The unification process of the electricity markets in Europe
With the objective of developing an integrated, reliable, sustainable and cost-efficient pan-European “supergrid”, European leaders has settled ambitious goals for 2050 for integrating the European Union electricity markets.
Timely and well-planned development of new network infrastructure is crucial in achieving the European internal energy market (IEM), as well as allowing for the integration of an ever increasing amount of renewable energy, and meeting the challenge of more dispersed on- and offshore energy sources which need be connected with major demand centers.
There are four principal agreed goals:
A well-functioning energy market,
Security of supply
Greater interconnection of energy networks.
Energy efficiency plans, energy saving, and empower the renewable energies development.
To meet these objectives, the European Commission, following its November 2010 Communication proposal, proposed to immediately launch work to establish a modular development plan with the aim of producing a module for the expansion of the European electricity grid – the so-called electricity highway –, between 2020 and 2050, launched in 2012 the e-Highway2050 research project, which first conclusions are expected on November 2015.
This plan has two principal goals:
To be able to help European electricity markets integration
To let to pan-european grid, collect large quantities of electricity from renewal source, and be able to carry it over long distances.
To develop this grid modular development plan, there has been a definite effort to set how would be the pan-European “supergrid” in 2050. Based on the results, will be easier to set the development needs of the «electricity highways system» in the European Community. To construct different scenarios, they took into account possible changes in:
Socioeconomic aspects (economic benefits compared to a conventional set-up, financing, etc.)
Environmental protection aspect
New planning methods taking into account the global market
Regulatory and legal obstacles (in particular the governance of a supergrid)
Acceptance by society
In charge of investments and projects necessary to accomplish the unification project the EU has created ENTSO-E (European network of transmission system operators for electricity) who has formed six regional groups to identify and address network investment and development challenges reflecting regional particularities and needs:
The European “supergrid”
The main objective is to create the “supergrid” designed for the long-distance transport of large volumes of electricity. To do this, «electricity highways» – special new high-voltage lines – are required.
The current main problem is that in the past, plants were built according to consumption volumes, with the focus on transporting power over medium distances. However, currently one of the EU goals is to reduce as soon as possible the level of CO2 emissions from the Eurozone countries, which led to an increasingly strong demand for electricity generated from renewable energy sources, which generally, comes from hydro and wind sources produced in countries located in northern Europe due to weather conditions in the area. As a result, it is expect a strong increase in load flows from north to south. The same applies to the increasing production of solar energy in southern Europe, which will have to be transported to the load centers.
With current production and consumption centers increasingly alienated, the main future challenges in power transmission are in their transport throughout nations and continents. To get an idea of the importance of this, we should understand that historically the transmission system operators managed electrical flows in a way that more or less replicated the trades in the wholesale market. In the future electrical system, these flows will increasingly be operated on distribution networks.
Recently it was taken as example for other European countries, the Scandinavia energy model, for the high degree of interconnection between the Nordic countries, low carbon emissions level, and for being a market with high liquidity and “day-ahead market coupling”, which now serves as a model for the reform of the energy market of the European Commission.
However, after 40 months of work, much has been said at the political level efforts to integrate energy markets in the EU but with the current state of transition, all participants now face a series of potentially difficult challenges like: increasingly invasive regulations and a backdrop of falling and less volatile commodity prices, which have precipitated an era of change and uncertainty in which there are fewer trading opportunities and profits are harder to come by.
The European Union continues to promote a single competitive wholesale market for energy with some degree of success. Market coupling is now in place from the Nordics (Germany and Austria) to Iberia (Spain and Portugal) along with a common day-ahead price calculation. Price differences between countries are based on the difference between their production mix.
Despite this, there is therefore a long way to go to achieve the EU’s ultimate goal. Market complexity remains a challenge for participants who also face issues such as grid congestion, interconnection bottlenecks, and security of supply issues, and also still have to “navigate” across the different connectivity standards between TSOs (Transmission System Operator), for example.
Market rules should be updated to the reality of a much more decentralized system, where renewable energy and the consumer are the two most important points.
In short, to build Europe’s very large internal market for electricity has been a slow 25 years process, but it has been achieved, and only in the EU, nowhere else. The EU have conceived their internal market arrangements “its own way”, even though many other ways were originally imaginable.
Completing this program will not be a simple question of money, but a great political conviction about mutually beneficial interconnections between countries and regions, providing an economy of scale, improved capacity to innovate, and greater security and guarantees in the power supply. Britain and Spain still are electrical islands with interconnection capacity below five percent.
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