The European Union must step away from its reliance on coal, and develop an integrated power grid supported by clear and flexible regulations to transition towards renewable energy sources, if the region is to meet its Paris Agreement commitments.
These were the findings discussed at a session entitled ‘European electricity market harmonisation and the role of the market designs’ at the World Energy Council’s World Energy Congress summit held in Istanbul this week. The session spoke of the current transition towards a low carbon economy being supported by the development of renewable energy sources.
However, there are surprising barriers which have stunted the future growth of this transition.
The further growth of renewable energy is being affected by its zero marginal cost, vanishing entry barriers for wannabe-new players, its increasing decentralization, and digitalization, all of which are challenging and transforming the electricity market at an unprecedented speed, making it hard for regulators and developers to catch up and get ahead. Further, the session pointed out new solutions and services such as automated demand response over grid storage solutions, power-to-gas, and the Internet of Things, are all challenging the classic market frameworks and utility business models.
“The electricity market requires a reboot to adapt to this new reality.”
The need to phase out fossil fuels in favor of renewables, coupled with the need to better integrate renewables to minimize variation, is prime.
“In order to reach Europe’s climate targets, there is no other way than phasing out coal as a source of energy,” said Patrick Graichen, Executive Director, Agora Energiewende in Germany. “Two-thirds of coal-fired plants will have to be shut down by 2030. We also need a much more flexible power system if we introduce more wind and solar. We need fossil fuels to be flexible to match volatile wind and solar, which depend on meteorological conditions.”
“There needs to be a clear vision of where the market is going,” added Fintan Slye, Chief Executive, EirGrid, Republic of Ireland. “We need to think about what type of capacity we want. We need capacity and flexibility. When you get high levels of renewables on a large scale and an integrated European system, the potential for faults is higher. It needs to be a very flexible system.”
Just how to manage all of this, however, is up for debate, with numerous hurdles and barriers to navigate from industry and government.
“If companies paid 60 euros per tonne of CO2 emitted, everything would work […] We could transition easily,” Graichen said, though she thinks it is unlikely. “Industries won’t accept it. It would impact the whole supply chain and the workers.”
“Paying only 25 euros per tonne of CO2 emitted would not contribute much to the financing of renewable energy, but that also reduces the compensation to be given to these companies. It simplifies the equation.”
“The equation changes in every country. Everybody has different expectations when it comes to what should be paid for a tonne of CO2 emitted,” added Dalius Misiūnas, CEO, Lietuvos Energija. “If the problem is CO2 emissions, then let’s focus our efforts on that, but that means less money available for renewable subsidies. It is a choice we have to make.”