Opinion of the European Economic and Social Committee on ‘European cooperation on energy networks’ (own-initiative opinion)
Date: 2015-03-18
Institutions: European Economic and Social Committee
Subjects: electrical energy, energy consumption, energy cooperation, energy demand, energy grid, energy industry, energy production, energy supply, gas pipeline, renewable resources








C_2015268EN.01001401.xml










14.8.2015   


EN


Official Journal of the European Union


C 268/14





Opinion of the European Economic and Social Committee on ‘European cooperation on energy networks’
(own-initiative opinion)
(2015/C 268/03)







Rapporteur:




Mr COULON





On 16 October 2014, the European Economic and Social Committee, acting under Rule 29(2) of its Rules of Procedure, decided to draw up an own-initiative opinion on:

European cooperation on energy networks.

The Section for Transport, Energy, Infrastructure and the Information Society, which was responsible for preparing the Committee’s work on the subject, adopted its opinion on 4 March 2015.
At its 506th plenary session, held on 18 and 19 March 2015 (meeting of 18 March), the European Economic and Social Committee adopted the following opinion by 167 votes with 3 abstentions.
1.   Conclusions and recommendations









1.1.


The EESC considers enhanced European cooperation on energy networks to be essential for the general public and businesses.












1.2.


Civil society and regional players have a key role to play in energy transition, which is the only way to ensure energy efficiency, control over energy prices and the continuation of efforts to combat climate change.












1.3.


The EESC proposes that forums for discussion between regions and civil society organisations be created on the joint initiative of the European Economic and Social Committee and the Committee of the Regions, to include the economic and social councils or similar institutions of each Member State.












1.3.1.


The EESC welcomes the proposal of the Commission in its Energy Union communication to set up an energy infrastructure forum. This forum should provide for broad civil society consultation, so as to:






—


provide for systematic feedback and identification of local best practice,










—


promote discussion on local rules and steer funding towards efficient models,










—


foster acceptance of and commitment to energy issues.
















1.4.


The EESC recommends introducing a ‘European energy savings account’ which could be opened by any European and which would yield a return slightly above the EU annual inflation rate. This would tap funding specifically for European energy projects to supplement public or private (corporate) funding.




2.   Introduction









2.1.


The development of energy networks will already be a vital issue for Europe over the next few years. Extending and consolidating these networks is an absolute prerequisite for successful energy transition, which is essential for combating climate change, for Europe’s competitiveness and economic attractiveness, and for ensuring security of supply to consumers.












2.2.


This trend will require hundreds of billions of euros to be mobilised, for which the groundwork has been laid in the Commission’s programme for a job-rich recovery. This investment will go hand in hand with the spread of smart networks (both transport and distribution), which promise to be a significant market. Additional, novel types of funding will need to be generated, including by promoting community-funded projects.












2.3.


A proper EU energy infrastructure policy means developing key sectors to support innovation, which will strengthen European competitiveness on the global market.












2.4.


This focus on energy networks will be a key aspect of European integration and cooperation in the sphere of energy more generally. This now pressing issue has been comprehensively addressed in previous EESC work, including opinions on developing a European energy community. It is precisely the objective of the Energy Union proposed by the new Commission and steered by European Commission vice-president Maroš Šefčovič.












2.5.


Echoing the EESC’s priorities, the Energy Union duly aims to promote dialogue and cooperation, which are the only way to reduce costs, increase efficiency and respond to the needs of ordinary people and businesses.




3.   Challenges for gas infrastructure in Europe









3.1.


In 2014, the situation in Ukraine reawakened concern in Europe about natural gas supplies. With reserves from North Sea and Dutch gas fields declining, diversification of import sources is now a major issue, along with the continent’s capacity to cope with potential interruptions in supply. Over the next few years this will mean initiating or completing a number of cross-border projects for gas pipelines, compressors to reverse flows if necessary, as well as methane terminals. At the same time, intra-European infrastructure will be needed to promote integration of the internal market and prevent bottlenecks from causing price discrepancies.












