Powering Europe - European Wind Energy Association

20,000 MW. The costs of transmission expansion are
not included in the calculations and the results above.
However, mapping net trade flows gives a very disparate
picture, with some countries increasing their net
trade flows enormously and others decreasing them
depending on the specific power capacity being developed
in each country. The following two graphs indicate
the main countries’ net trade flows for both
scenarios. Positive trade flows indicate a net export
from the countries listed in the top line to the country
named in list to the right of the graph. Accordingly, negative
figures indicate net importing trade flows for the
country listed in the top line. Nevertheless, the graph
does not give a full picture of the hourly utilisation and
congestion of transmission capacities.
5.2 Sensitivities
Needless to say, there is a significant degree of uncertainty
linked to the results presented above. In this
section, we present and discuss a sensitivity analysis
of some of the major driving factors that influence the
merit order effect of fuel prices and the overall GHG
reduction targets.
In detail, the following sensitivities have been investigated:
1) Fossil fuel price increase by 25%
2) 30% European greenhouse gas emission reduction
target in 2020 compared to 1990 levels
In comparison, the results presented previously have
been based on the assumption of Europe meeting its
target of a 20% reduction in greenhouse gas emissions
by 2020 compared to 1990 levels.
Varying market situations such as supply and demand
imbalances can affect fuel prices in the short term.
In the longer term, the cost of production has a very
significant impact on the average fuel prices, but local
market conditions, which include the forces of supply,
demand, competition, policies and government
16 See http://ec.europa.eu/environment/climat/pdf/com_2010_86.pdf
chApTEr 6 themeritordereffectoflarge-scalewindintegration
regulation, can also have a significant impact on future
fuel prices, and explain the uncertainty involved
in forecasting fuel prices. In order to reflect the uncertainty
in this study’s long-term fuel price forecast, a
sensitivity analysis was carried out.
Moreover, since the UN Climate Conference (COP 15)
in Copenhagen in December 2009, the European Commission
has been stressing that it is of the utmost importance
that the EU maintain its global lead as the
world shifts towards a low-carbon economy. The EU
has said it will move to a 30% reduction in greenhouse
gases by 2020 compared to 1990 levels if other developed
countries commit themselves to comparable
emission reductions and developing countries contribute
adequately according to their responsibilities and
respective capabilities. But although COP 15 did not
result in a global agreement on a future greenhouse
gas emission reduction target, and the outcome left
a lot of political and market related uncertainty, the
EU Commission has been analysing the possibilities
for the EU to move from its current 20% reduction target
to the 30% GHG reduction target nonetheless. 16
So, there is a chance that the assumed greenhouse
gas emission target for the EU ETS sectors within this
study will become even higher. The following sensitivity
analysis therefore looks at how this more ambitious
GHG reduction target would influence the results of
the study on MOE.
Fuel prices
The merit order effect is indicated with the help of
the short-run marginal cost curve for 2020. In general,
short-run marginal costs include non-fuel variable
costs, fuel and transportation costs as well as
carbon costs. Fuel costs have a major influence on
the total marginal cost level, hence the assumed
fuel price. Therefore, it has been decided to investigate
the impact of the merit order effect on fuel price
changes.
The basic approach taken in the sensitivity analysis
is to vary the fuel price level, with all other influencing
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