Electricity Interconnections for Europe

Atthe Speedof Light?

ElectricityInterconnections forEurope

GOUVERNANCE EUROPÉENNE ET GÉOPOLITIQUE DE L’ÉNERGIE 8

Susanne NIES

Atthe Speedof Light?

ElectricityInterconnections forEurope 20 1 0 I f r i , © © Ifri, 2010 Atthe Speedof Light?

ElectricityInterconnections forEurope

GOUVERNANCE EUROPÉENNE ET GÉOPOLITIQUE DE L’ÉNERGIE T OME 8

Susanne NIES 20 1 0 I f r i , © The InstitutFrançais des Relations Internationales (IFRI)isaresearchcenter and aforumfor debate on major internationalpoliticalandeconomicissues.Headed byThierrydeMontbrialsinceits founding in 1979,IFRI is anon-governmental andanon-profit organization. Asanindependent think tank,IFRI sets its ownresearchagenda, publishing its findings regularlyforaglobalaudience. Using aninterdisciplinaryapproach, IFRI brings together politicalandeconomicdecision-makers,researchers and internationallyrenownedexperts to animate its debate andresearchactivities. With offices in Paris andBrussels,IFRI standsoutasone of the rare Frenchthink tanks to havepositioneditself atthe veryheart of Europeandebate.

The objectiveofthe “EuropeanGovernanceandthe GeopoliticsofEnergy” programistopromote acoherent andsustainable Europeanenergypolicy through seminars,debates,andpublications.This series covers the main aspects of the energytopic.

Tome 1: Abatement of CO2 Emissions in the EuropeanUnion (2007) Tome 2: L’Énergie nucléaireetles opinions publiques européennes (2008) Tome 3: The ExternalEnergyPolicyof the EuropeanUnion (2008) Tome 4: Gazet pétroleversl’Europe.Perspectives pourles infrastructures (2008) Tome 5: La Gouvernancemondiale del’énergie :enjeux et perspectives (2009) Tome 6: GovernanceofOil in Africa: UnfinishedBusiness (2009) Tome 7: Energyin India’s Future:Insights (2009)

IFRI IFRI B RUXELLES 27, RUE DE LA P ROCESSION R UE M ARIE-T HÉRÈSE,21 75740P ARIS C EDEX 15 –F RANCE B-1000 B RUXELLES –B ELGIUM P HONE:+33 (0)1 4061 6000P HONE:+32(0)2238 51 10 E MAIL:[email protected] E MAIL:[email protected]

W EBSITE: Ifri.org 20 1 0 I f r i , © ToJacques Lesourne 20 1 0 I f r i , © © Ifri, 2010 Contents

ExecutiveSummary ...... 9

Introduction ...... 15

IndependentVariablesand Legacies ...... 23 Concepts andDefinitions ...... 23 Dependents Variables ...... 31 Legacies:the Historyof Europe’sGridandInterconnections .... 55

AComplexEuropeanGovernance ...... 67 Interconnections in the Acquis Communautaire ...... 67 Transitions in the RegulatoryLandscape ...... 73 Subsidies,Priorities,Coordinators ...... 79

ExistingLinesand MissingLinks ...... 83 Links within the EU ...... 84 Links with Neighbors ...... 110 Conclusion:Existing Lines andMissing Links ...... 125

Perspectivesand PolicyRecommendations ...... 127 Interconnections andthe Faceofthe Gridin the 21 st Century ... 127 Interconnections,PoliticsandSolidarity ...... 129 PolicyRecommendations ...... 133 Open Questions ...... 135

Annex ...... 137 20 1 0 I f r i , © © Ifri, 2010 ExecutiveSummary

Electricityinterconnectionhasbecome aprominent issue in the news,sometimes even featuredasapanaceaforthe shortcomings of the Europeanelectricitymarket —apanacea thatwill ensure energysupplyandsecurityandpavethe way forapromising use of renewables in the future.Its development is,indeed, consideredkeyto the challenge of secure energysupply,asubjectofutmost concern forthe European Union (EU)especiallysincethe latest —though surelynot the last— gassupplyinterruption atthe start of 2009. Securityof supplymust beenvisagednot onlyviadiversi- fication of routes or suppliers,nor exclusivelyviathe introduction of changes in the energymix,butalso through the improvement of interconnections,both in terms of anopti- mizeduse of the existing ones,aswell asthrough the filling— in of the missing links among them. The present report is devotedto electricityinterconnections in Europe,their current state andthe projects concerning them. Consistent with politicalsciencevocabularyand methodology,interconnection will beviewed, here,asthe dependent variable in acomplexequation involving historical, geographical,economicandgeopoliticalfactors. 1 Reflecting IFRI’s focusoninternationalrelations andgeopolitics,the author will concentrate on the geopoliticsandgovernanceof

1. The terminologyoriginallystemsfrom the disciplineofmathematicsand statistics:inde- pendentand dependentvariablesareused todistinguishbetweentwotypesof quantities being considered,separatingthemintothoseavailable atthe start of aprocess and those being created byit,wherethe latter(dependentvariables)aredependenton the former (independentvariables). 20 1 0 I f r i , © 10 Atthe Speedof Light? ElectricityInterconnections forEurope interconnections.The work is not intendedto compete with engineers in ‘their’ field, nor with economists or regulators — abattle the author couldonlyloose,andthatwouldfurther- more betotallyoutsidethe scope of IFRI’s topics. Some basic understanding of the technicalsidebeing nevertheless required, anexplanation of certain concepts andpractices will beincludedin the introductorypart,based, precisely,on reports anddefinitions producedbyexperts andengineers. The growing publicandpoliticalinterest in interconnections demonstrates the relevancethe subjecthasacquiredwell beyondthe technicalandexpert circles andjustifies,in itself, the existenceofthis report. Quite possibly,however,after having consideredthe rather complicatedtechnicalfunda- mentals,the criticalobserver will findhimself still struggling with acompelling question of publicinterest bearing on this particularfield: centralism or federalism? For example:decen- tralizedlocalandregionalgridsorapan-Europeansuper grid reflectedon regulatorystructures? Nationalandcorporate interest,lobbying andthe exercise of power are intrinsicto this field.More transparencyin the debate is definitelya prerequisite forefficient decision making. The studyaddresses the following questions: • What is the role of interconnections in the development of a sustainable gridthatcanemerge from the existing systems, making optimumuse of existing generation capacity,ensuring energysecurity,andoffering economies of scales? Whatis their role in the process of building adifferent energyconcept, one thatwouldaddress climate change andfavor the use of renewables? • How are existing interconnections exploitedandgoverned, andhowcantheir exploitation beimproved?Does the EU needmore andnewinterconnections; andif so,where and why,andwho is going to financethem? Part I develops definitions andbasicnotions necessaryfor the understanding of the subject. Italso addresses the independent variables thatinfluenceinterconnections (here the dependent variable),andrecounts the historicallegacies and their enduring impactontoday’s grid. 20 1 0 I f r i , © ExecutiveSummary 11

Part II is devotedto the EU legalframework andto the complexlandscape of governanceandits current state of transition. Part III addresses the management of existing interconnections andthe missing links among them,detailing projects andneedsregion byregion,including variousdimensions of therelationship between the EU andthirdcountries. Part IV laysoutrecommendations forEU andnational policymakers. The conclusions of this studyare asfollows: Interconnections canprovidethe basis forincreasedsoli- daritybetween EU member states.Solidaritymeans mutual aidin the case of supplydisruptions.The practiceofsolidarity in awell understoodcommon interest requires anappropriate infrastructure,andinterconnections are essentialtomake this happen. Interconnections offer huge potentialtoimprove market efficiencyandspeedupthe movetowardsasingle electricitymarket. Butone must becarefulnot to overlook the needforimprovement within nationalmarkets,aprecondi- tion forEuropeanmarket integration. Positions diverge on whether newinterconnections are neededor not. Whereassome authors stress the insufficient exploitation of existing links,others complain aboutpoor dynamicsinsetting upnewcapacity.Three reports on Frenchinterconnections producedbythe Frenchregulator Commission deRégulation del’Energie(CRE)demonstrate thattoday’s existing electricityinterconnections are indeed insufficientlyexploited—even if positivetrendscanbe noticedasthe result of improvedgovernanceandincreased transparency.Onthis issue,however,it is veryimportant to remember thatfor alink to besecure andeconomicalits exploitation must not permanentlyexceeda50%level of its physicalcapacity. For thirdcountries,interconnection-relatedinterdepend- encecomes with additionalbenefits suchasthe convergenceof norm andgovernance. The question aboutthe limits of synchronization,or,to putitotherwise,of anoptimalsynchronization 20 1 0 I f r i , © 12 Atthe Speedof Light? ElectricityInterconnections forEurope space,remains unansweredandis politicalinmanyways. Alternatively,the establishment of directcurrent links is an option. Directcurrent links,however,donot enhancesynchro- nization,butjust join electricityregions withoutestablishing the automaticsolidaritypredominatingtodayboth in the huge synchronousRussia/CIS (Commonwealth of Independant States) areaandin the EU asawhole —the UnitedKingdom (UK) excluded.Onthe other hand, one canlegitimatelywonder whether synchronization with Northern Africa viaGibraltar— Ceutahasbeen the result of arationalchoice,considering thatit is saidto contribute to delaying intra-Maghrebsynchronization. The numerousandfast changes currentlytaking placein the independent variables affecting interconnections make the present time opportune forexploring:publicfinancefor infrastructure,Europeangovernance,the ThirdPackage and‘smart grids’ are keywordsinthis context. Smart grids,combined with the use of Information andCommunication Technology (ICT),are alreadywidelypresent in the gridandits management sincethe 70s(the setting upofcomputer-basedDispatch Centers is agoodexample of this). Further improvement needsstill bemade,however,in distribution to significantly increase energyefficiency.Europeangovernancehasalso madeprogress through the establishment of the seven electricityregions andthe adoption of the ThirdPackage.The financialcrisis,in turn,debilitating though it maybe,coin- cides nevertheless with significant fresh commitment by governments to invest in publicinfrastructure,including energyinfrastructure. Aglanceatthe past canshowthe effectiveness of such publiccommitments:the electrification of the US (United States) countrysideunder Roosevelt’sNewDeal,forexample. With thatinmind, it is fundamentaltoidentifyandprioritize those projects thatcanbedeemedof Europeaninterest,since the increase in publicspending unavoidablytriggers atoncea waveofindiscriminate lobbying forall sorts of ventures,many of them of restrictedinterest or not important atall. Leaving the flowstothe market andmaking the economicallyreason- able decisions are thusimportant goals; distortions from the market game,in turn,must beeliminatedwith time.This is 20 1 0 I f r i , © ExecutiveSummary 13

particularlycrucialwhen one considers thatenergyinfrastruc- ture andenergypolicy—unlikegovernment administration, forexample— are not overhauledeveryfourorfiveyears,but stayon,empirically,forthe spanofthree generations. The present is aperiodof intense soul-searching andques- tioning on matters of energy,andthe design of ourfuture energylandscape in Europe is subjecttomuchspeculation. The scopeofenergyefficiencyis difficult to anticipate.We ignore the energymixof the future,butexpectthe gas demandto keep roughlythe same from 2015,andthe advent of renewables,andmore nuclear. Today’s debates confront us with twoextreme scenarios —andanumber of “combinations” in between— the first one being the traditionalmodel with more nuclearenergy(especiallythe position of France) or cleancoal(China),andthe secondone the ‘green model’,with the lion’sshare of electricitygeneratedfrom renewables by 2050.The ideathatthe latter couldbeaccomplishedviaDC links transporting solarenergyfrom the Saharato the North sounds,today,likesciencefiction. Conversely,looking backon the present time from the 22nd centuryperspective,today’s coal,gasandnucleargeneration units might well appearto oursuccessors asnothing more thanarelicfrom along-gone past. 20 1 0 I f r i , © © Ifri, 2010 Introduction

The Europeanelectricitymapreveals the concentration of infrastructure in industrialandurbanareas,the searchfor proximitybetween generation andconsumption,the still very prominent East-West divide,andsome isolatedspaces.Italso displays,however,acertain number of cross-border interconnections.The following questions,thus,are in order: •Whatisthe importanceofthese lines? Are theysufficient both in number andcapacity?Who is in charge of them? •Whatisthe picture going to look liketomorrow?Are the existing interconnections economicallyviable? •Whyis it preferable to create interconnections rather than to transport the resources to generate electricityaprocedure thatis,in general,cheaper? The advantages of interconnections are asfollows: •theyimprovethe qualityof electricity; •theycontribute to the establishment of Europeannorms because theycompel the nationalTransmission System Operators (TSO)incharge of the lines to agree on common standards; •theydevelop cross-border capacities andare aconditiasine quanon foranintegratedEUelectricitymarket; •theydevelop cross-border capacities with thirdcountries and contribute to the development of common standardsandthe emergenceofaEuropeanmarket atlarge; •theyrespondto the challenge of regionalcongestion management; 20 1 0 I f r i , © 16 Atthe Speedof Light? ElectricityInterconnections forEurope

•theyare analternativetoinvestment in newcapacity; •theycreate solidarityamong member states andbetween these andthirdcountries; •theyenhancesecurityof supply; •theybroaden the scope forachieving environmentaltargets; •theyimprovethe efficiencyof the market bystimulating competition among nationaloperators. Electricityinterconnection,asaprocess thatinvolves more thanone country,is verydependent on the qualityof governance. The seeminglysimple operation of laying aline from one countryto another requires answers to some initial questions: •Who is to payforbuilding andmaintaining the line? Who is its owner? •Who is in charge of operationalsecurity? •Who decides on access to infrastructures? •Who sets the priceofthe output? Andhowdoes the market evaluate the benefits of the line atdifferent pricelevels? The Europeanelectricitygrid, asitexists today,has evolvedfrom localtosub-national,andfrom sub-nationalto nationalgrids,having reached, in certain areas,astrong regionaldimension. Itisimportant to note thatthe mere exis- tenceofnationalborders hasrarelyposedahindrancetothe expansion of electricitygrids:in Eastern France,Southern GermanyandSwitzerland, forexample,technicaland economicrationales havelargelyprevailedover national considerations.Logically,the Europeanelectricitygridof the future must beregionallyorganized, sinceideassuchasselling Spanish solarenergyto Denmark,Danish windenergyto Spain,or Frenchnuclearpower to Greecewouldbeeconomi- callyinefficient,losses in transmission high,andgovernance overlybureaucratic. The gridalso reveals the historyof industrialEurope:an intricate tale of war,conflict,cooperation andintegration. While pan-Europeanconnection dates backtothe early 20th century,adverse circumstances of politicalandtechnolog- icalnature,aswell aseconomicresistance,havehindered 20 1 0 I f r i , © Introduction 17

progress asmuchonthe optimalexploitation of existing lines asonthe setting upofnewones.Warinformer Yugoslavia andthe subsequent political,economicandculturalfragmen- tation of the territoryhavenot onlyhad animpactonthe splinter countries themselves,butalso on Greece,Romania, Bulgaria, Albania, andeven Turkey.Greece,although amember of the EuropeanCommunity(EC)since1981,waselectrically connectedquite belatedlyowing to the considerable degree of isolation of the former Eastern Blockstates thatwere loosely linkedviaaYugoslavinterconnection,andonlylater viaa submarine link with Italy. 1 Important EU member states like Spain andItalyare still partlyisolatedin terms of electrical interconnection. Andthe East-West dividepersists,even if borders haveshifted: while Polandwasinterconnectedwith the Western UCTE in 1995,the BalticStates —newmembers since2004— havestill not been so.Theycontinuetobepart of the former Soviet IPS/UPS system (IntegratedPower System/ UnifiedPower System),just asUkraine does except forone small interconnection nearLvov.Moldovaremains attachedto Russiaalthough two110kVlines link it to Romania. Needless to say,everyone of those countries is seeking urgent integration into the Western system partly,atleast,so astodecrease dependencyon Russia.The highlypolitical dimension of electricityinterconnection andthe subsequent affiliation with either the Western or the Eastern system is currentlyepitomizedbythe Russiangovernment’sstern opposition to the alternate current synchronization of Ukraine and Moldovainto the UCTE —directcurrent might beeasier to accept,sinceitdoes not involveintegratedelectricgovernance. This leadsstraight to the question aboutthe optimumfuture electricitygovernancemodel forEurope:shouldit becentral- ized, likethe Soviet CentralDispatchOrganization (CDO)that usedto beresponsible forthe totalityof the communist terri- tory,including CentralEurope,or,instead, regional,asithas been emerging to date in the EU?Oryet,wouldit berational, in the long run,to havethe continent split into anEastern andaWestern system?

1. GreecejoinedUCTE in 1987.Itbecame interconnected withYugoslaviain 1972,and later withItalyfollowingthe openingofEpire-Pouillesin 2009. 20 1 0 I f r i , © 18 Atthe Speedof Light? ElectricityInterconnections forEurope

Switzerland, on the opposite edge of the spectrum,is massivelyinterconnectedandconsequentlyplaysapivotal role through its participation in the UCTE/ENTSO-E(Union forthe Coordination of Transmission of Electricity/European Network of Transmission System Operators forElectricity). However,the factthatthe countryis not anEU member often requires additionalcooperation efforts andconstitutes an important handicaptogovernance. Turkey,acandidate since2005,is currentlyin the process of developing the technicalaspects of its interconnection, while it hasalready,thanks to its link with Greeceand Bulgaria, indirectlybenefitedfrom the latter’sintegration with the UCTE.Again in this case,where adirectcurrent link wouldhavehelpedovercome the de-synchronization with the countries on the eastern border,politicshasprevailedover rationality.Turkey’s quest forsynchronization is,in this sense, agoodexample of anold-establishedpattern:electricalintegration comes ahead of politicalintegration,not the other way around. The nextquestion is:shouldthe expansion of aEuropean gridbeleft to the market? Experienceandparticularlythe missing links showthatthe markets,if not properlyguided, wouldfail the task. The TSOswouldfail aswell. Electricity gridsand, consequently,interconnections themselves,are publicgoods,network services verymuchliketelecom or transport routes,andassuchneedanefficient partnership between private andpublicinstances.Todate,the EU is organ- izedinto fivesynchronousareasandamajor push is underwaytowardsstandardizing the UCTE, anorganization consideredabenchmark in terms of qualityof electricityand goodmanagement. Onaregulatorylevel,important changes are currentlyin progress:the EU’s ThirdPackage enhances newinstitutions andasaresult of it,the fiveexisting regionalorganizations —UKTSOA(UnitedKingdom Trans- mission System Operators Association),ATSOI (Association of Transmission System Operators in Ireland),Nordel (Organisation forthe NordicTransmission System Operators) andCentrel (the regionalgroupoffourTSOs:CEPS of the CzechRepublic, MAVIR of Hungary,PSE-Operator of Poland, 20 1 0 I f r i , © Introduction 19

andSEPS of the SlovakRepublic)— disappearedby2009and constitute nowalltogether ENTSO-E. Europe keeps enlarging; the constant demandstocreate interconnections with non-member states andregions have ledto ambitiousinterconnection projects with Russiaandthe CIS,aswell aswith the yet to beestablishedMediterranean Ring.The revisionofthe EuropeanNeighbourhoodPolicy, currentlyattachedto its regionalclustering strategy(Union forthe Mediterranean,Eastern Partnership),includes electricityinterconnection asaprominent issue. Andverymuch asithappenedin the earlydaysofEuropeanintegration, concrete policies,likeenergypolicy,are expectedto ‘spill over’ to regionalintegration. The exploitation of different pricing levels —cheapinthe East,expensiveinthe West— is asprom- ising to some actors,asfrightening forothers. Ahistoricalconsideration of the sources of electricity generation showsthatthe 19th andpart of the 20th centuries dependedon coal,whichwasthen replacedbyoil andsubse- quentlycompletedbygas(1960s) andnucleartechnology (1970s). Will the 21 st centurywitness amajor transition to renewable sources andaredesigned, muchmore efficient,ICT- basedinfrastructure? Isthe 100%-renewable perspectivestip- ulatedbythe EuropeanClimate Foundation for2050arealistic ambition? Ifso,whatwouldit all meanfor gridsthatalready had to adapt themselves to the nuclearchallenge? Asenviron- mentalconcerns over electricitygeneration grow,so does the interest in renewable energyasasourcefor feeding both nationalandEuropeangrids. This challenge hastranslated into the 20/20/20 requirement,bywhich20%offinalenergy is expectedto come from renewables by2020,equivalent to 35% of power generation. Increasing the use of this type of resources directlyimpacts the nature of the grids:decentral- ization andadaptation to smaller,intermittent production units will befundamentalsteps in atransition thathasonly just started.Low-voltage lines atalocallevel will becalledto coexist alongsidehigh-voltage Europeantransmission lines. For countries likeGermany,to single outjust one example,the closing downofnuclearplants in the South andthe future generation of electricitythrough windpower in the North will 20 1 0 I f r i , © 20 Atthe Speedof Light? ElectricityInterconnections forEurope require acomplete reviewof the existing grids,andintroduce significant distances between generation andconsumption sites.Itcanthusbejustifiablyexpectedthatthe electricity gridof the 21 st centurywill bedifferent in sizeandconfigu- ration from the one thatwasoncedesignedfor20th century conditions.Inthe new,somewhatperplexing landscape,small, decentralizedor even autonomouslow-voltage units supplying the immediate neighborhoodor village will exist sidebyside with high-voltage directcurrent ‘super lines’ linking countries andeven continents,asisalreadythe case between Europe andAfrica. The present studyis devotedto electricityinterconnections in Europe,their current state andthe missing links among them. Taking interconnections asthe dependent variable,the independent variables to bedefinedanddiscussed are: •governanceandinstitutions; •pricing; •newtrendsingeneration; •innovation andtechnicalchanges (ICT). The studyis organizedasfollows: Part I develops definitions andbasicnotions necessaryfor the understanding of the subjectmatter.Italso addresses the independent variable factors thatinfluenceinterconnections astheir dependent variable,andrecounts the historicallegacies andtheir enduring impactontoday’s grid. Part II is devotedto the EU legallayout,andto the complexlandscape of governanceandits current state of transition. Part III addresses the management of existing interconnections andwith the missing links among them,detailing projects andneedsregion byregion,including various aspects concerning the relationship between the EU andthird countries. Part IV laysoutrecommendations forEU andnational policymakers. 20 1 0 I f r i , © Introduction 21

This studydrawsonresearchfrom variousindividuals andinstitutes andon reports from organizations suchasthe EuropeanCommission,the EuropeanCoordinators andthe IEA (InternationalEnergyAgency),aswell asfrom the UCTE, ETSO (EuropeanTransmission System Operators),ERGEG (EuropeanRegulators’ Groupfor ElectricityandGas),national regulators andTSOs,especiallythe CRE, andmajor companies.The first transmission development report byUCTE, issuedatthe endof 2008,hasprovidedespeciallyvaluable documentarysupport forthe present research. While this report brings together technicaldatafrom the TSOsaswell as considerations abouttheir projects anddrivers,its scope is analytical. Interviewshavebeen conductedwith representatives from CRE, UCTE, ERGEG andETSO.Tworelevant reports on interconnections publishedbythe CRE (2007,2008) have madeofFranceanexcellent case study,especiallyon the limits of the exploitation of the existing lines.The annexcontains not onlyselectedreferences anddefinitions,butalso regional maps andanoverviewof existing andprojectedelectricity infrastructure byregion coming forthe most part from the UCTE 2008development report. The author wouldliketoexpress her gratitudetoJacques Lesourne,to whom this book is dedicated, to WilliamC. RamsayandMaïté Jauréguy-Naudin (IFRI EnergyProgram) for their advice,aswell astoMarcel Bial(UCTE),CeciliaHensel (ETSO),Christophe Gence-Creux andSophie Dourlens (CRE), François Meslier (EDF),DomenicoRossetti (DG Research), Manuel Baritaud(Areva)andVincent Lagendijk (University Eindhoven) fortheir appreciatedrecommendations andinsights. MarinaGaillardandDelphine RenardandMarielle Roubach (IFRI)haveprovidedvaluable editing support. The author is,of course,solelyresponsible foranyerrors in this study.

S USANNE N IES Senior ResearchFellowwith IFRI EnergyProgram, Head of IFRI Brussels Office 20 1 0 I f r i , © © Ifri, 2010 IndependentVariablesand Legacies

Part Istarts byintroducing basicnotions of electricityand interconnection. The reader in hurry,aswell asatechnically well-informedone,shouldthusskip the first section. Section 2 describes the independent variables,idest the factors influencing electricityinterconnection asadependent variable.The thirdsection is devotedto the historicallegacies of the elec- tricitygridin Europe to date:the past alwaysmatters in the fieldof energyinfrastructure between nations because it sheds light on relation,experienceofrelation andpotentialexten- sion or limits of endeavours thatbelong,per se,to the time frame of ‘longuedurée’.

Concepts and Definitions The natureofelectricity Electricityis auniquephenomenon. Halfwaybetween a commodityandaservice,it is intrinsicallyanetwork-based product. The specificities of electricityare well knownand make forits singularity:it is still difficult andcostlyto store butalwaysexpectedto beavailable immediatelyto meet an ever-changing demand.Storage is currentlyonlypossible by pumping water backinto the mountains during excess periods in order to make it available forsubsequentlyregenerating electricity.Manifestly,this option is naturallyrestrictedto countries in mountainousareas,suchasSwitzerlandor Norway.Storage on batteries still constitutes atechnological challenge given the disproportion existing,forthe time being, between the sizeofbatteries andtheir storage capacity.This is 20 1 0 I f r i , © 24 Atthe Speedof Light? ElectricityInterconnections forEurope preciselythe challenge facedbyelectriccars,forwhichbattery change or hybridconfigurations couldbeamong some of the potentialanswers. Electricitymoves almost atthe speedof light:273,000 km per second, more slowly—though not considerably—inwater (226,000km/second). The speedof electricitymakesitthe ultimate straightawaycommodity.Aproblem anywhere canbe transmittedeverywhere in ananosecond.Anoccurrenceof this type in Germanyatthe endof 2006,forexample,caused blackouts throughoutFranceandSpain andall the waydown to Morocco—although not in the UK, where the continent— islandlink is adirectcurrent connection andsolidarity,both forthe goodasfor the bad, impossible bydefinition.

Voltage Asfarasthe optimization of transmission asrelatedto voltage is concerned, the endof the 19th andthe beginning of the 20th centuries revealdifferent approaches,eachone attachedto different voltage options. 1 Today,the situation is becoming more standardized, with 50-cycle —whichcorre- spondsto220 volts— being usedinsideofthe UCTE andother regionalEuropeandistribution systems,and60-cycle —which correspondsto110volts— being preferredin the US.Since 1912,the following voltages havebeen usedfordistinctive purposes:

AC/DC Aprime governance-relatedissueinelectricitytransmis- sion is the choicebetween the twoexisting types of current: alternating current (AC)anddirectcurrent (DC). DC is the unidirectionalflowof electriccharge,while AC is the movement of electriccharge in periodicallyreverse direction. The choicebetween one andthe other wasthe objectofabitter confrontation when electricitygridswere first invented: arow

1. Voltage –whichwould bemorecorrectlycalled ‘voltage difference’–,washistoricallyalso named‘potentialdifference’.The termdesignatesthe differencebetweenpositionsAand Bof anelectron within asolid electricalconductor. 20 1 0 I f r i , © Independent Variables andLegacies 25

Table 1. Voltage used since1912atvarious levels UrbanRegionalNationaltointernational Mediumtension 50to 90110to 220 345 to 500

High tension 800 (Canada) Over distances of more 1,100 (China) than1,000 km (direct1,100 (projected current also consideredin Japan) ausefulsolution) 1,200 (projected in India) 1,500 (CIS)

between Tesla(AC)andEdison (DC)came to beknown,atthe time,as‘the warofthe currents’.Today,wewitness adiffer- entiation in use wherebyDC —whichpermits to sendhuge amounts of power from one point to another andto easily control inputandoutput— is roughlyusedforbatteries,solar cells,dynamos andhigh-voltage directcurrent (HVDC)lines, andACis usedgenericallyas‘the’ form of electricitycustom- arilydeliveredto businesses andhouseholds. Audio andradio signals on electricalwires are also AC.AC presents the addi- tionaladvantage of allowing forthe setting upofmeshedgrids thatinterconnectdistribution to high-voltage lines. Summing up,while AC is akin to synchronization,soli- darityandinterdependence,DCis associatedwith the setting upofregulated, controlledlines offering manageable input andoutputbutnoautomaticsolidarity.This explains why there is so muchdebate todayaboutthe use of DC asanalternative,especiallyconcerning the enlargement between asyn- chronousareas.

