the physical connection to the grid, plus a proportion of any upstream grid reinforcement costs based on its proportional use of new grid assets
• Reinforcement costs paid by generator relate to his use of the new connection assets • Provides some locational signals to generators
• Clear rules needed to determine proportional costs • Reliant on DNO to perform upstream reinforcements • Costs can still be high for DG
• Provides some locational signals to generators
“True”
Generator pays a cost equivalent to the cost of connecting to the nearest point on the grid with sufficient capacity to accommodate the generator without reinforcement
• Connection costs potentially very high (especially for remote wind farms, etc)
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Example European Legislation Electricity Liberalisation Directive 2003 / 54 / EC z Regulatory Authorities have the responsibility to monitor “the terms, conditions and tariffs for connecting new producers of electricity to guarantee that these are objective, transparent and non-discriminatory, in particular taking full account of the costs and benefits of the various renewable energy sources, distributed generation and combined heat and power” z They also have responsibilities relating to the “fixing or approving (…) at least the methodologies” for calculating connection tariffs z European Commission’s 4th benchmarking report expressed dissatisfaction with liberalisation progress so far….
Renewables Directive 2001 / 77 / EC Article 7 (grid issues): z Guaranteed grid access for renewables z Grid operators required “to set up and publish their standards rules relating to the bearing of costs of technical adaptations, such as grid connections and grid reinforcements”. z These rules must be non-discriminatory z Grid operators are required to provide new renewable electricity producers with a “comprehensive and detailed” cost estimate associated with the connection, and to publish their standard rules on sharing grid connection and reinforcement costs
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Research Approach Benchmark EU-15 Member States’ Approaches z Connection charge philosophies z Implementation methods z Transparency of the methods & procedures z Typical connection charges applied z Impact on DG / RES market penetration
Review Findings to Determine…
Develop a Series of Recommendations for Policy Makers
z The key themes and issues relevant to the majority of Member States
z That are practical, clear and can be implemented through policy frameworks
z Areas of commonality and consistency in different Member States’ approaches
z …in order to create a fairer and more level market environment for all market players
z Aspects of “good” and “bad” practice
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Summary of Key Findings Charging Philosophy: z There is little consistency across the EU-15 regarding connection charging approach z Deep connection charging is the most commonly used (generally negative towards DG & RES) z The more favourable shallow approach predominates in only 4 Member States z Member States with shallow charging tend to have higher DG & RES installation levels
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Predominant Charging Philosophy Deep Mixed or no standard Shallow
Summary of Key Findings Procedural / Cost Transparency: z Transparency remains low z Only 5 States considered to offer high (acceptable) transparency z Generally very hard for developers to obtain public domain cost & procedural information z Too much emphasis on the “negotiation” between developer and DNO. This is critical for DG. z Typical costs of connection are up to 20% of total installation costs
z Is current EU legislation failing? “Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Degree of Transparency Low Medium High
Summary of Key Findings Legislative Environment: z Legislation and regulations vary significantly across the EU-15 Member States z There is usually some national legislation describing general requirements… z But this is normally very “high-level” z Often leaves the detail to be determined by the DNO or to be subject to negotiation between developer and DNO
z DG developer is often disadvantaged “Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Innovative Mechanisms Exist…. z Move towards “Apportionment Rules” for DG and RES z Connection charge methodology statements exist
z Favourable connection terms for “environmentally benign” DG z Specific planning zones where shallow charging applies
z DNOs required to publish connection tariffs on the Regulator’s website (CREG) z Structure of charges align with Legislation (RD 11 July 2002)
z 1-month connection procedure for domestic-scale PV
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
z Shallow connection charging for plant < 10 MVA z Process defined in Regulator’s Network Code (no negotiation) z Each new plant pays an “average” connection charge for its category
Policy Requirements Our research has identified the need for: z Increased consistency and transparency in relation to DG & RES connection charging in Member States, using existing “best practice” as templates z A framework where there is reduced reliance on bilateral “negotiation” between developers and DNOs to determine connection charges z Clear and published connection cost calculation procedures and charges, based on a fair evaluation methods and with defined timescales…. “Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Policy Recommendations Consistency & Transparency 1.
The European Commission (and other policy makers) should recognise that increased consistency and transparency is needed in the approach to generator connection charging across Member States in order to create a consistent non-discriminatory environment for DG and RES
2.
Fully transparent interconnection procedures, connection charging mechanisms and connection costs should be introduced (and enforced) across all Member States.
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Policy Recommendations Connection Charging Philosophy (1) 3.
Our general view is that where possible connection charging for DG and RES should follow a SHALLOW charging philosophy. However, it is recognised that there are two issues that must be considered: i.
The method of recovery of reinforcement costs
ii.
The need for locational signals to discourage the siting of new generators in locations that would adversely affect overall system efficiency…..
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Policy Recommendations Connection Charging Philosophy (2) 4.
In cases where grid reinforcement is necessary following the connection of a new DG or RES, and where pure shallow charging is not considered acceptable: i.
The DG or RES should make a (percentage) financial contribution to reinforcement costs, similar to the Apportionment Rules in the UK, limited to those costs at the voltage level at which the generator is connected
ii.
The proportion of reinforcement costs not paid for by the generator should be the responsibility of the DNO
iii.
In deriving reinforcement costs, the DNOs should base their calculation methods on the “least cost technically acceptable solution”, and these should be published by the DNO and subject to Regulator approval
iv.
For very small generators, pure shallow charging shall always apply
v.
Where a generator is connected to the distribution network in a region that has already been reinforced following the connection of another DG or RES scheme, the same apportionment methods shall apply for the new generator
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Policy Recommendations General Procedural Issues 5.
DNOs should be required to submit binding connection quotations to DG & RES developers, including proposals for reinforcement works, within 60 days of application
6.
DG & RES developers should be given the right to access the technical parameters of DNOs’ networks in order to facilitate the optimal placement of new generation plant
7.
The annual connection charges levied by DNOs shall be used solely as a means of recovering the costs of maintaining the DNO’s assets in connecting the generator
8.
The power to impose changes to connection charging costs and practices should be the responsibility of Regulatory bodies within Member States
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
Conclusions z A substantial study of connection charging mechanisms across the EU-15 has been performed z Policy recommendations based on the findings of the study have been developed z Strong leadership is now needed from policy makers to develop the right frameworks to create a truly nondiscriminatory market place for DG and RES
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
For Further Information
http://www.elep.net
[email protected] … All contributions and views welcome!
“Proposals for a DG Connection Charging Framework in the EU”, Richard Knight Integration of DG into electricity networks workshop, Berlin, 8 March 2006
