At the end of February, the European Commission outlined a framework for a European energy union with a joint energy policy. The Commission believes that the energy union, with good interconnection capacity to keep the electricity grids stable, is an excellent way of meeting the climate challenge and reducing the EU's energy dependency.
Shortly after the European Commission outlined the prerequisites for the energy union, German research institute Prognos presented a report which it had drawn up on behalf of the World Energy Council.
In its report, Prognos studied the electricity markets of, amongst others, Germany, Austria, Italy, Poland and the UK.
According to the report, 10-17 GW of conventional generation capacity could be shut down if transmission links between EU member states were better. Sweden's capacity, for example, is 27 GW.
"This is based on the simple assumption that, if we take wind energy as an example, there's always more wind in one place and less in another. That way, you can even out the variation, so you get a more even price for the wind power. Otherwise, you get a really low price when there's a lot of wind and a high price when there's not much wind. And also, you don't have to have so much capital invested in reserve power to guarantee a secure supply of electricity. Basically, you can use existing resources better if you have good transmission networks," explains Kristian Gustafsson, European Affairs analyst at Vattenfall.
Interconnection capacity within Europe is currently fairly varied. The Nordic countries, particularly the Norwegian and Swedish grids, are closely interlinked.
"Up to now, developments have mainly been driven by mutually beneficial projects. For example, countries with a high proportion of hydro power like Austria and Norway have been able to offer their neighbours good regulation capability in exchange for a so-called dry year reserve for years when precipitation falls below normal levels. The problem is that we seem to have come to the end of the road when it comes to solutions between individual member states," says Kristian Gustafsson.
"It's been more difficult with projects where the EU as a whole benefits from extensive construction work but where, because the benefit is split between the member states, the development comes to a halt. One country may lose out on it, while another may do really well out of it. The EU as a whole may gain from them but it's not as easy to implement projects when there are no obvious win-win situations for all the member states. That's where the energy union and other EU initiatives such as, for example, the infrastructure directive with its Projects of Common Interest list or the 10-year European network development plans can help highlight the common interest in enhancing the grid."
According to Kristian Gustafsson, in Vattenfall's opinion, improving transmission opportunities between Scandinavia and the UK and within Germany and Sweden is one of the most important tasks.
"Sweden and the rest of Scandinavia are heading for a challenging situation where, at times, we will have a great deal of excess generation capacity. Having good opportunities to transmit excess electricity to other markets which, as a result of the significant expansion of renewables, have an increasing need to regulate their electricity systems, is of common interest to Europe."
"In Germany there are plans to build four large DC corridors totalling around 10,000 MW which are required to phase out nuclear power by 2022. They're also needed to allow electricity generated from wind energy in the north to be transported to the power-intensive industries in the south. It's crucial that these are put in place."
According to Kristian Gustafsson, it should be possible for individual players to build cables to connect electricity grids together. But, in the first instance, the network companies will be responsible for increasing transmission capacity.
"Vattenfall has no vested interest in owning transmission capacity, but they must be allowed to do so if it is the only solution at hand to ensure expansion. We believe that ways of solving problems such as who should pay must be found at EU and member state level. In other words, how the costs of projects where there's no obvious winner or loser but where clearly the project will make the EU more competitive overall, should be divided. We also have to increase people's acceptance of building more infrastructure. It's like building a motorway: nobody wants it in their back garden although most people agree that it's necessary."