3.2.


In addition, energy transition is unsettling the outlook for the gas industry in various ways by sending signals that can sometimes be contradictory. Gas infrastructure effectively relies on investment that is recuperated only over decades. The wish to reduce energy consumption or shift energy use from carbon-based to renewable energy sources consequently does little to encourage investment. In addition, the development of shale gas in the United States, plus imports of American coal to Europe, was not foreseen and has led to overinvestment in combined-cycle electricity generation, which was intended to counterbalance intermittent generation. On the other hand, energy transition entails developing biogas, which will require some adaptation of networks to take account of the dispersed nature and collection of this type of energy.












3.3.


As far as natural gas is concerned, the direction of European energy strategy ought to be clear and comprehensible in view of the considerable investment required, which the European Commission estimates at EUR 70 billion and the ENTSO-G at EUR 90 billion by 2020.




4.   Electricity networks and energy transition









4.1.


Electricity transmission and distribution networks are the backbone of Europe’s electricity system and a key asset in energy transition. They must be adapted to new power generation methods using renewable energy that are more widely dispersed geographically and intermittent, and to new consumer needs, in order to ensure a balance between electricity supply and demand. The first high-voltage and ultra-high-voltage electricity lines were developed to serve centralised generation systems — thermal, then hydro, then nuclear in many countries. Consumption needs in urban and industrial regions, where growth was very rapid from the 1950s, determined the siting of new lines. Today, Europe is criss-crossed by large flows of energy from renewable sources that traverse national frontiers, making interregional solidarity all the more necessary.












4.2.


The EU’s objectives for 2020 and 2050 — taking account of the climate and the environment, security of energy supply and competitiveness — are prompting a surge in investment in decentralised electricity generation from renewables. In France and Germany, and also Spain and Italy, some 95 % of such power plants are now connected to the electricity grid (low- and medium-voltage). This decentralised energy is essentially produced intermittently, i.e. when it is windy or sunny. The role and tasks of electricity distributors are therefore likely to change radically. In the past, the distribution network faced few ‘electricity bottlenecks’, and it distributed electricity generated centrally and routed through the transmission network (high- and ultra-high-voltage) to the end-user in a ‘top-down’ way. In future, the grid will be managed differently. The increasing proportion of decentralised renewable energy feeding into the grid, charging of electric vehicles and the greater role of customers who can be actively involved in the load management market will change the responsibilities and operations of electricity distributors, as well as the relationships between distribution and transmission networks. Thus distribution networks will in future be increasingly interconnected and complex, with multiple power generation sources and connecting increasingly diverse and fluctuating consumption patterns; electricity flows may even be reversed so that electricity moves from distribution to transmission networks when more power is generated than is consumed locally. The difficulties facing electricity transmission networks today, especially congestion management, can generally be expected to impact on the everyday management of electricity distribution networks in the near future.





Increased flexibility in power generation









4.3.


This energy transition on which all European countries have embarked results in energy being generated in different locations: these new sites, which are more dispersed than ‘traditional’ power plants, do not coincide with the previous template. Wind or photovoltaic power tends to be generated in regions remote from the main consumption centres. In Germany, for instance, transporting wind energy produced in the North Sea or the Baltic Sea to southern consumption centres is a major challenge: since transmission capacity is currently inadequate, generation of renewable energy sometimes has to be restricted, which wastes material and financial resources. The network must therefore adapt quickly to be able to accommodate new power sources. National energy policies, e.g. concerning the speed and scope of implementation of renewables, should also take effects on energy systems in other Member States into consideration.












4.4.


In addition to the issue of connecting to the grid, massive growth in these new fluctuating energy sources (in contrast to the controllable power production that has predominated until now), raises questions about the management of the electricity system and is causing new steering mechanisms to be devised.












4.5.


When it is up and running, electricity storage will provide an excellent solution to the intermittency of renewable energy and the fluctuation (daily or seasonal) in its consumption. However, the technology is still limited, essentially to pumped-storage hydro, a method that has certainly been tried and tested (over almost 80 years) but which is constrained by the paucity of sites and by their environmental impact. Moreover, these are large-scale plants that require electricity flows to be bidirectional: pumping and generating. The ideal situation would be dispersed storage.












