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Cross-border cables hold a crucial role in the energy transition

An interconnected transmission grid in Europe would result in lower prices and greater levels of clean energy. But several nations are falling behind on export capacity leading to some member states looking beyond the Union’s borders

Pandemic recovery funds may be put towards increasing the flow of electrons between neighbours


PRIVATE POWER
Europe’s cable companies are investing in production capacity to meet anticipated demand

FURTHER AFIELD
Countries on Europe’s border frustrated by a lack of progress inside the Union are analysing opportunities outside of the block to improve interconnectivity

KEY QUOTE
The growing renewables share in the power mix leads to fundamental changes in power flows, which requires new forms of load management and new power grid models


Europe’s energy networks need to be well-connected in order to ride out shocks like the ongoing spike in power prices, balance electricity grids and accommodate the ever-increasing volume of renewables that is coming online. That means that countries are adding more cross-border interconnectors to lash together their grids, so more power can be traded and less clean energy wasted when supply exceeds demand. However, these projects are often costly and require the political backing of two or more governments. Other factors such as geographical location and societal opposition also play a big role. Countries that are part of the European Union (EU) can tap into funding to build interconnectors; the Connecting Europe Facility (CEF) will dole out nearly €6 billion over the next six years to projects that are deemed worthy. To qualify for cash, governments must apply for inclusion on the Projects of Common Interest (PCI) list. The latest edition published in November 2021 counts 67 electricity transmission and storage projects, which include both cross-border and internal cables. The so-called Celtic Interconnector is one such example of a cross-border connection. The 600-kilometre, 700 megawatt (MW) cable will run from Ireland to France and will restore a physical energy link between Ireland and the European Union, following the United Kingdom’s quitting of the bloc. It is due for completion in 2026. As well as providing a degree of co-financing for interconnectors, the EU also sets interconnectivity targets. A 10% benchmark for 2020 was recently upgraded to 15% for 2030. In practice, this means that there must be enough installed cable capacity to export at least 15% of the electricity generated by a country’s power plants to its neighbours. Sixteen countries have already hit that target, while 11 are lagging behind. When a power plant fails or during extreme weather conditions, EU countries need to be able to rely on their neighbours to import the electricity they need,” says the European Commission. Cyprus, France, Greece, Ireland, Italy, Poland, Romania and Spain are the poorest performers of that cohort having barely reached 10% connectivity. In many cases, the amount of installed power capacity has outpaced interconnector development.

ISOLATED IBERIA
Targets only tell half the story, however. According to the Commission, Portugal has not yet met the 15% benchmark either. Given its geographical position on the western coast of the Iberian peninsula, it is struggling with a unique set of challenges. Portugal is somewhat of a clean energy champion and has managed to meet all of its power needs with renewables alone for long periods of time, even creating a surplus when hydro, solar and wind assets are maximising their output. However, despite Portugal’s high level of integration with the Spanish grid, the real problem is in the Pyrenees, where a bottleneck on the Spain-France border limits progress. ENTSO-E, Europe’s transmission system operators (TSO) group, estimates the connectivity rate is only 6%. New links are planned, including an undersea cable across the Bay of Biscay that could double cross-border exchange capacity. But the project is not due to come online until 2024 at the very earliest and Spain’s power generation is predicted to keep growing in the meantime. ENTSO-E says that Spain’s interconnectivity rate with France, Is too low to enable the Iberian peninsula to fully participate in the internal electricity market”, adding that further market integration is needed. French TSO RTE insists that France, Needs to develop interconnectors on all our borders” and its national energy and climate plan does not prioritise specific connections with any of the seven countries on mainland France’s borders. Given that current trends suggest that Spain and Portugal would benefit more than France if interconnection rates were boosted, as clean energy produced in the south would flow northeast, French authorities have dragged their feet to an extent and ENTSO-E offers some clues as to why that is in its outlook for 2040: France would be at the crossroads of low carbon electricity transition, which may raise significant needs for internal network reinforcements.” France is currently the furthest away of any of the 27 EU member states from meeting its 2020 renewable energy target, so will not be in a position to export surplus clean power anytime soon. Since progress is slow, Portugal’s government has drawn up plans to run an undersea cable across the mouth of the Mediterranean to Morocco to boost connectivity. Due to regulatory hurdles and other factors, the project is yet to be realised.

INVESTMENT BOOST
Talks are ongoing at an EU level to boost political support for better integration of the peninsula, according to diplomats and lawmakers. France’s six-month-long presidency of the EU Council starts in January 2022 and will be a prominent forum to push the topic up the agenda. Portuguese MEP Maria da Graça Carvalho, a member of the European Parliament’s energy committee, acknowledges the isolation problem and agrees that energy connections, in general, need to be reinforced. It is true that plans for further integration with our neighbours suffered from several stops and setbacks in the past,” the MEP says, adding that the second pillar of Portugal’s overall energy and climate strategy is geared towards energy efficiency, storage and a shift towards a decentralised system. EU member states will split an investment war chest worth €800 billion over the coming decade as part of a Brussels-led plan to repair the economic damage wrought by the Covid-19 pandemic. Carvalho says that it is, A big opportunity to fuel the investments required to bridge the technological gap.” The money can only be used to fund national measures though, so cross-border projects like interconnectors will have to look elsewhere for support. If the connectivity issue is not resolved soon, Portugal’s Plan B” involves ramping up green hydrogen production. Not only can the fuel be used to power industrial processes and heavy transport, but it is also seen as an outlet for surplus renewable power. Portugal is among the countries backing an update to the EUs Trans-European Networks for Energy (TEN-E) regulation that includes funding for hydrogen infrastructure. Negotiations on that review are ongoing.