Grids,AC, DC,HVDC and technicalcapacity Electricitygridsare madeupoftransmission anddistribution infrastructure.Transmission entails the movement of huge amounts of power throughoutacountryor among countries,from the generation site to step-downstations in consuming markets.This requires customarilylarge,high- voltage lines from generation plants to distribution lines via transformation stations.Important improvements havebeen 20 1 0 I f r i , © 26 Atthe Speedof Light? ElectricityInterconnections forEurope madetothe qualityof the lines through the commercialization of polyethylene-insulatedcables sincethe early1950sand the increasing application sincethe 1980sofpolymer cables. Todate,gasinsulation of cables andhigh-temperature super conductors is progressing in the fieldof research,although the technologyis not yet mature. 2 Distribution concerns delivery to the finalconsumer, 3 andmakesuse of small,low-voltage lines thatlook likecapillaries,with manybranches leading to the enduser. Inasimplifiedway,the differences between AC andDC transmission canbedescribedasfollows:AClines,in the typi- callyEuropeantradition,are overhead lines.These are cheaper thanundergroundlines buthaveanegativeimpactonland- scapes.InAC lines the power flowis self-adjusting andthe system ‘self-healing’.Inthe frequentlyencounteredN-1 case, where one generation unit or one important part of the system goes outofwork,ACis capable,in manycases,of repairing the damage automatically.The technicalortransmission capacityis determinedbytwofactors:the thermalcapacityof the line,andthe electricalstabilityof power system security. Ingeneral,exploiting the lines at50%oftheir technical capacityis consideredthe best wayof coping with the poten- tialN-1 situation. Nevertheless,eachline is specificand belongs to aspecificcontextandit is those twofactors that shouldultimatelydetermine the capacityuptowhichaline is charged.DC lines,in turn,are not self-adjusting butpresent twoimportant advantages:theyenable the transport of bulk power from point to point over long distances —whichmakes them particularlyinteresting with respecttothe future Southern solarprojects—,andtheyactassystem stabilizers, because the possibilityto calculate their inputandoutput allowsthem to beusedforblackstarts after anincident. Three companies todayholdamong themselves the major share in the worldmarket of HVDC technology,andall of them are European:ABB (Sweden),Areva(France) andSiemens (Germany). From aninvestor’sperspective,ACis preferable

2.See formoredetails:EASAC policyreport 11,‘TransformingEurope’sElectricity Supply–An InfrastructureStrategyforaReliable,Renewable and SecurePowerSystem’,May2009,p. 13. 3.See IEA, Lessonsfrom Liberalized Electricity Markets,Paris,OECD/IEA, 2005,p. 147. 20 1 0 I f r i , © Independent Variables andLegacies 27

forupto200 km of overhead transmission andupto50km of sub-seaor undergroundtransmission; in the rest of the cases DC is cheaper.The life expectancyof both AC andDC lines is about70to 80years —more or less likehuman beings! Today’s Europeansystem is characterizedbythe synchro- nousUCTE system —with the alreadymentionedDCexcep- tions suchasthe UK, Scandinaviaor Corsica—whichextends to Africa viaasynchronizedline linking GibraltarandCeuta. The Russia/CIS system is also ahuge synchronousarea, with aCentralDispatchOrganization basedin Moscow.

System security and defenseplans The worst nightmare in electricitytransmission is the blackout. While abrownoutisadrop in voltage in the elec- tricalpower supply,ablackoutisatotaldisruption of supply. Reasons are numerous:short circuits,overload, anddamage in lines or generation faults.Interconnections andblackouts are doublylinked: anabsenceofinterconnection increases the risk of blackouts asmuchaspoorlymanagedinterconnections do. Acontinuousoverexploitation of the line makesitimpos- sible to cope with overloads. Howdoes risk management deal with malfunctions? Firstly,the setting upofthe griditself needstoanticipate the possibilityof incidents andthe prime referencefor this is the alreadymentionedN-1 situation. The management of congestion —another likelyoccurrence— has to ensure thatelectricitygridsare operatedin suchawaythat the technicallimits are respected.Thus,asalreadymentioned above,the overexploitation of lines (atmore than50%oftheir capacity)hastobeavoided.The installation of double or triple lines canbeanadditionalsecurityasset. Ideally,andin order to enhancemore system security,there shouldbemanysmall lines,asHenri Persozrecommends,butinrealitythis is hardly feasible because of widespread publicresistancetowhatis consideredasanimpairment to the landscape. 4

4. H.Persoz,G.Santucci,J.-C.Lemoine and P.Sapet, La planificationdesréseaux électriques , Paris,EditionsEDF, 1984,Chapter1.1,‘Lechoixde lasectiondeslignes’,pp.26-29. 20 1 0 I f r i , © 28 Atthe Speedof Light? ElectricityInterconnections forEurope

The TSOs,in turn,develop defense plans against major incidents thatcannot beanticipated.Here,because not all incidents canbeavoided, the goalistolimit their consequences. Small incidents,likeathunderstorm or atree falling on aline, canprovokemajor andpotentiallyunmanageable ill. Insuch cases,immediate action is decisiveinorder to disconnectthe deficient areafrom therestofthe gridandthusprevent the phenomenon from spreading to the entire system in avery short time.Thatfirst step proceedsasanautomaticresponse, afeature thathasbeen largelyimprovedbythe introduction of Information andCommunication Technology.Defense plans dependon the verynature of the grid: if agridis meshed, like those in the UCTE synchronousarea, its frequencyis subject to permanent surveyso thatproblems are detectedthe very moment theyoccur. Insystems likeJapan’s,where the gridis long andpoorlymeshed, it is the tension thatissurveyed; finally,in areaslikethe Maghreb, where one countryis connectedto the other likewagons in atrain,surveillance concerns the transit atinterconnections. 5 Twoadditionalimperatives fordefense plans are thatthey donot detect‘wrong’ events,andthattheydonot to reacttoo late.Anewchallenge to gridstodayis the unevenness of the inputcoming from renewable sources,whichfor the time being hastobebalancedoutbyoften redundant traditional generation. The example of offshore windenergygeneration in northern Germanymayillustrate the problem. The generation of windenergyin Germanyis highlyprofitable because it is heavilysubsidized.Butthe gridin the North is congested andasaconsequencethe surpluselectricitypasses West and East into the Dutchandthe Polish grids. Instabilityin those twogridsisnot amatter of concern forthe GermanTSOs,but it does indeedbecome anationalproblem on the other sideof the border,forthe Dutchandthe Polish TSOs. Acommon approach,aswell asEuropeangovernance,is of the essencein this case in order to harmonizethe individualnationalprac- tices.Inthe meantime,the synchronousareaautomatically compensates forthe missing capacities.

5. The authorthanksFrançoisMeslier(EDF)fortheseinsights. 20 1 0 I f r i , © Independent Variables andLegacies 29

Table 2.Recentmajorblackoutsin Europe and theirorigin Date Reason/Consequences FranceJanuary12 th 1987 Lowtension in the grid. ItalySeptember 28 th Powerline in Switzerlandshutoff, 200395% of Italywasinthe dark for severalhours. GreeceJuly12 th 2004Lowtension in the grid. France,Belgium2006Incident in northern Germany, (Antwerp region),affecting 10million citizens Spain,Northern including parts of Paris aswell as Africa Northern Africa (Morocco) forhalf anhour. PolandJanuary18th-19th Kirill windstorm caused 2007interruptions in manylines. Southern FranceOctober 3 rd 2008Violent thunderstorms ledto the failure of the principalline between Marseille andNice (400,000 kV). 1.5 million citizens were withoutelectricityduring the morning.Reason:deadlockin electricitysupplyoriginating in the Alpes Maritimes Department. PolandJanuary2008Overload duetocircularflowfrom windenergyviathe German-Polish connector Szczechin,resulting in overload of Polish transmission lines.

Table 2belowlists major blackouts in the last fewyears in Europe andmentions their reasons.The French,Belgianand Polish examples revealnot onlythe weaknesses in the German system,butalso the interconnection—blackoutnexus. The Italianexample andthe relatedstudies on its origins demonstrate the negativeimpactoflackofinterconnection aswell as the needforaEuropeanregulator.The question is thusno longer ‘interconnection or not’,butrather ‘interconnection, then how?’.The appropriate response will come from studies thatidentifythe neededlinks aswell asfrom adequate tech- nicalandpoliticalgovernance.

Overheadorunderground transmission? Overhead lines,bydefinition,must beable to cope with adverse weather conditions.Asoflate —andpartlyprompted 20 1 0 I f r i , © 30 Atthe Speedof Light? ElectricityInterconnections forEurope bythe important delaysthatthe establishment of newinfrastructure is suffering duetopublicresistance— alivelydebate haseruptedon their advantages anddisadvantages as comparedto those of undergroundtransmission. Price,tech- nologicalchallenges andpublicacceptanceaccount forthe differences between both types.Onall three counts,the rates are higher forundergroundlines. While most overhead lines work with three-phase alternating current,long-distanceaswell asundergroundand undersealines generallyuse directcurrent —with the exception of the alreadymentionedGibraltar—Ceutalink. DC requires transformation stations atboth endsbutoffers,as hasalso been said, the advantages of diminishing losses during transport,allowing forcomprehensivecontrol of inputs andoutputs andnot being boundbysolidarityandthus dependency.DC lines are also easier to manage andrequire no intervention from aTSO,whichisdefinitelynot the case for AC lines with their numerousbranches andaffiliations.The rule,again,is clear:upto200 km,ACis economicallyprefer- able; over 200 km,DCis more advantageous. Undergroundtransmission,while presenting the advantage of avoiding windandstorm,is amuchmore expensive option,with the life-cycle cost reaching uptotwotofour times thatofanoverhead power line.Thus,common utility ducts thatalso lodge other utilitylines are sometimes used in order to offset in part the pricedisadvantage.Onthe other hand, undergroundtransmission emits muchless powerfulmagneticfields,andrequires astrip of onlyone to 10meters,whereasoverhead transmission requires 20 to 200 meters forsafety,maintenanceandrepair.Until the 1960s,insulation of undergroundcables running through a rigidsteel pipe wasaccomplishedwith oil andpaper. While polymers havereplacedthose earlymaterials,many oil andpaper cables are still in operation. Currently,opting forundergroundtransmission,even despite its cost,is becoming farmore common. However,publicresistanceto it growsatthe same rate asits use increases,putting pressure on publicandprivate entities to seek waysofover- coming thatrejection reflex. 20 1 0 I f r i , © Independent Variables andLegacies 31

Additionalobstacles often includeecologicalorother miscellaneouslocalconcerns,asmuchasnaturalimpedi- ments.Inthis context,the case of the recentlyagreed Spanish-Frenchinterconnection through the Pyrenees should beviewedasareal—albeit expensive— breakthrough that putanendto more than15years of quarrelling anddelays.6 Andif its priceisnolonger 20 times higher thanthatofan AC variant,it does still exceedthe latter byfivetimes.A similarprojectwasapprovedin the southwest of Francein December 2008. Operators expectthe cost of electricityto decrease if undergroundlines become more frequent in the future. 7 Nevertheless,undergrounding cannot beconsid- eredapanaceaforall. DominiqueMaillard, RTE, hasvery muchinsistedon the factthatburiedlines are exposedto otherrisks suchasfloodsandare more difficult to repair, with the alreadymentionedcost factor adding to the list of disadvantages. 8

DependentVariables The author hasidentifiedfourindependent variables affecting interconnection:governanceandinstitutions,pricing, newtrendsingeneration,andinnovations andtechnological changes.All of those parameters exert strong influenceover both the exploitation of existing lines andthe setting upof newones.Presentedhere asindependent variables,those four factors have,in turn,proven to besubjecttochange themselves and, simultaneously,to entertain significant interaction among eachother.Governanceimpacts on prices,prices impactontechnologicalchange,technologicalchange impacts on prices,andso on. The following sections describeeachofthe fourfactors.

6.See the casestudyin Part III (p.97). 7.See ‘Constructionofanunderground lineover70km in ordertosatisfyenvironmental concerns’,available at:http://www.localtis.info/servlet/ContentServer?c=artVeille&page- name=Localtis%2FartVeille%2FartVeille&cid=1228195724301. 8. ‘InvestinginEurope’sEnergyFuture’,IFRI’sAnnualConference,Brussels,February 2009. 20 1 0 I f r i , © 32 Atthe Speedof Light? ElectricityInterconnections forEurope

Scheme 1. The nationalelectricity grid

Governanceand institutions Nationalelectricity governance The following simplifiedpicture uses Franceasan example to showthe different parts of the system andthe operator concernedwith eachofthem. Onthe generation side, EDF retains animportant role butnolonger holdsamonopoly. RTE, the TSO —itself asubsidiaryof EDF—,is in charge of transmission. Distribution,in turn,is in the handsofvarious distributors,with EDF again being animportant,butnot the sole operator. The CRE, aspertainstoaregulator,oversees the whole process.This simplifiedexplanation also showsthe results of liberalization,whichhasopenedupthe market through the tool of ‘unbundling’.The process of separating power generation,transmission andsupplyeither legallyor entirely(ownership unbundling) helps newplayers arriving in the market to compete,atanystage of the process,with the historicalandoften state-owned, operators. 9

9. Newpackage of legislativeproposals,knownas‘ThirdPackage’,witheven stronger unbundlingrules,from September2007,endorsed in Marchand April 2009bythe European Council and the EuropeanParliament,leavingfinallythree optionsforunbundling:full ownership unbundling,independentsystem operatorISO(aseparatebodytowhichcompa- niesareobliged tohand overthe operationoftheirtransmissionnetworkwhilestill owning them),and independenttransmissionoperatorITO(aless completeformofunbundlingthat preservesintegrated supplyand transmissioncompaniesbut compelsthemtoabideby certain rulestoensurethe twosectionsof the companyoperateindependently). 20 1 0 I f r i , © Independent Variables andLegacies 33

Typesof exchangeand functionality of interconnections Interconnections maybeusedforregular,periodicalor sporadicexchanges.AC lines automaticallylendassistancein case of incidents in neighboring regions,whereasDC lines stay boundto previouslyestablishedparameters.Regularexchanges add to or even substitute generation capacityin one of the two interconnectedregions or countries.This type of exchange is in most cases aone-wayoperation meant to dealwith asym- metricgeneration capacities,or different pricing levels,on two sides of aborder.Inthe case of periodicalexchanges,the interconnection aims to offset sporadichardships,suchasmay happen during the winter months.Ideally,southern and northern regions wouldbeinterconnectedin order forboth to benefit from the different climate andcomparativeadvantages of eachother with respecttorenewable energygeneration: solar-basedin the South,wind-basedin the North,andso on. Alternatively—just asajoketoapplysome humourtoa realproblem—,countries couldagree thatthe Germans will dotheir laundryat12am,the Frenchat1pm,andthe British at3pm! Realisticchanges in consumption habits could, atany rate,beinducedbythe introduction of ICT into the distribution system allowing customers to havevisibilityaboutthe more advantageousmoments forthe purchase of electricity. Finally,sporadicexchanges occurduring specifichardship periodssuchasblackouts.Eachone of the abovedescribedsitu- ations hastoberegulatedon anational,bilateral,regionaland even Europeanlevel. The obviousconsequenceisthatsynchro- nization diminishes the autonomyof the nationalactors. Synchronizing the gridsofcountryAandcountryBrequires preliminaryfeasibilitystudies,carriedoutbythe TSOsandthe respectiveregionalorEuropeanorganization likethe UCTE or Nordel,andnow,since2009,ENTSO-E.While the voltage of the line defines the maximumpotentialload, capacities canberegu- latedatthe twoentrypoints.Thus,depending on the nature of the agreement or in order to address specificimperatives —commer- cialreasons,forexample,or the urgent needof increasedsupply on one side— the twocountries canreduce,increase or stop the flow,alwayswithin the limits of the capacityof the line. 20 1 0 I f r i , © 34 Atthe Speedof Light? ElectricityInterconnections forEurope

The first phase (Phase A)ofanysuchprojectconsists of drawing upaproposalfor acontractualagreement thatlays downtechnicalrequirements andoperationalaspects,delimitation clausesfromformer partners,congestion management procedures,andlegalandregulatoryconditions.Phase B involves the implementation of the contractualagreement. Phase Cincludes preparation andtests to becarriedoutin isolation aswell asinterconnection tests thatmust besuccess- fullycompletedbefore the gridsare effectivelyconnected. Efficient governanceonboth sides andmutualtrust are important prerequisites to the auspiciousestablishment of anylink. The France—Spain example will also beusedto provide anoverviewof the interconnection process andthe multi- plicityof players involvedin it. Following the identification of amajor congestion area,10 andunder strong EU influence,the twogovernments agreed to establish anewinterconnection between their countries. The FrenchandSpanish TSOsRTEandEER set upajoint venture to financethe works,with some additionalfunding from the EU.According to the agreement,it will bepossible forboth TSOstoregulate the capacities of the line atentry through converters thatwill allowforthe exchanges to be scheduledin conformitywith mutuallyestablishedterms.The capacities of the interconnection will besold50/50byRTE andEER, through bidding.Inthe case of anemergency,it will bepossible to increase or decrease the flow,alwayswithin the limits of the overall line.EachTSO will beresponsible for day-to-dayoperationandwill havea‘red’line available in case there is anemergencyon its grid.Both TSOsare members of ENTSO-Ewhichwill in turn beresponsible forsetting network securitycriteria.Atacountrylevel,the nationalregulators (CRE andCNE)will oversee the entire electricityvaluechain, in conformitywith EU andWTO rules.Linking the electricity gridsoftwocountries is ahighlycomplexprocess,asmuch fortechnicalreasons asfor the governanceaspectofthe venture.Severalplayers are involved, asscheme 2shows.

10.See Part III,p. 97forfurtherdiscussiononthe French-Spanishinterconnection. 20 1 0 I f r i , © Independent Variables andLegacies 35

Scheme 2.Bilateralinterconnection

Aclustered setof players Table 3provides anoverviewof the variousparticipants andtheir mission statements.Itdoes not aspire to beexhaus- tiveand, forthe sake of clarityandsimplicity,does not mention private actors suchasEurelectricor Medelec, which of course does not meanthatthe author underestimates their impactonEU electricitygovernance. The table distinguishes between nationalandEuropeanlevels andoutlines history, mission andfurther integration of variousorganizations. Weare currentlywitnessing animportant Europeanization process on the technicalfront with the merger of regional TSOs(Nordel,UCTE etc.) under the ENTSO-Eumbrella. Paradoxically,the nationalregulators’ role hasbeen reinforced. Simultaneously,the regionaldimension is also on the rise.All in all,national,bi-national,regionalandEuropeanlevels coexist,andwecouldeven speculate aboutthe upcoming emer- genceofasomewhatpan-Europeandimension resulting from the EuropeanNeighbourhoodPolicyelectricityprojects. 20 1 0 I f r i , © 36 Atthe Speedof Light? ElectricityInterconnections forEurope

Table 3.Complex

Organization Description

NationalTSO Transmission System Operators (TSOs) are responsible for the bulk transmission of electricpower on the main high-voltage electricnetworks. TSOsprovidegridaccess to the electricitymarket players (i.e. generating companies,traders,suppliers,distributors anddirectlyconnected customers) according to non-discriminatoryandtransparent rules. Inorder to ensure the securityof supply,theyalso guarantee the safe operation andmaintenanceofthe system. Inmanycountries, TSOsare also in charge of the development of gridinfrastructure. Inthe EuropeanUnion,internalelectricitymarket TSOsoperate independentlyfrom the other electricitymarket players. Theyare of verydifferent sizes; in some EU member states there is only one (like Ireland, France),while in others there are several(Germany,UK). NATIONAL National Nationalregulators were set uptoaccompanymarket liberalization, Regulators aswasthe case with the FrenchCommission of EnergyRegulation (CRE) in 2000.Theyare in charge of electricityandgasmarket regulation (Examples:CRE, BNETZA etc.).

UCTE The Union for the Coordination of Transmission of Electricity(UCTE)is the association of Transmission System Operators in continentalEurope. Members:24countries,with 36 TSOs www.ucte.org:aboutus/members Headquarter:Brussels President:Marcel BIAL

Nordel Nordel is the organization of the Transmission System Operators (TSOs) of Denmark,Finland, Iceland, NorwayandSweden. REGIONAL 20 1 0 I f r i , © Independent Variables andLegacies 37

governance Further Integration EU. Mission Level/Development NationalTSOssupervise the regionalornationalgrid. Organizations of TSOs: One in some countries,more in others. UCTE, Nordel,ATSOI, Example:Germanyhas4TSOs,butdebate continues over whether UKTSOA it wouldnot make more sense to set upaunifiedgrid.One of the ENTSO-E reasons for this moveisGermanfearthatanunbundledgridcould (formerlyETSO) fall fullyinto the handsofforeign investors. FlorenceForum. Unbundling with three options reinforcedbythe EU’s ThirdPackage adopted on April 22nd 2009.

Independent,the regulators oversee the market asawhole aswell as ERGEG market access. ACER Theycontrol access to grids,market regulation andsurvey FlorenceForum of the market in aperiodof liberalization. The nationalregulators The nationalregulators havebeen reinforcedbythe EU’s Third havebeen reinforced Package of April 2009. bythe EU’s Third Package adopted on April 22nd 2009. Provides areliable market base byefficient andsecure electric‘power ENTSO-E highways’. Pressure to set it up Through the UCTE networks,about500 million people are supplied byThirdPackage. with electricenergy;annualelectricityconsumption totals approximately2,300 TWh. There wasdebate on its abolition duetothe setting upofENTSO-E. Ceasedto exist on July1 st 2009. Nordel’s mission is to promote the establishment of aseamless Nordic ENTSO-E electricitymarket asanintegratedpart of the North-West European electricitymarket andto maintain ahigh level of security in the Nordicpower system. Nordel’s objectives are: –development of anadequate androbust transmission system aimed atfewlarge priceareas; –seamless cooperation in the management of the dailysystem operations to maintain the securityof supplyandto use the resources efficientlyacross borders; –efficient functioning of the North-West Europeanelectricitymarket with the goaltocreate larger andmore liquidmarkets andto improve transparencyof TSO operations; –establishment of abenchmark for Europeantransparency of TSO information. Nordel continuouslyexchanges information with the authorities andthe market players,whichisimportant for the evolution of anefficient electricitymarket. Ceasedto exist on July1 st 2009. 20 1 0 I f r i , © 38 Atthe Speedof Light? ElectricityInterconnections forEurope

Table 3.Complex

Organization Description Centrel CENTREL is the regionalgroupoffourTransmission System Operators: CEPS, a.s. of the CzechRepublic;MAVIR ZRt.,the HungarianPower System Operator Company;PSE-Operator S.A.ofPoland, andSlovenská elektrizacnáprenosovásústava, a.s.,or SEPS, a.s.,of the SlovakRepublic. CENTREL wasfoundedon October 11th 1992in Praguefollowing significant politicalchanges in all of the abovementionedcountries after 1989. These fourcountries havebeen collectivelyreferredto as the ‘Visegrad Group’ sincea1991 summit of the countries’ leaders. After the creation of CENTREL, the conditions for membership to UCTE were established.AndCENTREL hasbeen amember of UCTE since January1 st 1999.

UKTSOA Organization of the fourBritish Transmission System Operators. ATSOI Organization of the Irish Grid. BALTSO BALTSO is the cooperation organization of Estonian,Latvian andLithuanianTransmission System Operators. The Agreement on Foundation of Estonian,LatvianandLithuanian Transmission System Cooperation Organisation BALTSO wassigned on March30 th 2006bythe representatives of OÜ Põhivõrk from Estonia, Augsts-priegumaTikls from LatviaandLietuvos Energijafrom Lihtuania. www.baltso.eu REGIONAL Headquarters:Vilnius

IPS/UPS IPS: IntegratedPower System The IntegratedPower System (IPS)portion of the network includes the nationalnetworks of Ukraine,Kazakhstan,Kyrgyzstan,Belarus, Azerbaijan,Tajikistan,Uzbekistan,Georgia, MoldovaandMongolia UPS: UnifiedPower System The Russianportion of the interconnection is knownasUnifiedPower System of Russia(UPS)andincludes sixregionaltransmission operators: ECO Centre,ECO South,ECO North-West,ECO Middle Volga, ECO Urals andECO Siberia.ECO East (set upinJuly2001) operates in isolation from UPS of Russia.Replacement sinceJuly2008ofits operator RAO UES byFederalGridCompany(FGC UES)Russia. 20 1 0 I f r i , © Independent Variables andLegacies 39

governance(continued) Further Integration EU. Mission Level/Development AsCENTREL electricitynetwork comprises the interconnected ENTSO-E systems of its members,the main objectives andtasks of CENTREL are asfollows: –topromote efficient use of transmission capacitythrough the establishment of economic, business,technicalandorganizational conditions andthe provision of mutualassistancewhichfacilitates electricitytrading; –toenhanceregionalcooperation of CENTREL members; –topromote regionalinterests in the Europeanelectricitysector; –todevelop transmission systems in CENTREL area; –topromote reliable operation of common system block; –toexchange experiences andimprovement of operationalconditions of the CENTREL members’ transmission systems,including system services; –toexchange information. Ceasedto exist on July1 st 2009. Ceasedto exist on July1 st 2009. ENTSO-E Ceasedto exist on July1 st 2009. ENTSO-E BALTSO is responsible for: ENTSO-E –Initiation,development andimplementation of conditions necessary for reliable operation andinterconnection of the electricalenergy systems of Estonia, LatviaandLithuania; –maintenanceofthe process for development of the Baltic transmission system; –initiation,development andimplementation of conditions necessary for coordinatedandsafe operation of the electricenergymarkets of Estonia, LatviaandLithuania; –promotion andimplementation of cooperation between the Organization andits members on one hand, andenergycompanies of non-member countries on the other hand; –arrangement of publicrelations activities relatedto the Balticenergy system andelectricitymarkets; –initiation,maintenanceanddevelopment of relations with other relevant organizations andinstitutions in the BalticStates,in Europe andin the rest of the world. Ceasedto exist on July1 st 2009. Decentralizedcontrol,bycountry. Centralizedsecondarycontrol of frequencybyUPS of Russia. Single set of rules/regulations for IPS/UPS regime control is not yet completed. Inpractice,power balances are coordinatedthrough SO-CDO. Multitudeofbilateralandmultilateralagreements. Operation basedon experienceandcommunication of dispatchers who usedto function within the single power system of the former USSR. The system works well; for the last 3years frequencydeviation was in line with UCTE standards. 20 1 0 I f r i , © 40 Atthe Speedof Light? ElectricityInterconnections forEurope

Table 3.Complex

Organization Description

CDO: CentralDispatchOrganization Eastern SynchronousArea, whichspans over 8times zones andconsists of the Independent Power Systems of 12countries andUnifiedPower System of Russia. Installedcapacityof 300 GW Vast territoryleadsto:

REGIONAL –extensiveuse of long-distanceextra/ultrahigh-voltage transmission lines; –extensiveuse of automaticemergencycontrol devices. ACER See ERGEG Decidedbythe EU parliament on April 22nd 2009. Tobeinplaceatthe latest bythe start of 2011. Location to bedecidedamong severalcandidates bythe endof 2009: most likelyto go to anewmember state in CentralEurope (Ljubljana, Bucharest,Bratislava). Focus:oversee investment within EU, arbitration. Cross-border issues are veryprominent in the tasks of ACER. ETSO Createdin 1991,with ATSOI, UKTSOA, NORDEL andUCTE as the association founding members. InJune 2001,ETSO wastransformedinto InternationalAssociation with directmembership by32independent TSO companies from 15 EU member states,plusNorwayandSwitzerland Atthe endof 2001,followedthe inclusion of Slovenia(full member) andCENTREL (associate members); in June 2003,the CzechRepublic; in 2004,Poland, HungaryandSlovakia;inFebruary2005,the Lithuanian TSO, Estonia, Rumania, Cyprus,Latvia, Serbia, BosniaHerzegovina, CroatiaandFYROM Associate Members. Bulgariabecame full member in 2007. ETSO networks nowmore than490million people,with aconsumption

EUROPEAN of electricityamounting to approx.3,200 TWhper year. Itcovers more than290,000 km of HV (400 and220 kV)lines. Headquarter:Brussels SecretaryGeneral:CeciliaHELLNER, former Swedish TSO www.etso-net.org ReplacedbyENTSO-E ENTSO-EOnJune 27 th 2008,in Prague,the Chief ExecutiveOfficers (CEOs) of 36 EuropeanTSO companies from 31 countries signedaDeclaration of Intent,asaproactivestep ahead of the draft ThirdLegislativePackage,to create anewassociation:the EuropeanNetwork of Transmission System Operators for Electricity(ENTSO-E),before the endof 2008. The newbody wasestablishedto cover the needsofthe TSO communityand in accordancewith the principles set outbythe draft ThirdLegislative Package of the InternalElectricityMarket. OnDecember 19th the CEOs of 42EuropeanTSOsfrom 34 countries createdENTSO-Eandagreedto propose to the presidents of current TSO associations,i.e. European Transmission System Operators (ETSO),Union for the Coordination of 20 1 0 I f r i , © Independent Variables andLegacies 41

governance(continued) Further Integration EU. Mission Level/Development

ETSO is responsible for: –inter-TSO compensation –securityof supply –tariffs –renewable energies Ceasedto exist atthe endof 2008.

