THE FUTURE OF ELECTRICITY: LIBERALISATION, LONG DISTANCE TRANSMISSION, HVDC AND SUPERGRIDS

 Polly Higgins
28.07.08
ELECTRICITY & TRANSMISSION IN EUROPE AND BEYOND

Russia is running out of gas, oil is peaking globally, and energy prices are escalating.  The most recent climate change science from NASA tells us that we must stabilise our carbon dioxide emissions at 350 parts per million, a figure we have already overshot with emissions currently standing at 385 parts per million. The joint challenges facing us are of the widespread adoption of low carbon energy sources and the implementation of resource and requirement-appropriate electricity grids.  Business as usual is simply no longer an option.

For Europe, that means some major changes ahead: of the way we generate electricity, new customer requirements, new technology opportunities.  We fundamentally need to change our ageing transmission grids and electricity networks to embrace a trans-national smart grid able to accommodate clean energy sourced from geographically wide ranging locations from the likes of wind in Northern Europe and concentrating solar power farms in the Sahara.  Some of this power will be from intermittent sources (wind), some not (heat storage can be used for CSP)  and some power may go the opposite way through the grid. This is contrary to the situation at present, where the flow is largely unidirectional – from the power station down to the user. 

A growing consensus is gaining momentum at Brussels level that in addition to adoption of large scale low carbon energy resources, home generated electricity from microgeneration will also become the norm, with surplus sold to the grid.  Other demands on the grid will evolve, such as the use of electric cars that will be plugged in overnight to recharge. Our grids will need to accommodate these varied, complex and fluctuating loads.

SUPERGID OF THE FUTURE
Electricity networks across EU are 40 years old or more and are fast approaching the end of their design lives.  Many national grids require substantial investment in updating, with the replacing and interconnecting of networks.  Rather than simple replacement now is the time to take the opportunity for fresh thinking and innovation for smart grid design, of the most up to date communication technologies to embrace the new challenges and exciting opportunities ahead. 
Variable renewable energy output inevitably requires to be supplemented by reserve capacity, storage or increased trade with adjacent areas.  Future electricity markets and networks will need to provide consumers with a highly reliable, ?exible, and accessible power supply.  Thus, the use of both large centralised generators and smaller distributed power sources across Europe will need to be fully exploited. All this and more is the vision of the future – a future that will be with us very soon.
Ten years ago the EU opened it’s energy markets, but until now its journey has been ponderous and largely unsuccessful, resulting in a mixed bag with many member state markets dominated by large state-owned or private monopoly enterprises.  This has prevented new suppliers from successfully entering the market, and created investment reluctance. To make it work, full liberalisation of the market is required.  Networks need to be separated from supply, new traders must be given non-discriminatory access to the market and cross-border energy trade must be made easier.
WINDS OF CHANGE
But have we got what it takes to make this happen? There’s been a lot of talk, but little decisive action – until now.  If you look closely you will notice that the winds of change have recently shifted direction.  The pro-liberalisation camp has strategically advanced, and plans are indeed afoot to make this all happen.
It’s Official: Unbundling is the Way Forward
The recent decision on the 18th of June by the European Parliament marked a decisive stance.  In a move supported by the renewable energy industry, provisions will now be adopted in support of full ownership unbundling in the electricity market.  The verdict from Brussels is that the separation of vertically-integrated power companies’ generation assets from their transmission networks will now proceed. The high number of votes demonstrated the strength of the European Parliament’s support for a properly liberalised energy market and a level playing field for renewables. Just as the telecommunications sector has been successfully liberalised, so now will the energy sector, with Brussels set to clear the obstacles that interfere with the flow of energy and choice across the continent.
“Allowing power generation companies to own the transmission grid makes no more sense than allowing an airline company to own the sky,” commented Christian Kjaer, EWEA Chief Executive. “The European Parliament has shown its commitment to fair access to the electricity grids, which is essential if the EU is ever to attain effective competition in the power market while meeting its objective of 20% renewable energy by 2020.”
Transparency, accountability and accessibility are three buzzwords merrily bandied around by Members of Parliament in support of liberalisation of the electricity sector.   There will be transparency of network rules and codes, which will apply to all grid participants; accountability will be required of the new Agency for the Cooperation of Energy Regulators (the director of ACER will be subject to a vote of approval by the European Parliament and will be required to regularly report back to the European Parliament on the performance of his or her duties, duties which will include strong decision making capabilites, not merely an advisory role); accessibility of information will facilitate easy evaluation of consumption data and the ability to change supplier will bolster consumer protection measures. 
Further measures
Vulnerable energy consumers are to be protected. EU countries are to take “appropriate measures […] to ensure that the number of people in energy poverty” – those unable to afford heating the home to an acceptable standard, as defined by the WHO – “decreases in real terms.” MEPs also insisted that countries work towards cutting the cost of energy to low income households – and that Member States protect pensioners and disabled people from disconnection of in winter. In the same vein, they backed an amendment mandating national authorities “to introduce pricing formulas which increase for greater levels of consumption”.
With climate change in mind, MEP’s also authorised national authorities to require system operators “to give priority to generating installations using renewable energy sources or waste or producing combined heat and power” — except when the safety and reliability of the grid is compromised.
National authorities are to work together to integrate their national markets “at least at one or more regional levels”, the Committee also decided.  This would be the” first and intermediate step towards a fully liberalised common European market”. A concerted effort is also to be made towards integrating the EU’s “electricity islands.”
These are provisions with teeth. Times, as they say, they are a’changing.
THE VISIONARIES

