Jean VERSEILLE and Olivier LAVOINE
European Affairs Director at RTE and Financial Director at RTE
Investing in the European electricity transmission network means opening a path towards a successful, less expensive, and socially responsible energy transition.
Given that the objectives for 2020 are on course to be reached, the European Commission has proposed new ambitious targets for 2030. On this basis, in October, the European Council has adopted new 2030 energy and cli- mate goals. These include reducing greenhouse gas emissions by 40%, increasing energy efficiency by at least 27%, and bringing renewable energy’s share of energy consumption in Europe to 27%. However, to strike a balance between the three pillars of the energy policy (sustainability, competitiveness, and security of supply), the Commission strongly emphasized the importance of a robust and interconnected electricity transmission network. Means of production and consumption profiles can be mutualised through an adequately interconnected network, enabling authorities to get the most possible benefits out of the various complementary energy sources as well as limit the use of additional generating capacity and improve the security of supply at a lower cost to society. In view of the current state of storage technologies, the flexibility of the transmission network makes it the best method for integrating wind and solar energy, given that production sites of this type of electricity are often located far from consumers. Creating connections between European electricity networks helps optimise the diversity of the energy mix in Europe.
Planning a network for all of Europe
Whereas in Europe, the energy mix remains a national choice, and therefore cannot be subject to any overarching prospective, the transmission network operators, joint since 2009 in the association “European Network of Transmission System Operators for Electricity (ENTSO-E)” have been given by European regulation the responsibility of jointly establishing a ten year indicative development plan for the electricity transmission network. This plan, which is drawn up every two years, accounts for predictable changes in consumption and production sources, on the basis of various scenarios, in order to identify the infrastructure projects needed to create an integrated European energy market. Since 2012, the plan has earmarked a list of “common interest projects », for which permitting procedures and construction have to be accelerated. Five electricity interconnection projects involving France are included on this list. In addition, each transmission network authority is planning for the investments necessary for guaranteeing its own network’s security and funding the renewal of infrastructures, some of which are ageing.
Significantly more investment needed
Based on these different planning levels, one may anticipate that expanding and adapting the European network will require an investment of approximately 250 billion euros between now and 2030. This « investment cliff » represents both a challenge and an opportunity.
An opportunity: It is one of the rare instances of European consensus with regard to the needs and priorities of projects that combine proven expertise with the most innovative technologies and provide benefits to all of society; the latter will be especially true should the recognised priorities be met at the right time. Consequently, during this period of increased investment, access to funding via the markets has rarely, until now, proven to be problematic for these projects
But also a challenge: The amount of investment required for the energy transition means that network authorities, must, in order to maintain their access to funding, preserve healthy balance sheets and acceptable debt levels if they are to remain solvent over the long term. Concretely, this means that the electricity transmission tariffs of these regulated monopolies must continue to cover operating costs as well as all investment costs (amortization and financial costs), without increasing tariffs beyond a level that consumers can afford. Looking beyond isolated, temporary solutions (i.e. financial support provided to certain common interest projects), public, regulatory, and transmission network authorities must come together to schedule investment priorities and thus fulfil stated needs, while maintaining a balanced financial situation, a stable regulatory framework, and tariff rates that are acceptable to the community.
Finally, citizen support will make all the difference in ensuring that the electricity transmission network is on time to tackle Europe’s energy transition challenges.