The establishment of ENTSO-Ewill further strengthen TSO cooperation in anumber of keyareas,suchasthe development of technicalandmarket-relatednetwork codes andthe coordination of system operation andgriddevelopment,with the aim of enhancing the integration of the Europeanelectricitymarket,contributing to asustainable energyenvironment andensuring secure andreliable operation of the Europeanpower transmission system. Binding TSO membership in ENTSO-E, asproposedbythe EC, is one keyto success for the newbodyandwill accelerate the development of common codes,contributing to reliable andefficient pan-European andregionalelectricitymarkets. 20 1 0 I f r i , © 42 Atthe Speedof Light? ElectricityInterconnections forEurope

Table 3.Complex

Organization Description Transmission of Electricity(UCTE),Nordel,UKTSOA (UK),BALTSO (Baltics) and ATSOI (IrelandandNorthern Ireland),to initiate the necessaryprocedures to transfer their activities to the newTSO bodyandto endtheir respective associations assoon asENTSO-Eis establishedandthe transfer of activities hasbeen accomplished. Headquarter:Brussels (Bd Saint Michel,former Headquarters of ETSO, UCTE) President:Daniel DOBBENI, CEO of Elia, BelgianTSO ElectedSecretaryGeneral(February5 th 2009) Konstantin STASCHUS ERGEG CEER andERGEG are organizations establishedfor the cooperation (Euopean of the independent energyregulators of Europe. Regulators ERGEG wasset upbythe EuropeanCommission (Decision of November 11th 2003, Groupfor 2003/796/EC)asits advisorybodyon internalenergymarket issues. Itismadeup Electricityand of the nationalenergyregulatoryauthorities of the EU member states. Gas)/CEER ERGEG advises andassists the Commission (DG TREN, DG COMP, DG (Council of RESEARCH)onits owninitiativeorupon request,in particularwith respecttothe European preparation of drafts for implementing measures in the fieldsofelectricityandgas. Energy For example,ERGEG providedsignificant inputtothe EuropeanCommission Regulators)/ in the preparation of its ThirdEnergyLiberalization LegislativePackage (adopted ACER in September 2007). One of ERGEG’s flagship projects is the RegionalInitiatives,whichitlaunchedwith the Commission’s backing in spring 2006,in aneffort to speedupthe integration of Europe’s nationalenergymarkets. The ERGEG RegionalInitiatives establish seven electricityandthree gasregional markets in Europe asanintermediate step in the creation of asingle,competitive EU electricityandgasmarket.

EUROPEAN ERGEG members are the nationalenergyregulatoryauthorities of the 27EU member states. The EU Commission is representedatahigh level. The National EnergyRegulators of the candidate countries andthe countries of the EEA participate in ERGEG meetings asobservers. ERGEG is also calledCEER/ERGEG. CEER members are the EnergyRegulatoryAuthorities of the EU or the European EconomicArea(EEA). Foundedin 2000 byten nationalregulators,it is basedin Brussels. CEER establishedsixworking groups,one being electricity.The Florence School andIERN is also part of CEER/ERGEG. SecretaryGeneral:FayGEITONA President:LordMOGG, former Commission official ACER, the Agencyfor the Cooperation of EnergyRegulators wasproposedbythe EU Commission,within the framework of the Thirdpackage,asabodythatshould advise the Commission,facilitate nationalregulators to cooperate andadopt individualdecisions on cross-border issues. FlorenceForumThe ElectricityRegulatoryForumofFlorencewasset upasaninitiativeofthe Commission asaself-regulatoryforumin1998,similartothe MadridForumfor Gas. The participants are nationalregulatoryauthorities,member states,the European Commission,Transmission System Operators,electricitytraders,consumers,network users andpower exchanges. The Forumconvenes onceortwiceayear,formerly in Florencebutnowin Rome. The first meeting washeldin 1998. http://ec.europa.eu/energy/electricity/florence/index_en.htm Within EU Commission DG TREN. 20 1 0 I f r i , © Independent Variables andLegacies 43

governance(continued)

Further Integration EU. Mission Level/Development Moreover,ENTSO-Ewill work with aclearmandate in line with market expectations andin consultation with EuropeanRegulators andthe Commission. This newenvironment will enable TSOstofocusontransparent objectives andto speakwith ‘one single TSO voice’ on issues concerning the InternalElectricityMarket. ENTSO-Eincludes three committees for pan-Europeanactivities on System Development,System Operation andMarket Frameworks,incorporating regionalgroups under eachCommittee. Both organizations pursuethe same overall aim of facilitating the creation of asingle,competitive,efficient andsustainable internalmarket for gas andelectricityin Europe. CEER andERGEG share similarobjectives andthe work andachievements of both are intrinsicallylinked.Yet there is one main differenceinthe role of the organizations in relation to the EU andthe other stakeholders in Europe’s energysector:cooperation in the framework of the CEER is basedon a voluntaryagreement among the regulators themselves,while ERGEG was foundedbythe EuropeanCommission in 2003asits officialadvisorygroupon energyissues. Source:www.energy-regulators.eu/portal/page/portal/EER_HOME/ EER_ABOUT ERGEG’s purpose is to facilitate aconsistent application,in all member states, of the provisions set outinDirective2003/54/EC, Directive2003/55/EC and Regulation (EC)No1228/2003,aswell asofpossible future Community legislation in the fieldof electricityandgas. The Commission wouldlike to reinforcethe role of ERGEG, transforming it into ACER, aninitiativecontestedbyEurelec-tricandETSO. ACER proposal:Commission Communication of January10 th 2007,AnEnergy Policyfor Europe.

Itsrole is to discuss the creation of atrueinternalelectricitymarket,aplace where,informally,all the actors come together aroundthe same table. The Forumcurrentlyaddresses cross-border tradeofelectricity,in particularthe tarification of cross-border electricityexchanges andthe management of scarce interconnection capacity. 20 1 0 I f r i , © 44 Atthe Speedof Light? ElectricityInterconnections forEurope

Investmentand pricing Investmentrequirements in the electricity sector IEA forecasts the world’s needforelectricityinvestment in transmission anddistribution between 2006and2030ata minimumof g 4,500 billion,whichisequivalent to more than the totalforecast foroil andgastogether.More thanhalf of thatisearmarkedfordeveloping andtransition countries,with Chinahaving alreadysuccessfullymanagedelectrification in the last years. 11 Most of the investment requirement stems from the industry’s double challenge to address climate change anddeliver energysecurityall atonce. Onthis issue,uncer- taintyreigns on aboutthe different options athand—more renewable versusmore nuclear,etc. Inthe EU asawhole,35% of electricitysupplycouldcome from renewable sources by2020 or 2030;nuclearenergyalso seems to begaining groundin acontextofgrowing concerns over climate change andenergysecurity,especiallywith respecttogassupplies from RussiaviaUkraine.The US president,in turn,fixedhis owncountry’s ambitions forrenew- ables at25% of primaryenergyby2025. According to TSO forecasts,midterm investment in the electricitysector will reacharound g 4billion per yearinthe EU until 2013. Anincrease is then expectedbefore 2023. IEA hasestimatedthe totalgridinvestment neededin the EU at g 49 billion for2001-2010.While cross-border investment currentlystaysat g 200 million per year—arelativelylow figure ascomparedto overall investment projects—,the 32electricityprojects identifiedasbeing of Europeaninterest will together require g 6billion. This will raise the resulting cross-border investment to g 700-800 million,almost fourtimes the current level. The investment requirement forthe connection of offshore windfarms is estimatedat g 0.9 to 1.3 billion per yearuntil 2013,butisthen expectedto almost double in

11.Quoted from EdCrooks,Currentconcerns, FinancialTimes ,Energysupplement,October 28 th 2008;cited from IEA: ‘IfinChinanow99%ofthe populationhasaccess toelectricity, compared toanAsiaaverage of 74%,the level of electrificationinIndiareachesonly60%. In developingcountries,distributionlossesaswellasthe theftof electricity remain unresolved problems.’ 20 1 0 I f r i , © Independent Variables andLegacies 45

the long term ( g 1.7-2.5 billion).12 Asfor investment in elec- tricitygridsandtrans-border lines,it will beprimarilyunder- takenbythe nationaloperators.Investment in high tension electricitygridsisprogrammedforaseven— to ten-year period.Inrecent years,regulatoryuncertainty,aswell asques- tions concerning future generation (the role of renewables, CCS,ETS),haveset backinvestment in the grids. Inparticular, the distancebetween renewable sources production sites and consumer areasisanimportant investment challenge,which, according to the Commission,shouldbedealt with through a Europeanapproach. Currently,the variousstimuluspackages havebeen leading to more publicinvestment in electricity infrastructure:preciselybecause of that,it is crucialatthis point to privilege the right projects andto avoidinvesting in infrastructure withoutalong-term perspective. This maybe easyto assess,butnot alwaysaseasyto execute,given the pressure exercizedbylobbies andthe uncertaintysurrounding the future of energyschemes.

Electricity price The priceofelectricitydependsonthe following seven factors: •the production cost (depending on the modeofproduction andthe cost calculation methodused); •the transportation cost; •differing taxes (varying from one EU member state to the other,whichpartlyaccounts forthe pricedifferences); •the cost of commercialization (advertising,marketing, customer services); •the quantitysubscribedbyacustomer (with the largest breachexisting between private householdsandindustrial consumers); •the tension delivered;

12.Source:DrWolfgang Kerner,DGTREN B1,StrategicEnergyReviewand Priority InterconnectionPlan,Regulators Electricity InfrastructureWorkshop(Brussels,February 23rd 2007). DG TREN. 20 1 0 I f r i , © 46 Atthe Speedof Light? ElectricityInterconnections forEurope

•the modeandperiodof consumption (for example,the differencebetween peakandoff-peakrates). Electricityprices forhouseholdconsumers are fixedby government decree in 16 EU memberstates (regulatedtariffs, likeinFrance),andare not regulatedin 11 (likeinGermany). Asaresult,distinctivepriceregions tiedto differences in the abovementionedfactors emerge within countries.Andprices are verydifferent within the EU,with,forexample,alowrate of g 0.12kW/h including taxes in France,andnearlythe double in Germany,at g 0.22 kW/h,in 2008.13 Inthe past,prices used to besubjecttosignificant fluctuations,with France,for example,having experienceddecreases between 1997 and 2000 andthen important increases since2001especially following the rise in production costs andnewinfrastructure, aswell asthe obligation to buy renewable energy. 14 The liberalization of the nationalelectricitymarkets is progressively giving customers the opportunityto switchtoanother supplier andthusbenefit from lower prices forthe kW/hourunit and variousservices,while the tariff forthe use of the publicgrids is,bydefinition,non-negotiable.InmanyEU countries,public support andexisting subsidies in favor of renewables have translatedinto competitiveprices or taxreduction forusers of renewable generatedelectricity.Nevertheless,arecent report on the consumer markets showedthatthe EU electricity market is generallyconsideredunsatisfactoryandits share in the citizen budget —5.7% on average in the EU-27— much too high. Additionally,consumers hardlyever change operators,even if theyhavethe right to doso,with only8% in the EU professing to bereadyto switch.15 Industrialcustomers,in turn,havethree options for purchasing electricity: •viaorganizedspot markets (electricitystockmarkets suchas PowernextinFranceorEEX in Germany,whose prices are publiclyavailable);

13.Source:Eurostat2009. 14.Source:http://www.environnement.ccip.fr/energie/electricite/tarifs-et-prix.htm. 15.EU CommissionerforConsumerAffairs,MeglenaKuneva, quoted by FinancialTimes , February 2 nd 2009:‘SurveysparksEU probeintoelectricity market’. 20 1 0 I f r i , © Independent Variables andLegacies 47

Scheme 3.Electricity pricesacross the EU in 2008

Bulgaria Latvia Greece Estonia Lithuania Malta Rumania Slovenia CzechRepublic Finland Poland France Hungary Spain UnitedKingdom Cyprus Portugal Slovakia Belgium Ireland Luxembourg Sweden Germany Netherlands Italy Denmark 0.00 0.050.100.15 0.20 0.25 0.30 euro/kWh Basicprice Taxes VAT Source: Eurostat 16.

•over the counter (OTC),whichmeans directlyfrom producers suchasE.ON andEDF,traders suchasTotalandGaselys, or other eligible players or traders suchasGFI or Spectron. Sincethese prices are set viabilateralnegotiations,theyare less publiclyknownthanthose in the first category,butremain subjecttoestimation byorganizations likePlatts; •on the retail market. Onthe spot market,adifferenceexists between the spot prices (for the dayahead)andthe forwardprices (for the month,quarter or yearahead).

16.Foradetailed overviewon the electricity pricesbytype of userin the EU-27 from 1997 to2008,see Queendetail http://epp.eurostat.ec.europa.eu/portal/page/portal/energy/ introduction. 20 1 0 I f r i , © 48 Atthe Speedof Light? ElectricityInterconnections forEurope

Ingeneral,generation capacityin the EU hasdiminished in the last years,andthe volatilityof oil andgasprices has had animpactonthe priceofthermalgeneration. Finally, liberalization hasledthe newlyprivatizedcompanies to integrate investment costs,something thatwill surelyimpactthe spot prices in the nearfuture.The following picture showsthe huge differences in electricityprices across Europe,with the cheapest electricitybeing available in Bulgaria, andthe most expensiveinDenmark. The abovedescribedcomplexityof the nationalpictures is increasedmanifoldin the case of trans-border exchanges.

Pricinginterconnectioninthe electricity sector Isthe pricelevel differentialbetween both sides of the border anadvantage or adisadvantage? Under optimum governancethe market shouldbenefit from competitivecondi- tions andlead to lower electricityprices on both sides of the border.Unfortunately,duetoflawsingovernanceanda predominantlynationalfocusonthe part of most players,this is not the case today,asthe reports bythe CRE havedemon- strated.Onoccasions,however,coupledmarkets likethe Franco-Belgianshowahigh degree of priceconvergence, whichisclearlyanencouraging signal. Not just electricityprices varyacross the EU andinside the countries themselves,butthe tariff forEU electricitytransmission does aswell. The CzechEU presidencysuggested, in the first half of 2009,the introduction of asingle EU tariff on transmission services in order to enhancemore cross-border flows. The electricityflowing through interconnections is either ownedbythe operators of merchant lines who benefit from temporaryexemptions,or is sharedbythe twointerconnecting TSOswho sell their 50%share viaauctioning,or aslong-term contracts,either monthlyor annually.Inthe secondcase,the interconnection electricityis soldoutsideofthe regulatedelec- tricitymarkets of the respectivecountries.Onlythe non-used volumes of those long-term contracts are madeavailable on spot markets likePowernextorEEX.Their pricelevels reflect 20 1 0 I f r i , © Independent Variables andLegacies 49

onlythe leftover volumes rather thaninterconnection elec- tricityatlarge.Acquiring long-term capacities is anopportu- nityforaforeign player aspiring to take position in agiven country.The priceofelectricitysoldon the long-term market dependsonthe qualityof the offeredproduct. Quality,in this context,comprises the existenceofasecondarymarket forthe onwardsale of unusedcapacity,the procedure of nomination, the financialprocess,compensation, 17 the qualityof the elec- tricityitself,etc.Inthe case of Franceandits neighbors, secondarymarkets havebeen establishedsince2001. Excess capacities canthusbeeither resoldor transferredto other players.TSOsare in charge of the highlycomplexclearing procedure to beaccomplishedtwoandone daysahead of use, aswell asofthe so called‘netting’,whichisthe settlement of obligations between twoparties thatprocesses the combined valueofatransaction. The day-ahead markets,in particular, tendto experiencesignificant dysfunction,whichhighlights the flawsofthe market itself.Market coupling offers an adequate answer to these problems.

Marketcoupling Interconnection andthe associatedpricing intricacies have ledto anewterminologyfornewmethods,presentedin brief in the following pages.Market coupling is apromising wayof integrating electricitymarkets from nationaltobilateraland then onto regionalmodels.The EU hasrecentlywitnessed severalmarket coupling projects,with the Northern andthe West-Centralregions being the most advanced. Market coupling is amethodforintegrating electricity markets in different areas. Buyers andsellers automatically integrate the cross-border exchange andno longer needto acquire capacities explicitly.The model hasverymuchbeen inspiredbyScandinavia, whichoptedfrom the start forthe market splitting paradigm. Market coupling viainterconnection canbedesignedaccording to apreciselydefinedcontrac- tualarchitecture,or viathe alreadymentionedjoint companies

17.Compensationincaseofcurtailmentof capacities(exceptin caseof‘forcemajeure’)is eitherbased on the initialpriceofcapacity oron the marketspreadbetweenthe energy markets. 20 1 0 I f r i , © 50 Atthe Speedof Light? ElectricityInterconnections forEurope or aCommon Auction Office. The capacities are purchased bytraders,large consumers (businesses),distributors,or Europeanelectricitycompanies.Capacities aswell asdatahave to besubmittedto the TSOs,the Auction Officeandthe nationalregulators.Investments suchasthose relatedto the maintenanceofthe interconnection are carriedoutbyajoint company. The technicalaspects of market coupling are managedvia atechnicalsoftware tool calledthe market coupling system (MCS),whichisusedbythe power exchanges in order to calculate cross-border flowsandmarket areaprices.Exchanges maybecalculatedaseither price-based, also termed‘close coupling’,or volume-based.Inthe first model,the pricecalcu- lation is left to the MCS thatcalculates bycombining price andflow.Inthe second, volume-basedflowor ‘loose coupling’ volumes are additionallyintroducedinto the calculation. The Auction Officeisresponsible forthe calculation of the trans- border flows,using relevant datasuppliedbythe TSOsand the power exchanges. Different auction methodsare appliedin market coupling, suchas: •explicit auction:the transmission capacityis auctionedsepa- ratelyfrom the wholesale market. This is the basicmethodof commercializing interconnection electricityin Europe.Itis particularlyappropriate forthe allocation of long-term capacityrights (sold, forexample,atyearlyandmonthlyauctions; •implicit auction:forday-ahead capacityrights,implicit capa- cityauctioning goes further andreflects alreadyacertain degree of integration. Here the flowis basedon the day-ahead market datafrom the twointerconnectedmarkets.Implicit auctioning reflects muchbetter thanexplicit auctioning the realprices in the twoareas,aswell asthe cost of congestion. Implicit auction is the common denomination forboth market coupling andmarket splitting. Ifmarket splitting works with just one auction office whereasmarket coupling links two,in both cases cooperation must ensure thatduring 24hours quantities moveinthe right direction,i.e.,towardsthe higher pricearea.Inboth,also, 20 1 0 I f r i , © Independent Variables andLegacies 51

production is stimulatedin the lower pricearea, andproduc- tion deficits enhancedin the higher pricearea. Todate,the main market coupling or market splitting projects thathavebeen establishedare the following: •the NordPool market splitting.The TSOsinvolvedin this implicit allocation of capacities are Energinet.dk,Statnett, SvenskaKraftnätandFingrid; 18 •the trilateralcoupling of the Netherlands,BelgiumandFrance (TLC). The power exchanges APX, BelpexandPowernext,and the TSOsTenneT, EliaandRTE agreedon amarket coupling on November 21 st 2006; •theMIBEL market covering the IberianPeninsula.The power exchange involvedin this market splitting is OMEL, andthe TSOsare REE andREN; •the Italianmarket,whichissplit into severalinternalzones. Congestions between these zones are dealt with through a market splitting solution. Inaddition to those existing coupling andsplitting solutions,the main projects currentlyunder implementation or under studyare: •Central-West market coupling:Germanywill join the coupling between the Netherlands,BelgiumandFrance(target date: March2010); •coupling between Central-West andNordPool:the 580km of DC NorNedcable (between the NetherlandsandNorway) 19 and the interconnection between GermanyandDenmark (EMCC project) are to bemanagedaccording to acoupling algorithm. This projectistermedmulti market coupling (MMC),which preciselydesignates the link between twoalreadycoupled markets.Here,manyheterogeneousmarkets couldbeinte- grated.Oncethe cable successfullyopens,the TLC will be enlargedto the NordPool system. This last link,however,will bedone viaDClines,andwill thusnot besynchronized.

18.Available at:http://www.nordpoolspot.com/Market_Information/Press-releases-list/Press- Release-no-162006/. 19.Thisisaprojectcurrentlyunitingthe TSO Statnett,TenneTand the powerexchangesNord PoolSpotand APX. 20 1 0 I f r i , © 52 Atthe Speedof Light? ElectricityInterconnections forEurope

Merchantlines Merchant lines present aninteresting exception to the publiclyaccessible,‘unbundled’infrastructure.Inorder to stimulate investment,exemptions were grantedin 2003both forliquefiednaturalgas(LNG)infrastructure andelectricity interconnections. According to article 7ofthe EU regulation 1228/2003 ‘newdirectcurrent interconnections may,upon request,be exempted[...]under the following conditions: •the investment must enhancecompetition in electricity supply; •the level of risk attachedto the investment is suchthatthe investment wouldnot take placeunless anexemption is granted; •the interconnection must beownedbyanaturalorlegal person whichisseparate atleast in terms of its legalstatus from the system operator [...]’.20 Merchant lines are generallyDC lines,andthuseasier to control andto govern then AC lines.The EU regulation was adoptedatamoment when the EU wassuffering from insufficient regulatedinvestment in interconnection capacityand thusdecidedto tryto offset the trendbygranting exemptions —whichhavetoberequestedto the EU Commission— for some 20 or 25years.This means thatthirdparties haveno access to the merchant infrastructure within alimitedperiod of time.Nevertheless,until recently,suchopportunitywasonly rarelyexploited.Achange hasintervenedonlyin the last months,partlyduetoincreasedpublicinterest andthe allocation of newsubsidies,including to renewables andappropriate infrastructure.The companyIMERA, afrontrunner in the field, recentlyannouncedthe establishment of twomerchant lines called‘EuropaGrids’:EuropaGridAtlantics,linking the UK, Ireland, FranceandSpain,andEuropaGridNordSea, tying upScandinavia, Western Europe andthe UK. 21 This

20.RegulationNo. 1128/2003,Article 2(7). 21. News Wire,February 2 nd 2009,or Imerapower.com (Alsosee the paragraph on Imeraon p. 96). 20 1 0 I f r i , © Independent Variables andLegacies 53

company,whichwill besubjecttomore in-depth discussion in Part III of the present work,hasspecializedin the development of underseainterconnections andthe connection of offshore networks,focussing especiallyon the introduction of renewable energyin the infrastructure.Today’s merchant line projects,asamatter of fact,are all HVDC sub-sealinks.

Newtrendsin generation Inrecent years,the share of electricitygeneratedfrom renewables hasgrownrapidly—although quite unequally— within the EU22 andthe trendis likelyto continue,especially in light of the alreadymentioned20/20/20 objective. Surprisingly,the northern countries producetodate much more renewable energythanthe southern ones,including solarenergy.This paradoxof the North is even truer forthe Mediterraneancountries. 23 Ahuge potentialinrenewables remains unexploited: if hydro-energyis exploitedto about 64%,the use of solar,wind, andhydrothermalorgeothermal energies is,in turn,still in its verybeginning. Renewable energywouldlogicallybeproducedfarfrom consumption areasasthe renewable resourceofwater is in mountain regions,nearthe seaforwind-power,or in southern Europe of North Africa forsolar-generatedcurrent. This requires major adaptation of the grids,andthe extendeduse of HVDC,especiallyforoffshore windenergyor distant solar. Intermittencyinherent in renewables is also animportant problem thatneedstobesolved.For the time being,the introduction of renewables into the gridrequires the parallel operation of traditionalgeneration units capable of offsetting irregularinput. Currently,there are feasibilitystudies underwayconcerning twomajor projects:the Mediterranean

22.Forrenewablesgenerationcapacity byEU memberstates,see UCTE Transmission DevelopmentPlanReport 2008,p. 15. 23.See ‘Méditerranée :une interdépendanceénergétiquecroissanteentrenordetsud’ (December11th 2008),available at:http://www.actu-environnement.com/ae/news/ interdependance_energetique_mediterranee_6382.php4.Accordingtothe studybythe ObservatoireMéditerranéendel’Energie(OME),70%ofthe renewable electricity generation comesfrom the NorthernMediterranean,whichisparadoxicalsincethe SouthernMediterranean isespeciallyprivileged bynatureforsolarenergygeneration. 20 1 0 I f r i , © 54 Atthe Speedof Light? ElectricityInterconnections forEurope

Ring forsolarenergy,andthe northern projectfor wind energy.Both are discussedlater,in Part III.Incompliancewith the target to in-crease the share of renewables by20%by2020, windwill havetorepresent athirdof all renewables bythat date.Across the EU,this means thatapproximately13% of the totalelectricitysupplywill stem from wind, mostlyfrom offshore generation.24 Northern windpower projects and renewable endeavours in the Southern MediterraneanRing project,whichaims to bring solarelectricityto the European market,share common characteristics.

Innovation and technicalchange The potentialfor energyefficiencyis veryhigh. According to areport bythe EU Commission concerning ICT in the EnergySector, 25 the potentialfor improvement,especiallyin the electricitysector,is considerable:estimatedatabout30to 40%for efficiencyincrease in generation,at2%for the avoid- anceoflosses in transport,andat8%for distribution. The report also refers to the contribution of HVDC lines to energy efficiency.EASAC, asalreadymentioned, stresses the potential of newcables —likethose insulatedwith gas— andhigh temperature lines. 26 Andit insists on the pioneering role that cities shouldplay,given thatmore than50%ofthe world population is concentratedin them andthatconsequently 75% of the world’s energyis consumedin cities.Inthis context,aninitiativesuchasthe Clinton Foundation’sClimate Initiative,knownasC40Cities —Climate Leadership Group, deserves specialmention here. 27 Wehavewitnessedimportant improvements in the grid andespeciallyin the dispatching anddefense plans sincethe 1980s,andthen even more sincethe 1990s. Nevertheless,

24. G.W.Adamowitsch,‘Projectof EuropeanInterest,Connectiontooffshorewindpowerin NorthernEurope (NorthSea-BalticSea)’,(BrusselsSeptember24 th 2008). Annualreport September2007-September2008,available athttp://ec.europa.eu/energy/infrastructure/ tent_e/doc/off_shore_wind/2008_off_shore_wind_annual_report_2007_2008_en.pdf. 25. Informationavailable at:http://ec.europa.eu/information_society/activities/sustainable_ growth/docs/com_2008_241_1_en.pdf. 26.EASAC2009,p. 13. 27.Available at: 40cities.org . 20 1 0 I f r i , © Independent Variables andLegacies 55

insofarasdistribution is concerned, the cost of smart metering is still too high foramass product. The tendencyhowever is towardslower prices,andexperts forecast implementation in the nextdecade. Researchaswell aslocalandregionalexperienceonsmart gridsclearlydemonstrate their value,even if this still remains unfortunatelyunexploitedforthe time being. 28 The term ‘smart grid’describes amodernizedelectricity network thataddresses electricityreliabilityaswell asglobal warming.Asdigitalupgrades of distribution andlong distance transmission,smart gridsoptimizeoperations,facilitate the introduction of renewables viadigitalaccess anddelivery control,andreduceCO2 emissions.Historically,smart grids emergedfrom earlyattempts in the 1980stocome upwith electroniccontrol,metering andmonitoring.Storage of electricityis one of smart grids’ objectives.Severalprojects are currentlyrunatlocalorregionallevel,suchasItaly’s Telegestore project,the first to havenetworked27million homes using smart meters,since2000.Inthe US,the cityof Austin (Texas) replaced1/3 of its manualmeters with smart meters in 2003. AndBoulder (Colorado) recentlyfollowedsuit, with the completion of afirst smart gridprojectbyAugust 2008.29 The ThirdLegislativePackage also includes provisions on metering:by2020,the EU expects 80%ofconsumers to haveaccess to smart meters.

