Energinet: Methodology for socio-economic assessments of electricity transmission projects

This report outlines the methodology employed by Energinet in conducting socio-economic assessments for electricity transmission projects. The framework is designed to support investment planning and decision-making processes by ensuring that infrastructure developments align with Denmark’s strategic energy objectives, including security of supply, economic efficiency, and the integration of renewable energy sources.

The methodology adheres to the socio-economic analysis guidelines established by the Danish Ministry of Finance and the Danish Energy Agency. It provides a structured approach to evaluating potential electricity transmission investments by analysing their market effects, security of supply implications, asset-related costs, and ancillary service requirements. Additionally, it accounts for broader socio-economic impacts, such as environmental effects and the facilitation of cross-border energy exchanges.

The analysis framework encompasses a comprehensive assessment of both qualitative and quantitative factors. It includes cost-benefit evaluations for new investment initiatives and cost-effectiveness analyses for regulatory-driven projects. The report also details the application of sensitivity analyses to address uncertainties in key assumptions, ensuring robust decision-making in long-term energy infrastructure planning.

Energinet uniquely uses BID3 for market modelling (spot market model). BID3 modelling simulations of electricity generation and electricity consumption at hourly levels with climate profiles for different historical climate years, combining this with stochastic outages on power plants and interconnectors. The simulation is carried out for the entire European electricity system, and the possibilities of imports on interconnectors are reflected sufficiently in the modelling. BID3’s powerful capabilities are used to estimate:

• Trade benefits and transit compensation and integration of renewable energy for interconnectors. For example the change in curtailment of renewable energy and the weighted electricity spot prices using BID3 modelling
• Resource adequacy such as EUE (expected energy not served)
• Available capacity for reserve exchange
• The socio-economic value of changes, such for climate impact due to CO2 emissions from the electricity sector is embedded in the calculation of trade benefits for interconnectors

By systematically assessing the socio-economic implications of electricity transmission projects, Energinet aims to optimise resource allocation, enhance market efficiency, and contribute to the transition toward a climate-neutral energy system.