The year 2016 witnessed several project investments, and policy and regulatory initiatives across various regions, which were aimed at facilitating grid expansion and strengthening, mainly to connect new and renewable energy sources. Renewable Watch presents a round-up of key recent developments…
With the Republican Party winning the US presidential elections in November 2016, the federal policy is expected to tilt towards thermal power generation. Earlier, in February 2016, the ambitious Clean Power Plan announced by the Environmental Protection Agency in August 2015 had been put on hold by the Supreme Court of the US.
These developments are expected to have a negative impact on utilities’ budgets for renewable energy-related electricity transmission projects in the short term. However, investments are likely to pick up over the long term as the economic competitiveness of green energy will remain intact, driven partly by the Energy Policy Modernization Act of 2015 and partly by state-based emissions-related policies.
The US Senate passed the Energy Policy Modernization Act in April 2016 to create a platform for green energy growth and grid modernisation, while also promoting the production of fossil fuels. Various provisions of the Senate Bill enable effective and adequate planning of the grid infrastructure. The bill also seeks to speed up the federal permitting process for transmission projects, which is slow and unpredictable at present.
Also on the policy front, the US Department of Energy, in September 2016, issued a final rule, Coordination of Federal Authorizations for Electric Transmission Facilities, to establish a pre-application process to simplify the siting process for certain transmission projects. The rule modifies the existing procedures and provides a framework for an integrated inter-agency pre-application process, which aims to promote coordination, facilitate early cooperation and exchange of environmental information, promote early engagement with local, state and tribal stakeholders, and increase the efficiency of the existing federal permitting process.
Meanwhile, investments in transmission assets continued in North America, with various projects being approved. Significantly, the Independent System Operator New England approved the Northern Pass project in July 2016, which entails the development of a 192 mile (309 km) transmission line to bring 1,000 MW of power from Hydro-Québec’s hydroelectric plants in Canada to New Hampshire and to the rest of the New England region in the US.
Other major projects approved include the New England Clean Power Link, the TransWest Express transmission project, the Great Northern project, the SunZia transmission project, the Columbia- Alberta transmission line, the Southern Cross project, the MVRP project, the Mark Twain transmission project, the Great Northern transmission line and the Merrimack Valley reliability project.
Several projects were also cancelled or put on hold during the year by the permitting authorities, primarily on account of the reduced energy demand. These include the Central Valley Power Connect project, the B2H transmission project, the Twisp project, the Rock Island Clean Line, the Artificial Island transmission project, the Walkemeyer-North Liberal project, the North Steens transmission line, and the Edic-Fraser transmission project.
The year 2016 was a difficult one for the power transmission segment in Latin America. This was especially true of Brazil, which is grappling with an economic downturn, triggered by the fall in global commodity prices. According to a report issued by Brazil’s energy regulator Agencia Nacional de Energia Eletrica, about 62 per cent of transmission line projects awarded in the country are behind schedule. Various concessions were cancelled during the year due to project delays. These included the cancellation of two lots secured by Spain’s Isolux Corsán at the first transmission auction of 2015.
Brazil’s transmission sector woes were compounded in 2016 by the announcement of the Spain-based company Abengoa’s bankruptcy, which affected the development of about 6,100 km of new lines and the operation of 6,800 km of existing transmission projects. In May 2016, national grid operator Operador Nacional do Sistema Elétrico announced that the company’s stalled transmission projects would be offered to investors through a public auction, likely to be conducted in early 2017.
Elsewhere in Latin America, governments continued to focus on reform efforts in order to boost investments in power transmission networks. The Chile government approved the Power Transmission Bill in July 2016 to create a new regulatory framework for the transmission segment. The bill aims to facilitate the transportation of electricity generated by renewable energy sources to consumers, reduce electricity prices for households and businesses, and foster a competitive market with the entry of more players. The bill also proposes to create a single independent coordinator for the two national grid systems – the Sistema Interconectado Central and Sistema Interconectado del Norte Grande.
