Only European electricity network planning will deliver the required transmission capacity to meet current energy challenges and optimise the use of existing networks and power plants, Brussels-based think-tank Bruegel said yesterday (7 June). Its new analysis shows that upcoming EU legislation will not be enough to do the trick.
Despite efforts to integrate the European electricity market over the past five years, markets remain mainly national, with a single price for each country and cross-border transmission lines limited, the paper points out.
It finds evidence of little price convergence and argues that net transmission capacity in the EU in fact decreased by over 15% between 2005 and 2009.
Europe will have to invest increasing sums in interconnection to integrate growing shares of intermittent renewable energy, replace ageing infrastructure and handle a "massive shift" in the geographic distribution of generation in Central-Western Europe, said Georg Zachmann, research fellow at Bruegel and author of the report.
In Germany, for instance, an increasing share of electricity will be produced in wind farms in the north, while most of the population lives in the south, he said.
The European Commission is currently preparing a new energy infrastructure package, due to be unveiled by the year's end, which should address these problems. It includes a new instrument to replace the Trans-European Energy Networks (TEN-E), which would adopt a more European perspective on energy supply when allocating Community funding to projects.
Moreover, the European Network of Transmission System Operators for Electricity (ENTSO-E) is preparing a non-binding Ten-Year Network Development Plan to pinpoint where new infrastructure is needed.
But Zachmann argued that neither of the initiatives will deliver the required network capacity as they do not provide an integral network development solution, nor a binding plan with robust means to implement it.
He added that the EU's focus on market coupling to optimise the use of the existing transmission system will not deliver a significantly more efficient use of capacity, which requires coordinating efforts to optimise system operations rather than simply linking nationally optimised markets with single-price zones.
The analysis recommends that the EU continue to push for a jointly implemented network development plan based on a cost-benefit analysis, which would include rules on sharing the costs and benefits of investment in transmission lines that affect more than one country.
"This should be done in a market-based manner," Zachmann stressed, adding that non-uniform electricity prices within a country should be allowed.
In addition to EU-level network planning, he called on incentives for network companies to merge across borders and optimise network usage in cooperation.
Matti Supponen of the Commission's energy deparment agreed with the recommendations but warned that nodal pricing leading to regional differences in electricity prices would be hard to swallow.