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Professor Richard Green, Professor of Sustainable Energy Business and Head of the Department of Management, discusses building a bigger transmission network across Europe

The UK is getting an ever-increasing share of its electricity from renewables – almost 25 per cent in 2015 – and the share is set to rise.  Renewable generators, like wind and solar power, cut carbon emissions and reduce the amount of fossil fuels the UK has to import. What they do not do is provide “firm capacity”: the wind may not be blowing at the time of the system peak, and the sun will certainly not be shining since that peak occurs at 5 or 6 pm in December or January.

We need something else to provide (nearly) guaranteed supplies of power at those peak times. One of the options is to have transmission lines to other countries that are likely to have spare capacity; these have the additional benefit of allowing us to sell electricity to those countries when we have a surplus. Building a bigger transmission network across Europe will allow the electricity industry to concentrate renewable generators in the best areas (wind farms where it is windy, and solar panels in the south), and to move power between regions as the weather requires. This could save €15 billion a year by 2030, according to research with three Imperial College London colleagues (Danny Pudjianto, Iain Staffell and Goran Strbac), recently published in The Energy Journal.

Of course, moving electricity between countries needs a market at each end in which it can be bought and sold, and those markets need to have compatible rules. The European Commission, and groups it has set up (both of transmission firms within the industry, and government regulators), are working to make sure this happens. This is an area where Europe is following the UK, for we built the first electricity market in Europe, and it was pressure from the EU that has led other countries to adopt policies based on those we chose.

Building the new lines (including cables under the English Channel and the North Sea) is also an engineering challenge. I recently talked to someone who had built substations at each end of one of those lines; one in England and one in the Netherlands. The English substation had cost significantly more than the Dutch one because of the cost of complying with various “EU rules”. But of course, the Netherlands was a founder member of the EU and was complying with exactly the same rules. The difference was the way in which the UK Government had chosen to write those rules into our own laws: British ministers and civil servants chose policies that made life harder on this side of the Channel.  This is only one anecdote, but it is not the first time I have heard (or read) that apparently onerous rules imposed from Brussels were actually designed in Whitehall.

In other words, the EU Commission negotiated a better deal for British consumers than our government had been able to do

There are some EU decisions we do have to follow to the letter, however.  Two and a half years ago, my colleague Iain Staffell and I did some work for the European Commission on the future of the British electricity market, and how government support for new nuclear reactors would affect it. This was part of a State Aid inquiry, for all the EU’s governments have agreed to limit their ability to give money to firms to try to change their decisions, to get round the situation where (for example) several countries offer ever-increasing amounts of taxpayers’ money to attract a new car plant; the car firm profits hugely and the taxpayers lose out.

The Commission decided the UK Government’s support for the new nuclear station at Hinkley Point in Somerset was almost within the rules, but was too generous to the companies wishing to build the station. In other words, the Commission negotiated a better deal for British consumers than our government had been able to do, reducing the price we would have to pay for the electricity from the station.

The Commission has the clout to stand up to other big companies, too, such as Gazprom of Russia. Gazprom has always tried to sell gas to one country at a time, imposing contract terms that prevented the buyer from selling it on to any other . Doing deals that way meant every deal was important to the buying country (since it often had little choice about where to buy from) and less so to Gazprom. That allowed Gazprom to strike hard bargains each time, but the Commission has opened up Europe’s gas markets (in the same way the British Government earlier created a market in the UK), making Gazprom’s divide-and-rule strategy impossible.

I have heard claims Vladimir Putin is funding groups that are trying to break up the EU. I have no way of knowing whether they are true, but the fact the EU is able to stand up to Gazprom (and to oppose his actions in Ukraine) might be a motive for him doing so. I doubt anyone’s vote on June 23rd 2016 based on energy policy, but it is an area where cooperation on a continental scale can make a lot of sense.

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Richard Green

About Richard Green

Professor of Sustainable Energy Business
Economist Richard Green is Professor of Sustainable Energy Business and Associate Dean of Education Quality at Imperial College Business School. He was previously Professor of Energy Economics and Director of the Institute for Energy Research and Policy at the University of Birmingham, and Professor of Economics at the University of Hull. He started his career at the Department of Applied Economics and Fitzwilliam College, Cambridge. He has spent time on secondment to the Office of Electricity Regulation and has held visiting appointments at the World Bank, the University of California Energy Institute and the Massachusetts Institute of Technology.