In Mexico, the government restructured the state-owned Comisión Federal de Electricidad (CFE), in accordance with the national electricity industry law, allowing CFE to participate in the country’s newly created wholesale power market. In November 2016, the company announced that its new distribution, transmission and basic supply subsidiaries, as well as sister companies CFEnergia, CFE Internacional and CFE Calificados, would start independent operations from January 1, 2017.
In another major development, Mexico’s Secretaría de Energía, or Ministry of Energy, announced a universal electric service fund worth MXN 12 billion for the expansion of the national electricity grid and the installation of solar panels in isolated localities. The initiative aims to increase electrification coverage from 98.5 per cent to 99.8 per cent during the period 2017-21, bringing energy to 1.5 million additional households.
Also in Mexico, energy regulator El Centro Nacional de Control de Energia signed an agreement with the California Independent System Operator in October 2016 to explore participation opportunities in the real-time market of the Baja California Norte grid, in order to maximise benefits from the Western Energy Imbalance Market.
In 2016, the Asia-Pacific region witnessed big funding deals to help countries strengthen their domestic grid networks, mainly to connect renewable energy sources. The focus was also on developing regional interconnections to boost electricity trade. Significant progress was made in the area of ultra high voltage (UHV), high voltage alternating current (HVAC) and high voltage direct current (HVDC) technologies, with the commissioning of several projects as well as the launch of new ones. Reform moves and policy initiatives aimed at streamlining the transmission sector and increasing private investments were also undertaken in several countries.
The Asian Development Bank emerged as the leading donor for financing big transmission projects across the region. It extended loans worth $150 million to Sri Lanka for the Green Power Development and Energy Efficiency Improvement Investment Programme. In Afghanistan, it approved a $415 million grant to boost the country’s power supply and strengthen cross-border electricity trade. A $231.3 billion loan to Vietnam was approved for strengthening the country’s electricity transmission grid in the southern region. A $810 million multi-tranche financing loan facility was approved to develop Pakistan’s power transmission system.
Other major donors were the World Bank, German Development Bank KfW and the Japan International Cooperation Agency (JICA). During the year, the World Bank approved a $470 million loan for India’s North Eastern Region Power System Improvement Project and $150 million in financing for the Modernisation and Upgradation of Transmission Substations Project in Uzbekistan. KfW extended Euro 238 million for financing intra-state transmission projects under India’s Green Energy Corridors programme in Gujarat and Madhya Pradesh. Further, KfW approved a Euro 137.5 million loan to finance power transmission networks and substations in Bangladesh. Meanwhile, JICA approved a JPY 54.98 billion loan for Vietnam’s Thai Binh Thermal Power Plant and Transmission Lines Construction Project (IV) and a JPY 15.45 billion loan for the implementation of the Transmission System Strengthening Project in India (Madhya Pradesh).
The regional grid integration in South Asia received a major boost with the commissioning of the 400 kV Nepal-India cross-border transmission line. Further, the two countries announced plans to construct at least six more cross-border interconnections to boost energy trade. In Central Asia, construction works commenced on the Central Asia-South Asia 1000 transmission line, which aims to facilitate electricity trade between Tajikistan, the Kyrgyz Republic, Afghanistan and Pakistan. Research and planning activities were initiated on the Japan-based SoftBank Group Corporation’s ambitious Asian Super Grid project, which aims to connect power grids across Asia in order to import electricity generated from renewable resources.
Several UHV and HV projects were commissioned in China during the year, including the 57.4 km long Shanghai section of the 1,000 kV UHV AC Huainan-Nanjing-Shanghai line project; the 1,000 kV Ximeng (Inner Mongolia)-Jinan (Shandong) UHVAC project; and the Luxi back-to-back asynchronous interconnection HVDC project in Yunnan province. Further, construction works were initiated on the State Grid Corporation of China’s (SGCC) ±800 kV Zha Lute-Qingzhou UHVDC project and the ±1,100 kV Xinjiang-Anhui UHVDC line.
During 2016, the focus of developments in the European transmission segment remained on building an integrated common European market to ensure security of supply and increase the share of green energy. According to the European Network of Transmission System Operators for Electricity (ENTSO-E), investments worth Euro 150 billion need to be undertaken in 200 transmission and storage projects of pan-European significance over 15 years.