Legacies:the History of Europe’sGrid and Interconnections The demandforenergyandconsequentlyforelectricity greatlyincreases along with economicdevelopment and growth. Inthe contextofexpansion experiencedbythe US in the first three decades of the 20th century,demandgrewby

28. See communicationfrom the CommissiononICT(May5 th 2008). 29. United StatesDepartmentof Energy’sModernGrid Initiativereport,available at: http://www.netl.doe.gov/moderngrid/opportunity/vision_technologies.htm. See alsoonthe issue: The EmergingSmart Grid.Investmentand EntrepreneurialPotentialinthe Electric PowerGrid of the Future ,GlobalEnvironmentFund,2006,available at: Centerforsmartenergy. com. 20 1 0 I f r i , © 56 Atthe Speedof Light? ElectricityInterconnections forEurope

Scheme 4. Smart grids

Source: http://www.oe.energy.gov/images/smartgrid—diagram.jpg.

12%ayear. Until the present financialcrisis,wewere witnessing similarphenomenain ChinaandIndia. Europe is verydenselypopulated, afactmirroredbyits similarlydense andintegratedelectricitygrid, particularlyin industrialregions aswell asonthe borders of the triangle composedbyFrance,SwitzerlandandGermany.Anintegrated or interconnectedsystem provides the opportunityfor managing gridperformancethrough integration andcooperation between regionalandnationaloperators,butalso increases the risk of broader blackouts.Asaconsequenceof the proper exercise of this broader grid, the reliabilityand qualityof electricityin Europe havebeen improved. Adetailedpresentation of the historicallegacies would exceedthe scope andgoalofthis paper.The interestedreader canrefer to the impressiveresearchbyThomasHughes,especially Networks of Power:Electrification in Western Society, 1880-1930 ,whichcompares electricitydevelopment in Chicago,London andBerlin (1983). Anexcellent historical studywaspublishedatthe endof 2008byLagendijk, Electrifying Europe:The Power of Europe in the Construction of ElectricityNetworks.More nationalstudies havebeen publishedon the US —Nye(1990)—,Russia—Coppersmith 20 1 0 I f r i , © Independent Variables andLegacies 57

(1992)—,andFinland—Myllyntaus(1991)—,to note only some of the most outstanding research. Most countries have been coveredbyspecificregionalresearch.

The first gridsin the early19th century The following paragraphs summarizemain events and steps to-wardsaninterconnectedEurope andare forthe most part basedessentiallyon the abovecitedpublications aswell asonUCTE reports. Today’s grids,originating in NicolaTesla’s design in 1888, startedto spread after 1896. Technologicalmaturityin production andtransport wasreachedonlyatthe endof the 19th century.Earlier gridswere localized, with one or two plants providing electricityto anearbycityor small region through alocalgrid.Those gridswere called‘islandized’for the same reason thattodaywecall disconnectedcountries like Spain or Italy‘electricityislands’. The first nets,operating with DC, emergedin 1882in New York,butalso in smaller,less important places likethe indus- trialcityof Bellegarde,France. Researchandimprovement efforts focusedover the following years on howto avoidtrans- mission losses,andhowto stabilizethe grids,asblackouts were frequent atthatearlystage.The introduction of three- phase alternating current allowedforthe first time in 1883 to connectadistanceof80km. Searchfor the optimalfrequency aimedto diminish losses andledto the 50and60hertzpara- digm some decades later. The first high-tension line of more than100 kVwasput into serviceinGermanyin 1912,linking Lauchhammer to Riesa.Again in Germanyin 1929,the first double-circuit line wasinaugurated, with 220 kV, linking Brauweiler and Ludwigsburg.The US followedwith 287 kV(Boulder- Los Angeles,1932),then Sweden with 380kV(Harspranget- Halsberg,1952),the Soviet Union with 525kV(Moscow- Volgograd, 1960),Canada with 735 kV(Montréal- Manicouagan,1965),the US again with 765 (Broadford-Baker, 1969) andagain the Soviet Union,with 1,200 kV(Ekibastuz- Elektrostal,1985). 20 1 0 I f r i , © 58 Atthe Speedof Light? ElectricityInterconnections forEurope

The lion’sshare of high-tension lines andinterconnections operates todaywith three-phase alternating current. Aswe havementionedearlier,the debate on whether AC or DC was more efficient characterizedthe earlyyears of electricity,and eventuallyledto the former winning the contest. Nevertheless, undergroundandespeciallyundersealines (likethe interconnection between Franceandthe UK, IFA, openedin 2000),as well aslong-distancelines,favor DC, which,in general,is making acomebackandis nowmore often considereda seriousandreliable alternativefor long-distancehigh-voltage transmission. Sinceconductors are veryvulnerable to temperature,wind, rain,andice,factors suchasmaterials,butalso height anddistancebetween pillars,matter heavily. The main challenge in the earlyelectrification years was the connection between major production sites (hydroelec- tricityin the mountains,or coalmines andother fossil reserves) andconsumption areas. Surprisingly,efforts at regionalcross-border integration andEuropeanization were alreadymadeinthe earlyyears of electrification. Germany, centralFranceandSwitzerlandconstitutedthe nucleusfor the future Europeangrid, following the momentousintroduction of higher voltage lines in the aftermath of WWI. 30 Swiss, FrenchandGermaninterconnections linkedthe German publicutilitycompanyRWEwith AlsaceandLotharingiain Franceaswell aswith northern Switzerlandin 1926.31 Hydroelectricityaswell ascoal-basedelectricityproduc- tion dominatedthatearlystage.The Rhine Valleyconstituted animpressiveearlyNorth-South connection,linking the Germancityof Nordhorn on the Dutchborder to the Ruhr cityof Trier nearLuxemburg.Bludenzin Austriaand Frankfurt followedsuit,andalso anItaly-Switzerlandinter- connection. Switzerlandthus,duetoits hydro energypoten- tialaswell astoits geographicalposition,earlyon became a pivotalpart of Europeanelectricitynetworks asanimportant

30.Lagendijk 2008,p. 42,detailson thiswithtableson exchanges,importsand exportsin the early20s,and amapfrom 1928,the ‘RWE system’,drawnbythe authorfrom archives, p. 48. 31. Lagendijk 2008,p. 42,Figure2.1,‘Swiss,Frenchand Germaninterconnectionsaround in 1926’,sourceH.Niesz,L’échange,World EnergyCouncil,available at: Worldenergy.org . 20 1 0 I f r i , © Independent Variables andLegacies 59

transit countryforelectricity.Governanceandorganization were criticalfrom the verybeginning,sincethe market itself didnot ensure the necessarydevelopments:lackoftrust and politicalfactors interferedandcontinuetointerfere heavily with electricityinfrastructure projects,verymuchastheydo todaywith other energycommoditymarkets suchasgas. Globalorganizations dealing with energy—andmore specifi- callywith electricity—eventuallycame into being,likeCIGRE, set upin1920,UNIPEDE (1925) andthe WorldEnergyCouncil (1924).Butothers also took part in the debate:among them, the LeagueofNations through its Committee on Electricity Questions, 32 or the InternationalLabourOrganization whose GeneralSecretaryAlbertThomaspleadedforpublicwork in setting upinfrastructure after the GreatDepression.33 Those organizations attemptedto regulate the future regionalcross- border interconnections.The 50Hzcurrent became the stan- dardacross Europe,following the norm establishedin 1918 on three-phase alternating current.34 The first pan-Europeanelectricitynetwork projects were developedasearlyas1929byGeorg Viel andthe Swiss engi- neer Ernst Schönholzer,aswell asthe Germanengineer Oskar Oliven.35 ButBelgianproposals from Hymans were met with strong opposition from the nationalindustry,Oliven fled GermanyandThomasdiedin 1932.The projects were buried, butthe idea, asLagendijk rightlyputit,‘had takenroot’36 and wouldbecome realityonlysome fiftyyears later.Those early debates andproposals aboutapan-Europeangridpondered the following alternatives:either agenuinelyEuropean‘super’ system (Oliven),or agraduallygrowing system of more and more interconnectednationalnetworks,asother proponents andindustryrepresentatives favored.Itisinteresting to note here thatthe Soviet Union later undertook the Oliven system byputting in placeahighlycentralized‘super system’ with a CentralDispatchOrganization basedin Moscow.Awareness of

32.Lagendijk 2008,p. 86. 33.Lagendijk 2008,pp.90-91. 34. Lagendijk 2008,p. 57(Extensiveinformationonthesedevelopments). 35. Lagendijk 2008,pp.80-91(Extensiveinformationonthisaswellashistoricalmapsof the projects). 36.Lagendijk 2008,p. 103. 20 1 0 I f r i , © 60 Atthe Speedof Light? ElectricityInterconnections forEurope the beneficialaspects of interconnections,suchasan improvedenergymixandmutualassistance,rose insideboth camps in the interwarperiod.Realization of the ‘Europe A/Europe B’dichotomyresulting from the rift between the East/South andthe West ledmanyof the plans to devote particularattention to East andSouth electrification.37 And some authors also suggest not underestimating the Nazi influenceonthe setting upofelectricityinfrastructure across Europe —the ideaof aMediterraneanring or even the closure of the Gibraltar-Ceutastraights were alreadydiscussed in those days.38

ColdWarand separategrids

Heavy politicalinterferenceonthe subjectofgridsbecame evident again after WWII, with massivemeddling from both super powers,the US andthe Soviet Union. For example,civil warinGreecemadeNATO use the concept of ‘energysecurity’ andset upaworking grouponthis issue. Europe’sdivision as well asregionalintegration ledto the emergenceoffourelec- tricitysystems:UCPTE, foundedin May1951 verymuch under the auspices of the US andthe Marshall Plan,then Nordel in 1963,Sudel between Austria, ItalyandYugo-slavia in 1964,andIPS/CDO in the Soviet Blocin 1963,on the other sideofthe Iron Curtain. Inthatearlyperiod, NATO wasalso interestedin interconnections andset upaspecialcommittee dealing with ‘wartime securityandinterconnections’.The project,whichwill remindthe observant of NATO’s current attempt to playarole in energysecurity,wasabandonedsome years later. 39 Infact,the interconnection-securitylink,or the valueofinterconnections asameans to tie countries together with the respectivealliances,wasanimportant consideration in the aftermath of WWII.Thus,TurkeyandGreecebecame

37.Lagendijk 2008,p. 105. 38. B.Stier,‘Expansion,réforme de structureetinterconnexioneuropéenne:Développement etdifficultésde l’électricitésous le nazisme,1939-45’,in Lesentreprisesdusecteur de l’énergiesous l’Occupation ,DenisVaraschin Ed. (Arras,ArtoisPressesUniversité,2006), pp.289-290. 39. Lagendijk 2008,p. 157,and SpecialWorkingGroupofNATO,‘The Productionand DistributionofElectricity in Wartime’,NATOBrussels,cited byLagendijk. 20 1 0 I f r i , © Independent Variables andLegacies 61

major targets forthe TrumanAdministration. Aspecific electricityprogramfor Greecewasentrustedto the US CompanyEBASCO andfinancedbythe OEEC, aspart of the InternationalEmergencyProgram. The US administration believedthat‘the electrification projectwasnot just aprogram forthe efficient utilization of the country’s indigenous resources,butthatitwouldhelp to maintain securityand peace,attainedin 1945’. 40 Another securitycase wasWest Berlin,whichturnedinto anelectricityislandwithin the Soviet zone after the Soviet blockadein1948. Muchasithappenedwith other enclaves, Berlin became electricallyindependent,with its ownpower plant dating backtoNazitimes andlater rebuilt bythe Western Allies after the Soviets partlydismantledit.41 The ColdWarstronglyshapedEurope’selectricityland- scape andreinforcedthe East-West divide. Nevertheless,some countries playedarole asinterfaces or bridges through the Iron Curtain:Austria, Yugoslavia, aswell as—to acertain extent— FinlandandEast Germany.Sincefast growing Europeaneconomies requiredmore andmore electricityand energyasawhole,lower prices in the Eastern Bloc(dueto cheaper fuel prices in the East) madeimports from Poland andothers particularlyattractive,although certainlyvery controversialfor politicalreasons.The export of unusedhydro- electricpotentialfrom Yugoslaviato AustriaandWest Germanywasaprominent issueaswell,albeit astrongly contestedone.Resistancecame especiallyfrom Germany, influencedbythe Hallstein Doctrine thatforbadeanydiplo- maticcontactwithcountries thathad previouslyrecognized East Germany. 42 Map1showsexisting interconnections in 1963. Austria playedapivotalrole:interconnectedwith Czechoslovakiaand

40.Lagendijk 2008,p. 160 (InformationonGreeceand the US electricity program). 41.S.Nies, Sand in the Works . EnclaveschallengingmetropolitanStates.Acomparative studyof the governanceofenclaves (HDR, Paris,2004);publishedelectronicallywithGRIN and available at:http://www.grin.com/e-book/109517/sand-in-the-works-enclaves-challenging- metropolitan-states-a-comparative;Lagendijk 2008,pp.160-162. 42.Lagendijk 2008,p. 190‘The PathofLeast Resistance:Austriaand Yugoslavia’. 20 1 0 I f r i , © 62 Atthe Speedof Light? ElectricityInterconnections forEurope

Map1.Existingand planned cross-borderinterconnections in CentralEurope in 1963

Source: adaptedbyLagendijk 2008,p. 134 (UNECE, Outline of aStudyon the Possibilities of Increasing Interconnection Between ElectricPower Transmission Networks in Europe,UNdoc, ser; ME/31/64/C.2(A)(Geneva: UNECE 1964).

Hungary,butalso with Yugoslavia, it ensuredthatGreece, whichwouldhaveotherwise been isolated, participatedin the Western Europeanmarket. East andWest Germanywere linkedviaasmall transformation station. 20 1 0 I f r i , © Independent Variables andLegacies 63

Map2.Yugoslaviain the East West Trade in 1954

Source: Lagendijk 2008,p. 176.

East/West electricity trade duringthe ColdWar While West Germanyremainedstronglyopposedto East- West trade,Austria, starting with the agreement with Czechoslovakiain 1954,became aplatform foritandthus linkedthe UCPTE andthe CDO,the Soviet CentralDispatch Unit. Yugoslaviawasalso,atthe endof the ColdWar,deeply involvedin East-West trade,asthe following mapdemon- strates.Itisparticularlyregrettable thatthis asset shouldhave disappearedin the bloodyandruthless wars of the 1990s,and with them too the gridthatwastaking shape during the Cold War. Withoutthe Balkans war,Yugoslavia, muchlikeAustria does today,couldhaveprovidedaformidable opportunityfor advancing the unification process of Europe after 1989. The mapbelowhighlights the connecting role thatYugoslavia played, viaAustria. 20 1 0 I f r i , © 64 Atthe Speedof Light? ElectricityInterconnections forEurope

The setting upofthe UCPTE in 1951 wasdecisivein paving the wayforthe existenceofregionalorganizations. The entitybecame abenchmark forother similarorganiza- tions thatcame in the years thatfollowed. Another crucialelement in electricitygriddevelopment from the 1960sonwardswasthe increasing attention paidto environmentalissues andNGO concerns,whichresultedin important delaysinlegalapprovalprocedures.The situation hasnot yet changed, with anewline taking on average around ten years to belegallyapproved.Thus,installing newgeneration units continues to beeasier thansetting upnewlines, especiallyoverhead ones. The first electricityinterconnections within the EC were set upinthe spirit of favoring mutualassistanceincase of technicaldisruption:theyoccurredbilaterally,linking two countries or smaller regions (Benelux,France,etc.). Only later,oncethe securityof the system andsynchronization were achieved, the ambitionofimproving the market pricing wasputonthe agenda where it still remains animportant goal.

Bridgingthe formerEast/West divide The endof the ColdWarchallengedthe Europeanelec- tricitygridonceagain. The main goalwas,andstill is,to connectthe East to the West. Important steps havealready been takeninthatdirection:the setting upofCENTREL in October 1992,uniting the Visegrad states of Poland, Hungary, Slovakiaandthe CzechRepublic, andthe synchronization with UCPTE on October 18th 1995,are some examples.The electricalintegration of the twoGermanystook placeone month earlier,in September 1995. In2001,the Visegrad states enteredinto the UCPTE. Simultaneously,the ‘westernization’ of former East Bloccoun- tries resultedin their progressivedisengagement from the Eastern system:asaconsequence,formerlyexisting interconnections,likethose establishedwith Hungary,havebeen out of servicefor more thanadecade,andtheir state hasdeterio- ratedsince. Itisunclearwhether those interconnections could 20 1 0 I f r i , © Independent Variables andLegacies 65

beputbacktoserviceagain in order to connectIPS/UPS and UCTE.The rights of way,however,are there,whichisaposi- tiveelement. The relationship between future member states andthe EU on electricityissues hasbeen forsome time animportant concern. The factthatelectricalsynchronization hasempiri- callyprecededpoliticalintegration andmembership,has renderedthe UCTE veryattractivetomany.Turkey,Morocco, Tunisia, Algeria, Ukraine andMoldovahave—not surprisingly—appliedforinterconnection. Andagain:DClines, whichdonot enhancepoliticalintegration to the same extent, are not consideredbymost asanequallyvaluable solution, butjust asthe ‘secondbest’.

Institutionalredesign Regulatorychange,in turn,hasprogressivelyledto insti- tutionalchange.Institutionshaveatoncebeen designedfrom ‘below’—within member states andatregionallevel— and from ‘above’,with the Commission often pursuing different options regarding the same issues.Institutionaldoubling, naturally,wasandstill is the consequence. Atthe same time, institutions havechangedandadaptedthemselves to the new requirements,including the EuropeanCommission itself.The DG TREN gainedimportanceandpower especiallyafter the Russia-Ukraine conflictin2006. Bythe endof 2009,Energy will havebeen set upasaseparate Directorate General, reflecting the newlyacquiredprominenceofenergypolicy. The UCPTE became the UCTE following unbundling and the separation of production andtransmission in manyof the member states.UCTE, Nordel,UKTSOAandATSOI foundedETSO in 1999 in order to harmonizetheir positions. Eurelectric, the association of the electricityindustryin Europe,whichwasfoundedin 1990to represent the industry asawhole,mergedin 1997 with UNIPEDE.Institutions moved to Brussels; so didUCTE in 2001. Renewable energies,in the wake of the environmentalmovements of the 1970sand 1980s,andin answer to the evidenceofclimate change,have become awidespread concern andhavebeganfundamentally changing the electricitylandscape.The newlyacquiredangst 20 1 0 I f r i , © 66 Atthe Speedof Light? ElectricityInterconnections forEurope over the future of the environment andthe decisions takenat Kyoto andCopenhagen,havealso translatedinto the setting upofneworganizations suchasMedelecor the Desertec project,DEWI or Dena, to name onlysome of them. In2004,when the EU admittedthe eight CEE states as well asCyprusandMalta, the UCTE statedthatenlargement had been ‘technicallyanticipatedbythe organization’,which had integratedthose states prior to enlargement. 20 1 0 I f r i , © AComplexEuropeanGovernance

Part II puts Europeaninterconnection governanceunder closer scrutiny.‘European’ does not here meanexclusivelythe EU,butalso the nationalandregionallevels.Alarge number of players is involvedin the process:theywill belistedand discussedin the nextpages.Atthis verymoment,important changes are underway.The endorsement of the EU’s Third EnergySecurityPackage hasledto three important institutionalchanges:the establishment of twoEuropeanagencies —ACER andthe ENTSO-E—,andthe reinforcement and homogenization of nationalregulators.

Interconnectionsin the AcquisCommunautaire

Itmaybeusefultoremindthe reader here thatfor the last thirteen years the EU hasbeen engagedon the path of setting upaninternalenergymarket —aprocess thatstarted in 1996 with the first legislativepackage.Atthattime,cross- border transfers were under control of generators,andthe prime objectiveofthe First Package wasthustoopen upthe nationalmarkets.The picture is verydifferent today,following the emergenceofunbundling andthe establishment of TSOs, butalso the newissueofclimate change,whichwasabsent in the agenda of the 1990s. Supplydisruptions havebeen a primaryconcern ever sincethe twooil shocks of the 1970s; the gassector,however,had not knownanysuchhardships until the Ukraine-Russiaconflicts in 2006and2009. The EU seems resolute to strengthening its energypolicy,asisindi- catedbythe huge financialcommitment to energyprojects,as 20 1 0 I f r i , © 68 Atthe Speedof Light? ElectricityInterconnections forEurope well asthe recent fining of GDF/SuezandE.ON foranti- competitivebehaviourconcerning the Megalgaspipeline. 1 Stronger Europeanorregionalgovernanceisnevertheless still neededto dismantle some negativelegacies from the past. Today’s landscape of Europeanorganizations dealing with electricityinterconnection is highlycomplexandevolves with the legislativechanges.Action is often either doubledor insufficient, duetothe particularwayin whichthose structures were set up in the past. Even atthe nationallevel,coordination is sometimes difficult. Germanyis aprime example,with its fourTSOswho must decideunanimouslyon anynewtransmission project. Italso happens thatsometimes the fourdevelop competing projects,including on the subjectofinterconnections,with highlycounterproductiveconsequences.Onoccasions,moreover, the fourmust sit atatable along-sideaFrenchoraBelgian TSO,whichunderstandablycomplicates negotiations further. Bilateralism is highlyrelevant atthe time of setting upinterconnections,aswasmentionedalreadyin the generaloverviewon market coupling.Bilateralism translates into regionalism,which then allowsbi-regionalprojects to emerge,aswith the envisaged link between NordPool andCentral-West. The Central-West PentalateralForum,whichcomprises Germany,Belgium,France, Luxemburg andthe Netherlands,canbeconsideredabenchmark. Itwascreatedin December 2005bythe respectiveenergy ministers andprogressivelyintegrated—market design,data exchange,etc.— especiallysincethe beginning of 2009. Given the specificnature of electricityandthe high risks thatgoalong with its transportation,appropriate governance is akeyfactor in —negativelyspeaking— handling risks and —positivelyspeaking— creating atrueEuropeanelectricity market. Subsidiarity,whichmeans dealing with problems on the appropriate subnational,national,regionalorEuropean level,andcentralregulation,must bereconciledin this respect.

The 10%axiom The question of interconnections hasbeen on the European Commission’sagenda since1996. In2002,the Barcelona

1. ‘Steppingupthe competitioncrackdown’,EuropeanVoice,July23 rd 2009,p. 17. 20 1 0 I f r i , © AComplexEuropeanGovernance 69

EuropeanCouncil mandatedthatEU member states set up their interconnection capacityto aminimumof10%oftheir respectivegeneration capacity. Why10%,andnot 5%,or 20%? There is surprisinglyno rationalanswer to the question,whichexplains the criticism this requirement hasbeen facing. 2 Nevertheless,10%couldbe consideredasomewhat‘symbolic’quantity:it is easier to understandthaneight (whichwasthe first proposal),more important thanfive,whichwouldbejust ‘lump sum’,and more realisticthan20,whichwouldbeperceivedassheer megalomaniaandanattempt atEuropeanovertake. However,even if the unexplainable 10%axiom deserves criticism,perhaps the figure itself does not reallymatter,and shouldrather beconsideredin its positivesense,asanindica- tion of acertain degree of Europeancommitment towardssoli- darityandliberalism within electricitymarkets.

The Second LegislativePackage and Regulation 1228: the legaltake-off The legislativestarting point of EU regulation on interconnections came with the insight thatthe Europeanelec- tricitymarket wasfarfrom being completed, not sufficiently liberalized, anddominatedbystrong nationaloperators.Cross- border electricityexchange wasthusenvisagedasameans of improving the situation. The consultations,whichstartedin 2000,culminatedin 2003with the SecondLegislativePackage on the liberalization of electricityandgasmarkets,comprising Regulation3 No1228‘on conditions foraccess to the network forcross-border exchange in electricity’.4 Regulation 1228 went into forceonJuly1 st 2004.

