Brainstorming Session 1 Define the Scope of CBA

Scope of CBA 3. 0 Improvements: Storage 1/2 Main topics/indicators that require improvement General principles Justification on why this is important What would look this indicator in an ideal environment - Clear reference to what is STORAGE? (principle concept of storage – specific benefit) • General over-arching description of importance/role of storage; - Flexibility – Holistic treatment? • Increased monetisation – greater specificity - Quantify all benefits - Arbitrage benefits (related with SEW) - Why a CBA methodology for storage and not for other power plants? So. S (Flexibility and Adequacy) - Contribution to RES integration during lifetime – Seasonal storage effect (related to arbitrage) - Increase system flexibility to the system to integrate RES generation – Storage response related to fault ride capability during active power operation - Adequacy benefits. Benefits in terms of reducing local reliability of the system (reduces ENS) So. S (Ancillary Services) - Availability of de-centralised storage (small devices) – value of optimisation in the DSO services – Communication between TSO and DSO. Observability and availability for contributions in local and global. - Contribution to the ancillary services – System services like as frequency/voltage management, frequency regulation, increase system inertia & system resilience - Found a methodology to capture benefits at less than 1 hour resolution - Not monetisation of ancillary services benefits increases. Capacity market monetisation @ENTSO-E All rights reserved 2

Scope of CBA 3. 0 Improvements: Storage 2/2 Main topics/indicators that require improvement RES and CO 2 Justification on why this is important What would look this indicator in an ideal environment - CO 2 value – avoided damage in terms of climate impact - Improve CO 2 assessment (dispatched different power plants, reduce CCGT production). Displaced CO 2 - Reduced RES curtailment Avoided Cost (network) - RES allocation in long term – contribution of Storage and transmission in terms of time and geography - Quantify the benefits in terms of network investment deferral - Contribution for saving transmission investment costs in future (relation between short and long term) Losses @ENTSO-E All rights reserved - Contribution to savings in congestion managements - How are losses treated for storage projects. It is possible that storage projects can reduce losses 3

Frame the “how” to improve the CBA indicators chosen as necessary to improve in the morning session main topics/indicators that What would look this indicator in an ideal require improvement – environment– copy paste brainstorming session 1 General principles • Clear reference to what is STORAGE? (principle concept of storage – specific benefit) • Flexibility – Holistic treatment? • Quantify all benefits • Arbitrage benefits (related with SEW) • Why a CBA methodology for storage and not for other power plants? • Contribution to RES integration during lifetime – Seasonal storage effect (related to arbitrage) • Increase system flexibility to the system to integrate RES generation – Storage response related to fault ride capability during active power operation • Adequacy benefits. Benefits in terms of reducing local reliability of the system (reduces ENS) • Availability of de-centralised storage (small devices) – value of optimisation in the DSO services – Communication between TSO and DSO. Observability and availability for contributions in local and global. @ENTSO-E All rights reserved So. S (Flexibility and Adequacy) How is to be implemented (assumptions on method, view on resources, how long will it take ) – consider doing this in the TYNDP frame where we need to assess around 200 transmission projects and around 30 storage ones) - Reference to EC Document - Definition + Scope of storage (sector coupling) - Arbitrage benefits (? ? ? ) So. S Adequacy - EENS calculation (test for storage and consider technology type) DSO consideration - SAIDI and SAIFI calculation DSO benefits - Flicker, Power Quality Coordination TSO and DSO - Qualitative indicator (total MW of storage under control of TSO) 4

Frame the “how” to improve the CBA indicators chosen as necessary to improve in the morning session main topics/indicators that What would look this indicator in an ideal require improvement – copy environment– copy paste brainstorming session 1 1 So. S (Ancillary Services) RES and CO 2 How is to be implemented (assumptions on method, view on resources, how long will it take ) – consider doing this in the TYNDP frame where we need to assess around 200 transmission projects and around 30 storage ones) • Contribution to the ancillary services – System services like as frequency/voltage management, frequency regulation, increase system inertia (synthetic & synchronous) & system resilience Indicators for So. S services: • Found a methodology to capture benefits at less than 1 hour resolution - Find a methodology to capture benefits at < 1 hour resolution (? ? ? ) • Not monetisation of ancillary services benefits increases. Capacity market monetisation • CO 2 value – avoided damage in terms of climate impact - Frequency stability, voltage stability and inertia – Avoided costs and avoided CO 2 costs - Storage for balancing energy – Avoided costs SEW - Check for Storage • Improve CO 2 assessment (dispatched different - Long term effects power plants, reduce CCGT production). Displaced CO 2 • Reduced RES curtailment @ENTSO-E All rights reserved • RES allocation in long term – contribution of Storage and transmission in terms of time and geography 5