4.5.1.


Other avenues are being explored, such as hydrogen storage, but none of these will lead to industrial, large-scale development within the next decade.












4.6.


Given the current absence of adequate decentralised storage capacity that is effective, financially viable and environment-friendly, even if different self-consumption options can be combined, the best solution for receiving and using new renewable energy is still effective power-flow management. It is precisely this that is facilitated by a sufficiently connected and robust regional, national and European grid. By ensuring that generation capacity is pooled at different levels through interconnections, the system of energy networks provides substantial economies while guaranteeing electricity supply right across the European Union.












4.7.


This economy of means is not related to the size of the network alone, but is also provided by the interplay of social, cultural, geographical and weather factors, or of course differences in power generation modes. Let us return to the example of interconnectivity between European grids. Evening consumption peaks are staggered owing to differences in lifestyle between neighbouring countries: people do not eat their evening meal at the same time in Belgium, Germany, France or Spain, and likewise in Romania, Bulgaria, Greece and Poland. In addition, electricity systems in different countries vary in their susceptibility to certain contingencies: high-demand periods in France correlate strongly with low temperatures (the consumption peak will occur on a particularly cold winter evening, at around 7 p.m., whereas Germany is very sensitive to wind power generation, and Spain will experience its consumption peaks at around 1 p.m. during the summer because of air-conditioning use).












4.8.


Pooling electricity generation capacity through interconnections allows each country to share the risk associated with these contingencies and so decrease its capacity needs.












4.9.


Electricity transmission networks allow large-scale development of renewable energy reserves and better management of the constraints imposed by their intermittent character; the network makes it possible to resort less to ‘back-up’ capacity, very often provided by power plants that rely on fossil fuels (coal, gas, oil) that are big greenhouse gas (GHG) emitters. Networks (transmission and distribution) ensure that occasional local over-generation, e.g. high photovoltaic power generation during the lunch break in a residential area, can be routed to areas where it will be used. These networks also make it possible to cover the needs of the same population during the night and on days when there is little or no sunshine.





The need to regulate consumption









4.10.


Thus a well-managed European network based on infrastructure adapted to the new power-generation map is manifestly a key instrument for energy transition. But this is only part of the story.












4.11.


In industrialised countries, the fully controlled types of power generation — such as hydroelectric or nuclear — deployed up to the beginning of the 1990s, led to the assumption that generation must be adapted to consumption (supply and demand) rather than the reverse. The network operator was to ensure that energy generation and supply were adapted to variations in consumption so as to guarantee a permanent balance between electricity generation and electricity use.












4.12.


But the situation has changed, and changed irreversibly. The development of new uses for electricity (widespread use of air-conditioning, proliferation of electronic equipment, mobile telephony and applications, etc.) and switches to electricity taking place for instance in the transport sector (electric vehicles) mean that current consumption has to be managed in a way that does not saturate the generation system and electricity networks, in order to avoid excessive investment.












4.13.


Consumption peaks associated with greater weather variability must be taken into account. In countries where electricity is used for heating, consumption peaks are becoming more frequent during harsh weather: in France consumption exceeded 102 GW at the end of February 2012, which is 30 % higher than 10 years previously. More frequent heatwaves combined with greater prevalence of air-conditioning systems are already triggering consumption peaks. This may create a problem for power generation. For example, in western Europe electricity consumption peaks reflect winter cold snaps as well as summer heatwaves, i.e. anticyclones with no wind. This does not matter too much when wind power represents only a minor percentage of total power generation, but the current increase in the share of this energy source is changing the game.












4.14.


Load management is one useful way of controlling demand which allows consumption peaks to be reduced and the load curve to be evened out more generally. This consists in reducing the physical consumption of a given site or group of users at a given moment. The reduction will be dispersed in the residential sector, or will take different forms for industrial sites. The ‘deferred consumption’ effect must be taken into consideration.












