· · · Institutional Repository

The European refining system has been through an intense restructuring in the period 2008-2012 and it is still uncertain how this restructuring will unravel. This created the motivation for this research study. Research objective: to analyse if, and in what manner, potential structural, technical changes to the European refining system will most likely affect oil product supply- and demand balances in the period 2010 - 2025. The applied research methodology consists of spread sheet modelling combined with scenario analysis to build an input-output model from the bottom up. Main finding is that supply- and demand balances will most likely further deteriorate and hence cause increased trade flows.

The functioning of vital infrastructures, such as energy and telecommunications infrastructure, is key to societal and economic security and well-being in modern society. The reliability of these infrastructures is thus of paramount importance. Transmission system operators (TSOs) fulfill a central role in achieving this reliability, by maintaining, operating and developing the transmission networks that form the backbone of the infrastructure. However, the TSOs have to achieve this in changing conditions and with increasing uncertainties; vital infrastructures are faced with rapidly changing market conditions and regulations, especially given the ongoing liberalization process in the European Union. Furthermore, they not only have to maintain reliability, but also other values like affordability, accessibility and sustainability. To ensure an adequate level of reliability, while also remaining efficient and profitable in a changing environment, TSOs need to continuously reevaluate their planning and investment decision making methods. To be able to do this, they need insight in the trade-off between reliability and efficiency and the different investment options to improve reliability. In this research, we aim to add to that insight by comparing three vital Dutch infrastructures (the gas infrastructure, the electricity infrastructure and the fixed line telecommunications infrastructure) using an analytical framework based on the ISO31000 Risk Management standard. By using risk management, we create a generic framework that explicitly deals with uncertainty. We focus on three elements in the risk management process: context, assessment and treatment. The study consists of a comparative case study, based on literature review and interviews with TSOs and regulators. The context has been described along a set of factors, that have been categorized as either technical, economic or institutional. The final set of 12 factors is considered to be as parsimonious, relevant and complete as possible, to give a structured and efficient overview of the different infrastructures. From analyzing the context it follows that the infrastructures are very different, but often have striking similarities on individual context factors and experience similar developments, such as internationalization and institutional fragmentation. This fact enables us to analyze the particular influence of these factors on the assessment and treatment of reliability. This final set of factors thus forms a strong basis for the rest of the analysis. Reliability is neither a simple nor an unambiguous concept for multiple reasons. First, we can identify different levels of reliability. Second, reliability risks can occur on different timescales and in different parts of the supply chain. Third, in vital infrastructures the public interest in reliability has a large influence on the perception of reliability. Finally, the discussion on reliability is often embedded in a specific infrastructure. To compare the assessment of reliability in different infrastructures, we have to deal with these complexities. Therefore, we have developed a new conceptual model that identifies different levels and dimensions of reliability and also is generic enough to be applied to all analyzed infrastructures. The assessment of reliability in gas and electricity infrastructure shows strong similarities, while in telecommunications infrastructure the assessment is radically different as a result of rapid technological developments and strong differentiation in services offered. When analyzing the treatment of reliability, it becomes clear that individual treatment options are very infrastructure specific and comparing them is difficult and of limited use. Therefore, four high-level treatment strategies have been identified, which can be compared between infrastructures. These four treatment strategies are investing in larger infrastructures, investing in smarter infrastructures, supply responsiveness and demand responsiveness. The dominant strategies of the TSO in gas infrastructure are investing in larger infrastructures and supply responsiveness; in electricity infrastructure it is supply responsiveness and in telecommunications infrastructure it is investing in larger and smarter infrastructures. Demand responsiveness is important, but not a central strategy for TSOs, because they deal with aggregated traffic flows and have no direct contracts with consumers in which to include incentives for demand responsiveness. The trade-off between reliability and efficiency is sometimes mistakenly simplified and over rationalized in the discussion between regulators and regulated TSOs. Considering that the costs of reliability risks and the investment costs to reduce these risks can be estimated, it is contended that this trade-off can be analytically optimized. However, given the multidimensionality and subjectivity of reliability and the complexity of transmission networks, this optimization is most likely false and extremely difficult. In an infrastructure where different stakeholders have different perceptions and requirements for reliability, which also change over time and as a result of incidents, an adequate level of reliability can only be determined in a political, rather than an analytical, process. Another concern is that fragmented regulatory oversight and the decoupling of public values, can lead to conflicting interventions and suboptimal decisions by the TSO. Especially when the regulation of a specific value is very stringent compared to other values (e.g. efficiency by price regulation) and the regulated TSO has only specific responsibilities and capabilities, the risk exists that the scope of the TSO is narrowed only to those responsibilities and capabilities, instead of developing and encouraging new solutions. To avoid this, regulation should be more holistic and should address conflicts between different public values instead of decoupling them. To achieve an adequate trade-off between reliability and efficiency, while dealing with institutional fragmentation and uncertainty, TSOs should employ more proactive mechanisms to efficiently and effectively utilize existing and future transport capacity. Especially the gas infrastructure lacks such mechanisms, e.g. an efficient capacity allocation mechanism. Also, while we have shown that analytically optimizing the trade-off between efficiency and reliability produces no sensible results, TSOs still need a way to determine and achieve an adequate level of reliability. Considering the political and complex nature of reliability, it is necessary to develop instruments to achieve long-term reliability in cooperation with other stakeholders.