Frame the “how” to improve the CBA indicators chosen as necessary to improve in the morning session main topics/indicators that require improvement – copy paste brainstorming session 1 What would look this indicator in an ideal environment– copy paste brainstorming session 1 How is to be implemented (assumptions on method, view on resources, how long will it take ) – consider doing this in the TYNDP frame where we need to assess around 200 transmission projects and around 30 storage ones) Avoided Cost (network) • Quantify the benefits in terms of network investment deferral - Use adequacy metric (EENS and LOLE) - Local impact • Contribution for saving transmission investment costs in future (relation between short and long term) • Contribution to savings in congestion managements Question 4: What are the most important 3 improvements you consider ENTSO-E should work on in the next CBA 3. 0 Principles (4 votes) Ancillary Services (3 votes) So. S (2 votes) Avoided Costs (1 vote) @ENTSO-E All rights reserved 6

Framing the work of the work-stream - Storage 1. Objectives of the work-stream § Principles (Rationale and Context – Ref. Regulation) § Ancillary Services (New category (separate from So. S, Avoided costs for frequency, voltage and inertia – New Method) § So. S (evaluate and expand, EENS for Storage based on existing precedents (National Grid) 2. Deliverable/s § Principles (Improved documents and Consistency) § Ancillary Services (Avoided cost methodology and Test case/Case Study) § So. S (EENS for Storage reviewed and redefined, Cost of new entry for capacity market and DSO consideration – Metric) 3. Members of the group [type and resource estimation] § Principles (Administrative task – Low impact: Time + people) § Ancillary Services (National TSO, Market design representation, Technical and Third Party (EASE)) § So. S (TSO and DSO, Technical and Market design representation) 4. Timeline § Principles (short – term) § Ancillary Services (Longer time requirement) § So. S (Moderate time requirement) @ENTSO-E All rights reserved 7

Brainstorming session 1: define the scope for CBA 3. 0 improvements Group 2 @ENTSO-E

Main topics/indicators that require improvement So. S • Reactive Power Indicator • Flexibility • Considering extreme climate situations • Balancing • Ancillirary Services SEW Justification on why this is important What would look this indicator in an ideal environment Lack of So. S-Figures in last TYNDP. CBA 2 indicators are still generalized. Difficulties to show the Benefits of So. S for transmission projects In future scenarios we expect more critical grid situations and we have to show the contribution of the transmission projects The only indicator which is per definition monitised. Important for NPV Split SEW in a Socio and Economical Part To capture all the benefits Additional benefits of RES NTC Redispatch Consistency NDP & TYNDP @ENTSO-E All rights reserved Renaming SEW. Not reflecting the true meaning The main reason for energy transition is not captured yet. Explanation is unclear. Main input for CBA-Calculations Explanation of Redispatchsimulations Methodology To make TYNDP more reader friendly More accurate and harmonized methodology Everybody understands everything 9

What is the CBA impact on the overall investment decision process If a business case is given for someone Projects should be assessed in an economic and socio “way”. Two ranking systems for projects. Monetised Ranking Investment Decision Socio Ranking What is the benefit for the society? Companys will earn money… Project promoters decides to build a project based on an “own” CBA in TYNDP is for the public @ENTSO-E All rights reserved 10

Frame the “how” to improve the CBA indicators chosen as necessary to improve in the morning session main topics/indicators that require improvement – copy paste brainstorming session 1 What would look this indicator in an ideal environment– copy paste brainstorming session 1 So. S • Reactive Power Indicator • Flexibility • Considering extreme climate situations • Balancing • Ancillirary Services SEW @ENTSO-E All rights reserved How is to be implemented (assumptions on method, view on resources, how long will it take ) – consider doing this in the TYNDP frame where we need to assess around 200 transmission projects and around 30 storage ones) We had kind of longer discussion on a possible implementation of this/these indicator/s without coming to a concrete solution Split SEW in a Socio and Economical Part Giving a clear definition of this indicator and clearly explain what is included under it. 11

Framing the work of the work-stream -SEW 1. Objectives of the work-stream § giving a clear definition of what is meant under this indicator § Renaming the indicator so that it reflects what is covered by it § For monetising the „additional“ benefit of RES and CO 2 the outcome of already existing studies should be used § determining the actual impact of CO 2 (not only the monetary value as for CO 2 costs) § giving a monetary value per ton CO 2 and/or per MW/MWh of included RES 2. Deliverable/s § Monetary values in € per [t], [MWh] 3. Members of the group [type and resource estimation] § Project promoters § Academics @ENTSO-E All rights reserved 12

