EU says €200bn needed for energy grids by 2020

Nov 18, 2010 12:00 AM

€200 bn is needed to upgrade Europe's gas and electricity grids over the coming decade, the European Commission recently, adding that half of the sum will have to come from government coffers at a time of budgetary pressure.

The EU has begun the search for new electricity grid solutions as its commitments to greenhouse gas emission cuts and renewable energy have raised new issues for Europe's ageing grid, which is not capable of integrating large amounts of decentralised energy. Moreover, the Russia-Ukraine gas dispute, which cut supplies to large parts of Eastern Europe in January 2009, brought to the surface the need diversify supply channels. The Energy Infrastructure Package was set to define the energy infrastructure priorities for the coming decade. It also initiates the debate on a new instrument to finance projects of European interest.
An implementation report of the Trans-European Networks for Energy (TEN-E), which defines which projects are eligible for Community financing, highlighted major changes that have taken place in EU energy policy in the past few years, including the adoption of the 2020 climate objectives and the third internal energy market package. It argued that TEN-E in its current form has “neither the resources nor the flexibility to make a full contribution to the delivery of the ambitious energy and climate goals”.

The EU executive presented its energy infrastructure priorities for the next 2 decades.
It warned that the EU will not meet its goals on renewable energy, greenhouse gas emission reductions and security of supply without significant investment in cross-border interconnections and in integrating renewable energy into the network.
“We're still using the old territorial limits, which existed before the EU,” EU Energy Commissioner Günther Oettinger said, presenting the EU executive's communication. He pointed out that the EU is currently not able to transport energy from West to East or from North to South.
Only half of the required investment in energy transmission networks will be delivered by the market on time, the Commission said. “The other €100bn will require public action on permitting and levering the necessary private capital,” it said.

Priority corridors
The Commission defined 4 priority corridors for electricity and 3 for gas where concrete projects eligible for European funding will be identified in 2012. These projects of “European interest” will also benefit from an accelerated permitting process with a time limit for the final decision. The EU executive said it would propose a new financial instrument in June 2011 to support the priority projects from the EU's next long-term budgetary period (2014-2020).
The electricity priorities include an offshore grid in the North Sea and a connection to transport power from wind parks to Northern and Central European cities and to hydro storage in the Alpine region.

Other projects are aimed at connecting the Iberian Peninsula with France, strengthening the regional network in Central Eastern and South Eastern Europe and integrating the Baltic energy market into the European market. For gas, 2 priority corridors run North-South in Western Europe to remove internal bottlenecks and in Eastern Europe to boost Baltic market integration. The Southern Gas Corridor is also given priority status to deliver gas directly from the Caspian Sea to Europe with the aim of bypassing Russia. It will also be discussed by the EU and the US at an upcoming summit in Lisbon.

Electricity 'highways'
In terms of a long-term strategy to de-carbonise Europe's energy supply, the Commission proposes to establish a plan for the development of “electricity highways,” the first of which could be commissioned by 2020. These lines would be able to transport wind power from the North and Baltic Seas and solar power from the Mediterranean to major consumption centres.
The strategy also mentions planning for transport infrastructure for CO2 after carbon capture and underground storage technology becomes commercially viable, probably after 2020.

The European Network of Transmission System Operators for Electricity (ENTSO-E) endorsed the Commission's aim to tackle barriers like inefficient and slow permitting procedures and access to capital for network developers, which hinder the development of electricity networks
“Transmission system operators, as future owners and operators, look forward to cooperating with the Commission, using their knowledge and experience, for the design and operation of the contemplated electricity highways, with the aim of ensuring a secure and reliable integration with the existing grids,” the TSOs said in a statement.

Gasunie, a gas infrastructure company, argued that a well-developed gas infrastructure is a key condition for the successful completion of the EU internal market for gas. It stressed that further investment in infrastructure will be needed to accommodate the changing patterns of supply and demand and to improve market functioning and supply security.
“The challenge for the Commission will be how to reconcile its ideas of increased EU funding for energy infrastructure development with the current market based approach [the user pays principle]. In any case a proper national investment climate remains crucial”.
Gasunie also expressed its support for proposals to harmonise permitting rules and create more predictability. “However a time limit for permitting procedures in its current form will not help to speed up permitting procedures, and even poses the risk that authorities will be working towards a deadline instead of taking a timely decision,” it said.

The Trans Adriatic Pipeline (TAP), a gas pipeline project to link Italy with Albania and Greece, welcomed the Commission's recognition of gas as an important part of the EU's future energy mix. It stressed the important role of commercial decision-makers and the market, urging governments to ensure that any public incentives build on the principle of cost-effectiveness.
“TAP is pleased with the political direction in today's Communication, and the recognition of TAP as one of the viable options for bringing additional volumes of gas to the European market and creating increased diversity to Europe's gas supply. TAP is now looking forward to the next concrete steps, and expects that the EU and the relevantmember states will ensure that the competition among alternative projects can be carried out on transparent and equal terms on a level playing field,” said Kjetil Tungland, managing director of TAP.

