A European Grid?

Posted in Europe | 21-Dec-12 | Author: Ciarán McCarthy

The EU’s Energy Situation: An Improvement or simply worsening?

Over the past few years, a newfound concern for the Energy Security of the EU has emerged. This could be due to the growing awareness of the vulnerability of the EU since as a collective unit, the 27 member states of the EU (EU27) are effectively dependent on outside suppliers. As of 2009, the EU had a staggering oil import dependency of 83.5% while its gas import dependency was 64.2%. Of this gas dependency, 40% of the EU’s gas is imported from just Russia and Norway, effectively making the EU vulnerable to a large scale crisis should there be any shocks with regards to the Russian and Norwegian supply. These figures demonstrate that the EU is in a precarious position but it becomes worse when the level of energy produced from within the EU is taken into account. Statistics published in 2011 show that the EU is producing 48% of its own energy needs but that this figure has dropped by 13% when compared to 1990 levels. The levels are predicted to drop to 36% by 2020 unless the energy mix is changed.

It is perhaps for these reasons that we have seen a push towards ‘greener’ forms of energy in recent years and why the next EU budget will be the most ‘green’ budget to date with €200 billion being dedicated to ‘green’ initiatives, provided it gets approved in the vote to be taken at the end of this year. This budget would be a step in the right direction and build on the progress made through the ‘Connecting Europe Facility’ which is aiming to fund €50billion worth of investment in the transport, energy and digital networks across Europe. But perhaps further steps are necessitated, perhaps along the line of the ‘Europe Alone’ Model discussed by Patrick Criqui and Silvano Mima (2012). This model outlines Europe taking a strong regional approach and greatly developing renewable forms of energy and improving energy efficiency while simultaneously imposing large costs on polluters i.e. €89 per tonne of CO2 emitted into the atmosphere. The benefits pointed out in this model are that the EU would:

  • greatly reduce its levels of imports with regards to dependency and volume;
  • lower the demand for energy as less would be wasted;
  • see a major growth in renewable sources of energy (RES).

The last point of seeing a major growth in RES is of great importance because between 1990 and 2009, RES in the EU energy mix grew by only 5% to go from 4% to 9%. Overall, this model could help ensure that the EU would become more self-sufficient and in doing so become less exposed to the potential risk of Petropolitics from current suppliers.

Bundles of Energy Going to Waste?

Wind, solar, biomass and PV are perhaps the best known forms of RES as they currently contribute most to the overall RES energy mix but there are other viable options which have perhaps not gotten enough mainstream coverage in the EU. One such form is known as Bulk Energy Storage (BES). In the summer of 2011 the Electric Reliability Council of Texas (ERCOT) just managed to avoid enforcing rolling blackouts across the state due to the increased demand for energy. The only reason it managed to avoid rolling blackouts was because it purchased all the sources of electricity available on the spot market. This meant ERCOT had to pay thirty times the normal price for electricity. This is relevant to the EU because renewable forms of energy do not always produce electricity when they are most needed e.g. Germany has a huge surplus of electricity produced by wind power and this surplus flows into neighbouring networks which causes distortions in energy systems. Since the EU is moving towards developing renewable forms of energy it is possible that in the future the EU could face a similar situation to ERCOT and have to overpay in order to get enough energy if the RES are not producing enough at peak times. In fact it could be argued that the EU is already in this situation by tying itself to long-term contracts with Russian company Gazprom that are based on oil-indexed prices. However, if the EU was able to store the energy produced by RES such as wind power it would find itself in a much stronger position and such storage of energy is currently available thanks to Danish architecture firm, Gottlieb Paludan which has developed the ‘Green Power Island Concept’ (as seen below) in conjunction with the Technical University of Denmark. This concept involves building an artificial island with wind turbines and a deep central reservoir. With this concept when the wind blows, the energy created is used to pump water out of the reservoir and into the sea but when power is needed the seawater is then allowed to flow back into the island, driving a turbine thus producing energy.  

windpark

A second concept is being developed by a company called Gravity Power in California. With this concept two water shafts are drilled into the ground with one being larger than the other while they remain connected at both ends (as seen below). Water is pumped down the smaller shaft in order to raise a piston in the larger shaft. With this model, when the energy is required the piston is lowered, forcing the stored water through a generator and creating energy to go into the grid. The benefit of this model is that it is incredibly compact meaning it can be built next to large residential areas while further shafts and turbines can be added at future dates if required.

 

concept

Another concept that varies from the above forms of Bulk energy storage but still deserves more media focus is a form of concentrated PV power. One model has already been created which is a 700,000-module, 53 Megawatt (MW) photo-voltaic (PV) power-plant located on a former military exercise area in East Germany (as seen below). With this production ability the plant has the capability to deliver electricity to 15,000 households per year.

 

solar

Although this is an impressive feat there is another German initiative called Desertec which has the aim of creating a large-scale, concentrated solar power plant which would then transfer the energy produced to the EU. This technology has the potential to change the current RES landscape as Desertec wishes to build a station on a piece of unproductive land in the Sahara which would have the production capability of 100,000 MW, equal to 100 large, coal-fired power-plants, with the future potential of providing 15% of the EU’s power needs. This project has the backing of industrial suppliers Siemens and ANN, the German energy companies EON and RWE as well as solar companies Abengoa Solar, MAN Solar and Schott Solar. Deutsche Bank and insurance company Munich Re have also signed on meaning the financial prospect s of the idea are promising. Although the concept itself is technically feasible, the main problem which it is facing is the issue of transporting the electricity to Europe as there is currently not a grid in place within the EU which could support the project.