Due to the introduction of a new grid connection policy, transmission system operator TenneT expects congestion to arise on the Dutch transmission grid in the near future. This new connection policy was introduced by the Ministry of Economic Affairs to abolish the discrimination between existing grid users and new entrants, and should improve competition. It allows generators to be connected to the grid directly, without having to wait for transmission capacity expansions that may be required. As this could cause transmission flows as desired by market parties to exceed the available capacity, TenneT must apply congestion management in order to guarantee the safe and reliable operation of the transmission grid. The Ministry decided that basic system redispatch should be used to manage congestion. This method was regarded the most appropriate short-term implementable option available, but has some drawbacks nonetheless. In existing literature it is argued that it potentially leads to high costs, that it is vulnerable to strategic bidding, and that it creates economically sub-optimal outcomes from a grid efficiency perspective. This study has quantitatively evaluated the application of the method in the Netherlands, in terms of congestion costs, their allocation, the incentives it creates, and the opportunities for (and the consequences of) generators bidding strategically. These outcomes were compared to three other congestion management methods (market splitting, market coupling, and the APX-based method1), in order to assess the validity of the proposition that market-based methods, which form the current trend in Europe, lead to better outcomes. Using a quantitative model of the Dutch electricity system the application of all four congestion management methods was simulated. This was done under four different scenarios, each of which was based on extreme conditions that were expected to contribute to congestion in parts of the grid: • Low wind availability in Germany • Cheap natural gas • Green revolution • Code red The simulations revealed that the transmission link between the Maasvlakte region and the Ring is most prone to become congested. However, this study also found that the resulting congestion costs will be low. This is the case because the variable cost levels of production units in the areas upstream and downstream from the congested grid segment were found to be very similar. A deviation from optimal dispatch will therefore result in only slightly higher dispatch costs. Under the most extreme scenario conditions, in which 1292 MW needs to be redispatched from the Maasvlakte to other areas of the Netherlands, net congestion costs were found to be € 231 / hr. On a yearly basis this would be € 2 mln., which is significantly lower than cost estimates found in literature, which expect this cost to be in the order of magnitude of € 10–100 mln. To identify the most appropriate congestion management method for the Netherlands, multi-criteria decision analysis (MCDA) was applied to compare the methods, in a pairwise manner and on the basis of eleven criteria. The analysis revealed that conflicting objectives preclude the identification of a single most appropriate congestion management method. It found that the APX-based method outranks market splitting and market coupling, but it remained inconclusive with respect to the appropriateness of basic system redispatch in comparison with these methods. The policy objectives of the Ministry thus appear to be different from those presumed elsewhere and by existing literature, considering their explicit preference for market-based methods. In order to improve the results of this analysis, the Ministry must reassess its objectives with respect to the conflicting criteria of proportionality, and long-term generator and TSO incentives. Also, additional research should improve the conclusiveness of the model results that were used for MCDA, as this would contribute to a more conclusive recommendation on method appropriateness. In particular, such research should encompass the options for incorporating a renewable energy compensation scheme under market-based methods, and it should, by constructing a more extensive, continuous, agent-based model that is capable of incorporating the strategies pursued by individual generators, provide a broader insight and more detailed data on the extent of congestion and the (resulting) consequences of strategic bidding.

The emergence of green gas is a promising development within the Dutch gas market. Green gas is biogas with natural gas quality and can lead to a significant (up to 70%) greenhouse gas reduction. It therefore contributes to several sustainable energy targets and might partly solve some economical and geopolitical issues within the gas market. Currently, the green gas share is about 0,5% and ambitions for a share of 50% by 2050 are posed. Related to and included in the green gas sector, Bio-CNG is the most mature and sustainable renewable transport fuel and has the most potential on the short term. Unfortunately, several obstacles are present within the emerging Dutch green gas market in general and within the Dutch (Bio-)CNG market in particular. The exact problems (and its consequences) that hinder the further development are not clear at present. Likely, new concepts (comprising technical and institutional aspects) for the distribution of green gas to fuelling stations could take away these problems. With that in mind the main research question for this study is: What are feasible socio-technical concepts for the Dutch distribution system of (Bio-) CNG to fuelling stations, that take away the identified problems within both the green gas market and the (Bio-)CNG market? First, a thorough problem analysis is executed. Based on the identified needs, functional requirements are developed. Non-functional requirements are identified via a stakeholder analysis and via boundary values within certain institutions in place. In addition, the institutional analysis gives insight in the current participating organisations, their resources and the interactions. Specific institutional economic aspects are identified, that can influence the (institutional) design largely. Hereafter, the technical design alternatives are constructed, based on the functional requirements and the possible technical tactics. Subsequently, these alternatives are evaluated on their performance via a score on the non-functional requirements. Additionally, these evaluations comprised several scenarios. After the selection of four feasible technical alternatives, the institutional design embedding took place. In some cases, the institutional design choices gave reason to redesign the technical design slightly. Finally, the conclusions and recommendations considering these combined technical and institutional designs are posed. Eventually, a generic design approach for infrastructure systems (or even socio-technical systems) is abstracted from this research. This approach combines several techniques in order to be able to derive at feasible socio-technical conceptual designs. The interaction between institutions and technology is included prominently, as are the aspects of requirements engineering, scenario development and the creation and evaluation of technical design alternatives.