A lot of clever people from research institutes, universities, industry, regulators and
utilities have been examining what the future will require for quite some time. With the European Parliament decision on unbundling, a Europe-wide liberalised energy sector embracing a smart grid to facilitate the flow of cross-border low carbon energy from various sources is now ready to be rolled out. 
New Alliance: Union for the Mediterranean
But there is more – expansion of the energy sector across the Mediterranean is now less than a decade away.  On July 13th, with the arrival of the new EU French Presidency, a Mediterranean Union was formally endorsed, promoting regional cooperation between the EU and developing nations bordering the Mediterranean (North Africa). Touted as a multilateral relationship it will build on the existing Euro-Med free trade area, increase co-ownership of the process and make it more visible to citizens. Named the “Barcelona Process: Union for the Mediterranean“ (UMed), it  encompasses all 27 EU Member States and the European Commission, together with  other members and observers of the Barcelona Process (Mauritania, Morocco, Algeria, Tunisia, Egypt, Jordan, Palestinian Authority, Israel, Lebanon, Syria, Turkey and Albania), and the other Mediterranean coastal states (Croatia, Bosnia and Herzegovina and Monaco). 
The Union for the Med has opened the door to the flow of energy supplies between the countries bordering onto the Mediterranean basin and Europe.  Thus it is anticipated that grid interconnections will be in place between Member States of the EU before 2020, facilitating connection of low carbon energy sources across the Mediterranean basin, from North Africa and further afield.  For such a unified low carbon energy vision, its time has now arrived.
An Old Idea…
The idea is not new. Buckminster Fuller in the 1970’s envisioned an interconnected global grid linked to renewable resources.  For the past 22 years the Global Energy Network Institute (GENI) has investigated his proposal for a global electric energy grid. GENI has conducted research on the viability of the interconnection of electric power networks between nations and continents, with an emphasis on tapping abundant renewable energy resources. Their research serves to underline the benefits this will bring: linking renewables between all nations will mollify conflicts, grow economies and increase the quality of life and health for all.
Not Such a Madcap Idea Afterall
Like Copernicus, Buckminster Fuller was ridiculed by some for his expansive vision. However technological development now moves power further and cheaper than it did 30 years ago, just as he envisioned it would.  When Buckminster Fuller first espoused his vision, electric power could only be efficiently transmitted a few hundred kilometers. Breakthroughs in materials science extended this transmission distance to 2500 kilometers, and Direct Current (DC) lines are now able to reach over 7000 km. This allows utilities to interconnect across time zones and compensate for variations in seasonal demand. Today about 2% of all electricity is transmitted along HVDC lines, in more than 90 projects around the world, linking large energy projects to centres of high energy demand.
Most networks are historically predicated on Alternating Current systems (AC), which were chosen over 100 years ago because it was easier then to transform AC supply than DC supply.  Now, with the development of high-voltage valves, it has become possible to transmit DC power at higher voltages and over longer distances with lower transmission losses.
Research by the IEA, as set out in it’s newly published report Energy Technology Perspectives 2008- Scenarios and Strategies to 2050, supports the use of DC transmission systems.  With losses typically around 3% per 1000 km, it makes economic sense for long-distance and sub-sea transportation. In the case of wind electricity, the IEA estimates that transportation over 2000 km would add USD 0.02 to USD 0.03 per kWh. To connect across the Mediterranean basin would require only 400  – 600 km depending on where the links were positioned. In theory an HVDC line could be laid from Morocco to London, a distance of 2700 km, with losses of less than 8%.
… New Impetus
Interconnection into Europe was deemed an audacious idea even six months ago.  Now the foundations of such links are to be built under the newly formed Union for the Mediterranean, which has been backed by amongst others, France, Germany and the UK.  For the past 5 years TREC (Trans Mediterranean Renewable Energy Co-operation), an initiative of the Club of Rome, has promoted the DESERTEC concept of building Concentrating Solar Power (CSP) plants out in the Sahara desert to provide clean renewable electricity. TREC have successfully advanced the concept of a renewable energy transmission network combining CSP with wind farms and other renewables to transmit power to Europe from the Middle East and North Africa, via high voltage direct current (HVDC) cables across the Mediterranean.
Now the Union for the Mediterranean is planning the construction of a €45 billion high voltage direct current (DC) grid to transfer electricity produced by Saharan and North African solar installations to consumers thousands of kilometres away. The Project Proposal is called the Mediterranean Solar Plan.
Med Solar Plan

