Securing Energy Supply across the EU

by | Dec 3, 2012

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As one of the measures for awarding the Nobel Prize to the EU, the “advancement of reconciliation” stands on shaky ground in the light of competing European member countries’ energy policy. There remain significant barriers faced by the EU in moving to its goal of a single internal energy market by 2014. In reality, achieving the goal is a long way off and is increasingly hindered by uncoordinated member state approaches to their own pressing energy supply issues.

With most member countries looking anxiously at dwindling security of supply over the next five years, an increasing number of countries are actively discussing and in some cases rolling out legislation for capacity markets to help deal with perceived risks to loss of load. In France, ambitious cuts in the share of nuclear power to 50% by 2025 will require a corresponding acceleration in replacement capacity, while their German neighbors have been playing catch up ever since the decision to phase out nuclear power last year. Earlier than anticipated coal plant retirements and poor spark spreads (power-gas differentials) deterring CCGT investment are playing their part too in undermining system adequacy in the UK. And across Europe, while the growth in renewables is adding capacity to the market, it is often replacing controllable, base-load generation with intermittent, non dispatchable output.

Capacity markets or strategic reserve are seen as potential solutions to guarantee sufficient capacity is available during periods of high demand or periods of low RES production (low wind or cloudy). Capacity market designs drawn up in isolation however have already brought criticism from the European Network of Transmission System Operators for Electricity (ENTSO-E) and indeed the EC’s deputy director-general for Energy for their isolated development and lack of cooperation with fellow members. Furthermore they are perceived in some quarters as having a distortion effect on the creation of a single liberalized market, arising as they are from the implicit mistrust of market mechanisms to ensure sufficient future generation capacity. As well as drawing parallels with individual member’s renewable subsidy schemes, disparate nuclear, CCS and smart grid policies are also running contrary to the spirit of EU integration. The European Wind Energy Association has recently been at pains to defend the role of wind and point to a legacy of structural flaws in network and market design for the dysfunctioning loop flows on the grid or the proliferation of bespoke RES support schemes used across Europe.

While not exactly fighting out or squabbling over energy sources, the European Union member countries are instead it appears taking the opposite isolationist approach. For “peace and reconciliation” the Nobel Prize may be warranted, but it seems member countries remains somewhere short of a synchronized, coordinated team, at least as far as energy sources are concerned.

Barry Walsh is a lead consultant for Infosys.

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