2.7. IMPROVEMENTS AND COMPLIANCE WITH THE ERAA METHODOLOGY

Previous study:

Many elements of AdeqFlex’19 were already aligned with Regulation 2019/943 and the ERAA methodology, even before the methodology was adopted by ACER. Furthermore, the main methodological requirements stipulated in the Regulation (including those outlined in the ERAA methodology) were successfully implemented as part of AdeqFlex’21, as follows:

• the model was applied to more than 20 countries, including most EU Member States (Art. 23, §5);

• the model took into account a central scenario and several sensitivities and performed an economic viability assessment (EVA) of Belgian capacities (Art. 23, §5, b, c);

• the model took into account the contribution of all resources, including existing and future potentials for generation, energy storage and demand response, as well as imports/exports and their contribution to flexible system operation (Art. 23, §5, d);

• the model included a flow-based methodology (Art. 23, §5, g);

• the model applied a probabilistic method (Art. 23, §5, h) and a single modelling tool was used (Art. 23, §5, i);

• the model took into account real network developments (Art. 23, §5, l); and

• the model took national generation, demand flexibility, energy storage and the availability of primary sources into account as well as the level of interconnection, based on the latest data available for each country (Art. 23, §5, m).

In addition to the methodological improvements already included in AdeqFlex’19 and AdeqFlex’21, Elia has integrated or improved the elements outlined below in the present AdeqFlex’23.

Ten-year horizon:

This study provides insights into all years of the 10-year horizon, resulting in insights for 12 target years (every year from 2023 until 2034 inclusive are simulated for adequacy indicators). In order to reduce the amount of simulations and computations, not all sensitivities and scenarios are simulated for all years: some key years are analysed in more detail where relevant. A large amount of sensitivities (more than 300) are performed on Belgium and other countries in order to grasp and understand the implications of varying certain assumptions.

For comparison, the ERAA 2021 simulated the years 2025 and 2030, and the ERAA 2022 simulated the years 2025, 2027 and 2030 respectively. The full 10-year span is expected to be assessed from ERAA 2024 onwards.

Economic viability assessment (EVA):

Elia worked in close collaboration with a renowned finance professor to develop a robust method for calculating the economic viability of the different assets in the electricity system, in line with the ERAA methodology requirements. This method was widely discussed with stakeholders, both for AdeqFlex’21 and for the present study and updated WACC and hurdle premiums are used. In this study, as in previous ones, the first method referred to in the ERAA methodology, i.e. the assessment of the viability of each capacity resource, is considered. The applied methodology is also further improved with the main novelty of implementing a multi-year assessment. This novelty allows the impact of the changing energy mix and prices over the lifetime of possible investment candidates to be evaluated.

Furthermore, the new rules regarding price cap increases have been implemented within the EVA methodology of this study, following the ACER decision of 10 January 2023 [ACE7]. Price cap increases are taken into account starting from the first simulated horizon in the study. These increases are endogenously considered in the calculations of economic viability, meaning that the magnitude of the increase is dependent on the simulated prices and their sequential progression.

Flow-based:

Belgium is a front-runner in the use of flow-based modelling for adequacy studies. The first adequacy study which used flow-based modelling was performed in 2015. Elia’s modelling framework integrates all known and planned market design introductions into the flow-based capacity calculation method, such as the consideration of the Core CCR; ‘advanced hybrid coupling’(AHC); or the minRAM rules introduced by the Regulation.

New flow-based domains were calculated for 2023, 2024, 2026, 2030 and 2034, taking into account planned network development. The considered domains including up to 41 dimensions (ALEGrO + Core countries + AHC interconnectors) add a large amount of complexity to the models, but allow the grid constraints to be correctly modelled as they are used in today’s market set-up.

End user flexibility/ Implicit DSR:

The integration of digital and flexible assets such as EVs, heat pumps and variable RES generation enable essential end user flexibility. A new methodology for the estimation of potential demand side flexibility from residential and tertiary sectors has been developed in this study, in close collaboration with the DELTA-EE consulting company. The methodology focused on i) an evaluation of the key enablers of demand side flexibility; ii) a calculation of the potential technical flexibility associated with each asset type; iii) an estimation of the maximum achievable penetration based on current market plans and policies for ‘EVs and charging points’, ’electric heating loads’, and ‘energy storage’ devices. These estimates are considered as input when defining the different scenario assumptions. The study also included an overview of the different barriers to enable such flexibility.