The Blatant Grid Problem

The issue of requiring an electricity grid that can support the transmission of electricity throughout the twenty-seven member states of the EU is not a recent development. Despite the need for a modern and efficient grid to be in place to act as a support system that can enable integration among the EU27 vis-a-vis RES, a functional system has not been developed. This is illustrated by the fact that only 5% of the electricity generated within the EU is traded between the member states. This can be attributed to the current transmission infrastructure being reminiscent of a system from the 1970’s / 1980’s. The reason that we have not seen progress made in this area is because energy policy has traditionally been a matter of national control meaning that member states have acted in a unilateral manner. This has resulted in what can only be described as a ‘patchwork’ of national policies now being in place across the EU with each system having different characteristics and market designs. Although the responsibility of market liberalisation does reside at the supranational EU level, the Treaties have ensured that the responsibility for shaping policy with regards to a nations energy-mix has stayed firmly at a national level meaning an attempt by the EU to intervene in this policy area could be viewed as an affront by the member states.

Despite this clash the EU is continuing in its attempts to underline the importance of an internal grid to the individual member states. In November 2010, the Commission issued a communication to the European Parliament, the Council, the European Economic and Social Committee and the Committee of the Regions entitled ‘Energy infrastructure priorities for 2020 and beyond – A Blueprint for an integrated European energy network’.  In the document the Commission acknowledged the “urgent” need to extend and upgrade current electricity grids and storage facilities in order to foster market integration and maintain the energy security of the EU. The communication also stated that through a well interconnected and smart grid, the cost of RES deployment can be brought down as the greatest efficiencies can be found on a pan-European scale. Furthermore the Commission effectively pointed out what the hindrance is to such a network

”Tariff-setting remains nationally focused and key decisions on infrastructure connection projects are taken at a national level. National Regulatory authorities traditionally have aimed mainly at minimising tariffs, thus tend not to approve the necessary rate of return for                    projects with higher regional benefit or difficult cost-allocation across borders.....”

A perfect example of how a better network could be mutually beneficial to EU countries can be seen in the example of Germany and Poland. After the Fukushima Daiichi Nuclear disaster Germany decided to reduce its nuclear energy capability meaning the largest economy in Europe has now become the largest electricity importing country in the EU. As already mentioned, Germany has a surplus of wind energy which is flowing into neighbouring networks and causing distortions in these networks so it is evident that a better integrated network could amend these problems. Instead Germany has preferred to extend its internal North-South network. In the case of Poland, the country has a booming economy but 40% of its power plants are 30 years old or more while an additional 15% are 50 years old or more. This means that the power-plants are inefficient and simply cannot keep up with demand, which is currently growing at a rate of 3-4% per annum. Despite this fact, Poland has continued to rely on its rich coal reserves (currently producing 88% of its electricity requirements) in its attempts to cope with this rising demand for energy. An obvious solution would appear to be to enhance the electricity grid between the neighbouring countries as both Germany and Poland would experience mutual gains. An enhancement would allow Germany to secure its energy supply from Poland as it transitions to post-nuclear production while Poland would be able to import Germany’s cheap excess wind-generated electricity which would in turn relieve some of the pressure on its ageing power-plants. Yet it remains highly unlikely that Germany and Poland will pursue this path in the near future.

The Future

The intention of this piece is not to make an improved internal electricity grid seem like the simplistic solution to RES generated electricity but rather to show that it is essential and with such a network in place it allows for the aforementioned alternative sources of energy to become valid options for policy-makers.

It is accepted that implementing this network will be a tiresome affair as the heart of the problem will no doubt be who will pay for the grid and what gains each member state can achieve. It is also accepted that this network will prove costly. The EU Energy Roadmap for 2050 (published 15th December, 2011) noted that between 2011 and 2050, cumulative grid investments alone would cost between €1.5 - €2trillion. The Blueprint for an integrated European energy network also estimated that between 2010 and 2020, €200 billion would need to be spent to upgrade transmission networks. However it also noted that half of this figure would be taken up by the private network. What the private sector wants before committing such large sums of money is a reasonable amount of investment guarantee and this can only be provided if the EU27 realise that RES and the internal electricity market require a collaborative and enduring policy approach that reflects the long-term and evolutionary nature of these sectors. If such an approach was adopted then it would better position the EU to influence international energy developments as well as strengthen the ability of member-states to respond to a supply side shock.

Although the above figures may seem extravagant, the International Energy Association (IEA) found in a 2010 study that more than €460 billion is spent globally for subsidies and general financial assistance to oil, coal and natural gas consumption. Spending such large amounts globally on fossil fuels is incredibly short-sighted and contradictory as budgets for RES and electricity grids have been reduced in the wake of the economic crisis.

If the EU27 come together and work in a collective fashion, not only will it place them in a better collective position but the Blueprint for an integrated European energy network’ predicted that if the EU meets the investment requirements for the internal electricity grid, the associated work will create up to 775,000 new jobs between now and 2020. This will add an additional €19 billion to EU GDP by 2020 when compared to growth under a business as usual model.

Günther Oettinger, Commissioner for Energy, has stated in the past that the EU can only suggest measures and it is for the member states to put them into action. The paths for the EU27 have been made clear; either continue to invest large amounts in fossil fuels and work in a unilateral fashion or invest higher amounts in RES and collaborate on an internal energy network so that each member-state benefits in the long-run. The decision is now up to the EU27.

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