The European Commission (EC) formed an expert group in October 2016 to boost the development of electricity interconnections so as to achieve its electricity interconnection targets. In its European Energy Security Strategy, the EC extended the electricity interconnection target of 10 per cent by 2020 to 15 per cent by 2030, for both regional and cross-border interconnections. As of now, 22 of 28 countries are on track to reach, or have already reached, the 10 per cent target set for 2020.
On the institutional front, Turkey’s grid operator TEIAS joined ENTSO-E as an observer member after the successful synchronisation of its grid with that of the ENTSO-E Continental Europe region. ENTSO-E is also set to approve measures to integrate the Ukrainian and European power grids.
As the European grid becomes increasingly integrated, there is a growing focus on developing common operational codes and guidelines for the power grid. In May 2016, Europe’s transmission system operators (TSOs) approved the draft System Operation Guidelines, which set out harmonised rules on grid operation to ensure security of supply and promote higher renewable integration. These guidelines also formalise the roll-out of regional service coordinators. The System Operation Guidelines are part of the sixth network code/guidelines drafted by ENTSO-E under the Third Energy Package.
During the year, ENTSO-E also initiated the process for developing methodologies for a common European grid model as required by the Network Code on Capacity Allocation and Congestion Management. ENTSO-E also launched a consultation, along with the partners of the Trans-European Replacement Reserves Exchange project, to gather experience and knowledge that will contribute to the implementation of the draft Electricity Balancing Network Code for cross-border electricity balancing.
In February 2016, 25 consortium partners from 13 European countries, including 12 TSOs, as well as universities and research institutions, launched an international project, called MIGRATE, to investigate the requirements for Europe’s future electricity grid. The project aims to devise various approaches to solve key technical issues related to grid stability, supply quality, and control and security of supply that arise owing to the increasing use of renewable energy feed-in sources. The European Union (EU) is providing roughly Euro 17 million in funding for the project.
The development of offshore wind energy sources continues to remain a priority for the European countries. In March 2016, the EU announced the PROgress on Meshed HVDC Offshore Transmission Networks project, which aims to investigate the benefits of a meshed offshore transmission grid. This project is currently the biggest energy project in the EU’s Horizon 2020 Research Programme, which will provide funding for the project from January 2016 till December 2019.
In line with the EU’s action plan, the North Sea countries – Belgium, Denmark, France, Germany, Ireland, Luxembourg, the Netherlands, Norway and Sweden – signed a political declaration and action plan in July 2016 to boost the development of offshore wind energy, create cross-border links and increase power trade.
In October 2016, the UK’s energy regulator, the Office of Gas and Electricity Markets, launched the fifth and biggest tender round under the offshore transmission owner regime. The shortlisted bidders will be required to own and operate five proposed transmission links to offshore sites over a 20-year period.
European TSOs are progressively adopting and implementing smart technology solutions including storage systems, supply supervisory control and data acquisition systems and static synchronous compensators. During 2016, the EC’s Innovation and Networks Executive Agency signed 43 grant agreements worth almost Euro 275.5 million for smart grid and storage projects under its Horizon 2020 Research Programme – the biggest EU research and innovation programme with nearly Euro 80 billion in funding, available over seven years.
The focus of Middle Eastern countries was on adopting new and smart technologies to improve grid reliability and efficiency, expanding the domestic grid to meet power demand, accommodating renewable energy and strengthening cross-border links.
Amongst the Gulf countries, Saudi Arabia and Iran took the lead in smart grid projects. Saudi Arabia announced plans to invest SAR 12 billion for the implementation of smart grid projects to increase renewable energy integration and provide a means to meet the emerging electricity demand. The Iran Power Generation Transmission and Distribution Management Company engaged South Korea’s power utility, Korea Electric Power Corporation, to develop a smart grid in Iran.
During the year, Jordan announced that it was making steady progress on its Green Corridor project, which is likely to be completed by 2018. The project will strengthen the country’s 400 kV South-North transmission corridor, enabling new facilities generating large amounts of renewable energy to be connected to the network.