4.15.


Regulating consumption is one tool; others include the development of smart networks (less investment), forms of power generation and storage. Here network managers must play an active part and contribute to the development of new consumption management techniques. It is not just technology, but also real market mechanisms, that will allow the progressive transformation of consumers into ‘prosumers’. Prosumers are now coming into their own, and managers of networks (transmission and distribution) are key players. In France, for example, calls for tender have now made it possible to substantially step up the amount of load reduction since load management was introduced in 2010: from 100 MW when the system was piloted to over 700 MW in late 2013. Here too, there is much that needs to be discussed between operators, local authorities, employees in the sector and consumer associations.












4.16.


The new market mechanisms to be introduced over the next few years, such as the capacity mechanism, should underpin this trend in the medium to long term and so help to capitalise more on flexibility in the demand for electricity.




5.   From economic and social optimisation to environmental optimisation









5.1.


Pooling and optimisation of power generation on the one hand, and burgeoning consumer power and flexibility on the other, all bring us back to an essential purpose of the electricity transmission and distribution network, namely regional solidarity. The transmission network effectively makes it possible to reconcile differing regional or even differing national balances, disparate generation potential, and distinct and irregular consumption profiles. As well as providing flexibility between generation and consumption, the transmission network is a tool that can be used to optimise the electricity system from an environmental perspective.












5.2.


Power flow management takes account of the technical constraints and economic and social ‘hierarchy’ of different electricity sources. So-called unavoidable energy (which would be lost if it is not used immediately, for example wind or photovoltaic power) is used first, then run-of-river hydroelectric, and then nuclear, whose marginal cost is low. These are followed by fossil sources: coal, gas and oil, depending on the fuel cost. Reservoir hydro-power tends to be used to ‘regulate’ the other sources; the same goes for other flexible conventional production facilities (e.g. gas-fired power plants).












5.3.


This system should theoretically guarantee optimum and economical use of power sources. But the many factors that have to be taken into account place stress on the system, and the increasing role of renewables may contribute to destabilising it.












5.4.


Apart from the technical injection of renewables into the electricity grid, their development in the context of support mechanisms, especially financial mechanisms, raises the issue of their interaction with classic market systems.












5.5.


This must be seen in context: thermal generation systems, especially combined-cycle gas, are barely profitable owing to stagnation in consumption — which may be considered positive for society — and to the fall in coal and carbon prices in Europe. Against this background, feeding in power from renewables could produce imbalances on regulated markets. Thus negative prices have been observed in wholesale markets, and there is a risk of this paradoxical situation occurring in certain European countries for several hundred hours per year. Shutdowns over the past few years of over 70  000 MW of power generation from combined-cycle gas systems due to lack of economic viability, with massive technical, social and economic knock-on effects, evidences the lack of coordination between development of the new European energy model and conditions imposed by the internal energy market.












5.6.


The decommissioning of many thermal power plants, in particular gas plants, all over Europe could become problematic. Apart from the associated social issues, current supply margins — which made it possible for instance to get through the cold snap experienced in Europe in 2012 — will narrow throughout the 2014-2018 period, with a pronounced contraction in 2015 and 2016. The various scenarios considered by several companies show that if a cold spell like that of February 2012 were to recur under the same weather conditions (wind, sun, cold), it will no longer be possible by 2016 to meet the security of supply requirement set by certain Member States, i.e. an average 3-hour cut in electricity supply.












5.7.


The electricity market is now struggling to send efficient long-term signals, which are vital to stimulate the necessary investment and to achieve Europe’s energy and climate objectives. In the European Union and most of its neighbouring countries there is an urgent need to devise a new model to guarantee security of electricity supply. This model must allow new technological and industrial options to be developed based on smart grids, while rethinking the economics of energy systems in their entirety so that they are compatible with the various objectives set for 2030 and beyond.





Brussels, 18 March 2015.


The President of the European Economic and Social Committee

Henri MALOSSE