NORD.LINKStatus of a transnational project

German Norwegian Energy ForumBerlin 24. October 2013

Foto: TennetT

Content• Partners• The rationale• The project

– Key figures– Status progress

• Economics – the investor perspective

Connectingrenewables

DC Nordseekabel GmbH & Co.KG

The NORD.LINK Partners

• Norwegian TSO• Owner and operator of the Norwegian

grid, including interconnectors• 50% project ownership

• Dutch and German TSO• Owner and operator of the grid at the

connection points in Germany• 25% project ownership

• German government owned financial institution

• Active in financing Energiewende projects• 25% project ownership

Strategic fit

• Increase security of supply • Market integration in Europe• Create value for stakeholders and society• Facilitate integration of renewable

Connecting hydro to wind

• Reduce CO2 emissions

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Key figures• Tonstad – Wilster

• 514 km submarine cable

• 53 km overhead line, Norway

• 55 km underground cable, Germany

• In operation 2018

• 1400 MW

• VSC converter technology

• Investment 1.5 – 2.0 billion EUR

Status progress – NORD.LINK

Technical license

License according to the Offshore Energy Act

Interconnectorlicense

Exclusive Economic Zone(EEZ)

Offshore license

Regional Planning Procedure

Norwegian Water Resources and

Energy Directorate

Ministry ofPetroleum and Energy

Ministry ofPetroleum and

Energy

Danish Energy Agency

Federal Maritime and

Hydrographic Agency (BSH)

State Mining Authority (LBEG)

Amt fürPlannfeststellung

Energie (AfPE)

Required licenses

Stadt und Kreis- Wegennutzung- Wasserung- Private

Socio-economic business case

NPV (2013 MEUR) | 

Congestion rent interconnector 1 325Revenue from trade with reserves 100Compensation from capacity mechanisms 240Investment cost cable and converter 700Operation‐ and maintenance costs ‐40"Interconnector" profitability 925Producer‐ and consumer surplus 1 350Reduced congestion rent other interconnectors ‐340Transit costs ‐20System operations costs ‐250Losses in the Norwegian grid ‐200Norwegian grid reinforcements (net) ‐220Residual value 20Socio‐economic profitability, Norway 1 260IRR 11 % 10 %Repaid in year 2029 2031

Approximate numbers from the Norwegian Interconnector License applicationFlat exchange rate 1 EUR = 8 NOK used for conversion

Widerbenefits

Overall economic benefit> (Investment + increased variable cost) => Profitable

Investments in the electricity sector, - complex decisions, high uncertainty

• Fuel prices

• CO2-price

• Interconnector capacity

• Energy efficiency

• New renewable generation

• New nuclear /dismantling of old nuclear

• Development of demandand demand response

… regulatory intervention in the markets increase uncertainty for investors

ELECTRICITY PRICE DRIVERS

Capacity Mechanisms –a challenge for the European EM integration

Capacity Markets – important for the business case for our planned interconnectors

• UKAuthorities have published a draft solution for a national capacity market(27. June and 11. October)

• GermanyHas not concluded yet – have strategic reserves for the coming winter

• NorwayIn the interconnector license applications,we have estimated that each interconnectorcould earn 30 MEUR/year from CM participation

• Our viewAs a general principle market developments should facilitate trade and follow the principles behind the Internal Energy Market

We support market coupling and the development ofan integrated European electricity market. It will:

Facilitate competition and provide effective resource utilization Provide cost efficient security of supply

Our planned interconnectors will contribute to the same by:

Allowing Norwegian flexible hydropower capacityto play along with other production capacityto the common benefit of the systems on both sides, thus

providing a contribution to the transformation of the European electricity system

If the introduction of capacity markets is deemed necessary, they must be designed so that all market players, also interconnectors, are allowed to participate

Closing remarks

BACKUP

Market Coupling – a success story

Benefits of the integration due to market coupling, implemented across EU, is estimated to be between €2.5bn to €4bn per year (booz&co, 2013)

Market coupling of Germany and The Netherlands

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Interconnectors contribute to security of supply

Capacity availability of nuclear power and interconnectors

Sources: IAEA (2013) and CIGRE (2012)

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Capacity availability [%]for 29 countries with commercial nuclear reactors (2010)

Capacity availability [%]for 35 HVDC interconnectors around the world (2010)

HVDC interconnectors 1 - 35Countries 1 - 29

AVERAGE

AVERAGE