EUROPEAN CHAMPIONS
The need for more cross-border links and undersea cables to link offshore wind farms to shore is an opportunity for the private sector to meet demand. For once, Europe is well-placed in that regard. Three European companies—France’s Nexans, Italy’s Prysmian and Denmark’s NKT—already control 80% of the global market outside of China. The predicted growth in demand for transmission cables has prompted the three companies to invest hundreds of millions of euros to increase production capacity and in huge cable laying vessels. Technological progress allows for cables to be installed at even deeper sea depths, opening up new frontiers, like the Mediterranean Sea. NKTs chief commercial officer, Michael Hjorth, is bullish about his sector’s long-term outlook but insists that Europe’s regulators have to keep a close eye on the market—particularly from outside influences. If there is something that we would like support on from the European Commission then it is in competition policy and how non-EU companies operate in the European market,” Hjorth says, explaining that when it comes to China in particular, there is a lack of reciprocity, as European countries struggle to do business in its market.

TSO TALKS
Laying massive cables across frontiers and stitching grids together is only part of the solution for a renewables-based network as far as power sector association Eurelectric is concerned. Transmission system operators need to collaborate better as well. An analysis of interconnectors published in September 2021 shows that transmission capacity is not being used anywhere near its full potential, especially in the intraday and balancing markets. Recent market-coupling projects, such as optimisations in how the internal energy market is actually managed, have boosted the day-ahead market at least. Although the situation has improved a lot in the last years, there is still room for improvement,” Eurelectric says, explaining that electricity market network codes—technical rules designed to create an integrated pan-EU power system—need to be implemented quickly.

BEYOND THE BORDERS
Europe is not an island of course. High-power cables already link many countries on the EUs fringes with neighbours such as Albania, Morocco, Russia, Turkey and the United Kingdom. Some of those interconnectors are remnants of past political unions, but others have been built specifically to trade power and boost energy security. Several ambitious projects are planned to increase the size of the network. A 200 kilometre-long subsea cable between Italy and Tunisia, known as ELMED is in development as is a massive 1500 kilometre-long monster between Greece and Israel via Crete and Cyprus—ending the energy isolation of Cyprus when completed. Both projects are due online by 2025. These interconnectors will be increasingly important as the EU proceeds with its own decarbonisation agenda: the growing renewables share in the power mix leads to fundamental changes in power flows, which requires new forms of load management and new power grid models,” explains Maria Pastukhova, from think tank E3G. Not all of these needs will or can be met by renewable power generation within the EUs borders, Pastukhova adds. Essentially, the more options the better, when it comes to greening the Union’s power mix. Interconnectors need to come in one package that supports renewable power scale-up and includes system-wide cooperation, where new renewables don’t solely benefit the EU or are deployed only for the sake of EU exports,” she insists, warning that if the latter point is not ensured, the EU would risk engaging in a neo-colonialist form of policy-making. Existing energy partners such as Morocco and Turkey use a lot of fossil fuels in their energy mix, around 80% and 60% respectively, making importing power to the EU an unsustainable long-term prospect. However, a controversial new EU policy may spur a change.

BORDER ADJUSTMENTS
The European Commission has designed a carbon border adjustment mechanism (CBAM), an anti-climate-dumping tool that will slap a levy on certain imports like steel and fertilisers that do not meet sustainability criteria. Electricity is also included in the draft list of products. EU lawmakers and governments still need to agree on the CBAM, a process likely to last well into 2022. If the policy is adopted with power imports included, it will make fossil fuel-based electricity trades gradually more expensive as charges are phased in up to 2026. Current volumes of electricity traded with these countries are not enough so as to break the bank, but the levy could stoke political tensions. The CBAM already faces an uphill battle to avoid disputes at the World Trade Organisation. Pastukhova suggests that EU lawmakers should do all they can to help countries like Turkey and Ukraine decarbonise, through co-financing and knowledge sharing. Ukraine intends to link its grid to the EUs in the near future. The Commission already considers its Green Deal, its flagship set of climate policies, to be an environmental playbook that other countries and regions should follow, while a new infrastructure scheme known as the Global Gateway promises to funnel financing towards clean energy projects. Up to €300 billion in private and public financing is supposed to be mobilised, with loans on offer for any countries that want an alternative to China’s Belt and Road Initiative—the country’s global infrastructure development strategy launched in 2013.

SAFETY NET
Interconnectors, more renewable sources and energy savings are among the EUs top priorities, but there is already a plan in place to help countries that struggle to hit their energy transition targets which does not actually involve anything so tangible. New energy rules include an instrument known as statistical transfers, which is essentially an accounting tool that allows the EU member states to sell surplus renewable energy statistics to potential buyers. The transaction does not involve any actual exchange of electrons, it is a financial agreement that allows the recipient to record clean energy data on its books, rather than the country that generated the power—similar to renewable energy certificate programmes. Lithuania and Luxembourg were the first to avail themselves of the option back in 2017. Denmark and the Netherlands did a similar deal worth €100 million in mid-2020 that has ultimately enabled the Dutch to hit their 2020 renewables target. The agreements are a win-win: buyers avoid potentially hefty penalties for missing targets, while the sellers get an investment injection for more renewables capacity. One EU official calls it an elegant virtuous circle”. In late November, the Commission launched a new online service that shows where surplus energy is generated and which countries are best suited to inking a transfer, by displaying data such as volumes and price. The timing is just right since the platform will make it possible for EU countries to cover the missing statistics [from] their 2020 target. It will also allow them to plan new transfers, helping them to keep the trajectory towards the 2030 targets,” the Commission says. In a perfect interconnected European energy market, wind power generated in Portugal would be fired off across the continent to consumers in Finland. There is a substantial amount of work needed before that is a possibility, but progress is being made. •


TEXT Sam Morgan