Donors Meeting Chisinau June 4 2015 Energy and Extractives Global Practice Belarus Moldova and Ukraine Country Unit Europe and Central Asia Region Electric Power Sector Issues Title of Presentation ID: 647990
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Slide1
Moldova Electric Power Market Options Sector Study
Donors MeetingChisinau, June 4, 2015Energy and Extractives Global PracticeBelarus, Moldova and Ukraine Country UnitEurope and Central Asia RegionSlide2
Electric Power Sector IssuesTitle of Presentation
2Extreme dependence on power imports and natural gas as fuel
Domestic generation covers only 25% of demand, mostly by old and inefficient CHP plantsImports from MGRES now covers almost 75% of demand
Ukraine import share now very minor in terms of volume
Moldova system synchronously interconnected with IPS/UPS system via 110 kV and 400 kV lines
Existing 400 kV line with Romania not used for imports due to complex operation and lack of maintenance
Near-total dependence on one source/supplier of natural gas, both for domestic generation as well as imports
Electricity Sector IssuesSlide3
Peak Load Demand and Supply
Moldova Electricity Power Market Options Sector Study3
Peak Load Demand and Supply, 2008 – 2013 (MW)
2008
2009
2010
2011
2012
2013
Annual Peak Load Demand
792
780
805820831833CHP-140303013.72527CHP-2210196201173202162CHP-Nord202020202020HPP Costesti599600Deficit, covered by:517525545607584624– MGRES 517524545420399438– Ukraine 187185186
Source: Moldelectrica
Electricity Sector IssuesSlide4
Demand ForecastMoldova Electricity Power Market Options Sector Study
4Assumptions for electricity demand forecast
Electricity demand has been and is linearly correlated with PPP GDPGDP growth rate of 3.26 %/year, which is equal to the average during 2001-2013
Assumptions for peak load forecast
Annual peak load occurs in the winter season (but gap decreasing)
Load factor will increase by 0.5 %/year due to increased use of air-conditioning, etc
Demand forecast through 2033
Estimated average
annual growth in electricity demand
2.1
%
and in peak demand 1.6%
2013
20142015201620172018201920202021202520302033GDP in bill. US$12.2712.6713.0813.5113.9514.4114.8815.3615.8618.0321.1723.31Electricity Demand in mill. kWh4,0724,1704,2484,3284,4104,4964,5844,6754,7695,1775,7666,168Peak Load Demand in MW833849862873
886
898
911
925
939
999
1,085
1,143
Power System Planning
Source: Calculations based on
Moldelectrica
data and Energy Strategy until 2030 of the Republic
of MoldovaSlide5
Supply Capacity Assumptions
Moldova Electricity Power Market Options Sector Study5
Moldova Renewable Energy Sources (RES-E)2% of 150 MW capacity to be installed considered base load equivalent (= 3 MW)Moldova Combined Heat and Power Plants250 MW CHP-3 will be in operational in 2020
CHP-N in Balti will keep 20 MW capacity until 2033
CHP-1 and -2 will be retired in 2020
Imports from Ukraine
Already prior to current problems forecasts showed UKR not to be able to satisfy its own peak demand starting in 2018, thus unable to cover Moldova’s power deficit through 2033
Imports from MGRES
Significant investments needed to keep current capacity operating, so ability to fully cover Moldova’s power deficit beyond 2020 questionable
Imports from Romania
Able to export about 3,300 MW at any time during 2020 – 2033 (even excluding Romania’s 4,500 MW RES-E capacity)
Power System PlanningSlide6
Energy Balance Forecast
Moldova Electricity Power Market Options Sector Study6
Peak load capacity deficit of 870 MW expected by 2033
Year
2012
2013
2015
2019
2020
2025
2030
2033
Annual Peak Load Demand
8318338629119259991,0851,143Domestic Generation247209222222273273273273CHP-125270 0 0000CHP-22021622022020000CHP-30000250250250250CHP-Nord202020202020
20
20
RES-E
0
0
0
0
333
3
TOTAL Deficit
584
624
640
689
652
726
812
870
Covered by: MGRES imports
399438550400Depending on the scenario selected Ukraine imports18518690289
Source: Forecasts based on ANRE data. Data for 2012 and 2013 are actuals.
Power System PlanningSlide7
Interconnection Scenarios ExaminedTitle of Presentation
7The study examined eight different scenarios:
Self-sufficiency 1 assumes the use of both natural gas and coal for new plants. Self-sufficiency 2 assumes only natural gas use.Synchronous
1, 2 and 4
assume that Romania will cover the entire power deficit and all ancillary services of Moldova.
Synchronous 3
assumes MGRES will be interconnected with ENTSO-E.
Asynchronous 1, 2 and 3 link two power systems with different frequency standards through Back-to-Back stations, enabling interconnection with ENTSO-E while remaining in IPS/UPS.