Finally, the modelling of demand side flexibility in Antares for the selected residential and tertiary sectors has also been further improved for this study in collaboration with the E-CUBE consulting company. Overall, this methodology development has introduced a significant improvement in relation to (i) the modelling of so-called ‘implicit’ DSR as outlined in the ERAA methodology; (ii) the consideration of barriers and constraints in the residential and tertiary sectors that had not been previously taken into account; and (iii) a refined appreciation of flexibility volumes coming to the market in the future.

Flexibility needs and means:

In this study, Elia further improves the modelling of end user flexibility provided by heat pumps, EVs and home battery applications for short-term flexibility objectives. It elaborates on the technical limitations in light of consumer comfort and the share of capacity assumed to participate in the intra-day and balancing markets. This allows a better understanding of the potential value of unlocking this flexibility for the system, both for adequacy as well as for balancing a system which contains high shares of renewable energy. Specific attention is paid to assessing the impact of these evolutions in terms of reserve capacity reductions and operational cost savings.

Elia further refined its methodology in line with the ERAA guidelines as part of AdeqFlex’21 with regard to the calculation of the total system’s flexibility needs and means; including an assessment of the dimensioning of Frequency Containment Reserves and Frequency Restoration Reserves for each target year.

Electrification of Industry / Explicit DSR:

Following Elia Group’s ‘Powering Industry Towards Net Zero’ study [ELI-4], further work was carried out for this study in order to define both additional electrical demand due to new industries, fuel switching and data centres, as well as forecasts for their potential flexibility. This study thus introduces a significant improvement in relation to the modelling of the so-called ‘explicit’ DSR as outlined in the ERAA methodology. This comprises the modelling of ‘power-to-heat’ or the flexibility of certain industrial processes.

Sensitivities with and without capacity mechanisms:

In line with the Regulation and the ERAA methodology, Elia includes scenarios both with and without market-wide capacity mechanisms in Europe.

Climate years:

Elia follows the approach developed for AdeqFlex’21, by the use of a forward-looking climate database developed by Météo-France. This database provides 200 climate years and takes into account climate change. The synthetic 200 years considered cover a large amount of possible future situations, all linked to the expected climatological conditions in 2025 (which is still considered as representative for the ’10year’ horizon analysed in the present study). This approach is fully aligned with the ERAA methodology.

Sectorial integration:

Regarding sector coupling, the interfaces between the electricity system and different sectors such as transport, heating and gas are taken into account through the inclusion of assumptions about EVs, heat pumps and thermal gas unit generation capacities respectively. In order to grasp the implications of the use of electricity to generate hydrogen, electrolysers are modelled as (flexible) consumptions of electricity in Belgium and abroad in the present study. Power-toheat devices are also considered as (flexible) consumption in Belgium and abroad (where such data is available).

Figure 2-12 compares the steps ENTSO-E has outlined as part of its roadmap towards full implementation of the ERAA methodology set by ACER with the methodology adopted for the present study.

FIGURE 2-12 — COMPARISON OF THE METHODOLOGY PLANNED FOR THE ERAA AND ADEQFLEX’23

Based on the implementation roadmap published by ENTSO-E on December 2022

Based on the methodology used for this study published in June 2023

12 target years (every year from 2023 and 2034) with a large amount of sensitivities

4 target years

Preparation of the forward looking database and temporary solution

Test climate change impact on model*

Forward looking climate database from MétéoFrance (200 synthetic climate years) economic viability assessment (multiyear, inclusion of storage etc..)

FB for at least Core in Central Ref Scenario (FB domains for 2025)

Extension of the geographical scope*

Improve Implicit DSR/Enhance Explicit DSR

Price dependent Implicit DSR electrolyser modelling

Prepare further integration of P2X

Methodology based on academic expertise, in-line with the ERAA methodology, extended to consider multi-year, of European perimeter and with investment decisions within the 10 target years of the study and endogenous price cap increase. Full adequacy FB simulations, adequacy patch and all climate years are considered in the EVA simulations

FB for Core perimeter for all the horizons FB domains for 2023, 2024, 2026, 2030, 2034 Advanced Hybrid Coupling as from 2025

Improved modelling of Electric Vehicles and Heat Pumps (natural, local and market optimisation including V2G)

Enhanced modelling of Small Batteries (local and market optimisation)

Inclusion of DSR for newly electrified processes in industry and data centres

Enhanced modelling of additional electrolysers New modelling of P2Heat (Heat Pumps and e-boilers) in industry

* development under consideration