2.Commentthatthereisno reason forthe 10%,byarepresentativeofDG TREN,aswellas UCTE. 3.Aregulationisalegislativeactof the EU thatenters immediatelyintoforce,in all EU memberstatessimultaneously.Regulationsaredifferentfrom directives,whichmustbe transposed intonationallawand implementmeasureswithin establisheddeadlines,based on article 249 of the EC treaty.Regulationsarealsoknownbythe termof‘Europeanlaws'. 4. The full text canbefound at:http://www.energy-community.org/pls/portal/docs/ 36276.PDF. 20 1 0 I f r i , © 70 Atthe Speedof Light? ElectricityInterconnections forEurope

The objectiveofthe regulation,further amendedin 2006, wasto‘laydownbasicprinciples with regardto pricing and capacityallocation’ (Introduction of the regulation). Regulation 1228comprises 14 articles covering subjectmatter andscope: fair rules forcross-border exchanges (Article 1),definitions (Article 2),the inter-transmission system operator compensation mechanism (Article 3),charges foraccess to networks (Article 4),provision of information on interconnection capacities (Article 5),generalprinciples of congestion management (Article 6),newinterconnections (Article 7),guidelines detailing methodologyof compensation,(Article 8),regulatory authorities (Article 9),provision of information andconfiden- tiality(Article 10),right of member states to providefor more detailedmeasures (Article 11),andpenalties (Article 12)as well asthe Commission Report (Article 14). Anannexsets management guidelines.The amendment of December 1 st 2006 focussedon the existing mechanism andthe improvements to bemade,aswell asonthe introduction of anewregional approach. Regulation 1228/2003hasalso become one of the legal references forthe EnergyCommunityof South East Europe (ECSEE),whichisaproof of the spillover of EU legislation, especiallyto countries thatare interestedin future membership. 5 Asaresult of the newregulation of cross-border electricityflows,management of interconnection capacitystarted to shift from prioritylists —or pro ratamechanisms (before 2004)— to market coupling. InJanuary2007the EuropeanCommission publisheda priorityinterconnection plan,aspart of the first Strategic EnergyReview. 6

ERGEG’Sregionalinitiatives:from regionaltoEuropean? Amajor institutionalandregulatoryevent forthe promotion of interconnection efficiencycame somewhere in between

5. See http://www.energy-community.org/portal/page/portal/enc_home/areas_of_work/ electricity/Regional_Market/Regulation_1228. 6.See http://ec.europa.eu/energy/energy_policy/doc/12_priority_interconnection_plan_annexe_ en.pdf. 20 1 0 I f r i , © AComplexEuropeanGovernance 71

the SecondandThirdlegislativepackages,with the establishment of ERGEG regions in February2006,dividing the EU into seven electricityandthree gasregions.The seven regions are:Central-West; Northern; France,UKandIreland;Central- South; South-West; Central-East andBaltic.Eachregion is chairedbyalead regulator.ERGEG regions donot correspond to historicalgrids,butrepresent those territories that, according to ERGEG,shouldintegrate first in order to promote,asanextstep,atrueEuropeanmarket. France,for example,participates in fourregions:Central-South,Central- West,South-West,aswell asinthe one it shares with the UK andIreland.The ElectricityRegionalInitiatives Task Force (ERI TF)within the ERGEG monitors advancements towards regionalintegration on ayearlybasis. 7 The initiativealso aims to strengthen market development integration with South Eastern Europe:the latter’selectricitymarket exists under the so-calledAthens ForumProcess,whichispart of the Stability Pactfor South Eastern Europe.Reports byERGEG are presented in the FlorenceForum,andcommentedbyETSO. 8 According to ERGEG,the emergenceofaEuropeanelec- tricitymarket must evolvethrough regionalintegration first, whichrequires common investment projects andadequate funding.Working groups havebeen set upfor eachregion within ERGEG with the mission to identifyimportant obstacles aswell askeyinterconnections thatneedto beestablished.Current developments andespeciallythe advancements in the Central-West region confirm the rationale of the approach:regionalintegration moves muchfaster than Europeanintegration,or,to putitinthe wordsofChristophe Gence-Creux (CRE):‘This integration —likethe setting up of the common centre RTE-Elia—wouldnever havebeen possible from above’. 9

7.ERGEGEuropeanEnergyRegulators WorkProgramme2008,Chapter4.2,p. 37.Electricity RegionalInitiativesTaskForce. 8. ERGEGReportsCoherenceand Convergence,informationavailable at:http://www2. e-control.at/portal/page/portal/EER_HOME/EER_CONSULT/CLOSED%20PUBLIC%20CONSULTATIONS/ ELECTRICITY/2008%20ERI%20Coherence%20and%20Convergence. 9. InterviewwithChristophe Gence-Creux,April 27th 2009. Christophe Gence-Creux isrespon- sible forthe three CRE reports. 20 1 0 I f r i , © 72 Atthe Speedof Light? ElectricityInterconnections forEurope

Table 4. ERGEG-initiated electricity regionsand leadregulators ElectricityRegion Member States Lead Regulator Central-West Belgium,France,Germany, CREG (Belgium) Luxembourg,the Netherlands Northern Denmark,Finland, DERA (Denmark) Germany,Norway,Poland, Sweden France,UKandIrelandFrance,Republicof Ireland, Ofgem (GB) GB, Northern Ireland Central-South Austria, France,Germany, AEEG (Italy) Greece,Italy,Slovenia South-West France,Portugal,Spain CNE (Spain) Central-East Austria, CzechR, Germany, E-Control (Austria) Hungary,Poland, Slovakia, Slovenia Central-East BalticEstonia, Latvia, LithuaniaPUC (Latvia)

The ThirdLegislativePackage:institutionaldesign Approvedon April 22nd 2009,the ThirdLegislativePackage —comprising fivetexts— intendstogofurther on the path towardsgasandelectricitymarket liberalization. Butitmust beinsistedhere thatinthe case of some —andespeciallythe new—member states even the SecondPackage hasnot yet been fullyimplemented;itsuffices,foranexample,to look at Polandandthe particularstatusofthe Jamalgaspipeline. Energysecurityandthe solidarityqualityof interconnections figure more prominentlyin the ThirdPackage thanthey didin the previousone,andisolatedmarkets are recognized asbeing more vulnerable.Also in contrast with the Second Package thatchangedmostlythe nationalparameters,this one advocates aredesign of the institutions.Interconnections and cross-border electricityexchanges madetheir wayuptoan important placeinthis package despite having been rather overseen in the preceding publicdebate thatfocussedvery muchon‘unbundling’ aswell asonenergysecurityand climate change.The document stipulatesthatDirectives will go into force20 daysafter the publication of the texts in the OfficialJournalofthe EU;subsequently,member states will have18months fortheir transposition into nationallaw. 20 1 0 I f r i , © AComplexEuropeanGovernance 73

The blackoutofNovember 4 th 2006clearlydemonstrated, according to both the Commission andthe UCTE, thatnational TSO’s andregulators had so farfailedto cooperate sufficiently. Adecision wastaken,then,to establish aregulators agency calledACER within the following 18 months —whichmeans byno later thanearly2011. Italso became clearthatregula- toryactivityhad to bestreamlinedandthe authorityof nationalregulators reinforced, especiallywith respecttothe TSOs. The Commission specificallystressedthatthe different sizes andresponsibilities of the nationalTSOsandregulators constitutedaserioushandicaptoanyfurther cross-border cooperation. Initially,when the directives from December 1996 andJune 1998 were convertedinto nationallaws,the role of the nationalregulators had been in factconceivedin avery different way.

Transitionsin the Regulatory Landscape The amendment to Regulation 1228/2003includedin the ThirdPackage triggers complexinstitutionalchanges.Onthe one hand, the regulatoryagencyACER is to beset upand the integration of the TSOswithin acommon organization encouraged, andon the other handunbundling —with three options— is to bereinforced, separating thusmore effi- cientlythe TSOsfrom the companies.Finally,the national regulator is given extensivepowers to oversee the process, including interconnections.The ideaof aEuropeanregulator dates backto2003,the date of the SecondElectricity Directive,andhassincebeen clarifiedbyanother directive concerning electricitymarket liberalization,in 2007.10 According to the Parliament andthe Commission,the body shouldcontribute to the integration of nationalelectricity markets,agoalthatgoes farbeyondelectricityinterconnec- tions alone.The EuropeanParliament hasrepeatedlyadvo- catedastrong role forthe regulator; the representatives of the member states,however,havebeen more reluctant to endorse thatinitiative.

10.COM(2007)528final,BrusselsSeptember19th 2007. 20 1 0 I f r i , © 74 Atthe Speedof Light? ElectricityInterconnections forEurope

The Agencyforthe Cooperation of EnergyRegulators will beincharge of: •harmonizing access procedures,especiallythrough the elabo- ration of norms andcodes thatshouldeventuallybelegally binding; •coordinating the gridthrough acommon modeofexploita- tion; •improving the plans anddevelopment of the Europeangrid through aten-yearEuropeaninvestment plan,basedon nationalinvestment anddevelopment plans. Inpractise,atleast in the beginning,ACER will havea more symbolicthanrealrole,andwill beespeciallyexpected to intervene in cases of arbitrage between nationalregulators, whenever theycannot reachagreement among themselves.

WhyACER? The factthatthe nationalimplementation of directives,as well asthe roles of the regulators,varies widelyfrom one member state to the other,remains amajor problem. Atthe same time,doubtpersists over whether aEuropeansuper regulator wouldbemore efficient thanthe current groupofregu- lators. 11 ACER’s goals andthe open questions relatedto the future agencywere describedbythe president of ERGEG,MP LordJohn Mogg,in the following terms:asaCommunityinsti- tution,the agencywill befundedfrom the EU budget,with a projected g 9million ayearandsome 50staff to belocated in either Romaniaor Slovakia.Different from ERGEG, whichrepresents individualnationalauthorities,ACER will be working from across-border perspective. Its role shouldbe decisiveonmatters of interconnections andcontribute to overcome the lackofinterest in setting them up. Mogg insisted, however,on the obstacle resulting from the Meroni principle, 12 alegalinstrument dating backtothe 1950s.13

11.Foranextensivediscussion,see Ferron 2006,pp.140-146. 12.The Meroniprinciple from 1958 prohibits the delegationof‘discretionary powers’that would amounttoatransferof responsibility replacingthe choicesof the delegatorbythoseof the delegates. 13.‘ERGEG: EU regulationataturningpoint’,InterviewwithLordMoggbyEurActivCzech Republic(February 23rd 2009),available at:http://www.euractiv.com/en/energy/ergeg-eu- regulation-turning-point/article-179672. 20 1 0 I f r i , © AComplexEuropeanGovernance 75

Inturn,ETSO’s movetowardsENTSO-Eis in line with the creation of aEuropeanCentre of Networks,aninitiativethat had also been mentionedin the EnergyGreen Paper.The Centre is in charge of regulating border exchanges aswell as securityandcompensation. Acomparison couldbemadewith another network industry,telecommunications,whichin2002 set upaquite originalnational/Europeanmodel andrefused to haveasuper regulator.Atthe same time,telephone and electricitygridsare no longer comparable following the introduction of wireless telecommunication thatallowsfor the coexistenceofseveralnetworks.Wireless electricitytransmission,though possible,wouldintroducehuge risks forvertical transmission —friedplanes,friedbirds,etc.Andverticalwire- less electricitytransmission —whichJapan,forexample,is currentlystudying— could, in turn,onlybeaninteresting projectfor the future,onceisolation methodshaveevolvedto the point of effectivelypreventing accidents.Inaddition,electricity,especiallybecause of its system securityrequirements, necessitates muchmore centralregulation thantelecommuni- cations do.

The decisivechange:morepowerfornationalregulators The most forcefulmeasure of the amendment,however, is less the creation of ACER thanthe gradualconvergence andreinforcement of nationalregulators.This factwill surely remindthe attentivereader of the apparent paradoxof the Lisbon Treaty,whichreinforces atoncethe EU andthe rule of nationalparliamentswithinthe legislativeprocess.The amendment paragraph relating to the nationalregulator stipu- lates thusthatthe power aswell asthe independenceof nationalregulators must bestrengthened.The lackofunifor- mityandin manycases the weakness of regulatoryauthority promptedthe Commission to encourage the strengthening, andto issueaclearmandate forcooperation on aEuropean level. The proposition also contemplates the increase of the market regulation powers of the regulators,in particularin the areasofmonitoring,complianceoftransmission anddistribution system operators,unbundling,congestion andinterconnection management. Regulators will also beincharge of reviewing the TSO’s investment plans andof checking the 20 1 0 I f r i , © 76 Atthe Speedof Light? ElectricityInterconnections forEurope conformityof their proposals with the European-wide10-year network development plan. The monitoring of network secu- rityandreliability,aswell asthe reviewof network security andreliabilityrules,will also beunder their responsibility. Transparencyobligations must befulfilled, andregulators couldthusforceTSOstopublish congestion datafrom within their countries. 14 Last butnot least,regulators will beallowed to take initiativeoninfrastructure projects,something thatis not the case to date.

TSOsanticipatethe move:ENTSO-E Infact,it is the ThirdPackage thatshouldhavecreated ENTSO-E, butthe TSOsanticipatedthe moveinorder to demonstrate thattheydidnot needcentralintervention to strengthen cooperation among themselves.Todate,the exact distribution of roles between ENTSO-EandACER is still to be defined.The risk of overlapping,parallel or even contradic- torywork cannot beexcluded.Aswasalreadydiscussedin the historicalsection,Europe comprises fivesynchronousareas: UCTE, UKTSOA, ATSOI, Nordel andIPS/UPS.Atthe same time,organizations likeBALTSO (the cooperation organization of Estonian,LatvianandLithuanianTSOs) andCENTREL are devotedto accelerating integration with the UCTE, which functions verymuchasabenchmark forEastern Europe,and also forthe Mediterraneanregion. Integration within ENTSO- Ewill not lead to the disappearanceofthe historicregions, simplybecause those regionalelectricityzones are basedon the historicgridsandsynchronization. Inorder to manage specificneeds,ENTSO-Ewill havenoother choicebuttoset upregionaldepartments corresponding to the former UCTE, Nordel,UKTSOA, andATSOI foraslong asthe systems are not entirelysynchronized. Where the existing electricityregions followdifferent tech- nicalstandardsthanthe members of the region,the sharing of responsibilitybetween the TSOsandUCTE, Nordel,UKTSOA, ATSOI on the one hand, andETSO or ENTSO-Eon the other, works asfollows:the nationalTSOsare in charge of national

14.See:http://ec.europa.eu/energy/gas_electricity/third_legislative_package_en.htm. 20 1 0 I f r i , © AComplexEuropeanGovernance 77

Map3.ENTSO-Emembers:42TSOs,34countries

Source: ENTSO-E.

development andoperation; nationalregulators likeCRE are in charge of gridaccess andoversight. Regionalorganizations like the UCTE must coordinate the TSOs,assess problems suchas blackouts,andlook into further griddevelopment. ETSO was establishedbythe regionalassociations atthe endof the 1990s with the mission to harmonizecompensation between TSOs andto unifyactions in order to favor the integration of the Europeanelectricitymarket. Finally,ENTSO-EsucceededETSO atthe endof 2008,yet its mandate andprecise definition are still verymuchunder debate. Open questions remain,aswehavesaid, concerning the relationship between ENTSO-EandACER, asconflictisinherent between TSOsandregulators,aswewitness on anational level. The conflictresults mostlyfrom their different roles and the perceptions thateachhasofthe other.

The Commission’sredesign2010:from DG TREN toDG EN AtapoliticalExecutiveEuropeanLevel,the growing prominenceofenergyis clearlyreflectedin the decision to 20 1 0 I f r i , © 78 Atthe Speedof Light? ElectricityInterconnections forEurope set upanindependent Directorate Generalfor Energy. Consequently,the existing Directorate Generalfor Transport andEnergy(DG TREN),whichwascreatedbythe former Commission President Romano Prodiin2004asamerger of twoDGscarriedoutfor the sake of efficiency,will bedivided again. One of the reasons forit—andnot the least of them— is thatDirector GeneralMathiasRuete cannot physically attendatransport andanenergycouncil atthe same time.At the endof 2008the Commission president Manuel Barroso announcedthe creation of anewDirectorate Generalfor EnergybyNovember 2009atthe latest,with astaff of 400-500, its ownexternalrelations,communications andpersonnel units.Aworking groupfocusing on its concrete design has been set up. Speculation continues,however,over the EU member states’ likelypush to create anewcommissioner post for‘EnergyandClimate Change’. 15 Wouldsuchamovefacili- tate energypolicies within the Union? Todate,energypolicy is on the portfolio of severalcommissioners:DGTREN and RELEX, aswell asDG IndustryandDGInternalmarket. For this reason,the SecondStrategicEnergyReview, 16 anEU ‘action planfor energysecurityandsolidarity’,releasedatthe endof 2008,wasintroducedjointlybyFerrero Waldner (Commissioner forExternalRelations andEuropeanNeigh- bourhoodPolicy)andPiebalgs (Commissioner forEnergy). DG RELEX hasinturn mademanyefforts to playarole in this field, especiallyin the foreign dimension of energypolicy, whichisthe least definedandless organizedfieldforthe time being. Experts agree thatenergypolicyrelating to the Communitymarket is fairlywell developed, even if its management remains spread across manyinstitutions, whereasForeign EnergyandClimate Policyis in its early stages,andinstitutionallynot developedatall. Inlight of important negotiations with producers andtransit countries, aredesign is necessaryandshouldcome upwith the next Commission.

15.Source:EUObserver(December4 th 2008). 16.See http://ec.europa.eu/energy/strategies/2008/doc/2008_11ser2/strategic_energy_ review_memo.pdf. 20 1 0 I f r i , © AComplexEuropeanGovernance 79

Subsidies,Priorities,Coordinators The cost of electricity interconnections Anelectricityinterconnection costs,asestimatedbythe CRE from experienceonthe latest establishedinterconnec- tions,anaverage of g 300,000- g 500,000/MW foranAC line, and g 600,000- g 800,000/MW foraDCline. 17 Howto finance suchimportant amounts in asituation where electricityborder marketsare stillimperfect,andreceipts bythe TSOsare not necessarilyreinvestedinto capacities —asisthe case with RTEreceipts going backinto the state budget?

Commission supplementary funding Europeansubsidies are crucialinthis field.The Commission fundsTEN-E(Trans EuropeanNetworks-Electricity)electricity transmission infrastructure projects with ayearlybudget of some g 25million (for gasandelectricitycombined),most of whichisspent on supporting feasibilitystudies.TEN-Eis an important label,additionallybackedbythe EuropeanInvestment Bank.18 The EIB hasseen its spending on energyinfrastructure roughlydouble between 2006and2007, 19 to reachone sixth of its overall budget,or g 8billion ayear,whereasthe Commission counts on g 8billion forthe entire budget period(2007-2013). The EIB complementaryfunding,whichnever exceeds50%ofa project’sbudget,requires thatthe projectbeeconomicallyviable, technologicallyfunctioning,andbackedbyacapable promoter or consortium. The EIB also generallygives preferencetopriority projects from the Commission. The bank’sstrategyis long-term, with aprojectedreturn on investment in 40-45 years. According to the Commission,TEN-Eshouldbereplaced byanewinstrument:the EU EnergySecurityandInfrastructure Instrument,one of whose objectives wouldbetoensure the

17.CRE,‘Rapport surlagestionetl’utilisationdesinterconnectionsélectriques’(2008), p. 10,and footnote13.The authors statethatthe pricevarieslargely. 18.Alsosee the report of MVV Consulting:‘ImplementationofTEN-Eprojects 2004-2006’, Brussels,2007,available at:http://ec.europa.eu/energy/infrastructure/studies/doc/2007_ 11_ten_e_evaluation.pdf. 19.InterviewwithThomasBarrett,EIB director,ActionforGrowthInstruments,Directorate forOperationsin the EU and CandidateCountries(November14th 2008). 20 1 0 I f r i , © 80 Atthe Speedof Light? ElectricityInterconnections forEurope grid’s contribution to achieving the EU’s renewable energy targets andguaranteeing securityof supply,through infrastructure projects within andoutsidethe EU. 20

The g 5billion stimulus package OnMarch20th 2009the EuropeanCouncil submitteda g 5billion package forinfrastructure projects.The financeof energyprojects altogether amounts to g 3,980million spread over twoyears.The fundsstem from the re-allocation of unspent agriculture subsidies.Theywill support clean-coal projects,offshore windfarms,aswell asenergyinfrastructure andinterconnections.More precisely, g 2,295 million will be devotedto gasandelectricityinfrastructure, g 505million to offshore windenergyprojects,and g 1,200 million to carbon capture andstorage.The budgetarycommitments havetobe madebefore the endof 2010.Asfor electricityprojects,the list of eligible projects comprises theBalticInterconnection, the Mediterranean—including France—Spain—,the North SeaAreaandsome small islandprojects forCyprusandMalta. Gridintegration foroffshore windprojects,andespecially offshore grids,are part of the proposal.21 The totalamount earmarkedforelectricityinterconnection projects atlarge is g 1,240million. Certain awardcriteriasuchasthe requirement of proven maturitybythe endof 2010havebeen criticizedon the groundsthatprojects meeting thatkindof prerequisite will beverylimited, if existing atall. The following table, compiledbythe author on the basis of the EU Council’sdeci- sion,presents the eligible electricityinterconnection projects to date.

TEN-Eand coordinators TEN-Ewaslaunchedin the late 1990swith the mission to identifyandsubsequentlypromote pan-Europeanpriority energyprojects.Alimitedbudget of g 25million hassince

20.Memo,SecondStrategicReview,EUEnergySecurity and Solidarity ActionPlan(November 13 th 2008),available at:http://ec.europa.eu/energy/strategies/2009/2009_07_ser2_en.htm. 21. See Council of the EuropeanUnion 7848/1/09,Brussels,March20th 2009,forthe list of projects. 20 1 0 I f r i , © AComplexEuropeanGovernance 81

Table 5. Interconnectionsand offshorewind grid: EU eligible projects ( g 1,240million) Envisagedcommunity Location of projects Project contribution supported ( g million) BalticInterconnection Estlink-2 Estonia, Finland 100 Interconnection Sweden BalticStates, Sweden,Latvia, 175 andstrengthening of the grid Lithuania in BalticStates CentralandSouth East Europe Halle/Salle—Schweinfurt Germany 100 Wien—Györ Austria 20 Mediterranean Portugal 50 Portugal—Spain interconnection reinforcement Interconnection France—Spain France,Spain 225 (Baixas—StaLlogaia) New380kVACsubmarine DC cable Italy 110 between Sicily—ContinentalItaly (Sorgente—Rizziconi) North SeaArea Interconnection Republic Ireland, UK 110 of Ireland—Wales ElectricityInterconnection Malta—ItalyMalta, Italy20 TOTAL 910 Small IslandProjects Cyprus 10 Malta 5

Table 6.Offshorewind projects Envisagedcommunity Project/capacityLocation of project contribution ( g million) Baltic-Kriegers FlakI, II, III Building on projects under development,financing Denmark,Sweden, aimedatensuring extra 150 Germany,Poland cost for securing ajoint interconnection solution 1,5GW UK, the Netherlands North SeaGrid Germany,Ireland, 165 1,5GW Denmark,Belgium,France, Luxembourg

Source: Council of the EuropeanUnion,Brussels,March20th 2009,Presidencycompromise for financing of the Infrastructure projects putforwardbythe Commision […], extracts. Table establishedbythe author. 20 1 0 I f r i , © 82 Atthe Speedof Light? ElectricityInterconnections forEurope then been usedforfeasibilitystudies.In2007,the Commission selected42gasandelectricitypriorityprojects,butonlyin 2009anappropriate budget hasbeen set uptomovethem further: g 2.35 billion forgasandelectricityinterconnections outofthe alreadymentioned g 5billion package.Aslate as 2008,asignificant number of member states had not yet reachedthe 10%objective.22 Missinginterconnection capacity, missing lines andcongestion were identifiedasthe primary reasons.Following the Maastricht Treatycreation of the Trans- EuropeanNetworks (TEN)—of whichTEN-Epriorityelec- tricitylinks are part—,afirst regulation waspublishedin 2003concerning their implementation. Apriorityplanfor interconnections wasadoptedin March2006,andEuropeancoordinators forthose projects were nominatedhalf ayearlater,in September. 23 EU funding hasbeen awardedto anumber of those projects,andthe recent gascrisis hasreinforcedthe sense of urgencyabout some of them. The priorityones comprise three electricity andone gasinfrastructure projects thathavebeen in dead- lockfor quite some time andrequire particularoversight. To thatend, former EU Commissioner forCompetition Mario Monti wasnominatedto coordinate the difficult French- Spanish interconnection project,whichhad been blocked since1994. Thanks to his action,the works were finally agreedupon in summer 2008.

Table 7.Projects and coordinators ProjectCoordinator Power link Germany,Poland, LithuaniaWladyslawMielczarski Connection offshore windpower Northern Europe Georg Wilhelm Adamowitsch French-Spanish Interconnection Mario Monti (NabuccoorSouthern Corridor,Gas) (JoziasvanAartsen)

22.BarcelonaEuropeanCouncil in 2002,minimumtargetnotachieved:Communicationfrom the Commissiontothe Council and the EuropeanParliament:Priority InterconnectionPlan, January 2007,COM (2006),846final. 23.TEN-Eguidelines1346/2006,AnnexIII. 20 1 0 I f r i , © ExistingLinesand MissingLinks

Part III is devotedto existing lines andmissing links.It presents andanalyzes the current situations andprojects forvariousEuropeanregions,aswell asthe large-scale projects forthe MediterraneanRing andthe IPS/UPS-UCTE interconnection. The mere existenceofthe projects does not necessarilyimplytheir (economic)rationality.Especially atatime when increasedpublicsubsidies forinfrastructure projects coincidewith widespread uncertaintyaboutfuture demand, projects couldemerge asthe result of mispercep- tions.The most difficult exercise is thusthe assessment of the realandpotentialneeds,both in terms of short, mediumandlong term supplyandof system securityand solidarity.Todate,insufficient cooperation among the TSOs andthe regulators,aswell aslackoftransparency,hinders progress. This part is organizedasfollows:afirst section is devotedto the state of interconnections within the EU, following the regionalscheme introducedbythe ERGEG. The secondsection analyzes existing projects between the EU andits neighbors,especiallythe MediterraneanRing andthe IPS/UPS interconnection. Relevant projects in line with the Commission’spriorityinfrastructure concept are examinedin eachregionalsection:the French-Spanish Interconnection,the BalticInterconnection,the challenge of windgeneration in Northern Europeandthe UCTE’s externalEU interconnections with Northern Africa and Russia/CIS. 20 1 0 I f r i , © 84 Atthe Speedof Light? ElectricityInterconnections forEurope

Linkswithin the EU Evidencefrom the Frenchregulatorreports According to the alreadymentionedEURegulation 2003, regulators shouldperiodicallyreport on management anduse of existing electricityinterconnections.Despite this obligation, until nowonlythe Frenchregulator CRE hasprovidedsuch assessments andin-depth analysis in the form of three very elaboratedanddocumentedreports,the latest of them publishedin June 2009. According to Christophe Gence-Creux, the thirdreport couldbethe last,sincethe CRE hassucceeded in persuading the regions to providetheir ownreports on the management andexploitation of electricityinterconnections from 2009onwards. The first report of the regions is scheduledto appearbythe endof 2009. The first decisiveconclusion from the CRE reports is the insufficient use of existing interconnection capacity.Itis important here to distinguish between twodifferent categories of capacity:physicalandcommercialcapacity.The physical capacityrepresents the electricalpotentialofaline,which,as wasmentionedalready,shouldnot beexploitedatmore than 50%average forsystem securityreasons.The commercial capacityof aninterconnection,whichtakesinto account the 50%securityparameters andanticipates consumption and production levels,is calculatedbythe TSO on the basis of the physicalcapacity.The commercialcapacity,identifiedin these terms,canbeusedto 100%,andis the referenceused, for example,in the CRE reports on the exploitation of the French interconnections.Evidently,one of the immediate consequences of partialcommercialexploitation is thatitbrings into question the likelihoodof anynewprojectinthe same location. According to the 2008report,interconnections with Germanyare usedto their maximumcommercialcapacity only10%ofthe time on average,with Belgiumonly6%,Spain 30%,Switzerland24%,andthe UK only19%. The onlyexception to this worrying picture is Italy,where the interconnection capacityis usedat80%—the downsideofthis,though, is thatthe gridis close to congestion.1

1. CRE Report 2008,p. 11,Table 2. 20 1 0 I f r i , © Existing Lines andMissing Links 85

CRE authors havedevelopedauseful‘market imperfection indicator’,whichfunctions asfollows:atheoreticalrevenue basedon the pricedifferencebetween markets is compared with the realrevenues on the borders,both forimport and export. The results of the CRE reports revealanimportant differencebetween the theoreticalandthe realrevenues, although the comparison of datafrom one yeartothe other (between the three CRE reports) showsapositivetrend. 2 The authors also identifiedthe economicallyunacceptable occur- renceofelectricityacquisition proceeding in the ‘wrong’ direction,from low-pricetohigh-priceelectricityregions. The insufficient exploitation of existing interconnection capacityaswell asthe imperfection of the markets is explained bythe CRE asthe result of: •the difficultyformarket players to anticipate pricedifferen- tials from one dayto the next,andalso from one month or one yeartothe next; •the preferencefor long term products,whichagain increases the difficultyforthe secondarymarkets to anticipate next-day prices; •the unevenness of nationalmarkets,both with respectto their different sizes andthe number of players,aswell asthe asymmetryamong players. According to Christophe Gence-Creux,the regulatory contexthad changedverymuchin2006, 3 andis changing again in 2009following the adoption of the ThirdPackage and the inherent institutionalchanges thatgowith it. The reports demonstratedapositivechange since2007andacontinuation of the positivetrendin 2008.

EU priorities EU incentives forlinking upboth gasandelectricitylines, not just within the EU butalso between the EU andits neighbors,are particularlystrong atthe moment. OnNovember 14th 2008,the Commission identifiedsixnewpriorityinfrastruc- ture areas:

2.CRE Report 2008,p. 12Table 3and paragraph 1.3.ImperfectMarketIndicator. 3.CRE Report 2007,p. 7. 20 1 0 I f r i , © 86 Atthe Speedof Light? ElectricityInterconnections forEurope

•connecting the Balticareato the EU (gasandelectricity); •bringing independent supplies from the Caspianviaa southern corridor (gas); •increasing LNG capacitywhere needed(gas); •complementing the MediterraneanRing (electricityandgas); •better connecting CentralandSouth Eastern Europe (electricityandgas); •developing aNorth Seaoffshore super grid(to connect nationalelectricitygridsinNorth Western Europe together andpluginthe numerousoffshore windprojects).4 These priorities havebeen translatedinto EU support within the alreadymentioned g 5billion package.