Power System PlanningSlide8
Scenario Investment Costs and Tariff Levels
Title of Presentation8The values for two
out of seven criteria used in scenario ranking are shown below. Levelized tariffs are used only for ranking purposes. Actual end-user tariffs
may show greater differences between scenarios
Power System Planning
Scenarios
Total Investments (US$ million)
20-year levelized tariffs, (US$ cents/kWh)
Nominal
PV*
SS-1
1,445
1,023
16.60SS-21,00570016.31S-141028515.01S-238326614.96S-334824214.94S-446332215.07A-170949115.45A-271549515.43A-372850415.48Slide9
Multi-Criteria Decision Analysis
9Moldova Electricity Power Market Options Sector Study
Multi-Criteria Decision Analysis used the following criteria:Present value of investment costs20-year levelized tariff
3. Security of supply
4. Level of competition (number of supply sources)
5. Capacity to transit electricity between East and West
6. CO
2 emissions
7. Operational difficulty (number of interconnection lines to be disconnected)
Scenario Ranking
Values of criteria are calculated by the model based on quantified input data
Weighting for each criterion is calculated, by scenario
Total score for each scenario is the sum of calculated individual criterion scores
Criteria can be changed but must be quantifiablePower System PlanningSlide10
Asynchronous Scenarios
10Moldova Electricity Power Market Options Sector Study
Asynchronous -1 (A-1)
Asynchronous
-2 (A-2)
Description
Pros
Higher capability to stabilize power system
Less expensive
Mature technology
Direct supply to demand center
Cons
Less operational experiences
25% more expensive0.5% higher losses (1.2% versus 0.7%)Additional equipment to stabilize voltage fluctuation may be needed (subject to additional study)PV of investment costUS$ 491 millionUS$ 495 millionTariff15.45 US$ cents/kWh15.43 US$ cents/kWhAsynchronous interconnection with Romania (ENTSO-E) through BtB (VSC & LCC)Major new lines400kV Iasi – Straseni330kV Straseni – Chisinau400kV Chisinau - Vulcanesti400kV Vulcanesti - IsacceaAsynchronous interconnection with Romania (ENTSO-E) through BtB (LCCs)Major new lines400kV Suceava – Balti400kV Iasi – Straseni330kV Straseni – Chisinau400kV Chisinau - VulcanestiPower System PlanningLCC=Line-Commutated Converter VSC=Voltage-Sourced Converter Slide11
Asynchronous Scenarios
11Moldova Electricity Power Market Options Sector Study
Asynchronous -1 (A-1)
Description
Pros
Higher capability to stabilize power system
Cons
Less operational experiences
25% more expensive
0.5% higher losses (1.
2% versus 0.7%
)
PV
of investment costUS$ 504 millionTariff15.48 US$ cents/kWhAsynchronous interconnection with Romania (ENTSO-E) through BtB (VSC & LCC)Major new lines400kV Suceava – Balti400kV Chisinau - Vulcanesti400kV Vulcanesti – Isaccea400kV and 330Kv line bays and 400/330kV transformersPower System PlanningLCC=Line-Commutated Converter VSC=Voltage-Sourced Converter Slide12
Recommended:Asynchronous interconnection
Moldova Electricity Power Market Options Sector Study12
The top ranked interconnection scenarios are three alternative asynchronous interconnection scenarios with Romania, each scenario having two interconnections
.
Although one of these scenarios, referred to in this study as Asynchronous-2, ranks under most assumptions higher than the other two, the three
asynchronous scenarios
are within one percent of each other in terms of ranking.For that reason we recommend that these three scenarios be studied at the same time at feasibility stage in order to ultimately select the most appropriate one for implementation.
All three asynchronous scenarios:
Can be implemented by 2020
Integrate
Moldovan power system into EnC
Enable
supplies from both West and EastHelp put downward pressure on electricity pricesImportant investments necessary both in the BtB interconnections and in the domestic transmission systemPower System PlanningSlide13
Asynchronous vsSelf-sufficiency and Synchronous
Title of Presentation13
Self-sufficiency:Very high cost: US$ 0.7-1.0 billion.
Limited choice of fuel sources.
Increases dependence on sole source and supplier of gas.
Synchronous:
Full synchronization may
take
10-15 years
or more
. Until then Moldova energy security remains exposed.
Synchronous interconnection scenarios imply disconnection from IPS/UPS (Ukraine and MGRES) thus reducing competition.