Key objectives of the Med Solar Plan are the expansion of integration of energy markets and the promotion of sustainable development through the creation and development of a solar market. It is proposed that key skills will be shared and market players from the EU will help facilitate such a development, with the long-term aim of importing solar electricity into the EU.

The Med Solar Plan, they say, will ensure a multilateral mobilisation of the political authorities, institutions and financial sectors.  Recognising that energy policy in developing nations is still piecemeal at best, it proposes that the European Commission will promote the framework for the necessary dialogue on the energy policies and sectoral strategies that require to be implemented by the various countries.  It will build on the established work of existing initiatives such as the Euro-Mediterranean Energy Market Integration Project. This will include the build of HVDC grid connections across the Mediterranean basin.

The Med Solar Plan aims to have in place 20,000 megawatts of CSP in North Africa by 2020. Estela Solar, the CSP industry Association, estimate that a further 36,000 megawatts of CSP will be online in Southern Europe by 2020. 
If the projected annual growth rate of CSP through 2012 is maintained to 2020, say the Earth Policy Institute, global installed CSP capacity will exceed 200,000 megawatts—equivalent to 135 coal-fired power plants. With billions of dollars beginning to flow into the CSP industry and restrictions on carbon emissions imminent, CSP is primed to reach such capacity.

Wind Supergrid
Compare this with wind: If the present 27 per cent annual growth rate of installed wind power capacity is maintained (100,000 megawatts having been reached in March of this year), total capacity in 2020 will hit 2 million megawatts.
With both their enormous growth potential, wind and solar will be foundation players in our future new low carbon energy economy.  A supergrid would treat wind and solar (and other renewables) as trans-national resources which would enable all participants to share in the enormous energy potential, to their mutual advantage.
TREC have not been the only ones to call for connecting of renewable energy systems with a supergrid. Airtricity have presented proposals to link in their offshore wind farms throughout Europe via a high voltage sub sea transmission network. They say it could ultimately cover the Baltic Sea, North Sea, Irish Sea, English Channel, the Bay of Biscay and the Mediterranean.  With such a geographically extensive range, fluctuating availability becomes less of an issue.  By building wind farms in the seas around Northern and Western Europe, as well as areas of the Mediterranean, it would become possible to harness the wind whenever it is blowing and transform it into a stable source of power, say Airtricity.
PRACTICAL REALITIES, First Steps
Legislatively, it can be said that the necessary frameworks to shape a low carbon renewable energy future are now starting to shape up. But it is still early days; the Renewables Energy Directive is still being debated and may yet provide some surprises (note the UK’s recent but so far unsuccessful attempts to exclude the mandatory requirement to implement priority access to the grid for microgeneration).  The European Commission estimate the EU Member States will need to invest in excess of 750 billion Euros in power infrastructure over the next three decades, divided equally between generation and networks (some €90 billion will be invested in transmission and €300 billion in distribution networks).  The EU has yet to commit any major funds towards such a massive upgrade or transformation of the bloc’s energy infrastructure. In addition, the EU has yet to secure funding for a range of ‘low carbon’ technologies.  But that’s not to say it can’t or won’t happen – it will. The question is can we do it fast enough?