Improvinglinkswiththe EU The UCTE publishedits first transmission development planinthe fall of 2008,aswasrequiredbythe EU.The report presents asurveyof investments thatUCTE TSOshaveeither alreadyapprovedor are still considering.Itisorganizedas follows:the fiveUCTE regions involving 23countries are introducedseparately;eachcountryis presentedindividually, with its major problems,projects andinternaldevelopment; maps andtables forexisting andprojectedinfrastructure are organizedinsideofthe fiveregionalareas. Some of the maps andtables are reproducedin this studywith the gracious permission of the UCTE.The report shouldaim to providea more detailedandcriticaldiscussion of the projects; to date, it rather amounts to amere compilation of information aboutthem,asprovidedbythe TSOs. ERGEG,on the sideof the regulators,publishes regularreports on the Electricity RegionalInitiative(ERI),presenting the Baltic, Central-East, Central-South,Central-West,Northern,South-West,and France—UK—Irelandregions separately. 5

4. Quoted from EU EnergyLawNewsletterof November13 th 2008:‘Commissionadopts the SecondStrategicEnergyReviewand announcesTEN-Eenergyinstruments’. http://www.claeys- casteels.com/newsletter/index.php?ucode=F1H2N7N6Q8JO&item. 5. http://www.energy-regulators.eu/portal/page/portal/EER_HOME/EER_INITIATIVES/. 20 1 0 I f r i , © Existing Lines andMissing Links 87

Inthe introduction of its report,the UCTE highlights the growing uncertaintyregarding the location andthe amount of future generation duetothe increasing volatilityof factors suchasenergyprices,energypolicydecisions on renewables, emission trading schemes andnuclearenergy.Both the UCTE andERGEG complain aboutthe complicatedandlengthy legalprocess of commissioning newinfrastructure.The time neededto commission gridequipment is estimatedatseven to ten years foroverhead lines.Experts andpoliticians agree thatthe problem,ashasbeen mentionedbefore,is often less relatedto financethantopublicresistanceorbureaucracy. Consumption andgeneration are twointerdependent factors influencing griddevelopment. UCTE estimates that consumption will growbyaround90GW in the nextten years,whereaselectricitygeneration will growby220 GW over the same periodof time,including some 80GW to come from windgeneration. Before setting upnewgeneration capacity,upgrading interconnections andthe internaltrans- missiongridsshouldbethe first step. Member states could thusbenefit from generation across Europe asawhole.The UCTE estimates the requiredinvestment forthe nextfive years atabout g 17 billion,anamount thatwouldgreatly increase if overhead lines where replacedbyundergrounding. 6 Atthe same time,if the latter endsupbecoming ageneralized pattern,economies of scale will begenerated—ashasalready startedbeing the case— andprices will decrease in the future. 7

AssessingTEN-E Before developing the regionalpicture,this paragraph introduces the identifiedEUpriorityprojects,the so-called TEN-E(see also Map8inthe Annex). The mapshowsidenti- fiedpriorityprojects thataddress important congestion on the borders between France,Belgium,the NetherlandsandGermany (EL 1); Italy’s precariousandisolatedsituation (EL 2); the simi- larlyisolatedsituation of the Iberianpeninsula(EL 3); the

6.UCTE TransmissionDevelopmentPlan2008,pp.1-2. 7.See ABBGrid Systems,ExecutivebriefingNote2008:‘Assessingthe caseforpowerunder- grounding’. 20 1 0 I f r i , © 88 Atthe Speedof Light? ElectricityInterconnections forEurope needto connectGreeceandthe Balkancountries entirelyto the UCTE system (EL 4); the needto better interconnectthe UK andIreland(EL 5and6); the needto establish aBaltic ring in order to offset the isolation of the BalticStates; and the integration of windenergy(EL 7). Proposedregionalelec- tricitypriorityprojects concern the reinforcement of East-West interconnection in CentralEurope (EL 8) aswell asthe establishment of the Mediterraneanelectricityring (EL 9).

The vanguardregion:CentralWest Overview Belgium,France,Germany,Luxembourg andthe Netherlandsconstitute the Central-West Region,ledbythe BelgianfederalEnergyRegulator (CREG). Its ambition is to set upasingle regionalelectricitymarket. The region repre- sents 1.1 million GWhofelectricityconsumption,which amounts to approximately40%ofthe EU electricitymarket.8 Central-West cantodaybeconsideredaveryadvancedregion in the EU andin Europe asawhole in terms of integration of the markets.Onlythe ScandinavianStates are more integrated electrically.Market integration hasbeen promotedbymergers andacquisitions,likethe takeover tentativeofthe FrenchEDF forthe secondBelgianelectricitycompanySPE in May2009.9 Congestion occurs on the German-Dutchborder,with over- loadsresulting from incoming windpower.The projectofa new60km double-circuit line is in its permitting phase; the facilitycouldbeoperationalatthe earliest in 2013. Congestion occurs also atthe French-Belgianborder,dueto generation development in northern France. RTEandEliahave launchedastudyto decidewhether to strengthen the existing interconnection or to alternativelybuildanewline; the chosen option couldbeoperationalin2012/15 atthe earliest. There is also aprojectunderwayforanewline between GermanyandBelgium,with unclearentrydates,andstudies being carriedoutongridextension options.

8. Source:ERI Central-West region,on ERGEGwebsite Ceer-eu.org . 9. http://www.la-croix.com/article/index.jsp?docId=2373329&rubId=4079. 20 1 0 I f r i , © Existing Lines andMissing Links 89

TowardsaregionalTSO? The Central-West region counts fiveregulators.The very activerole thatthe region currentlyplaysisanencourage- ment forthe other sixto followits example.Year2008 witnessedmajor progress in regionalintegration,with the setting upofauniqueauction platform (CASC-CWE),aswell asthe regionalcoordination center chargedwith the control of electricitytransfers.Progress hasalso happenedon the management of the French-British interconnection. Market coupling hasstartedin the region on abilaterallevel,and looks highlypromising.The CRE report 2009qualified2008 as‘ayearofmajor advances in the region’. 10 The opening on February18th 2009ofajoint coordination officeofRTEandEliawasasymbolicstep thatillustrates the region’srole asaleader.Sincethen,forthe first time ever in Europe twoTSOsexchange realtime information every 15 minutes. The project,namedCORESO,came aslargely unexpected.Inconcrete terms,the twoTSOsshare instru- ments,dataandsoftware,andthusguarantee more system securityin the region.11 Inthe mediumterm,aregionalTSO might beestablished.‘Everycommitment whichleadsto the decrease of the number of involvedactors shouldbe welcomed’,statedChristophe Gence-Creux. 12 The RTE-Elia initiativeinspiredthe GermanTSO RWEandthe Dutch TenneTto manage congestion on the German-Dutchborder in asimilarway.The same is truefor the coordination projectallying EnBW TransportnetzeAG,another one of the fourGermanTSOs,andSwissgrid: both TSOsfounded, in September 2008,ajoint coordination venture,CESOC (Central EuropeanSystem Operation Coordinator).13 France,includedin fourERGEG regionalinitiatives,has taken,right from the start,averyactiverole in the process of regionalintegration; in part,this owes to the factthatCRE is apowerfulregulator,verymuchlikethe Belgianone —and quite unlikeBNetzA, one of the Germancounterparts,for

10.CRE 2009,p. 5. 11.InterviewwithDominiqueMaillard,RTE,Euractiv.fr,February 12 th 2009. 12.Interviewbythe author(April 27th 2009). 13.http://www.presseportal.ch/fr/pm/100011338/100569414/swissgrid. 20 1 0 I f r i , © 90 Atthe Speedof Light? ElectricityInterconnections forEurope example.Inthe long run,asGence-Creux explained, the number of coordination centers in the Central-West region, whichwill surelybeset upbilaterallyfirst,will then haveto bereducedagain,to reachthe idealsizeofone per region. Asfor pricing,the example of the market coupling between France,the NetherlandsandBelgiumshowsthat prices havelatelybeen converging more andmore forthe three markets —agoodreason to favor the extension of the market coupling paradigm to the other member states of the region. The FlorenceForum,the informalhigh-level regular gathering on the subjectofelectricityin Europe,especially devotedits 2008annualconferencetothatsubject. Aproject coordination groupwasset upwith the mission to elaborate a mechanism andaschedule formarket coupling.Iftodaysome ten projects formarket coupling are underway,it is obvious thatacountrycannot engage in more thanone market coupling projectatatime.Itwouldjust not feasible to doso because the contracts to bepassedin eachcase couldnot be signedsimultaneouslyandin compliancewith different sets of parameters all atonce. The merger of PowernextandEEX in April 2009resultedin the creation of the joint companyEPEX spot. AMemorandum of Understanding had been signedbyboth electricitystock exchanges in the summer of 2008andaSpot Trading SE had been registeredin Paris bySeptember 2008; share exchanges later took placeinApril 2009.14 The project,whichintendstolay the foundation forapan-Europeanexchange,alreadycovers Germany,France,AustriaandSwitzerland, i.e.,more thanone thirdof the EU electricityconsumption transactions.Itisimpor- tant to note,however,thatEPEX spot does not fall into the cate- goryof market coupling:in its case,the markets are not linked butfunction independently,even if the quotations are set upby the joint stockmarket. One stockmarket,in fact,canbeincharge of azone including different andnot coupledmarkets. The process formarket coupling,whichisindependent from the setting upofEPEX, findsanobstacle in the huge

14.http://uk.reuters.com/article/oilRpt/idUKL246892320090402. 20 1 0 I f r i , © Existing Lines andMissing Links 91

number representedbythe 21partners aroundthe negotiation table:the TSOs—fourfor Germanyalone—,the regulators,aswell asone representativefrom eachofthe five governments.‘Too many’,according to Gence-Creux,who is not alone in advocating the reduction of partners in the negotiation. Onthe issueofthe GermanTSO’s,he pointedout: ‘Theypresent even competing projects,andit is not fair that theyare four,butthatthe other countries haveonlyone TSO in the negotiations.’15

Conclusion All in all,Central-West hastobeconsideredtodayasa region in the vanguardof its kind, even if Nordel still holds the lead: Nordel startedto come upwith multilateralgrid design asearlyas2002 andno other EU region hasyet caught upwith it on thatfront. Trilateralmarket coupling between Belgium,Franceandthe Netherlandsisareality,andthe integration of the electricitywholesale markets is on course for Belgium,Franceandthe Netherlandsonone hand, and GermanyandFranceonthe other.Central-West is the most advancedin terms of interconnection,with road maps, common cross-border capacitycalculation,aswell assingle auction offices.Transparencyhasbeen increasedbynew government mechanisms,asdiscussedin Part II.The purple marks on Map11(see Annex)represent major congestion points,aswell asnewprojects neededto improvesystem stability,especiallywith the feeding in of renewables. Finally,GermanyandFranceintendto increase the power exchange capacityon the Ensdorf—StAvoldinterconnection —aposition thatChristophe Gence-Creux questions,stressing thatexisting capacities are important,butinsufficiently exploited.Summing up,Central-West is astronglyintercon- nectedregion where the main potentiallies with the improved use of existing capacities andthe further integration of the markets. Asalreadymentioned, integration here goes much further thaninthe other electricityregions.

15.Interviewbythe author(April 27th 2009). 20 1 0 I f r i , © 92 Atthe Speedof Light? ElectricityInterconnections forEurope

NorthernEurope:benchmark,and the offshorewind challenge Overview Nordel is,indeed, verymuchahead of the other regions in terms of gridintegration andcommon operation andplan- ning.Itpublishedits first comprehensive‘gridmaster plan’ in 2002,with asecondone following in 2008.16 The participating countries are Denmark,Finland, Germany,Norway,Polandand Sweden,who integratedveryearlyandare linkedto the continent through DC lines,verymuchlikethe UK andIreland. Some of the identifiedregionalpriorities are the optimization of the use of interconnections andthe cooperation on investment in newinfrastructure.Aspecificregionalchallenge is the integration of windenergyinto the grid.The EU stimulus package,with animportant portion devotedto the development of anoffshore grid, is amajor incentivetowardsthat goal. Nodirectline exists yet between GermanyandNorway, butthe coupling of the hydro-dominatedNorwegiansystem with windelectricityfrom Northern Germanyis apromising projectfor both countries.NordLink is currentlycarrying out afeasibilitystudy.The coupling,whichisexpectedto use an HVDC transmission system of 700-1,400 MW,couldbeopera- tionalby2015. The impetusbehindthis endeavouris,thus,to ensure system stabilityaswell assecurityof supply.The link is part of the BalticRing project(see Map9inthe Annex). In order to get the multi-countrycooperation on the right track, aEuropeancoordinator,Georg Wilhelm Adamowitsch,was appointedin 2007. Hedeliveredhis first report on the state of the projectatthe endof September 2008.17 Inparallel,a EuropeanWindIntegration Study 18 (EWIS)wascarriedout. Asecondstudy,undertakenbyTradeWind 19 —aEuropean projectfundedbythe EU—wascompletedbyaconsortium ledbythe EuropeanWindEnergyAssociation (EWEA). The latter looks into how300 GW of windpower canbeintegrated

16.Nordel,Grid masterplan2008. Available onlineat195.18.187.215/Common/GetFile. asp?PortalSource=1965&DoclD+5647&mfd=off&pdoc=1. 17.Adamowitsch,Annualreport September2007-September2008http://ec.europa.eu/energy/ infrastructure/tent_e/doc/off_shore_wind/2008_off_shore_wind_annual_report_2007_2008_ en.pdf. 18. Wind-integration.eu . 19. Trade-wind.eu . 20 1 0 I f r i , © Existing Lines andMissing Links 93

into aninterconnectedEurope by2030.The inherent risks involvedin feeding in windpower andcircularmovements havebeen demonstrated, especiallythrough the Polish example. Adamowitsch’srole in the earlyphase of the project concerns bilateralexchanges with nationalauthorities and their integration into the regionalproject,the extension of the projecttoCentral-West,andthe dialoguebetween wind experts from TradeWindandEWIS on one hand, andthe UCTE development teamonthe other. The countries of the region,more or less inclinedto producing offshore windenergyin the future,are listedhere according to the order of importancethattheygrant to wind energy,on adecreasing scale:the Netherlands,the UK, Norway,Denmark,Germany,Sweden,FinlandandPoland. Their approachispredominantlynationally-mindedand barelycoordinated, butthe Kriegers FlakwherebySweden andDenmark are linkedviaasub-seacable in the BalticSea canbeconsideredabenchmark forfurther development on a Europeanscale:sincewindfarms profit from varying subsidies anddifferent regulatorysystems,the concernedcountries haveagreedto discuss acommon framework forthe entire area. Asfarasgriddevelopment is concerned, member states are,forthe time being,focusing on establishing links between windfarms andthe onshore high-voltage transmission network. Sincetoday’s gridalreadyfunctions close to the transmission capacitylimits andcongestion is ahuge problem, Adamowitschstatedthatadding newlinks wouldentail aseriousrisk of further congestion andeven blockage, especiallyin Germany.Thus,acoordinatedapproachto the Europeanoffshore windpower projectnot onlybythe coastalstates butbyall the EU member states is animportant requirement. When visiting the concernedmember states, Adamowitschwitnessedanuncoordinatedandfragmented approacheven insidethe states.The UCTE development report from 2008,aswell asnationalstudies suchasthose by the GermanDENA, veryclearlydemonstrates the needto upgradeexisting infrastructure,add newlinks,anddevelop 20 1 0 I f r i , © 94 Atthe Speedof Light? ElectricityInterconnections forEurope

Table 8. TradeWind scenarios:offshorewind powerinstalled capacities(GW) for2015,2020 and 2030 in NorthernEurope 2015 2020 2030 Belgium0.5 1.3 3.8 Denmark 1.01.6 3.3 Finland0.6 1.23.9 France2.04.04.0 UnitedKingdom 6.5 20.033.0 Germany3.015.030.0 Netherlands2.03.5 20.0 Norway0.1 0.5 7.3 Republicof Ireland0.3 0.3 0.5 Sweden 1.8 3.8 11.0 Poland0.00.02.0 BalticStates 0.00.01.0 TotalNorthern Europe (GW) 18 51 120

Source: TradeWind.

Map4.Offshorewind scenariosand generation

Source: TradeWind. 20 1 0 I f r i , © Existing Lines andMissing Links 95

interconnections.Aworking groupfor onshore andoffshore griddevelopment wasestablishedbythe coordinator in July 2008,with the commitment to meet fourtimes ayear. It will proceedfrom factualgridplanning,especiallyon the Norway—Germany—Denmark interconnection,to solutions on the technicalandpoliticallevels. Environmentalandlocalconcerns,aswehavesaid, pose animportant obstacle to the development of offshore wind energyandto Europe’scommitment to developing renewable energies.Adamowitschhasaskedforapublicdebate to find solutions to the major problem of balancing localconcerns andEuropeantargets.

Imera Imerais aprivate companybasedin Dublin,specializedin offshore gridsandHVDC cables,aswell asinthe ‘unlocking of the renewable potentialacross Europe’,viaappropriate infrastructure.InFebruary2009,the companyannounced, aswementionedearlier,the setting upofapan-European electricitygridcovering part of the Northern Region viaits EuropaGridNorth Seasection,andthe AtlanticRegion,linking the UK, Ireland, FranceandSpain,viaits EuropaGridAtlantic portion. The announcement came on the tail of the stimulus package proposalbythe EU Commission. Imerawasset upby its parent companyOceanteam,locatedin Norway,which possesses aspecializedfleet forsubmarine electricitycables. The factthatitisasmall enterprise,independent from big stakeholders in the electricitybusiness,is animportant asset forImera, whichhasalreadyreceivedthe green light from the EU commission forits merchant offshore interconnections linking the UK with Ireland. 20

EuropaGrid offshore:overview Imeraholdslicences forfiveprojects thatconstitute the foundation of the EuropaGrid: among these are the already mentionedUK-Irelandlink,the France-UK link andthe

20.Quoted from ‘EuropeanCommissionGrants ImeraEUExemptionforEast West Inter- connections’,December22 th 2008. 20 1 0 I f r i , © 96 Atthe Speedof Light? ElectricityInterconnections forEurope

Table 9. Imeraprojects Name Countries concernedCost/Construction Start EuropaGridNorth SeaScandinavia, g 2.76 billion Western Europe,UK EuropaGridAtlanticUK, Ireland, France, g 1.65 billion; already Spain started, first cables will be laidin 2010

Belgium-UK link. The companyis in the process of raising g 100 million in order to financethe development of the first phase of EuropaGrid. 21 EuropaGrid, through its twobranches,wasindeedeligible forthe EU stimuluspackage andhasadditionallybeen granted the benefits of the 2003merchant lines exemptions.Imera grids,thus,will beHVDC merchant lines.According to Imera, the EuropaGridwill promote auniqueelectricitymarket,and thusincrease securityof supplyandcompetition andfacilitate more efficient electricityexchanges within the EU.Inaddi- tion,the linking of offshore windmills will favor technological advances thatshouldcontribute to solving the problems presentedbythe feeding in of the windenergyandthe need forstabilization. Ananalysis of the projects (see Map9inthe Annex) reveals thatthe link between IrelandandFranceisexcessively expensiveandnot reallynecessary.The links between the UK andIrelandare more or less finalized.Concerning the links between Spain andPortugalonone handandthe one between FranceandSpain on the other,theywouldallowformore renewable integration (windmills) in Europe.Nevertheless, their construction shouldnot beexpectedverysoon. Finally, the Eastern part of the grid, especiallythe Baltic-Swedish link, will befinalizedin 2009andimprovethe links with the Baltics,together with the alreadyexisting Estonia—Finland DC link.

21. Imeraisthe resultof the mergerof ImeraPowerand the Hydragrid business of Oceanteam ASA.Oceanteamisapubliclyquoted Norwegiancompanylocated in Bergen. Imerapower.com. See also‘Imeralancel’EuropaGrid’, Enerpresse No. 9754,February 4 th 2009,p. 2. 20 1 0 I f r i , © Existing Lines andMissing Links 97

Missinglinks:SouthWesternEurope Overview The South-West Region comprises France,Spain and Portugal,andis ledbythe Spanish EnergyRegulator CNE. Just likefor the Central-West region,its objectiveistoset up asingle regionalmarket. Annualconsumption amounts to 780TW/h,whichrepresents around25% of EU-27. The IberianElectricityMarket (MIBEL)wasbilaterallyset upin June 2007,further integrating the Spanish andthe Portuguese markets.Animportant regulatoryconvergencefollowed, and interconnection capacitybetween the twocountries has doubledsince. Atpresent,the challenge is to link upMIBEL with Franceandto analyzethe compatibilityof the existing rules andprocedures. The CRE 2008report showsthe congestion on the French- Spanish border,with its impactonthe IberianPeninsulaasa whole.The interconnectionbetween PortugalandSpain also needsimprovement atthree points in order to overcome major congestion. Projects are in their permitting stage and shouldbefinalizedby2009-2011. Asfor the French-Spanish interconnection,whichisthe subjectofthe belowcase study, it shouldbecompletedby2011-2012.

The France—Spain interconnectionBaixas—Bescano One of the most abundantlydiscussedprojects of the last decadehasbeen withoutanydoubtthe France—Spain interconnection. Anadditionalhigh-voltage Hispano-Frenchinter- connection wasdeclaredanEU priorityin 1994,butits accomplishment hasbeen stagnating ever since. Atpresent there are fourtie-lines (twoof220 kVandtwoof400 kV) linking FranceandSpain,the last one having been built in 1982.All of them facecontinuouscongestion.22 Important delaystonecessarydevelopment haveoccurredbecause of localresistanceandlackoffinancialcommitment. Additionally, reports from the Frenchregulator revealcontinuing significant dysfunction of the existing lines.Eventually,the setting upof

22.UCTE TransmissionDevelopmentReport 2008:35continued,UCTERegionalForumSouth- West. 20 1 0 I f r i , © 98 Atthe Speedof Light? ElectricityInterconnections forEurope anewHVDC line wasapproved, singledoutfor additionalEU funding,andmeant to becoupledwith ahigh-speedtrain connection forthe sake of economies of scale. Abreakthrough thanks to the EuropeanCoordinator Aswesaidearlier,it waslargelythanks to the effective arbitration of Europeancoordinator Mario Monti thatthe signature of the French-Spanish agreement on June 27 th 2008 putanendto years of multi-layer negotiation withoutresult. Afirst interim report waspresentedbythe chief coordinator atthe French-Spanish summit in Paris,in January2008,and the twogovernments gavesubstantialsupport to the completion of the electricityconnection aswell asofagaspipeline. 23 Three information sessions took place,andafinalagreement wassignedatthe endof June 2008. OnOctober 1 st 2008ajoint companycalledINELFE (Interconnection ElectriqueFrance-Espagne) wascreated, allying RTEandREE (RedElectrica deEspana)with the task to carry outthe necessaryfeasibilitystudies andthe setting upofthe line.Creating ajoint companychargedatoncewith feasibility studies andconstruction wasconsideredthe best guarantee of coherent choices andthe respectofall criteria. The costs andfuture profits of the venture are to beshared 50/50.Governments,butalso the EuropeanCommission, endedupcontributing more moneythanhad initiallybeen planned: from the estimatedtotalof g 600 million,Brussels will fund g 225million,the rest being sharedequallybetween Paris andMadrid.The strong environmentalresistancewas finallyovercome through the compromise to buildanunder- groundline,whichmadethe projectcost skyrocketfrom g 600,000 per kilometre to 10-12times more. 24 The totalcost forthe undergroundline is nowestimatedatbetween g 500 and g 750million,comparedto the initial g 90million that wouldhavebeen neededforthe overlandline. 25

23.JointdeclarationbyNicolasSarkozy and JoséLuisZapateroongasand electricity interconnections,January 28 th 2008. 24. LesEchos ,January 12 th 2008. 25. Monti2008,p. 12. 20 1 0 I f r i , © Existing Lines andMissing Links 99

Aroute hasbeen definedsegment bysegment,with the obligation to profit asmuchaspossible from existing infrastructure —beithighways,streets,railroadsorsome other electricitylines.The route itself must berespectfulofthe environment of the Pyrenees andeven of the regional culturalheritage —andthusspecificallyavoidcrossing an areawith important monuments. 26 The agreed-upon route goes the 60km from SentmenatandBescano in Spain to BaixasinFrance,including astretchof8kmthrough a tunnel in the most mountainousregion. The tunnel solution allowsfor bundling with other infrastructure; in April,word came outabouthigh-level talks being in progress with the TGV projectPerpignan-Figueras,again in searchofeconomies of scale andthe avoidanceofsetting upnewinfrastructure in the area. 27 Unlikewhatthe initialprojects had considered, the French- Spanish line will beaDCline.This means thattwoconverter stations havetobeset uponeachendof the line,connecting the DC line to the AC grid.Eachofthe stations,one placedin Baixasandthe other in SantaLlogaia(nearFigueras),will require anareaof some 5to10hectares.Additionally,the alreadyexisting converter station in Baixaswill beenlarged; on the Spanish side,anewone must beset up. Converter stations of this type alreadyexist andare technicallymature —one goodexample is the IFA2000 of the French-English interconnection. Criticalassessment The main reason forthe current insufficient use of existing lines in France—aspointedoutbythe last CRE report— is important congestion within the Spanish Grid thatspills over to the bottleneckonthe border.Thus, increasedefficiencyon the existing interconnection via improvements andmore transparencyon internalcongestion

26.See foradetailed discussionofthe RTEroute,‘LeprojetFrance-Espagne,Pointsur le projetde liaison souterraineencourantcontinu’,January 19th 2009, Rte.fr . 27.J.Lelong,Languedoc-Roussillon. ‘La concertationfaitavancerle projetd’interconnexion électriqueFrance-Espagne’,in Lesbrèvesd’actu Web ,April 22nd 2009. 20 1 0 I f r i , © 100 Atthe Speedof Light? ElectricityInterconnections forEurope are important steps thatshouldaccompanythe setting upof the needednewline. 28 One important point is the factthatthe line will beset upasaDCline,andnot anAC one,ashad been initially planned.Whatdoes this change? Asmentionedearlier,DC allowsfor pre-determining agiven capacityforthe exchange, butdoes not implysolidarity.Anoptimumsynchronization between twocountries relies,thus,on asmanyAC lines as possible.Ifthe Baixas-Bescano line is set upasaDCline,it willnot contribute to improvedsystem securitywithin France andSpain —thatistosay,to improvedsynchronization of the twosystems.Nevertheless,asRTEputs it in its report, ‘recent technologicalevolution makesushope that,in the future,DClines will start to contribute to animproved performanceofthe electricitysystem atlarge,especially concerning voltage’. 29 From ashort-term perspective,the interconnection is muchmore important forthe system securityin Spain (and Portugal) thaninFrance. Ifthe latter is widelyintegratedwith its neighbors,aswehaveseen in the chapter on the Centre- West region,the IberianPeninsulais to date poorlyconnected with the UCTE system andpoorlysynchronized—with one AC link through the strait of Gibraltarandsome other to France. Inthe mediumandlong term,however,the interconnection will not onlypositivelyimpactFrance,butalso the South-West region atlarge.Renewables andnewrequirements forgridsare aprime issuehere.Nonewlines havebeen set upsince1982,butprojects linking Northern Africa andthe setting upofthe MediterraneanRing havegainedprominence, asmuchasthe discussion on solarelectricityfrom Southern Europe or Northern Africa.Inall of those plans,Spain is an important transit countryandwill,assuch,havetomeet better securitystandardsininterconnections.Simultaneously,wind

28. CRE Report 2007,pp.14-15;CRE Report 200,pp.43-44. The authorstatesinterruptions on 63 days,with,for2008,only255 auctiondays proposed insteadof366.Importantamend- ments tothe initiallyproposed capacitieshavediminishedthe valueofthe interconnection electricity.The authoralsonotesimproved usesince2005,especiallyconcerningthe decreaseofimportsfrom high tolowpriceareas. 29. Report RTE2009,‘LeprojetFrance-Espagne[...]’,p. 7. 20 1 0 I f r i , © Existing Lines andMissing Links 101 Ra mis / ). n S p a in , sion E u rope a n er S tr a teg y mi EE b et w een or TEN - E P roje c t L log a i w int ( ( y the a nsmis &R r of line T TE P l a n MVA Sa nt a P riorit y k V . F r a n c e , proje c t. E u rope a n C oor d in tor L log a i 2 8k c ir u it in A the 4 00 a n d this * 2 16 0 a ppointe db S tr a teg y Ba i x s- V c 5 0 km a ge ( FR ) for ( ES ). n c h a rge :R F r a n c e. d o u b le- b een olt V V i c S p a in , 57 N e w AC Ca p ac it y2 L ength in Ba i x a s- Sa nt I n c l u d e in I nter c onne tion h a s Ba i x a s TSO si G u i d elines). U nion 4 0 in or line p a rt ern a te : 20 11 P roje c t D es ription k V ne c tion e a st b or d er. on n t e r c onne ion 4 00 c the er the int N e w on of E x pe c te dd S p a ni s h- F r en c hi . energ y y stem. pro d u c tion E ffe c ts on 1 0 . T he po w er n a ting Ib eri a ns c onstr a ints E x pe c te d proje c t a ims nne x . the w in d Tab le elimi ,A these in T he a t L imit a tions of 2 00 8 R eport b or d er limiting ca p ac it y . le v el on inter c onne tion D e v elopment P roje c t D ri v er a high entire c ongestion T he F r a n c e– S p in of f ac es tr a nsmission C onstr a int T r a nsmission UCTE he ES B or d er – FR S o u r c e :T 20 1 0 I f r i , © 102 Atthe Speedof Light? ElectricityInterconnections forEurope andsolarelectricitygeneration in Spain is increasing tremen- douslyandthis is opening upnewopportunities forsupplying the EU markets. Increase in the use of renewable energies shouldallow phasing outthe verypolluting coal— andfuel-basedelectricity generation,especiallyin northern Spain.30 Butfor this to be possible,interconnections will befundamentalinorder to compensate forvolatilityin renewable generation. Again,as Monti stated, using renewables on alarge scale will beimpos- sible withoutstrengthening interconnections in general. And he also stressedthatthe existing lines facedcongestion,a point of viewnot sharedbyRTE.According to Monti,in 2007, on 97% of the daysthe maximumcapacitywasreachedduring atleast one hourofthe day,andexchanges had to berationed in manycases. 31 The CRE indicatedthatthose limits were due to nationalcongestion in Spain. CRE andthe Europeancoor- dinatorconverge on the point thatthe coordination between the twostates wasfarfrom optimal. Transparencyis lacking on both supplyanddemand.

