ISLES II ‘TOWARDS IMPLEMENTATION’

Brussels Seminar : 16th June 2015

Integrating Offshore Grid, Markets and Renewables

Chaired by Chris Stark,

Deputy Director, Energy and Climate Change, Head of Electricity, Scottish Government

Brussels Seminar

PROGRAMME

11:00 Background on ISLES project

11:10 ISLES II Work-Stream Presentations

Spatial Plan and Sustainability AppraisalIain Bell - Aecom

Network Regulation & Market Alignment StudyGary Keane - Pöyry Management Consulting

Business PlanCathryn Hooper – Source Low Carbon

11:45 Q&A and Panel Discussion

12:30 LUNCH

Integrating Offshore Grid, Markets & Renewables

Brussels Seminar

Q&A / PANEL DISCUSSION

Integrating Offshore Grid, Markets & Renewables

Guest Panellists

Nicole Versijp, European Commission, DG Energy

Jonathan Gaventa, e3g

Jan Hensmans, NSCOGI

Supported by ISLES II Consultants

ISLES II Project Steering Committee Representatives

Bob Hanna, DCENR, Ireland

John McAreavey, DETI, Northern Ireland

Damon Hewlett, Scottish Government

ISLES Feasibility Study Consultants

ISLES Feasibility Study 2012 (ISLES Concepts )

Northern ISLES

Southern ISLES

SCOTLAND

N IRELAND

N IRELAND

WALES

IRELAND

ISLES concept achieved EU ‘PCI’ status in October 2013

The potential benefits of being a Project of Common Interest include;accelerated licensing procedures, improved regulatory conditions, and access to financial support - €5.85 billion from the Connecting Europe Facility (2014 - 2020)

ISLES II “Towards Implementation” seeks to • enable further progress by promoting solutions that increase trade in electricity• position the ISLES zone concept as an attractive proposition for investment

WORK-STREAMS1 - ISLES Spatial Plan and Sustainability Appraisal2 - Network Regulation & Market Alignment Study3 - ISLES II Business Plan

ISLES II Study AreaISLES II Work-stream Consultants

Importance of ISLES to Scottish Government

1. Competence

2. Renewables

3. Offshore resource and expertise

4. Good neighbours

5. Good Europeans

ISLES II - Brussels Seminar

Iain Bell

Director - Environmental

Aecom

Spatial Plan and Sustainability Appraisal

SPATIAL PLAN AND SUSTAINABILITY APPRAISAL

AECOM is a global provider of professional technical and management support services to a broad range of markets, including environmental, energy, water, transportation, facilities and government. AECOM’s purpose is to enhance and sustain the world’s built, natural and social environments for our clients and the communities that we serve.www.aecom.com

ABPmer is a leading marine environmental consultancy with particular expertise in offshore renewables and marine cables. We have led and contributed to a wide range of strategic and project level studies within UK waters.

SPATIAL PLAN AND SUSTAINABILITY APPRAISAL

1. The ISLES Spatial Plan and Locational Guidance

2. Sustainability Appraisal • Strategic Environmental Assessment (SEA)• Socio-economic Impact Assessment • Appropriate Assessment/ Habitat Regulations

Assessment

PLAN OBJECTIVES

• Provide developers with locational guidance on the most suitable areas for development of offshore electricity grid.

• Identify measures to avoid, minimise or otherwise mitigate adverse effects;

• Assist developers in reducing consenting risks and give them a head start in planning for an interconnected transmission network.

• Inform future spatial planning (facilitating future energy developments in the ISLES Zone and more widely within the European Union).

SPATIAL PLAN STUDY AREA

SUSTAINABILITY APPRAISAL

• A process for describing the likely significant effects of the Plan.

• Identifies measures to avoid, reduce of offset adverse effects, and enhance beneficial effects.

• Allows environmental, social and economic concerns to be addressed as the Plan develops.

• Through consultation, provides a means for stakeholders to inform the content of the SA and therefore the Plan.

