November 22, 2017
Guest post by Michal Smyk, Member of the European Commission Expert Group on electricity interconnection targets and Deputy Head of Strategy, Polska Grupa Energetyczna (PGE), representing Polish Electricity Association (PKEE).
In the past months, the subject of interconnectivity seemed to temporarily disappear from the agenda as other legislative initiatives have taken priority. However, after publishing the Experts Group report “Towards a sustainable and integrated Europe”, the interconnections target should be back in the spotlight….where it belongs.
In a constantly changing environment with a growing social awareness, we will always find it challenging to justify the development of large scale, capital intensive infrastructure projects such as interconnections.
With the continuing democratisation of the energy system, we are witnessing the evolution of historically-centralised systems towards decentralised models. Generation is moving closer to demand. We observe the rapid growth of RES which profoundly affects the traditional way the energy systems function. These trends may develop at an even quicker pace as a result of the lower cost of batteries and storage technology as well as the digitalisation processes along the energy value chain.
In addition, it seems that the integration of old and newer systems continues. This means we should take advantage of primary energy resources in the most effective way. In general, PVs should be mostly located in the south of Europe, while wind farms should be located in the north. Therefore, we should use the transmission infrustructure only where it is economically justified.
It is often the case that a properly designed market is the most optimal way to deliver economic value. This is usually in contrast to a centrally-planned economy and excessive regulatory interventions. This is normally because the energy market is very specific due to the laws of physics and its social dimension. Multidimensional policies with sometimes contradictory targets result in a complex regulatory framework reflecting this uniqueness in order to meet the expectations of various stakeholders.
However, there should be as much common sense in these actions as possible. The report “Towards a sustainable and integrated Europe” is a right step in that direction. In the report, a group of experts recommend changing the way we think about interconnectivity. Instead of one interconnection target, which does not stand up to the current market requirements, the focus is placed on selecting the most promising regions and projects in terms of social welfare creation potential.
A few conditions and parameters were identified in order to achieve this new approach. Firstly, recognition of the fact that a well-functioning market should drive investments in new cross-border infrastructure and, most of all, contribute to the better utilisation of the existing one.
Secondly, identification of the regions with the best chances for developing economically-sound projects, which is done within the following dimensions:
- Price convergence i.e. to achieve a yearly average of the lowest possible price differentials between particular regions
- Security of supply i.e. to ensure that electricity demand, including imported energy, can be met in all conditions
- RES integration i.e. to enable export potential of excess renewable production
Finally, acknowledgement that the conditio sine qua non for making new investments is a transparent and comprehensive cost-benefit analysis.
The involvement of society is at the heart of these conditions and parameters, as well as stakeholder groups, at a very early stage of interconnector development, addressing their concerns.
When any of projects related to interconnection capacity meet these criteria, they should be included in the Ten Year Network Development Plan and future lists of Projects of Common Interest.
Last but not least, it should be constantly stressed that rapid technological developments in the near future are likely to strongly influence the functioning of network infrastructure. Therefore, the approach of measuring interconnectivity and its associated methodologies should also be validated regularly.
The pragmatic approach recommended in the report “Towards a sustainable and integrated Europe” should be broadly acknowledged in Europe in the coming months and reflected in future decisions and actions by the European Commission and European Parliament.Dominique Ostyn