Conclusion The setting upofthe French-Spanish interconnection, coming after adecadeofdelays,must berecognizedasan outstanding break-through. Another HVDC cable hasbeen committed, andundergrounding seems to gain prominence in Europe atlarge.Nevertheless,improving the efficiencyof the existing infrastructures shouldnot beneglectedsinceit clearlyconstitutes acriticalparallel objective. The reinforcement of the regulators resulting from the ThirdPackage could help the Spanish regulator to improvecongestion management within the nationalborders,andto putpressure on the nationalTSO.

30.Report byMario Monti,‘InterconnectionFrance-Spain’(in Frenchand Spanish) (Brussels, September2008). AccordingtoMonti2008,p. 8,the gainsfrom closingthesepollutingplants represent1.5million tonsof CO2 ,whichcorrespondstosome600,000 cars.Montibased on CESI. 31. Monti2008report.See alsothe earlieranalysisof the CESIcabinet,http://ec/europa/ ten/energy/coordinators/indexen.htmaswellthe completereportsand the textsof the French-Spanishagreement. 20 1 0 I f r i , © Existing Lines andMissing Links 103

CentralEasternEurope and the Baltics Overview One of ERGEG’s regionalinitiatives concerns the Baltic andthe Central-East region. Both are dealt with together here, sincethe politicalproblems of one andthe other are closely linked.The factthatthe EU Council sent anote on the Baltic EnergyMarket Interconnection PlaninJune 2009,adopted consecutivelybythe Council,stresses the urgent needto improvethe situation,andthe increasedawareness towards doing so. 32 The Balticregion comprises the three former Soviet RepublicsofLatvia, LithuaniaandEstonia, with the Latvian EnergyRegulator PUC holding the lead.Consumption repre- sents only21.2TWh/year,whichisequivalent to not even 1% of EU electricityconsumption. Inthe long run,the Baltic region aspires to become alink between the Central-East andNorthern Europeanmarkets.Keypriorities here are the interconnection with the Central-East region,integration into the UCTE system,andtransparencyandcooperation of network regulators.Nocongestion is attestedin the Baltic region. Asfor Central-East,seven countries participate in it:Austria, the CzechRepublic, Germany,Hungary,Poland, Slovakiaand Slovenia, with Austria’s regulator E-control leading the group. The region is characterizedbysharp contrasts andhuge differences in terms of market development. Here,the border between the ‘old’andthe ‘new’Europe is particularlyvisible. Transparencyandinformation management are the most important short-term priorities. Asfarasconcrete projects are concerned, the improvement of the Polish grid, aswell asthe link between the Baltics andthe UCTE, shouldbeconsideredurgent,especiallyin the light of rising East-East tension,asdemonstratedbythe Russia-Georgiawarorthe Russia-Ukraine gascrisis.

32.Council of the EuropeanUnion,BrusselsJune 8 th 2009,10703/09,Notefrom General Secretariatof the Council toDelegations,BalticEnergyMarketInterconnectionPlan- Informationfrom the Commission. ENER 208,10703/09. 20 1 0 I f r i , © 104 Atthe Speedof Light? ElectricityInterconnections forEurope

Map13(see Annex)showsdisseminatedpurple fields corresponding to: •system securityimprovement andcapacityincreases,which are the impetusfor upgrading the existing line between the CzechRepublicandAustriaby2008; •the needto increase the capacityandthe feeding in of wind energy,whichisthe impetusfor the setting upofanewline between Germanyandthe CzechRepublic, however not before 2016; •congestion on the German-Austrianborder,whichwill be offset byanew380kVdouble-circuit overhead interconnection expectedto beinserviceinthe beginning of 2017; atthe same time,existing systems will beupgradedin order to cope with congestion; •system securityatstake on the Hungarian-Slovakborder, where the reliabilityof the network of both TSOs(Mavir and Seps) hastobeimprovedandinterconnections must beestablished, although this is not expectedto happen before 2015; •aspirations byGermanyandPolandto increase power exchange capacities through three projects,including converting anexisting 220 kVdouble line into a400 kVline after 2015; •aspirations byPoland-Lithuaniainterconnection,whichis part of the BalticRing,to incorporate the BalticStates into the internalelectricitymarket of the EU;the projectcomprises a new400 kVdouble-circuit interconnection together with the back-to-back1,000 MW station in Alytusandthe strengthening of the Polish grid; •plans byPolandandUkraine to modernizethe existing Rzeszow(Poland)-Kmelnitsakaya(Ukraine) 750kVline and converter station before 2010; •plans byAustriaandHungaryto install asecondsystem in order to increase transmission czapacityandsystem security by2010.

The primeimportanceofthe Polish-Lithuaniainterconnection The EU SecondStrategicEnergyReviewof November 13th 2008,mentioned‘the development of aBalticinterconnection plan,better linking the region with the rest of the EU, 20 1 0 I f r i , © Existing Lines andMissing Links 105

improving the securityanddiversityof its energysupply, improving securityof supply’, 33 asanenergysecuritypriority. Especiallyafter the Russian-Georgianwar,the perception of the BalticStates overdependenceonRussiahasbecome more andmore prominent andfinding analternativesolution has been placedhigh on the agenda.EU additionalfunding has been attributedto thatend.The basicBalticIPS transmission network consists of 330kVoverhead lines andis composedof 59 lines altogether. Inorder to providefull andeffectivecontrol of the elec- tricalring there are emergencyprotections andcoordinated emergencysystems,the most important of whichisthe emer- gencyprotection Ignalinanuclearpower plant. The rest of the BalticIPS transmission network consists primarilyof 110kV lines.The onlyexception is the Estonianpower system,where there is a220 kVnetwork aswell. The factthatthe second unit of the Ignalinapower plant (a‘Chernobyl’ type RBMK, built in 1974) will beclosedin 2009,andthatthe first unit wasclosedin December 2004,in accordancewith Lithuania’s Accession Treatyto the EU,creates amajor supplyproblem forthe three BalticStates aswell asfor the Russianenclaveof Kaliningrad.Recently,aprojectfor anewplant wasadopted, bywhichanewnuclearpower plant will beset upin Visaginas,nearIgnalina. 34 Atthe same time,Rosatom,the Russiannuclearagency,announcedthe setting upofanuclear power plant in Kaliningrad. 35 Itisclearthatonlyone of the twoprojects canbeconstructedandmake sense,andthatthe decision forone or the other hasahuge geopoliticalimpact. Currently,Ignalinaproduces more than2/3 of Lithuania’s elec- tricityandsupplies the neighbors widelyaswell. Setting up yet another nuclearplant wasconsideredthe onlysolution in order to avoiddependencyon Russia.Producing electricity with gaswasnot anoption,asitwouldhaverequiredgas

33.Memo:‘EU EnergySecurity and Solidarity ActionPlan:2nd strategicenergyreview’, (November13 th 2008),http://ec.europa.eu/energy/strategies/2009/2009_07_ser2_en.htm. 34. See:EnerpresseNo. 9816,p. 2,‘Lithuania: Unpasde plus pour une nouvelle tranche’ (May5 th 2009). 35. Announcementalreadymade in 2008,http://www.baltictimes.com/news/articles/20316/ and reconfirmedinJune 2009. Alsorumours about Siemensparticipationfollowingits divide from Areva. 20 1 0 I f r i , © 106 Atthe Speedof Light? ElectricityInterconnections forEurope

Table 11. The BalticNetwork Installedcapacity Length of network auto- Installedshunt Power system of HV lines transformers and reactors (km) transformers (MVAr) (MVA) Estonia1,297.4 2,280420 Latvia1,247.9 2,825240 Lithuania1,670.4 4,050150 BalticIPS 4,215.7 9,55 810

Source: Baltso,http://www/baltso.eu/index.php?id=544. imports from Russiaandfurther increaseddependency.Future plans must keep in mindthatanyUCTE interconnection of the region andthe subsequent IPS/UPS disconnection would putinto question the supplyof Kaliningrad, aRussianenclave neighboring LithuaniaandPoland. Averylong discussion,no results yet Discussions on the Polish-Lithuanianpower link date back to 1992,after both countries brokeoff from the Soviet system. The Polish power system split from the UPS/IPS atthattime andsuccessfullyenteredthe UCTE in 1996,while Lithuania remainedin UPS/IPS.Despite years of discussion,wewitness little progress.The following steps havetakenplace:on June 11th 2007the UCTE receivedarequest foraninterconnection with the Balticsystems from Latvia, LithuaniaandEstonia. The headsofstate of the three countries releasedajoint communiquéontheir decision to fullyintegrate the UCTE, askedthe BalticTSOstocarryoutanexhaustivefeasibility studyandrequestedfull support from the EU andthe UCTE. Finally,theyalso askedforthe cooperation of the Polish TSO. Infact,Polandhad been consideredone of the main obstacles to integration because of Warsaw’s concerns thatthe cheap Ignalinacurrent —or current from the nextnuclearpower plant to beset upafter Ignalina’s decommissioning— might compete with Polish coal-generatedelectricity. Environmentalconcerns (protectednaturalareasthatwill becrossed)aswell asuncertaintyaboutthe chances of success of synchronization were additionalcauses of anxiety. 20 1 0 I f r i , © Existing Lines andMissing Links 107

OnOctober 30 th 2007,acooperation agreement among the BalticTSOswasreached, whichdifferedslightlyfrom the first BalticRing Studyfrom 1996-1998:the latter had focusedon adirect-current line which,according to the study,wouldbefaster to complete andless politicallysensi- tiveasthere wasnoUPS/IPS delimitation issueinvolved. The synchronization projectisapriorityforthe EU,sincethe setting upofTEN-Eandthe SecondStrategicReviewof November 13th 2008. Andin summer 2009,a‘Baltic EnergyMarket Interconnection Plan’ uniting eight EU states —Denmark,Finland, Germany,Sweden,Poland, Estonia, Latvia, Lithuania—with Norwayasanobserver country,was adopted. 36 AEuropeancoordinator Professor WladyslawMielczarski wasnominatedEuropean Coordinator in September 2007,andanannualactivity report wasissuedin September 2008.37 Thanks to him,an agreement between the Lithuanianandthe Polish TSOsover the construction of the muchdiscussedpower link was signedin February2008. Ajoint venture company,LitPol Link,wasestablishedandis in charge of the investment plan forthe cross-border connection thatshouldbefinalizedby the middle of 2009. This will allowforconstruction of the line to begin in 2010.Costs of the transmission line between Elk andAlytusasestimatedbythe twoTSOsare to include g 230million foraback-to-backinverter station necessaryto link UPS/IPS andthe UCTE38 aswell as g 90million and g 600 million forthe upgrading of the network of gridsin LithuaniaandPolandrespectively. 39 Ignalinadecommis- sioning fundsare going to beusedalongsidewith structural funds.

36.CommunicationEU Commission,June 2009,http://ec.europa.eu/regional_policy/cooperation/ baltic/pdf/communication/com_baltic_en.pdf. 37.WladyslawMielczarski,‘AnnualActivity Report September2007-September2008:Poland- LithuaniaLink includingreinforcementof the Polishelectricity networkand the Poland- Germanyprofile’,Brussels,September23 rd 2008. http://ec.europa.eu/energy/infrastructure/ tent_e/doc/power_link/2008_power_link_annual_report_2007_2008_en.pdf. 38. Back-to-backstation:see annex,abbreviations. 39. Datafrom annualreport bythe Europeancoordinator,September2008,p. 5. 20 1 0 I f r i , © 108 Atthe Speedof Light? ElectricityInterconnections forEurope

Onthe western side,there are currentlytwopower connections between Eastern GermanyandPoland.The Eastern German andPolish operators,VET (Vattenfall Europe Transmission) and PSE (Polish Power Grid),havealso come together.Cooperation between AdamowitschandMielczarski provedto beparticularly usefulwhen circularpower flowsfrom windfarms causedmajor overload damage in Polandin January2008. Discussions over legalconcerns are currentlyunderwaybetween the TSOsandthe companies constructing newroadsbetween Berlin andPoznan. The ideais to use the road corridors forthe transmission lines, whichwouldallowforsome 1,000 MW between both countries. Considering the entire project,the coordinator hasidenti- fiedtoday’s main challenges to be: •the necessarysupport from the respectivegovernments, even more important in Polandwhere the TSO is 100%owned bythe state; •the increasedcost of the back-to-backpower station andthe technicaldifficulties of maintaining large electricityflows between the BalticStates andRussia; •environmentalconcerns,suchasthe consequences of pier- cing through vast lake areasandforests:numerousprotests by environmentalorganizations haveoccurredin opposition to road construction in those areas; •the future of the GermanTSOs:according to the European coordinator,asingle GermanTSO in the placeofthe fourexis- ting ones wouldhelp facilitate the project.40 The European coordinator hasalso criticizedthe insufficient progress made towardsthe reunification of the existing Germanpower systems thatcurrentlyonlyallowforlimitedenergyexchange. These ambitions havebeen reconfirmedbythe already mentionedcommunication from the Commission in June 2009. Itseems thatresistancetointegration is muchmore difficult to overcome here thaninthe case of France—Spain,andthe appointment of anEU coordinator hasclearlynot been sufficient to get outofthe deadlock.

40.C.Bryantand G.Wiesmann,‘Berlin pushesforanationalpowergrid’, FinancialTimes , October3rd 2008,p. 4,aswellas AnnualReport Coordinator2008 ,p. 9. Anynetworkdeve- lopmentin Germanyrequiresthe commitmentof the four TSOs. 20 1 0 I f r i , © Existing Lines andMissing Links 109

Conclusion Overcoming the electricityandgasislandization of the three BalticStates remains akeyEU objective. This important problem is reinforcedeven more with the closing downofthe last blockofIgnalina, andanewplant —beitinLithuaniaor Kaliningrad—isnot likelyto beopenedbefore the endof the nextdecade. The vulnerabilityof the three newmember states will beincreasedeven further.Slowprogress in the UCTE interconnection hasmadethe Northern-Balticinterconnection the most dynamicone of the two. Estlink 1—linking Estonia andFinland—wasset upatthe endof 2006asamerchant line benefiting from the EU exemption of third-partyaccess; a secondline,Estlink 2,will beconstructedwith the help of g 100 million from the EU. 41 The construction of aBaltic- Swedish interconnection wasdecidedin April 2009:aHVDC line of some 340km to beinstalledbyImerabetween Lithuania andSweden. The line,whichwill receivea g 175 million EU subvention,is expectedto beoperationalsooner thanthe UCTE interconnection line thatstill requires the preliminary update of the Polish infrastructure. Synchronization with the BalticStates is not likelyto happen anytime soon,butitshouldbeconsideredatop priority project,deserving the allocation of the necessarymeans both forthe upgradeofPoland’s nationalgridandforthe interconnection itself.Induetime,its accomplishment will provide securityof supplyandcreate the materialbasis forsolidarity. Until then,the DC links with Scandinaviacanbeconsidereda verypositiveshort-term solution,butnot apermanent one.

SouthCentralEurope:islandized,fragmented InSouth CentralEurope,the islandedsituation of Italy andthe interconnection with the Southern Balkans are matters of particularconcern. Italy’s connections are insufficient and congestion occurs regularlynot just with France,butalso with AustriaandSlovenia.

41.Decisiontaken in February 2009,http://www.fingrid.fi/portal/in_english/news_and_releases/ press_releases/?bid=849. 20 1 0 I f r i , © 110 Atthe Speedof Light? ElectricityInterconnections forEurope

FranceandItalyintendto offset congestion with an improvedline between Trinité Victor in FranceandCamporosso in Italy.The development of newgeneration in the Marseille areaespeciallyendangers the proper functioning of the existing line.The twocountries intendto replaceexisting lines in order to increase transfer capacity,especiallybetween Albertville in FranceandVenausinItaly.Anunderseadirectline between Corsica (France) andItalyis also under review,in order to further increase transfer capacities.The links between Slovenia andItalywill beupgradedthrough anew400 kVsubstation by2009aswell asa380kVdouble-circuit line by2013. The first one is aTEN-Eprojectaiming to connectthe EU with the south eastern Balkans. AustriaandItalyintendto overcome border constraints through newlines andthe upgradeofexisting ones by2011. ItalyandSwitzerlandintendto increase their current power exchange by2020 through a380kVline linking Lavorgo (Switzerland)with Morbegno (Italy). The ideais currentlyunder development. TunisiaandItalyagreedin June 2007toset upanelec- tricityinterconnection,andacorresponding joint venture namedSTEG wasset uptothatend.The new170km HVDC submarine line between TunisiaandSicily,with acapacityof 1,000 MW,is part of the MediterraneanRing projectand shouldbeoperationalby2011. Itwill export Tunisianelec- tricityto Italy. Bottlenecks between FranceandSwitzerland, aswell as the movement of future generation capacityin Switzerland, are drivers fornewcross-border links between the twocountries,with different scenarios being studied.

LinkswithNeighbors Interconnections are to agreatextent anembodiment of geopoliticsatlarge:muchasthe EU itself does,the UCTE masters,on its own,ahuge amount of soft power andattrac- tiveness,owing to the prestige of its members andto the guar- anteedqualityof its current. 20 1 0 I f r i , © Existing Lines andMissing Links 111

When aninterestedcandidate applies forUCTE membership,the UCTE passes the application on to the DG TREN for their comments.Oncethe application hasbeen approved, formalnegotiations are engagedwith the petitioning country or region in order to proceedto interconnection. Onoccasions, it is the members of the UCTE, andnot the organization itself, who are putincharge of the process.Suchisthe case with Turkey—another example of geopoliticsatwork— where the UCTE andthe EU prefer,forthe time being,to avoidany explicit institutionalimplication. Today’s mapofinterconnectedness reveals acertain number of semi-interconnectedcountries,whichmeans thatdifferent parts of their territoryare synchronizedwith one or the other, UCTE and/or IPS/UPS.Howdoes this work,in practise,when the twosystems are not effectivelylinked?TurkeyandUkraine, butalso member countries RomaniaandPoland, belong to this category.Inpractise,UCTE contracts require thatthe petitioning countryseparates the UCTE interconnectedpart from the rest of the grid.InUkraine,forexample,the electrical islandof Burstynhasbeen synchronizedwith the UCTE.Two agreements had to besignedto make this possible:the first one —signedbythe UkrainianTSO Ukrenergo andbyone TSO representing the UCTE—requiredUkraine to comply with the norms of the UCTE;the secondone demandedthe separation of the Burstynsection from the rest of the IPS/UPS grid.Today,the technicalmanagement forthe UCTE portion is carriedoutbythe control center in Warsaw,while the IPS/UPS section is controlledbyKiev.Kievis,additionally,in charge of the maintenanceofthe Burstynpart,andrespon- sible forthe commercialagreements with Hungary,Slovakia andRomania.Again,DClinks are analternativetothe complex contractualandtechnicalprocedure of synchronization.

Overcome fragmentation:SouthCentralEurope Overview InSouth Eastern Europe,the current situation is charac- terizedbyalackofEast-West andNorth-South corridors in the Balkanregion,andimportant congestion between Albania andMontenegro.The sparse structure of the Balkannetwork, 20 1 0 I f r i , © 112 Atthe Speedof Light? ElectricityInterconnections forEurope especiallyin the former Yugoslavia, deserves specialattention. The link between member states GreeceandItalyneedstobe improvedviaasecondHVDC link. Aprojectisunder study butnoopening date hasbeen set yet. CroatiaandItalyare scheduledto set uptheir first sub-seainterconnection by2014. This will beastep of inter-regionalimportancethatwill get the insufficientlyconnectedformer Yugoslavialinkedwith the UCTE system,andsimultaneouslyimprovethe situation of the largelyisolatedItaly.RomaniaandTurkeyare studying anexport projectfor Romanianelectricitythatcouldbeoper- ationalby2018:the twocountries plantobelinkedviaa 400 kVHVDC submarine cable connecting Constantain RomaniaandPasakoyin Turkeyover alength of 400 km. Again,DCandmerchant lines are likelyto prevail over cheaper solutions suchascrossing Bulgaria.

Institutionalreinforcement:the EnergyCommunity The role progressivelybeing acquiredbythe Vienna- basedEnergyCommunityis goodnewsfor the region. The Communitywasfoundedin Athens in 2005andenteredinto forceonJuly1 st 2006. Itcounts among its members the succes- sors of former Yugoslavia, Albania, andhasobservers from both EU andnon-EU member states.Indealing with the implementation of the Acquis Communautaire in the fieldof energy,the EnergyCommunitycurrentlyexplores the integration of Ukraine andMoldova.The institution wasveryeffi- cient during the Russian-Ukrainiangasconflictatthe beginning of 2009interms of co-managing the crisis with the EU and the EU member states.The EnergyCommunityhasbeen,asa consequence,politicallyreinforcedbythatcrisis. 42

Conclusion The electricityinfrastructure,not to talk aboutintercon- nection,is in its verybeginning in large parts of the region. Energytheft is widespread, andnationalregulators even in newEU member states cannot yet becomparedto well- establishedcounterparts in countries suchasFranceorBelgium.

42. Energy-community.org forfurtherinformationonthe institution. 20 1 0 I f r i , © Existing Lines andMissing Links 113

Unrealisticexpectations of large EU funding must becurtailed bythe acknowledgment thatnationalcontribution,aspart of the moralcodexof electricityinfra-structure andgrids,is essential. The role of the EnergyCommunityhastobefurther developedandthe spillover of legalstandardsaswell as complementaryfunding incentivized.

The MediterraneanRing Interms of potentialfor renewables,the Mediterranean South andTurkeyare consideredaimportant future source forsolarenergy—ifthese reachone daythe impressive amount of 200 GW,the gridwill havetobereconfigured completelyandhuge parallel lines will become necessaryin order to transport the energyto the North.

The Desertecproject AconsortiumoftwentyGermanbluechip companies constitutedthe DesertecprojectinMunichinJuly2009. Led byMunichRe,the projectwasinspiredbythe Germanbranch of the Clubof Rome,andis backedbythe Germangovern- ment.43 Itincludes the following companies:ABB,ABENGOA Solar,Cevital,Deutsche Bank,E.ON,HSH Nordbank,MAN SolarMillennium,MunichRe,M+WZander,RWE, Schott Solar,andSiemens.AMemorandumofUnderstanding was signedin the presenceofhigh-ranking nationalandinterna- tionalgovernment officials.The ambitiousprojectisready to invest some g 400 billion on solarprojects in the region: this means drafting concrete business plans andinitiating the industrialsetting upofalarge number of networked solarthermalpower plants throughoutthe Middle East and North Africa region (MENA). Alimitedliabilitycompany under Germanlaw(GmbH)wastobeestablishedby October 31st 2009. Howis this German-initiatedprojecttobeconsideredwith respecttothe ‘SolarPlan’ announcedin July2008within the Union forthe Mediterranean(UFM)? Infact,the UFM project,

43. Desertec.org . 20 1 0 I f r i , © 114 Atthe Speedof Light? ElectricityInterconnections forEurope whichintendstoset upsolargeneration of some 20 GW in the region by2020,with anestimatedcost of g 80billion,has been verymuchthe victim of geopoliticssofar,andhasbeen paralyzedbythe effects of the last Israel-Gazaconflict,andthe Israel-Palestine conflictatlarge.Clearly,the main advantage of Desertecis thatthe driving forcebehindit comes from private actors —ahighlydiversifiedspectrumofcompanies from varioussectors,NGOs,etc.— andnot from politics. From a technicalpoint of view,solarpower plants alreadyoperate todaywith acapacityof 500 MW (Spain,USA); others with 1GW capacityare under construction,andyet others with a 10GW capacityare in advancedstudyphase.Nevertheless, from acommercialpoint of view,solarpower requires huge investment,andwouldbeeconomicallyviable onlyafter some 10or 15 years of aplant’soperation. This justifies acommon initiativesuchasthe Germanone,whichshouldassoon as possible includeFrenchcompanies likeEDF in order to avoid aFranco-Germanrift on the subjectofenergyprojects in the future. One main issuestill pending is the question of transport. Here wewitness adebate on the characteristicsandeven the feasibilityof the gridto beset up. Those in favor of ‘small is beautiful’ anddecentralizedinfrastructure oppose here the supporters of anew‘super grid’. Hermann Scheer,president of Eurosolar,believes thata‘duplicatedcurrent system’ with HVDC wouldentail the risk of concentrating energydistribu- tion in the handsofafewmultinationalcompanies. 44 Others advocate anew‘super smart grid’,whichsomewhatreminds usofthe huge industrialprojects of Soviet times.The debate illustrates again the basicconcerns associatedwith DC and AC,aswell aswith merchant lines.Inaddition,access to the resources andrevenues forthe countries of the region themselves is animportant concern. Andthe factthatthe region is farfrom beingpoliticallystable is anadditionalreminder of the problems anduncertainties thatconsumer countries currentlyhavetocope with on matters of oil andgas.