Synchronous
3 assumes major role for MGRES as well, with most assets on Left Bank to be interconnected with ENTSO-E. However, not possible to political uncertainties.Asynchronous: 2 interconnections vs 1 or 3?1 interconnection not sufficient to cover demand so Moldova remains exposed.3 interconnections expensive. In future, if Moldova opts for synchronization, the cost of BtB disposal is even higher.Power System PlanningSlide14
Current Market Structure
14Moldova Electricity Power Market Options Sector Study
Power Market Design
Limited number of players and no structural basis for competitive market
6 licensed electricity producers
State-owned
ENERGOCOM SA
acting as single buyer of imports3 suppliers at regulated tariffs: distribution companies RED Union
Fenosa
(71.1% market share), RED Nord (26.7%) and RED Nord-Vest (8.7%) and 7 suppliers at non-regulated tariffs (3.5%)
Small market does not provide enough incentives for private sector investment in generation
Regulation and trading framework are missing for competitive market
Most TSO roles of
Moldelectrica are missing from legislationRegulations on wholesale competition are missingWholesale market is not competitive given fully regulated domestic generation and non-competitively procured supplies from MGRES and UkraineRetail market was to be fully opened by 2015Needed to achieve 100% retail market opening (currently at 10%) by 2015 to meet the EU Energy Directive 2009/72/ECSlide15
Competitive Wholesale Market CriteriaTitle of Presentation
15To build a truly competitive wholesale market in Moldova means meeting the following criteria:
Ensuring an appropriate market structure (i.e., having enough sellers and buyers to enable competition on both the supply and demand side)
Adopting
appropriate market rules for trading electricity as well as for procuring cross-border interconnector capacities over the various contractual time horizons
Ensuring
efficient balancing
, i.e., provision of ancillary services by contracting reserves in a regulated and competitive manner and using such reserves through a reliable balancing mechanismStrengthening existing institutions and creating appropriate additional institutions, including capacity building where appropriate.
A
competitive legal framework alone may not provide enough investment in generation under
the authorization
procedure.
Power Market DesignSlide16
Market Design Options
16Moldova Electricity Power Market Options Sector Study
Power Market DesignPossible market design options associated with interconnection scenarios and conforming with
EnC
requirements:
Market
Design Option
Interconnection
Scenario
Description
Standalone competitive
wholesale market (Moldova separate bidding zone)
SS-1, SS-2
Electricity subject to competition (in long-term) would be produced inside the countryCompetitive wholesale market with appropriate rules for energy trading and cross-border capacity allocation (Moldova separate bidding zone)A-1, A-2, A-3Suppliers able to purchase competitively priced electricity from East and WestMerging with an already competitive wholesale market (Moldova and Romania one bidding zone)S-1, S-2, S-3, S-4Electricity would be produced in the common market among Romania/EnC and MoldovaSlide17
Recommended Market Design
17Moldova Electricity Power Market Options Sector Study
Power Market Design
Competitive wholesale market with appropriate rules for energy trading and cross-border capacity
allocation (Option 2)
Maximizes benefits in terms of : (i) Security of supply; (ii) Level of competition; (iii) Affordability; (iv) Compliance with regional integration objectives; and (v) Sustainability.
Market structure
Making competition rules in Moldovan wholesale market effective requires competition on sell side, requiring electricity injection from the West. This will benefit Moldovan retail market and improve conditions for market opening.
Market rules
Appropriate market rules can be adopted by supplementing domestic generators with foreign/domestic traders who import electricity from West or East. Ensuring sufficient interconnection capacity with ENTSO-E would be of paramount importance. Role of ENERGOCOM to be reviewed.
Institutions
A market operator should administer day-ahead and centralized forward markets. Suggest using services of OPCOM, either directly or through a subsidiary in Chisinau.Slide18
Overall Conclusion
18Moldova Electricity Power Market Options Sector Study
Conclusion
Asynchronous
interconnection
scenarios are
recommended
Rank consistently highest in the multi-criteria decision analysisWould
ensure greater energy security and better prices for Moldova as the electricity could be bought from East and/or West in a competitive
manner
The nominal incremental investments
range
from US$421-441 million in current dollars, depending on the asynchronous scenario ultimately selected following feasibility studies
.Implementation would result in a 20-year levelized tariff of US$ 15.5 cents/kWh.Adopt a competitive wholesale market design, with appropriate rules for energy trading and cross-border capacity allocationWould help achieve desired increase in security of supply and possibly exert downward pressure on end-user prices due to competition in markets outside MoldovaMost of the legislative, regulatory and institutional actions necessary to implement this market structure are already mandatory under the EnC Treaty. Slide19
Next Steps
19Moldova Electricity Power Market Options Sector Study
ConclusionImplementation of recommendations will require:
Additional studies
Comprehensive system planning study
needed to determine required structure of domestic transmission system (necessary even without interconnection).
Feasibility studies
required for each major domestic system component.
Design of a medium-term investment program and financing plan
to secure adequate interconnection capacity, domestic transmission network reinforcements and CHP-3 replacement
Legislative/regulatory changes
to open up electricity market and to align legislation and regulations with EU Electricity Directive and Energy
Acquis requirementsInstitutional capacity building/strengthening of MoE, Moldelectrica and ANRE. We assume market operator will be set up with OPCOM.Slide20
Sandu
Ghidirim Senior Operations Officersghidirim@worldbank.orgMoldova Country OfficeWorld Bank Group
20/1, Pushkin StreetWorldbankgroup.org