LOCATIONAL GUIDANCE – CONTENTS

• A summary of offshore grid technology

• A routeing strategy and generic mitigation

• Potential Landfall Connection locations/constraints and opportunities

• For each Network Area - Environmental Features, Constraints & Routeing Opportunities– Biodiversity, Flora & Fauna– Population & Human Health e.g. fishing and

navigation – Water, Soil, Geology & Coastal Processes– Cultural Heritage – Landscape & Seascape– Material Assets

OUTPUTS FROM THE STUDY

• Locational Guidance and Routeing Strategy which promote the integrated consideration of technical and engineering issues with environmental, social and economic impacts

• Practical guidance on project level mitigation to address environmental, social & economic impacts – through network development & installation

• For each Network Area key environmental features, constraints & routeing opportunities have been identified

• SA concludes - there is potential to develop an interconnected offshore electricity network without significant adverse effects on the environment.

• This approach gives developers a platform to start considering how to use the information from ISLES to benefit their projects

ISLES II - Brussels Seminar

Gary Keane

Principal Consultant

Pöyry Management Consulting

Network Regulation & Market Alignment Study

INTRODUCTION: CONSULTANTS FOR THE REGULATORY AND MARKET WORKSTREAM

• Pöyry Management Consulting:Europe’s leading specialist energy practice

• Offering expert advice from strategy to implementation on policy, regulation, business operations, financing and valuation and sustainability

• Over 200 energy market experts in 12 offices across Europe

• Providing in-depth market intelligence across Europe…

• …with a growing presence in Middle East, Far East; and Central and South America

• Energy-Link was formed in 2000 and experience in Europe, US and Nigeria

• 2 Directors have over 50 years experience in the electricity industry

• Clients include Energy Market Participants, Asset owners, Industry and End user groups, Capital Investors

• Commercial focus for clients involved in complex energy project structures including due diligence, investment valuations and energy risk analysis

• Operational Risk Management and corporate governance

• Solutions orientated Business Applications

OVERVIEW: THE ISLES II RECOMMENDATIONS CAN HELP OFFSHORE COORDINATION ACROSS EUROPE

• Context: Coordination of offshore generation and cross-jurisdictional networks could deliver offshore transmission capacity for multiple users

• Barriers: There are two main regulatory and market barriers to realising the benefits of offshore coordination

• Recommendations: Governments should support a pragmatic approach to the development of measures to mitigate coordination risk for individual projects, particularly the generators who are at the heart of offshore coordination.

• Moving towards implementation: Governments can take practical steps in the near-term to prepare the ground for efficient delivery of coordinated offshore projects after 2020

CONTEXT: COORDINATED DEVELOPMENT PROVIDES TRANSMISSION CAPACITY FOR MULTIPLE USERS

Multiple generators sharing an offshore link

Generation and interconnection sharing an offshore link

Generation connected to an ‘offshore bootstrap linking two

parts of an onshore system

BARRIERS: TWO MAIN REGULATORY BARRIERS TO REALISING BENEFITS OF OFFSHORE COORDINATION

• Prevents realisation of benefits of shared offshore networks for• individual projects • onshore energy systems• wider policy goals

Barrier 1

• investment decisions for any particular set of offshore transmission assets do not fully take into account the benefits to other possible users

Barrier 2

• no arrangements exist to allow coordinated development on a cross-jurisdictional basis

RECOMMENDATIONS: PRAGMATIC APPROACH TO RISK MITIGATION LED BY NEEDS OF GENERATORS

• Mitigate the risks for individual projects of connecting to ‘multiple use’ assets

• Whole lifetime: Commit to continuity of regulatory regime for particular transmission assets

• Development: Ensure flexibility in consenting and licensing arrangements to allow for network design changes

• Development: Implement mechanisms for timely and efficient consumer underwriting of incremental network costs

• Operation: Provide firm access for generation to offshore network capacity

• Place the needs of generation rather than transmission at the forefront of the regulatory framework

• Adopt pragmatic approach to delivering workable regulatory arrangements

• e.g. ensure consistent treatment of assets with equivalent functions for a jurisdiction

OVERVIEW: THE ISLES II RECOMMENDATIONS CAN HELP OFFSHORE COORDINATION ACROSS EUROPE

• Context: Coordination of offshore generation and cross-jurisdictional networks could deliver offshore transmission capacity for multiple users