Result of the vote: most important indicator 1. 2. 3. 4. 5. 6. 6 votes: SEW 4 votes: So. S 3 votes (each): NTC, Redispatch, Consistency (between NDPs and TYNDP) 2 votes (each): Residual Impact, VOLL 1 vote: Losses 0 votes: Storage @ENTSO-E All rights reserved 13

Brainstorming session 1: define the scope for CBA 3. 0 improvements Group 3 @ENTSO-E

define the scope for CBA 3. 0 improvements (1/3) Main topics/indicators that require improvement Weighting results for time horizons & scenarios: Economic lifetime and Discount rate Justification on why this is important What would look this indicator in an ideal environment Decision are being made by different stakeholders, guidance is needed to compare projects when they rank differently in different years and scenarios (e. g. project X is better in Scenario A in 2030, but project Y is better in Scenario B in 2040) NPV calculation should properly take into account reasonable lifetimes of infrastructure. Unjust comparison between AC and DC if a single value (25 years) is used for all, because it differs in reality. Guidance for weight of scenarios 1) No monetization so far. Relevant to include the monetisation of EENS in the TYNDP. 1) Set a VOLL and use it to monetize EENS. 2) Adequacy is a problem in the extremes, not in ‘normal’ conditions. Monte Carlo analysis can show these extremes. 2) More calculations (100 s of M. Carlo years) Guidance for economic life time and discount rate in CBA, with different values depending on the technology. Security of Supply: Adequacy Flexibility Modelling 3) HVDC links can provide ancillary services. That’s an added value to be monetized. Regional differences exist and should be accounted for in simulations (e. g. importance of river flows in Nordic Regions) Reference network in non ENTSOE countries: how to update? New plants? @ENTSO-E All rights reserved 3) (no specific suggestion; Ancillary services in general should be worked on) More differences between countries (such as generator properties) when constructing input parameter set (extension of PEMMDB) 15

define the scope for CBA 3. 0 improvements (2/3) Main topics/indicators that require improvement Justification on why this is important Redispatch Effect of an internal reinforcements. Fictitious market area should be better. Capacities: What would look this indicator in an ideal environment Instead of full-network redispatch simulations, use a zonal approach with fictitious market areas. - Internal lines Clustering: complex / long term projects. 5 year rule is not suitable (no specific suggestion) for some long term projects. - NTC Delta NTC: what about a single line? NTC is 0? - Clustering IF single monopole? NTC is 0 Offshore grid Do we consider as « internal line » if between EU border to neighbouring country? Useful to clarify for the reader. « Borders » in projects with both internal and cross border assets > how to interpret modelling and indicators. New type of infrastructures. Benefit allocation per country Important to motivate investors. Stakeholders are interested in Report benefits on a per-country basis. these figures. National governments/NRAs trust ENTSO-E values. @ENTSO-E All rights reserved E. g. , fictitious market area(s) for the offshore grid(s) that are modeled. 16

define the scope for CBA 3. 0 improvements (3/3) Main topics/indicators that require improvement Storage Justification on why this is important Ancillary services Type of storages ? CBA: which weighting factor for each criterion? VOLL CO 2 and RES What would look this indicator in an ideal environment (no specific suggestion; Ancillary services discussion is important) Stakeholders want to know how to trade-off indicators against each other. In the PCI process, the European Commission does something like this. It would be good if it is already done by ENTSO-E. Need to harmonize. Important to monetize adequacy. Provide guidance on how to trade-off CBA (MCA!) criteria against each other. Monetization of CO 2. important to know about the other sector. (we are focusing on electricity sector but how about CO 2 we saved if the quota is used by other sectors? ) 1. Define societal value of RES in €/tonne (e. g. : 200 €/tonne) Monetized adequacy with VOLL defined in €/MWh 2. Then you have: a) CO 2 included in SEW through generation costs (e. g. : 30 €/tonne) b) Additional societal value: (200 – 30) * “avoided tonnes of CO 2” @ENTSO-E All rights reserved 17