The European Wind Energy Association (EWEA) stressed that an integrated European energy network is crucial for Europe's future prosperity. It urged the Commission to come forward with proposals on new financial solutions to pay for the new infrastructure.
“If governments do not get behind the proposal for a European grid, we will face an absurd situation in which renewable energy capacity is being built, but no adequate grid exists to deliver the 34% of renewable electricity needed by 2020 to reach the EU's binding renewable energy targets,” warned Christian Kjaer, EWEA chief executive officer. “Without a European grid there can be no single market in electricity, and no effective competition in the electricity industry. That's bad for consumers small and large”.

The Greens in the European Parliament welcomed the priority of the North Sea grid, and the recognition of the importance of decentralised energy infrastructure investments and heating and cooling networks.
But Luxembourg Green MEP Claude Turmes questioned the Commission's decision to postpone decisions on building a DC cable linking the North Sea wind area to the continent until 2020. “First electricity highways like a DC connection between North West Germany, Swizerland and Northern Italy should be commissioned already in 2015”.

Landis+Gyr, a leading company in smart metering solutions, was satisfied with the recognition in the infrastructure package that smart metering and smart grid technologies are not being deployed fast enough.
“The critical question is how the EU is going to turn this knowledge into action. We don't have much time to left to reach the EU's 20-20-20 goals – and other areas of the world are deploying these technologies faster than Europe,” said Jon Stretch, executive vice-president for Europe, Middle East and Africa. Stretch argued that the technology already exists and simply needs to be put in place. “Without laying the foundation of the smart grid through smart metering as quickly as possible, the infrastructure will not be ready to move towards an energy-efficient, low-carbon economy in the next 10 years”.

The Renewables Grid Initiative (RGI), a coalition of businesses and NGOs promoting 100% grid integration of renewable energy, expressed concerns that the Commission's communication does not provide for a predictable investment framework to expand renewables and energy-efficient technologies.
“Unfortunately, the document does not provide clear directions for investors, no indications of the desired infrastructure, nor a path for achieving the 2020 targets,” said Antonella Battaglini, executive director of RGI. The RGI urged the Commission to prioritise necessary electricity infrastructure development for new renewable energy generation so as not to stall potential large investment flows into large-scale offshore wind and required transmission lines, for instance.

Eurelectric, the European electricity industry association, welcomed the fact that the Commission had included carbon capture and storage (CCS) in its Energy Infrastructure Priorities.
“We also welcome the document's priority of a 'roll-out of smart grid technologies,' in particular the plan to set up a smart-grid transparency and information platform,” it said in a statement.
“The EU needs to urgently address the issue of public attitude towards the agreed energy and climate policy and its implications,” it added, calling for a Public Engagement Action Plan to be developed.

European Energy Regulators chief Lord Mogg called for national regulators to play a key role in the development of future infrastructure.
“The stronger independence of national regulators in the recent legislation is key to providing a predictable, robust and independent regulatory framework, both for monopoly networks and competitive markets”.
“This, in turn, is a precondition for attracting the private investment required to meet Europe's energy objectives. We see the Third Energy Package tools as highly complementary to the Infrastructure Communication proposals – indeed central to the successful delivery of the investments. Regulators have a key role to play in ensuring Europe get value for money from these huge investments”.

Green group WWF criticised Commissioner Oettinger for trying to please everybody and blurring what is important. “Future energy needs point clearly to electricity and its efficient use as a priority over other options, yet today's energy project shopping list fails to make this key distinction,” said Mark Johnston, senior policy adviser at WWF.
“Prolonging support for classical fossil infrastructure will divert resources from smarter power network investments. Energy ministers meeting next month must prioritise the electricity system if overall objectives are to be met,” he added.
The International Network for Sustainable Energy (INFORSE-Europe) criticised the Commission for coming forward with a “strategy of the past” by constructing “ever-longer pipelines to bring in ever-scarcer fossil fuels”.
“It is crucial that EU funding and national subsidies are not spent on international energy infrastructure at the expense of local solutions for energy efficiency and renewable energy,” the NGO network said in a statement.

INFORSE-Europe called on the EU to base decisions on whether to subsidise gas and power transmission lines on a careful cost-benefit evaluation. It argued that the lack of such an assessment in the Commission's proposal risks wasting resources in infrastructure when other solutions “could have addressed the same problems more cheaply and with less environmental costs”.
Greenpeace regretted that the Commission had missed the opportunity to tackle “the real energy issue”.
“If they do not make the strategic choice to develop a clean, flexible energy mix, we will end up with a wasteful and expensive energy system that tries to combine the growing share of renewables with old-fashioned, inflexible and dirty coal and nuclear. The Commission has presented some critical tools to help us along the path to a green future, but shied away from showing EU countries the way,” said Frauke Thies, EU energy policy campaigner at Greenpeace.

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