Europe’s underdeveloped power grid infrastructure means that a surplus of electricity cannot be traded across borders, wasting renewable energy in countries that produce more than they consume, write Jo Leinen and Werner Langen.
Jo Leinen and Werner Langen are German members of the European Parliament, for the Social Democratic Party and the Christian Democratic Union, respectively.
EU legislators are soon to start “trilogue” negotiations on the new regulatory design for the EU electricity market. The hope is to finally integrate the rising share of renewables into the grid and break down national barriers to cross-border electricity flows.
Electricity is one of Europe’s least traded energy sources due to limited grid infrastructure. Member states not only lag behind in meeting the 10% interconnection target, set for 2020; they also shy away from fully liberalising their markets, even if this means breaching EU laws and, more importantly, losing out on the substantial benefits the internal market promises.
Meanwhile, the need for inter-connectors is greater than ever. An underdeveloped grid means that a surplus of electricity cannot be traded across borders. This can lead to a situation where renewable energy production is wasted in countries that produce more than they consume, such as was the case in Portugal recently.
Even worse, it can result in blackouts if a country facing temporary capacity inadequacy cannot meet its need through imports from its neighbours due to insufficient infrastructure. This has almost happened in Belgium.
Connecting electricity markets can enhance security of supply by diversifying sources, contribute to the EU’s climate and energy goals by integrating renewables, and cut the costs of electricity. It can also reduce Europe’s dangerous dependency on energy imports from countries like Russia.
This is why the European Commission recognise interconnection projects by putting them on its list of Projects of Common Interest (PCIs), with the aim to boost investment and cut financing costs. Once granted the PCI status, the project may benefit from faster planning and permit granting, as well as lower administrative costs, and is eligible for public funding.
The good news is that investment costs are no longer an issue as private investors are now ready to foot the bill without government subsidies, meaning no additional burden on European taxpayers and consumers.
For instance, there is already 1,000 MW privately funded interconnector Eleclink between Great Britain and France under construction. Another independent PCI project – 2,000 MW Aquind interconnector – is being developed despite uncertainties over Brexit.
Other interconnectors being developed or under construction between the UK and the remaining EU countries are mostly supported by public funds either directly or through a “cap and floor” regime. In each case, there is strong economic and practical rationale for building such interconnectors.
Even after Brexit, the UK will remain a key component of the energy system of Europe, including its vitally important energy trade with the Republic of Ireland. This shows that energy security and decarbonisation imperatives can outweigh any energy-related impact of Brexit.
Yet, in many EU member states, traditional market actors, who preserve an incumbent position and a huge market share, are still reluctant to open up to competitors. This is why the Agency for the Cooperation of Energy Regulators (ACER) should act as the guardian of market competition. We desperately need private capital if we want our cross-border exchange to be more than just a fraction of what it could be.
Today, much attention is paid to Europe’s external energy supply. We tend to forget that strengthening and integrating better our EU internal energy market contributes to our energy security just as much.
The best way to reduce Europe’s reliance on imports from Russia is to make every effort to increase the efficiency with which we manage already existing resources, including our growing renewables potential. This will not be possible without further facilitation of cross border electricity trades in Europe, including the United Kingdom, as a part of the overall integrated energy market strategy.
It has also become very clear that while existing transmission system operators play a vital role in implementing this strategy, those targets can be achieved only if independent projects are also given a green light by national and European regulators.
Relying only on taxpayers money either in the form of direct investments or grants and loans from EU institutions to build future infrastructure is not sustainable. This also means that member states and their regulators have to open their markets and stop over-protecting their national transmission system operators and allow other forms of financing to participate in the developing of transmission infrastructure.