Frame the “how” to improve the CBA indicators chosen as necessary to improve in the morning session main topics/indicators that require improvement – copy paste brainstorming session 1 What would look this indicator in an ideal environment– copy paste brainstorming session 1 How is to be implemented (assumptions on method, view on resources, how long will it take ) – consider doing this in the TYNDP frame where we need to assess around 200 transmission projects and around 30 storage ones) Weighting results for time horizons & scenarios: Guidance for weight of scenarios Average Best Estimate as a basis and then range based on the others Probability assigned to scenario Define risk. Economic lifetime and Discount rate Guidance for economic life time and discount rate in CBA, with different values depending on the technology. Goal is to fill in the gap between ENTSOE tasks and the PCI process. Maps of beneficial projects per scenario? Map of projects ok for all scenario? … that’s post processing (also link with NPV computation). Could be done in two weeks. Ask ACER to propose one discount rate and live time for NPV computation per technology (AC and DC). Security of Supply: Adequacy More calculations (100 s of MC years) Flexibility Ancillary services @ENTSO-E All rights reserved FCR (if allowed to resize the reserves) Result of the Monte Carlo simulations. Look at the MAF how much time it takes. Adequacy : ENS. Perhaps do a MAF-like assessment at a project-level. Possibly only for few projects. (Is it easy to define which projects needs this analysis? ) (no specific suggestion) 18

Frame the “how” to improve the CBA indicators chosen as necessary to improve in the morning session main topics/indicators that require improvement – copy paste brainstorming session 1 What would look this indicator in an ideal environment– copy paste brainstorming session 1 How is to be implemented (assumptions on method, view on resources, how long will it take ) – consider doing this in the TYNDP frame where we need to assess around 200 transmission projects and around 30 storage ones) VOLL Monetized adequacy with VOLL defined in €/MWh External body (ACER) to propose an harmonized value. CO 2 and RES 1. Define societal value of RES in €/tonne (e. g. : 200 €/tonne) You could also compute VOLL dividing Cost of peak units by the LOLE. (no specific suggestion) 2. Then you have: a) CO 2 included in SEW through generation costs (e. g. : 30 €/tonne) b) Additional societal value: Modelling Redispatch @ENTSO-E All rights reserved (200 – 30) * “avoided tonnes of CO 2” More differences between countries (such as generator properties) when constructing input parameter set Instead of full-network redispatch simulations, use a zonal approach with fictitious market areas. (no specific suggestion) 19

Frame the “how” to improve the CBA indicators chosen as necessary to improve in the morning session main topics/indicators that require improvement – copy paste brainstorming session 1 What would look this indicator in an ideal environment– copy paste brainstorming session 1 How is to be implemented (assumptions on method, view on resources, how long will it take ) – consider doing this in the TYNDP frame where we need to assess around 200 transmission projects and around 30 storage ones) Capacities: (no specific suggestion) E. g. , fictitious market area(s) for the offshore grid(s) that are modeled. (no specific suggestion) Benefit allocation per country Report benefits on a per-country basis (no specific suggestion) Storage (no specific suggestion) CBA: which weighting factor for each criterion? (no specific suggestion) Internal lines NTC Clustering Offshore grid @ENTSO-E All rights reserved 20

Important elements to improve 1. • 3. • 5. 6. • 6 votes: So. S – Ancillary services 6 votes: So. S – Adequacy 5 votes: So. S – Value Of Lost Load 5 votes: Defining the (monetized) societal value of reducing CO 2 and integrating RES 4 votes: Report benefits per country 3 votes: Guidance for offshore grid assessment 3 votes: Guidance for weighting scenarios 1 or 2 votes for 5 remaining topics @ENTSO-E All rights reserved 21

Framing the work of the work-stream – So. S : ancillary services 1. Objectives of the work-stream § Set the scope (define which ancillary services to consider, which time frame, etc. ), § How to monetize ? 2. Deliverable/s Guidance for scope 3. Members of the group [type and resource estimation] § TSO experts / modellers § Storage promoters experts § DC and AC experts. 4. Timeline § (no specific suggestion) @ENTSO-E All rights reserved 22

Framing the work of the work-stream – So. S Adequacy: a lot of Monte-Carlo years 1. Objectives of the work-stream § Check feasibility of doing many more simulation runs § Method to select projects 2. Deliverable/s § Guideline on how many simulations should be done, which extremes to look at 3. Members of the group [type and resource estimation] § TSO modelers § Academics § People from the MAF team 4. Timeline § (no specific suggestion) @ENTSO-E All rights reserved 23

Framing the work of the work-stream – So. S - VOLL 1. Objectives of the work-stream § Let an external body (e. g. , ACER or EC) define the VOLL in €/MWh for different countries, actors, time frames. 2. Deliverable/s § VOLL values. 3. Members of the group [type and resource estimation] § ACER / NRAs § Consumers’ representatives 4. Timeline § (no specific suggestion) @ENTSO-E All rights reserved 24

Framing the work of the work-stream – CO 2 and RES: define societal value of CO 2 and use for additional benefits indicators 1. Objectives of the work-stream § Define the indicators § Define a methodology 2. Deliverable/s § (no specific suggestion) 3. Members of the group [type and resource estimation] § Academics § Economists 4. Timeline § (no specific suggestion) @ENTSO-E All rights reserved 25