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Information and communicationDirectorate-General for Energy and Transport

European Commission

Security of Electricity Supply in the EU

Stefan Gewaltig

European Commission

Directorate General for Energy and Transport

IEA/NEA Workshop on Security of Energy Supply for Electricity

Generation, Paris 24 May 2005

Information and communicationDirectorate-General for Energy and Transport 2

The concept of SoS

Three issues are important:

Access to primary energy sources

Investment in generation and networks

Safe operation of networks


Context

Demand for energy is growing ….Demand for energy will grow in the EU by 0,9% per year over the next 25 years; electricity by 1,5%

Demand will grow much stronger in the rest of the world

The Union currently imports some 50% of its energy requirements, a figure that will rise to 70% if nothing is done


Context

The market is opening ….

All consumers will have the right to choose supplier by July 2007

Incumbent companies need to be challenged, especially through cross-border competition

Cross-border flows will be increasing and becoming more complex to manage

The balance between electricity supply and demand will now be determined by market mechanisms


Context

Supply-demand is becoming tighter….

Existing overcapacities have been reduced

Other production is reaching the end of its economic lifetime.

Reinforced emission standards will require substantial investment in future

>> Wholesale electricity prices are beginning to increase.


Context

Future investment needs

EURELECTRIC estimate the need for new investment until 2030 in EU-15 at around 520 GW, of which around one half will be replacement investment

520 GW is the capacity of around 650 gas-fired power plants

IEA estimates are even higher (607 GW or 760 plants)


But new investment is occurring

Objectives

Italy, various CCGT projects (8300MW) Spain\Portugal, various CCGT projects (11 400MW)

FranceGonfreville (260MW)Dunkerke (788MW)

GermanyDuisburg-Hamborn (255MW)Goldisthal (1065MW)Duisburg-Wannheim (240MW)Munich (417MW)Niehl (400MW)Sandreuth (180MW)Ludwigshaven (400MW)

Nordic MarketHorns rev wind (160MW)Nysted wind (165MW)Olkiluoto (1600MW)

UK\IrelandHuntstown (343)Ballylumford (600MW)Baglan Bay (525MW)Immingham (760MW)Spalding (860MW)Coolkeeragh (400MW)Various wind projects (up to 120MW)

Belgium\NetherlandsRijnmond (795MW)Zandvliet (385MW)Antwerp (120MW)


Objectives

Reduce import dependency

Reduce electricity consumption, demand side management

Develop indigenous fuels – renewable energy sources

Maintain all technology options

Secure access to existing and new external energy sources


Objectives

An efficient continuous electricity supply

Avoiding blackouts and other interruptions

Make competition really work

Delivering a market that responds to price signals and delivers supply-demand balance


Avoiding blackouts

Objectives


Avoiding blackouts – secure network operation

Respect technical limits on congested lines

Adequate and professional exchange of information between network operators

Rapid response to unexpected incidents

Extension and reinforcement of the existing network

Objectives


Maintain supply and demand balance

Market signals should produce a sufficient response

Despite the work undertaken since the start of the market opening, Member States do not have set out overall policy with defined standards on the issue

The risk is that the market will be distorted as a result of crisis measures

Objectives


Solutions

Reduce import dependency (1)

• Demand side management>Draft directive on energy services>Energy labelling >Green paper on energy efficiency

• Develop renewables>Directive on electricity from renewable energy sources > Report on support schemes for renewable electricity


Solutions

Reduce import dependency (2)

Secure and further develop access to primary energy sources

Dialogue with external suppliers

Promotion of new infrastructure (TEN-Energy programme)

Development of LNG


TEN-Energy gas projects


TEN-Energy electricity projects


Solutions

Security of Supply in existing EU legislation

Electricity Directive:

• Member States to monitor supply/demand balance on a regular basis; possibility for state to tender new capacity • Possibility of public service obligations related to security of supply• The nature of primary energy source as a condition for authorisation of new generation


Solutions

Security of Supply in existing EU legislation

Gas directive and electricity regulation: Exemptions from third party access for new gas and electricity infrastructure, including LNG terminals.

Directive on Security of Gas supply:-Member States to define policies for securing gas supply-Co-ordination of policies at EU level, including with respect to emergency measures


Solutions

Draft Directive on security of electricity supply

Objective

Establish a framework within which Member States shall define transparent and non-discriminatory policies on security of electricity supply, compatible with the requirements of a competitive internal market for electricity .


Directive on SoS: Secure network operation

TSOs to set rules on network security

Member States to ensure compliance with rules (legally binding)

TSOs and DSOs to set and meet quality

of supply and network security performance standards

Solutions


Directive on SoS: Market Design

Member States to take measures to maintain demand/supply balance

MS to ensure wholesale market which provides appropriate price signals

MS to publish market design

>> reliable regulatory framework

Solutions


Directive on SoS: Regulated network investment

Member States to provide regulatory framework providing investment signals for the development of networks

Co-ordination between TSOs and regulators about financing of projects

Potential “step in” rights for regulators

Solutions


ConclusionsSecurity of supply in electricity requires special attention, in view of growing demand and the new liberalised environment Demand side management, development of indigenous resources and extended supply sources are necessary to secure availability of primary energy sourcesContinued investment in generation and networks requires a stable regulatory framework, conducive to new investment

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