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ANALYSIS-European supergrid far-fetched but possible

Financial NewsDec 08, 2008 03:25AM ET
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By Daniel Fineren

LONDON, Dec 8 (Reuters) - Europe needs a huge increase in electricity grid investment, possibly from government, faster permitting and a communal approach to energy use to make the green dream of a European "supergrid" work.

The European Commission last month laid out a long-term vision of a seamless network from solar power farms in North Africa, across a wind-farm filled North Sea and on to Nordic hydropower reservoirs.

There is widespread support for cutting fossil fuel use and slashing Europe's carbon emissions by increasing renewable use to 20 percent of energy consumed in the EU by 2020.

But industry leaders and environmentalists agree the web of interconnections needed to link it up will only get built with a radical change in energy regulation, investment and consumption.

"The 2020 target implies a great challenge for investment in interconnectors and the big problem there is the difficulty in getting permits to build new lines," Cecilia Hellner, Secretary General of the European Transmission System Operators.

"Our view is that the biggest obstacle is the authorisation procedure. It's a great problem across Europe."

COORDINATED EFFORT

Building and then agreeing on how to distribute the energy generated across a continent-wide network may also test the EU's limits of cooperation as never before. Europe's national energy regulators are too focused on their own markets to help spur development of the many international interconnections needed to make the supergrid work.

"They are obliged under current legislation to look at what is best for the nation, not what is best for Europe," said Hellner, who represents Europe's various electricity network operators and owners.

"The concept of supergrids challenges the current structures which are basically national. That is a very important obstacle as well. You have to find means to cooperate."

But Christian Kjaer, the chief executive of the European Wind Energy Association, said the main barrier to getting Europe's grids working as a single, effective unit was that some of the biggest energy producers also own the networks.

Building connections to neighbouring countries or another company's wind farm out at sea could increase competition in their home markets, making such investments unattractive.

"We have a fundamental flaw, which is that we have not sufficiently separated transmission activities and production activities," he said.

"Unless we get full separation ownership wise between production and transmission, the people who are supposed to make investment decisions on new grid have disincentives."

Independent network operators benefit from investing in grids and building links to other countries to help manage spatial variations in supply and demand.

With most of Europe's green electricity expected to be generated by wind turbines across the North and Baltic Seas over the next few decades, many say an independent offshore network operator would be best placed to build and manage the grid they are linked up to.

But that would not solve the existing grid problems on land, Kjaer said, which need to be resolved to get the power to where it is needed.

GREEN DREAM

Environmentalists say that Europe could slash its carbon emissions without building any nuclear or coal-fired power plants by investing heavily in wind, solar, wave and highly efficient combined-heat and power plants.

But Europe's existing networks were all built to transport electricity from a relatively small number of large power plants and the renewable technologies will force operators to invest heavily and radically change the way they manage supplies.

Wind in particular presents a headache because it cannot be relied upon to provide enough energy when needed, but the supergrid should help overcome that problem because, its backers say, there will always be some wind somewhere in Europe.

"That gives a much greater market to trade the power but it also provides much greater stability," Robin Oakley, head of energy at Greenpeace UK, said.

"The overall output for the North Sea as a whole is much more consistent and you can also trade between countries so it allows Norway, for example, to provide back up through hydro power but also to buy in wind power."

The project, although potentially larger than any infrastructure project under taken by the EU to date, is not technically impossible.

"It's definitely not out of the question," Chris Bennet, future transmission networks manager at Britain's National Grid said.

But with the EC estimating last month it would take around 1.2 trillion euros ($1.5 billion) of investment by 2030, perhaps the obstacle is who is going to pay for it, Oakley said, especially now that recession in Europe is slashing investment.

"Even if there was private financing available and people wanted to speculate there's not even a clear regulatory regime around it," Oakley said.

"The European Union itself could invest. There's no reason why this couldn't be seen as a European project with several countries coming together to deliver it."

(Additional reporting by Nao Nakanishi)

ANALYSIS-European supergrid far-fetched but possible
 

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