Polly Higgins
Barrister, TREC UK
07515 389 066/0845 337 2105
polly@trec-uk.org.uk

Energy ministers clinch deal on liberalisation[fr][de]
http://www.euractiv.com/en/energy/energy-ministers-clinch-deal-liberalisation/article-176279
Published: Monday 13 October 2008  
European energy ministers managed to overcome a month-long deadlock over the opening of EU gas and electricity markets on Friday (10 October).
While ministers had agreed on the broad outline of a deal at the last Energy Council in June, many issues remained unresolved, including disagreements over how to prevent a small number of energy giants from dominating the EU market.
The Commission’s original plans had sought to ease the stranglehold of national energy majors by forcing large integrated firms to sell off their transmission assets so as to keep these activities fully separate from energy production (so-called ‘ownership unbundling’). But France and Germany successfully led a coalition of countries against the plans, finally obtaining the right for former state monopolies – such as EDF and GDF in France and E.ON and RWE in Germany – to retain ownership of their gas and electricity grids, provided that they are subjected to outside supervision.
But following pressure from countries like the Netherlands, Denmark, Spain, Portugal and Poland, the deal will forbid energy producers from buying up the transmission businesses of energy companies in European countries where full unbundling has been introduced. This effectively means, for example, that EDF would not be allowed to buy up high-tension electricity lines in the Netherlands.
Ministers also approved the so-called ‘Gazprom clause’, aimed at limiting the ability of energy companies from outside the bloc – including Russia’s state-owned Gazprom – from buying up distribution networks.
But the Baltic States and Poland were disappointed that the clause had been weakened compared to initial plans for a ‘reciprocity clause’. Such a clause would have acted as a sort of ‘EU investment veto’, preventing companies in third countries like Russia from acquiring European transmission assets unless they grant EU firms the same legal certainty and market-access rights as those enjoyed by foreign firms operating on EU soil. However, Germany, where roughly 40% of gas imports come from Russia’s Gazprom, succeeded in pushing through a weaker clause under which only a bilateral political agreement will be required, in a bid not to upset its main provider. In effect, this means member states will be able to negotiate bilateral investment clauses individually.
Final technical arrangements were also cleared up, including the voting system for the new EU Agency for the Cooperation of Energy Regulators (ACER), which is to oversee the functioning of energy markets. Germany had originally pushed for bigger countries, with larger energy networks, to have a greater say over the agency’s decisions. But under the final deal, all countries will have the same voting weight.
Commission President José Manuel Barroso welcomed the compromise as “good news for consumers and businesses in Europe” and “a crucial step towards the completion of the single market”.
The compromise now has to be approved by Parliament, which could prove tricky. In the initial vote on the issue, the House had insisted that ownership unbundling should be the only option for liberalising the EU’s electricity sector (EurActiv 19/06/08).

See also http://tx1.fcomet.com/~claverto/cms/common-affordable-and-renewable-electricity-supply-for-europe-and-its-neighbourhood.html

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