Policy & Regulation

The European Commission has recognised that Europe needs better energy corridors between countries. But what impact will policies and chosen technologies have on the smart grid projects within them?

Travelling around Europe can be a challenge if you are an electron. While people, money and trade all flow pretty freely across European country borders, energy networks across the continent have all been designed with national, rather than trans-national, needs in mind.

This was perhaps not too much of a problem in the days when energy policy was essentially limited to making sure there was enough carbon-fuel-based generation capacity to meet the needs of each nation.

But as the European Union (EU) attempts to combat climate change with the introduction of non-carbon energy commitments, the ‘grid that stops at the border’ approach no longer works, and the European Commission (EC) knows it.

Trans-Euro Infrastructure

That is why last October it took the wraps off what it calls a “proposal for a regulation on ‘Guidelines for trans-European energy infrastructure’.”

Essentially the measure aims to “ensure sufficient and timely development of energy infrastructures across the EU and in its neighbourhood in order to meet the EU's energy policy objectives of market integration, security of supply and sustainability,” according to the EC.

A Commission staff working paper on the regulation adds: “The existing framework is not geared towards delivering the identified European infrastructure priorities.

“Tariff setting and regulatory incentives remains nationally focussed on short-term cost efficiency without taking into account the corresponding long-term Europe 2020 investment challenge.”

Putting it right by 2020 will require investments of about €140 billion in electricity networks, along with €70 billion in gas networks and €2.5 billion in CO2 transport infrastructure, the EC estimates.

And this massive investment comes at a time when many national utilities will already be engaged in important smart grid deployments. “I don’t think it’s going to have a huge impact,” observes Una Shortall, deputy secretary general of the Council of European Energy Regulators.

That does not mean there is not an important link between the network interconnection and smart grid agendas, however. For a start, both will clearly help with the process of integrating large amounts of intermittent renewable energy into the system.

Beating bottlenecks

“For a long time the EU energy system has had important bottlenecks, such as the famous interconnection between Spain and France,” explains Miguel Angel Sanchez Fornie, director of telecommunications and control systems at Iberdrola.

“They pose important limitations. This is what we are trying to solve. If you have a serious problem in one region it means you can get support from other countries.

“There is a basic objective which is energy security, and that contributes to greater flexibility and competitiveness. Part of this affects smart grids and distribution networks. All the utilities are involved.”

What is currently up in the air is which infrastructure projects will be given top priority, and thus presumably benefit from EU funding.

Sanchez says Iberdrola is particularly interested in the fact that smart grids are expressly mentioned in the EC proposals, which may mean they could be considered of common interest, on a par with interconnection projects.

Both will be needed for Europe to achieve the level of grid flexibility it needs, though, he stresses. Chet Geschickter, research director in the energy and utilities practice at Gartner, agrees.

“It’s not clear that it’s an either-or situation,” he says. “What I can say is that in certain markets they are experiencing very high levels of renewable energy penetration: wind, solar, or both.

“And one of the things that larger transmission corridors will do is make it easier and more effective to integrate renewable power onto the grid.”

Renewables-based energy markets

The new energy corridors envisaged by the EC, he continues, will help regions that are experiencing very high penetrations of wind, like Denmark and some of the Nordic countries, to export wind power and maintain a balanced energy mix.

Meanwhile in markets such as France, which is heavily reliant on nuclear, says Geschickter: “It will help them import electricity to meet peak demand more readily. The overall prospect of this is that it will better balance the grid across Europe.” 

This does not lessen the need for smart grids, however.

“Realise that what the corridor enables is the import and export of electricity,” Geschickter notes. “And it should enable a more efficient marketplace. What it doesn’t do is guarantee a low price on things like peak power. It doesn’t ensure anything in terms of pricing.” 

This means there is still a strong economic motivation for the introduction of smart grids, although the opening of energy super-corridors could remove some of the incentive to pursue grid investments with low levels of return. “But I don’t think it gets rid of the need,” he says.

If that is the case then the combination of interconnection and smart grid investments should make for a fairly busy time in the energy sector across Europe before 2020. The continent’s electrons are finally going to get to travel.