Security of electricity supply Definitions, roles & responsibilities and experiences within the EU Thomas Barth Chairman of Energy Policy & Generation Committee EURELECTRIC
Outline Security of Supply a definition Needs for investments Prerequisites for investments Directive on Security of Electricity Supply Roles and responsibilities in guaranteeing supply security Example: fossil fuel power generation Conclusions
Security of supply a definition Security of electricity supply is the ability of the electrical power system to provide electricity to end-users with a specified level of continuity and quality in a sustainable manner relating to the existing standards and contractual agreements at the points of delivery.
Security of supply requires investments To replace existing plants and meet increasing demand, about 750 GW new capacity to be built in the EU-25 by 2030 (according to IEA) 750 GW equals: existing installed capacity 5,800 CHP plants (130 MWe each) 1,250 coal-fired plants (600 MWe each) 470 nuclear units (1,600 MWe each) 190,000 large wind turbines (4 MW each) in fact, at least 550,000 assuming a very high availability of wind plus 80% back-up capacity (e.g. 1,000 coal-fired plants) Investment costs vary from 550 billion to 1 trillion, depending on the level of renewables
Obstacles for investments Total construction time including planning and permits can be 5-10-20 years (minimum 3-4 years) Regulatory framework (including taxation) is not considered to be stable enough and network tariffs do not stimulate investments Public opinion does not favour new infrastructure (NIMBY BANANA NOPE) Total generation costs for some types of power plants are higher than the expected market price for electricity. High price risk. Climate policies restrict the choice of power plants
Directive on security of electricity supply reinforces some vital elements stable investments climate need for roles and responsibilities transparent and stable regulatory framework liquid wholesale markets mandatory operational rules for networks need for transmission reserve capacity contracts of varying lengths investment signals for networks otherwise: limited interference with market
The role of the EU Develop and maintain a wise geopolitical agenda in order to facilitate access to primary fuels Keep all energy options open Implement liberalisation package and ensure that market can freely function Create a harmonised framework for determining the necessary cross-border interconnection capacity
Roles and responsibilities for Member States Develop and maintain a wise geopolitical agenda in order to facilitate access to primary fuels Keep all energy options open Implement liberalisation package and ensure that market can freely function ensure a stable and predictable regulatory framework develop liquid wholesale markets with no price caps use market based capacity mechanisms, if necessary allow for longer-term contracts allow for customer response mechanisms, such as interruptible contracts Shorten / facilitate authorisation procedures
Roles and responsibilities for regulators Ensure stability and predictability of regulatory regime Consult market actors before introducing measures Provide adequate economic incentives for network operators Facilitate and safeguard the functioning of the market Shorten lead times for permitting Create the market framework for system operators to purchase generation reserves and other ancillary services
Roles and responsibilities for system operators Ensure network adequacy and real-time balancing Ensure non-discriminatory and transparent access to the grid Ensure safe and reliable operation of their respective systems Monitor system adequacy (both network and generation) but not responsible for generation adequacy
Roles and responsibilities for producers Fulfil contractual obligations towards their customers Provide data for system adequacy monitoring, without revealing commercially sensitive information Fulfil contractual obligations towards networks Respect corresponding market and competition rules Adhere in all their business to highest standards of probity, honesty and fair dealing Provide ancillary services under market conditions BUT in a competitive world, producers cannot be responsible for investing, operating plants, keeping reserves and provide ancillary services if it is not profitable
Roles and responsibilities for customers Accept the use of different fuels and generation technologies Accept investments in infrastructure in the neighbourhood Participate in response mechanisms, such as interruptible contracts and real-time management of consumption
Example: fossil fuel power generation Renewables 94.94 Mtoe Other 5.1 Mtoe Nuclear 248.4 Mtoe Fossil fuels count for 79% of Europe s primary energy consumption (2002; EU-25) Oil 638 Mtoe Solid fuels 305.53 Mtoe Gas 384.92 Mtoe Fossil fuels count for 54% of Europe s power generation (2002; EU-25) Renewables 387 TWh Oil 186 TWh Gas 543 TWh Other 43 TWh Nuclear 964 TWh Coal 895 TWh
Example: fossil fuel power generation (2) Fossil fuels needed in the balanced energy mix of Europe for decades to come Security of supply track record outstanding Main future challenge: environmental impact Need to develop cleaner fossil fuel technologies for the future Cost-effective way to reduce CO2 emissions (see graph)
Example: fossil fuel power generation (3) Two important technology strands: clean coal technologies and CO2 capture and storage Improving power plant efficiencies Providing cost-efficient solutions for separating and storing CO2
Example: fossil fuel power generation (4) European initiative: Technology Platform Zero-emission Fossil Fossil Fuel Power Plant Brings together key stakeholders: EU Commission, power generators, equipment manufacturers, oil & gas community, academia Goal: to jointly define research needs ( Strategic research agenda ) and a plan for implementing results ( Deployment strategy ) Key driver for development: price of ton of CO2 EURELECTRIC has held a central position in organising industry input to the platform Joint approach of various industries and authorities working together Key development to foster the role of fossil fuels in the future
Conclusions Security of Supply involves a complex relationships among many factors carefully consider before legislating Focus on creating an attractive business environment and ensuring regulatory stability Establish and foster liquid wholesale markets Investments in base load can only happen through markets Debate on peak load investments not settled; preference for market-based systems if needed Allow short-term market instruments, but also long-term contracts Publish clear roles and responsibilities for market actors Do not forget technological development and research Keep all energy options open