• Barriers: There are two main regulatory and market barriers to realising the benefits of offshore coordination

• Recommendations: Governments should support a pragmatic approach based on the mitigation of coordination risk for individual commercial projects

• Moving towards implementation: Governments can take practical steps in the near-term to prepare the ground for efficient delivery of coordinated offshore projects after 2020

ISLES II - Brussels Seminar

Cathryn Hooper

Partner

Source Low Carbon

ISLES Business Plan

EnergyAdvisory

> Formed through merger with Redpoint Energy in Spring 2012

> Offering unparalleled combination of energy market expertise and commercial insight

> Proud to work with some of Europe’s foremost policymakers, regulators, investors, developers, lenders and energy companies operating across the energy supply chain

> Independent partnership providing advisory services to developers, investors in the low carbon sector and to government bodies responsible for renewables programmes

> Over a decade of first-hand experience in managing development risks, and dealing with impacts of change to policy and regulation

Strategy and commercial optimisation

Investment analysis

Policy and regulation

Development services

Programme management

Policy advice and market intelligence

INTRODUCTION: CONSULTANTS FOR THE BUSINESS PLAN WORKSTREAM

OVERVIEW: ISLES II BUSINESS PLAN

• Outlines the commercial case for coordinated development• Emphasis on the complementarity between ISLES objectives and European

policy

• Aims to move the overall vision forward – practical next steps for governments to enable developer-led proposals for coordination to come forward

• Builds on the Network Regulation and Market Alignment Study Recommendations to propose institutional and decision-making framework:

• Need for a central consideration and decision-making capacity• Maintain discretion of national policy makers• Give clarity to developers over regulatory treatment needed for shared

network infrastructure

• Recommendation to introduce the ISLES Coordination Panel (ICP): body to consider coordination opportunities based on individual merits

ISLES CO-ORDINATION PANEL

ISLES Coordination Panel

Governments

Regulators

Transmission System

Operators

Developers

Network options

Licensing requirements

Policy interactions

CBAcoordination

option(s) considered

Provide views to

regulators

Regime design and licensing

Asset delivery

Identification of options

Economic assessmen

t

Views/ recommendations

Rep

rese

ntat

ives

from

Irel

and,

N Ir

elan

d,

Sco

tland

, Eng

land

, and

Wal

es

ISLES II Spatial Plan

recommendations

ISLES II ‘NRAMAS’recommendations

Present shared infrastructure options

relevant to project

Integration of ISLES II: Towards

Implementation work packages

* Despite regulators’ representation on the ICP, the Panel’s views and recommendations would not take precedent over each relevant

regulators’ own final consideration and decision-making process

NEXT STEPS TO IMPLEMENTATION

• Unlikely to see ‘big-bang’, fully meshed development by 2030. • ICP process allows for incremental approach: pilot projects can come

forward to be assessed for initial opportunities - to ‘anchor’ this framework

• In parallel to setting up ICP it will be important to:• Confirm regulatory arrangements needed to underpin coordinated

investment in each jurisdiction (in accordance with Network Regulation and Market Alignment Study)

• Explore options for renewable energy export to other member states

• Approach developers of potential ‘anchor’ projects

• Ongoing political commitment will be needed to agree workable, effective terms of reference for the ICP so that individual opportunities can be progressed

Brussels Seminar

Q&A / PANEL DISCUSSION

Integrating Offshore Grid, Markets & Renewables

Guest Panellists

Nicole Versijp, European Commission, DG Energy

Jonathan Gaventa, e3g

Jan Hensmans, NSCOGI

Supported by ISLES II Consultants

ISLES II Project Steering Committee Representatives

Bob Hanna, DCENR, Ireland

John McAreavey, DETI, Northern Ireland

Damon Hewlett, Scottish Government

Brussels Seminar

PROGRAMME

11:00 Background on ISLES project

11:10 ISLES II Work-Stream Presentations

Spatial Plan and Sustainability Appraisal

Network Regulation & Market Alignment Study

Business Plan

11:45 Q&A and Panel Discussion

12:30 LUNCH

Integrating Offshore Grid, Markets & Renewables