44.‘GermanBlueChip FirmsthrowweightbehindNorthAfricansolarproject’, The Guardian , June 16 th 2009. 20 1 0 I f r i , © Existing Lines andMissing Links 115

Settingupthe MediterraneanRing Inthe mediumandshort term,synchronization and the improvement of existing gridsisonthe agenda.On this issue,even if important progress hasbeen made,the synchronization viathe 27-km Gibraltar-Ceutastrait has paradoxicallyproven to beanobstacle to progress in the setting upoflinks between the Maghrebstates.Inthe case of Turkey,on the other hand, synchronization with the UCTE will oblige it to disconnectfrom its other partners —not necessarilyawise economicandpoliticaldecision forTurkey.The author thanks François Meslier,Secretary GeneralofMedelec 45,forimportant insights concerning the MediterraneanRing46 which,according to him,comprises fourmain systems including Israel,withoutcontinuityamong them. Theyare: •the UCTE, joinedbyMorocco,AlgeriaandTunisia, precisely sincethe setting upofthe Spain— Moroccosynchronouslink; •Turkey,since2000 interestedin integrating UCTE andsince then engagedin animportant upgrading of its system to be followedbyasynchronization attempt in 2009; •the groupmadeupofLibya, Egypt,Jordan,Palestine, Lebanon andSyria, whichiscurrentlystriving to set upinterconnections; •Israel,which,forobviousreasons of geopoliticsandwar, functions asanindependent system. Onlypeaceinthe region couldchange this situation. The beginning of synchronization Since1997,Morocco,AlgeriaandTunisiahavesynchro- nouslyoperatedwith the UCTE via400 kVACsubmarine cables to Spain. Inanextstep,Libya, Egypt,Jordan,Syriaand Lebanon shouldbeconnected, through the adaptation of two existing 225kVlines linking TunisiaandLibya.This interconnection wasapprovedbythe UCTE in May2003buta

45.Medelecisanindustrialinitiativeand workinggroup,datingbackto1992,termeda ‘liaison committee’onthe issueofelectricity interconnectionaround the Mediterranean. 46.See especiallyF.Meslier,‘Evolutionofthe electricalinterconnectionsaround the Mediterranean Sea, duetothe MediterraneanSolarPlan’,conferenceMarch19 th 2009. 20 1 0 I f r i , © 116 Atthe Speedof Light? ElectricityInterconnections forEurope synchronization test on November 21 st 2005failedafter seven minutes.For more successfulsynchronization,the UCTE thus recommendedimproving generation andregionalregulation, increasing the number of generation units,andreinforcing the network. While the partners havealreadyrequesteda newtest,the UCTE establishedalist of conditions thathave not yet been met.47 The verycause of the problem is the differenceamong the systems,with averylong butnot very powerfulLibyansystem —more than2,500 km-long— on the one handandaverypowerfulEgyptiansystem on the other. AsMeslier putit,the synchronousGibraltar-Ceutalink,aswell asthe chain system tying together the Northern Africancoun- tries likethe wagons of atrain,are twoserioushandicaps for synchronization; theyimmediatelymobilizedefense plans for minor reasons. DC links between AlgeriaandSpain are under study,as well asdirectlinks to Italy,whichwouldnevertheless be costly;access to the Gibraltarlink is consideredforthe time being asanalternative. There is sharedinterest in the interconnection stemming from the potentialexport of solarpower from Northern Africa to Europe,butalso potentiallyof nuclearpower. Tunisiaaims to ‘go nuclear’ andexpects to open aplant by 2020,after having signedacontractwith the Frenchgovern- ment to thateffect.48 The Union forthe Mediterranean(2008) aswell asthe BarcelonaProcess establishedtwoenergy partnerships in thatdirection:the development of aninte- gratedelectricitymarket,fundedwith —4.9 million forthe period2007-2010,aswell asthe MED-EMIP project(Euro- MediterraneanEnergyMarket Integration Project).49 France is particularlysupportiveofthe energydimension of the Union forthe Mediterranean. Currently,interconnection within the region is apriorityin order to provideastable regionalframework thatcould, in asecondstep,beinterconnectedwith the UCTE.

47.Information:Marcel Bial,UCTE, November2008. Interviewbythe author. 48.http://www.globalsecuritynewswire.org/gsn/nw_20090424_5066.php. 49. Medemip.eu . 20 1 0 I f r i , © Existing Lines andMissing Links 117

Map5.Interconnectionsin the MediterraneanRing

Source: OME, 2006.

From bilateraltoregional Bilateralinterconnections are the veryfocusofthe MediterraneanRing project. The factthat,to this date,North Africancountries export traditionalelectricitywhile solar energy,whichtheoreticallyhasapromising future in the region,is in its earlybeginnings,is arevealing consequence of insufficient investment andof the relativelyhigh costs of renewables-basedgeneration. The countries of the region,thus, risk privileging traditionalgeneration,whichbenefits from lighter environmentallegislation,to the detriment of solar energy.Besides,electrification is not fullyaccomplished throughoutthe region:the mountainousAtlasarea, for example,is not connectedto the electricitygrids. ‘Establishing functioning gridsinthese countries,linking them up,is also a means to make people stay,to prevent them from migrating towardsthe North,which,again,is in the veryinterest of the EU’,saidMarcel Bial.50

50.Discussionwiththe author(December22 nd 2008). 20 1 0 I f r i , © 118 Atthe Speedof Light? ElectricityInterconnections forEurope

UCTE-Turkey Electricityinterconnection alwayshas,empirically,preceded full membership with the EU.Canone assume thatthe Turkish case will also beinline with this statement? While onlythe future will tell,interconnection with Turkeyhasbeen progressing since2005. Astudyon aninterconnection was startedin October 2005andsuccessfullyfinishedbyApril 2007. The studyrevealedthatinterconnection wouldbefeasible under the following conditions: •thatthe frequencycontrol problem wassolvedon the Turkish side; •thatasystem protection scheme atthe boundarywasesta- blishedto manage extreme contingencies; •thatthe power exportedfrom Turkeyto the UCTE was limitedto 500 MW butthen progressivelywent upto 1,500 MW,whichisthe limit forAC systems. 51 UCTE interconnectionwith Turkeyprogresses,asalready mentioned, on abilaterallevel:the Romania-Turkeyintercon- nection andthe Greece-Turkeylines are clearexamples of this trend.Itisimportant to remember,however,thatthe entire region ‘behind’the former Yugoslaviaandthe Balkans is largelyhostage to its fragmentedelectricitylandscape,lackof resources andpoor governance. Directsub-sealines canoffer acertain remedy,butinthe long runonlythe change of the situation in the Balkans will fullyintegrate countries like Turkey. Looking atthe Turkish borders,the veryproblem of Turkey,whichhasnumeroussynchronizedinterconnections with its neighbors Iran,Iraq,Syria, ArmeniaandGeorgia, is thatsynchronization with UCTE will oblige it to turn the existing other links into asynchronousones.Ashort— and medium-term alternativetosynchronization wouldbethe setting upofback-to-backstations,aswasconcludedin the UCTE-IPS/UPS interconnection study.ButTurkey’s aspiration to membership prevents it from accepting thatsolution.

51.Informationfrom Marcel Bial,UCTEOctober2008. 20 1 0 I f r i , © Existing Lines andMissing Links 119

Map6.HDVC linksbetween Maghreband Europe

Source: Medelec.

From the AtlantictoVladivostok:UCTE-IPS/UPS Interconnection with the former Soviet Union system is animportant issuefor the EU,ashighlightedbyvariousinitia- tives (listedbelowin decreasing order of importance): •the UCTE interconnection with the three former Soviet republicsofEstonia, LatviaandLithuania, nowEU members, whichhasalreadybeen discussedbefore; •the explicit mention of interconnection asagoalinthe Eastern Partnership andits association agreements.Here,elec- tricitystandardsandinterconnectedness are prominent issues;52 •current studies on the electricityinterconnection with Ukraine andMoldova; •the UCTE-IPS/UPS interconnection study.

52.EasternPartnership,EUCouncil December11th -12 th 2008;K.Longhurstand S.Nies,‘The ENP revisited’, Europe Visions ,Brussels,January 2009, Ifri.org . 20 1 0 I f r i , © 120 Atthe Speedof Light? ElectricityInterconnections forEurope

Ifthe priorities are different in eachofthe abovementioned cases,the technicalproblems are common to all. Andasfor some former Eastern Bloccountries,likeHungary,whichused to beinterconnectedwith the IPS/UPS system,the lines themselves wouldneedto becheckedin order to assess whether theycouldbeputbacktowork. IPS/UPSinterconnection:reality and projects The most fascinating of all electricityprojects is,without anydoubt,the one born outofthe ambitiousideato intercon- nectEurope andAsia, viathe UCTE-IPS/UPS interconnection at large.The thought of it maybring glimpses of utopiassuchas thatofa‘Europe from the Atlanticto Vladivostok’ advocatedby deGaulle,andidealisticobservers maybereadyto accept the challenge andaffirm the virtues of its economicopportunityin the long run. The ideaof aunifiedEurasianelectricitymarket into asingle electricspacespanning over 13 times zones from the Atlanticto Vladivostok,reaching 800 million consumers (430million from UCTE and370million from IPS/UPS)with 800 GW of capacity,is seen asanexciting prospectonboth sides of the former fence. Economicopportunitymeans also competition andchallenge,with,forexample,cheaper Russian or Ukrainianelectricitycompeting with EU enterprises.Oreven, assome observers putit,interconnection might even result in decreasedsecurityof supplyandmore dependenceonRussia who coulddecidetosubstitute its gassupplies byelectricityand then control this market. Last butnot least,unlikethe case of the DesertecSolarPlanwhere newtechnologies andenviron- ment friendlyresources are expectedto bebrought into the EU market,Eurasianinterconnection might entail the risk of creating anEU dumpling backyardbyproducing cheapnuclear electricity,with no regardforenvironmentalrisks andsecurity. The following paragraphs discuss the project,starting by the state of the Russiangridwhose technicalupgradeisapre- condition. The stateofthe Russiangrid The Russianelectricitygridcovers 450,000 km with tensions between 110and750kV.Asignificant portion works in the 330and750kVsegments,ahigh voltage thatisnot found 20 1 0 I f r i , © Existing Lines andMissing Links 121

within the UCTE.Adistinction must bemadebetween,on one hand, the Russiangrid(UPS),andon the other the grids of the CIS andBalticStates,collectivelycalledthe Integrated Power Systems (IPS). Asmuchasthe UCTE gridreflects EU geographyandrealityandis accordinglystronglyintercon- nectedandmeshed, the Russianone also reflects the country’s geographyandindustriallandscape:the huge distances between the energyresources andthe consumption areasare the reasons whythe gridis onlypartlylinkedandpartlyanassort- ment of veryhigh-tension,long-distancecorridors.Russian electricityproduction currentlyreaches 210TWh,with 22% producedwith hydro energy,11% coming from nuclear,and the remaining 67% coming from fossil fuels. 53 While in the ENTSO system the regulation of demandand supplyis amajor concern,andbusinesses aswell asindividual customers are usedto enjoying significant levers —reimburse- ments in case of damage,forexample—,the power of customers in the former Soviet Union is still veryweak,not to sayclose to non-existent. Thus,IPS/UPS —veryfarfrom the Western culture concept of ‘consumer rights’— continuesolving the problem of demand-supplyimbalances the same waytheyusedto doitin the past:bysimplycutting off customers and, if necessary,entire regions.Southern Ukraine,forexample,hasbeen subjectto regulardisconnection. Consumers havenochoicebuttoaccept it.

IPS/UPS’sinterconnectedness today IPS/UPS has,to date,the following interconnections with thirdcountries: •the Finlandinterconnection,dating backtoSoviet times and linking the Soviet system to Finland, quite likethe onlydirect gaslink with thatcountry. 54 Ithasatotalcapacityof 1,420 MW, andincludes fourconversion stations in directcurrent; •the interconnection with Mongolia; •the interconnection with China; •the interconnection with Norway.

53.‘Russiaand the interconnected gridsof the CIS’,Anne-Marie Denis,RTE,Paris,March3 rd 2007,report in French. 54.S.Nies, Gazetpétrole vers l’Europe,Paris,IFRI, 2008,p. 198,Finland Connector,1973. 20 1 0 I f r i , © 122 Atthe Speedof Light? ElectricityInterconnections forEurope

Asfor links with the UCTE grid, IPS/UPS hasonlyone synchronizedinterconnection in the LvovpocketatBurstyn, nearMukachevo,in Ukraine.This part of the Ukrainian system is,asalreadymentioned, separatedfrom the rest of the gridandmonitoredfrom the WarsawUCTE monitoring centre. Projects The interconnection projects in progress includeRussia on one hand, andseparate projects forUkraine andMoldova on the other.ItisobviousthatRussiafears being excludedif onlythe latter were integrated.This explains Moscow’s resist- ancetoanysynchronization with those twotaking place before the long term synchronization atlarge.Here again, asynchronousDC lines,also fortechnicalreasons,shouldbe consideredasalternatives fornon-member states.The introductorypart on legacies describedthe ColdWarinfrastructure. Exploring the technicalstate of the ColdWarinterconnections with Hungary,nowoutoforder,to establish whether they couldbeusedagain to link the twosystems,couldpotentially reduceinvestment on lines andhelp avoidlong legislative procedures associatedwith newinfrastructure.This point shouldbepart of the agenda. Ukraine andMoldova Ukraine andMoldovarequestedinterconnection to the UCTE in March2006,through their TSOsUkrenergo andMoldelectrica.Both countries are todayelectricitynet exporters.The implementation phase of the projectisesti- matedto take seven years.Accordingtothe UCTE, the Terms of Reference(ToR)are finalizedandhavebeen approvedby the partners.Severalmeetings havetakenplacewith the EU concerning funding,andacall hasbeen madetoset upa consortium.55 ButRussiacontinues being adamantlyopposed to Ukraine’sinterconnection,asitis,in general,to Ukraine’s Western integration asawhole.Asfor Moldova, the EU and UCTE are quite worriedaboutthe perspectiveofa‘second Albania’inthe region,anenclaveencircledbyRomania,

55.Source:UCTE, Marcel Bial,November2008. 20 1 0 I f r i , © Existing Lines andMissing Links 123

RussiaandUkraine,potentiallyexplosivebecause of economic decline andthe Transnistriaconflict. Interconnecting Moldova is animportant politicaltask in order to increase stability in thatcountryandprevent it from becoming the poorhouse of Europe.Todate,MoldovaandRomaniaare linkedvia two110kWcables,whichallowsRomaniato import cheaper Moldovanelectricity. Russiaandthe CIS In2002,the UCTE receivedarequest from the Russian TSO,on behalf of the CIS andthe BalticStates,forasynchro- nousinterconnectionofthe IPS/UPS power systems with the UCTE.Apre-feasibilitystudywasconcludedin 2003,anda secondone waslaunchedin 2005andfinalizedin December 2008.56 The secondstudyhad to answer the following three questions: •Isasynchronousinterconnection between the UCTE and IPS/UPS possible? •Whatare the measures to betakenoneachside? •Whatare the associatedcosts? Onthe UCTE side,aconsortiumofeleven TSOsfrom nine member states participatedin the project. Onthe other side, there wasRussiaaswell asseven companies thathad estab- lishedajoint agreement forthe project:Belarus,Estonia, Latvia, Lithuania, Ukraine,MoldovaandCentralDispatchOrganization (CDO).57 The projectmanagement officehasone branch locatedin Hanover,Germany,andanother one atthe UCTE in Brussels.Fiveworking groups and g 10million were allocated forafeasibilitystudythatendedupwith the endorsement of keyconclusions bythe studypartners on May5 th 2008. According to those,the interconnection was‘feasible upon implementing severaltechnical,operational,andorganiza- tionalmeasures andestablishing the legalframework as identifiedin the investigation’.Itwasacknowledgedthatthe implementation phase wouldbealong process,andthata

56. Ucte-ipsups.org (homepage of the study). 57.Forthe detailed list see the projectUCTE IPSUPSStudy,on the UCTE homepage, Ucte- ipsups.org . 20 1 0 I f r i , © 124 Atthe Speedof Light? ElectricityInterconnections forEurope

Map7.The logo of the UCTE IPSUPS study

Source:Ucte-ipsus.org.

synchronouscoupling shouldbeconsideredasalong-term perspective. Inorder to achievethe world’s largest unified electricitymarket platform,the construction of HVDC links between the bordering countries maybeconsideredasa medium-term alternativesolution. This preliminarysystem coupling however requires separate investigations. 58 The feasibilitystudiesfurtherrevealedthattransfer capacities are limitedmainlyduetointernalcongestion in the two systems.Thus,asynchronouscoupling wouldrequire substan- tialinvestment in the transmission gridsonthe Eastern side. Investment in the IPS/UPS generation andtransmission sectors is also requiredin order to keep frequencyfluctuations from generating severe disturbances thatwouldimpactonsystem security.The complexlegalandregulatoryframework could onlybeachievedin the long run. This framework hastocover operationalandorganization issues aswell ashighlypolitical issues.

58.Keyconclusions:http://www.ucte.org/_library/news/20080505_UCTE-IPSUPS_Study_Key Conclusions_30April2008.pdf. 20 1 0 I f r i , © Existing Lines andMissing Links 125

Considering these findings,no fast change shouldbe expectedto today’s situation,duetoalackofinvestment capacities,legalaspects andvarioustechnicalproblems.

Conclusion The interconnection with the BalticStates shouldbe consideredafirst step in order to advanceonthe path of synchronization while avoiding integrating the systems too early.HVDC lines with back-to-backstations are to beconsid- eredasshort andmedium-term alternatives especiallyfor MoldovaandUkraine. 59 Energysecurityis animportant issue here:the resource-poor EU feels alreadyverydependent on its suppliers,andespeciallyatthe mercyof Russiaandthe transit countryUkraine in terms of gas. Afurther strengthening of dependency—with the arrival,forexample,of cheaper electricityfrom Russiaor Ukraine on the EU markets— is consid- eredbymanyexperts asahuge risk. Andthis is aneven stronger argument,asboth countries donot complywith the same rules asthe EU in terms of market organization. This said, there shouldbenoobstacle to pan-Europeanmarket integration oncethese countries haveintroducedcompatible rules of the game concerning unbundling,competition,etc.

Conclusion:ExistingLinesand MissingLinks Summing up,the following problems must still beover- come: •the poor interconnection —or even isolation— of Italyand the IberianPeninsula; •the newrisks brought along byrenewable energy,especially forGermany; •the poor state of the grid, poor integration of CentralEurope andespeciallythe BalticStates,whichalso havetobridge the gapbetween the decommissioning of IgnalinaIIin 2009 andthe start of the newnuclearpower plant —whether in Lithuaniaor Kaliningrad.The CentralEurope-East Europe rift

59.http://www.ucte.org/_library/news/081208_pressRelease_UCTEIPSUPS_studyClosing Session.pdf(forthe ClosingsessionofDecember5 th 2008onthe four-yearstudy). 20 1 0 I f r i , © 126 Atthe Speedof Light? ElectricityInterconnections forEurope hasbeen particularlyvisible here,andeven more so sincethe fall of the Soviet Union. Rivalryandresistanceare still very present. The ideaof acommon TSO forthe CentralEuropean states,in order to favor investment in both electricityandgas, couldbeapromising idea; 60 •the hybridsituation of countries who,although having already anislandedUCTE interconnection within their boundaries, still remain separatedfrom the rest of the grid, aswasexplained in the beginning of this part. This brings along the question astowhether the combineduse of AC (synchronization) and DC wouldnot bealong-term solution forsome geopolitical contexts suchasthe common neighborhoodareaof Russia andthe EU; •the largelyincomplete connection between the EU andits neighbors atlarge.Feasibilitystudies on the interconnection with the MediterraneanRing,aswell aswith IPS/UPS and Turkeyhavebeen undertaken,butwithin the EU Eastern Partnership,UCTE integration of the Ukraine andMoldova remain unaccomplished. South East Europe hasbeen amajor challenge sincethe YugoslavianEast-West boundarydisappearedin the 1990sand severalsplinter countries succeededthe Federation. The region is clearlythe worst-off among the EU neighborhoodareasand requires specificefforts to fill in the missing links andover- come extreme import dependencyduetoinsufficient generation. Illegalconsumption of electricityis veryfrequent in the region andmakesitdifficult to attractinvestors andcompanies. Setting uprules andguaranteeing their enforcement is thus the first condition forthe region’selectrictake-off.The higher profile recentlyacquiredbythe EnergyCommunitySouth East Europe with its potentialfor promoting the regionaladvances in the fieldof energyinfrastructure is averypositivesignal. Switzerland, anon-member state,continues to playapivotal role in electricityexchange andis integratedinstitutionallyvia the UCTE, butnot sufficientlyso in anoverall governance sense.

60.Forthe GasTSO,see proposalofthe EuropeanCommission,CommissionStaff Working Document,January 2009,‘GasSupplyDisruptiontothe EU:AnAssessment’,July19th 2009. 20 1 0 I f r i , © Perspectivesand PolicyRecommendations

Electrification andelectricitygridshavebeen apowerful symbol of development andmodernityever sincethe endof the 19th century.There is anopportunityagain todayto bring the subjectfurther into publicawareness,asamirror of modern industrialsociety.Toachievethatwill require the optimization of existing infrastructure,the use of the opportunities offeredbythe information age, 1 the improvement of trans- border governance,andthe setting upofthe obviouslymissing links. This part summarizes findings andhighlights constraints andupcoming challenges on the subjectofinterconnections suchasthe impactofgovernanceandregulation,renewable energies,innovation andsmart grids,enlargement andinvest- ment. The studyconcludes on policyrecommendations.

Interconnectionsand the Faceofthe Grid in the 21 st Century Aswesaidearlier,the Europeangridreflects the state of Europeangovernanceaselectricalintegration is the first step foracountry’s further integration —economicor political integration,andEUmembership.Along the same logic, the Europeangrid’s definitiveshape —whether it endsupbeing regionalorcentralized—will represent apars pro toto of the EU atlarge conceivedeither asafederation or asanuclear entity.

1. See foranexhaustivepresentationofthe InformationAge:Manuel Castells, The Information Age. Economy,Society and Culture ,II-III,Cambridge/Oxford,Blackwell,1996-1998. 20 1 0 I f r i , © 128 Atthe Speedof Light? ElectricityInterconnections forEurope

The prime objectivefor the EU electricitymarket should bethe establishment of asustainable electricitygrid: this means aneconomic, ecologicalandsecure infrastructure that avoidsasmuchaspossible unnecessarylarge scale investment in newgeneration facilities.Interconnections canbeapositive element in this scheme providedthat: •the entire potentialofalreadyexisting interconnections is fullyexploited, both in terms of quantityandprice; •theyhelp substitute generation in using capacities in one countryto export them to aneighboring country; •theyhelp introducenewsources from farawayareas,like solarenergyfrom the Sahara; •theyguarantee solidarity,especiallyin case of naturaldisas- ters or politicallymotivatedsupplydisruptions. Sustainable gridsare akeyelement to reachthe 20/20/20 target. Interconnections,in turn,offer companies the advantage of saving the cost of newinfrastructure.Theyare also in the interest of private consumers who havebecome increas- inglyconcernedwith the potentiallyadverse ecologicalimpact of infrastructure projects. Today’s AC gridis alreadyextremelyflexible andhasbeen technicallyupdated, the distribution part having been left aside forthe time being forfinancialandtechnicalmaturityreasons. Progress is to beexpectedwith the introduction of even more ICT2 andadrop in costs thatseems to bealreadyunderway. 3 The gridof tomorrowwill comprise decentralizedsmall units aswell asHVDC lines in the long runand, if the Sahara exploitation is accomplished, also alarge HVDC sub-seasystem linking the southern andnorthern shores.The impressive increase in the use of renewable energies forelectricitygener- ation,especiallyandparadoxicallyin the North,goes along with the challenge of howto integrate thattype of energyinto the grid.Anysolution requires coordination,whichsofarhas proven to bedifficult,sincetraditionalapproaches andfrag- mentedgovernancestill prevail even atstate level.

2.Bullx,amethodofextremecomputing,deservesmentionhere. See www.boursorama. com/infos/actualités/detail (Paris,June 16 th 2009). 3.http://www.smartgridnews.com/pdf/TheEmergingSmartGrId.pdf. 20 1 0 I f r i , © Perspectives andPolicyRecommendations 129

Technologicalprogress andinnovation is neededto respondto the challenge of renewals,whichdoes not just concern Europe butthe worldasawhole.Progress is also neededin terms of undergroundlines,whichare likelyto become more frequent in the future andare preferable from anecologicalpoint of view.Despite their being muchmore expensive,their increaseduse will bring along decreasing costs andeconomies of scale.Smart gridscouldalso turn outtobe apromising concept forthe task of increasing transmission efficiency. Bridging the gapbetween,on the one hand, the most advancedInformation Age sectors suchastelecoms and computers,andon the other the veryconservativeelectricity sector,hastobeconsideredaprime challenge,requiring first of all ashift in the institutionalparadigm. Financing the change andsetting the right incentives foritisaprime Public-Private Partnership (PPP)challenge on anationalanda Europeanlevel.

Interconnections,Politicsand Solidarity Interconnection asapoliticaldecision Toset upinterconnections is apoliticaldecision to the extent thatthe alternativeexists to transport the resources thatgenerate electricityfrom their sourcetoanother site for future electricitygeneration. The choiceofone over the other is not neutral. Interconnections,aswehaverepeatedlysaid, present manybeneficialaspects,with their potentialfor soli- darityin situations of emergencyanddisruption being one of the most prominent ones; theydonot,however,automati- callycontribute to animprovedmarket mechanism on both sides of the border —asthe CRE reports haveshown. We caneven witness absurdflowsfrom ahigher priceareato a lower priceregion,or the absenceofflowsinconditions that are largelybelowthe existing interconnection capacities.The improvement of market conditions dependsonimproved governanceaswell asontransparency.The EU hasgone through tremendousgovernancechanges,andthe process is stilloncourse. 20 1 0 I f r i , © 130 Atthe Speedof Light? ElectricityInterconnections forEurope

The prime role of nationalregulators The role of nationalregulators is crucialfor the improved functioning of interconnections. The ThirdPackage hasincreasedthe power of national regulators on the nationalmarket. This hasbeen afunda- mentalstep,sincecongestion does not onlyoccuronthe borders,butalso insideofthe countries.Todate,anddespite their obligation to doit,the majorityof nationalTSOsdonot deliver sufficient dataon congestion insideoftheir countries. The availabilityof suchdatais essentialinorder to dealmore efficientlywith congestion on the borders andto evaluate the necessityof newinfrastructure,including interconnections.

The prime role of regionalinitiatives Nordel came upwith amultilateralinitiativealreadyin 2002,butthe movefrom abilateraltoaregionalmodel is also anoption:the Central-West region hasmovedfrom bilateral to regionalparadigms thatinturn haveresultedin useful spillover to other regions andcouldpotentiallyencompass the EU asawhole.Electricityexchange viainterconnection, however,will alwaysberegional,limitedto some fivetoseven countries,depending on the number of neighbors of eachof the countries involved, andnever complete on aEuropean level. Itwill belimitedatleast until anewDC gridis set up in parallel to today’s meshedsystem,referring here to the alreadymentionedambitiousDesertecproject.

Institutionalchangeatthe speed of light? The movefrom ETSO to ENTSO-Eis ameasure of the accel- eratedpaceofchange,asare also the plannedcreation of DG EN atthe endof 2009,the unprecedentedestablishment of the 20/20/20 goals,andthe regulatorychanges adoptedatthe end of 2008onEnergyandClimate.The question remainsopen as to whether aEuropeanelectricitymarket wouldfirst require the dismantling of nationalstructures.Unbundling the links between generation andtransmission andthen integrating them into atrueEuropeanmarket is consideredbysome asthe only 20 1 0 I f r i , © Perspectives andPolicyRecommendations 131

wayto moveforward. 4 Does the Europeanelectricitymarket needa‘super regulator’ in order to function properly?This issue will beonthe agenda foryears to come,with astrengthened ACER —‘ACER Plus’— asonlyone among the possible options. Here again,twoantagonisticphilosophies underlie the current institutionalbattle:one in favor of the ‘federal’ approachcoming from below,with the ENTSO coordinating the nationalTSOsin aneffort to overcome the narrow-mindednationalapproaches, andanother one in favor of a‘Super AgencyACER’centralizing andrunning the projectfrom ‘above’.The concrete performance of eachone of these institutions will in time demonstrate which option wouldbethe most efficient.

Missinglinkswithin the EU Part III showedthe impressivelist of interconnection projects,butalso the huge regionaldifferences andanumber of missing links thatneedto beestablished.Congestion management on anationallevel hastobeimproved, andthis should befacilitatedbythe adoption of the ThirdPackage that empowers regulators with the necessaryauthorityto demand thatTSOsaccomplish thattask. Asfor the establishment of missing links,today’s priorities canbeidentifiedasfollows: •East:the inclusion of the BalticStates andthe improvement of the weakPolish gridforthe sake of improvedenergysecu- rity,asafirst step; •North:asolution to offshore windenergyintroduction into the gridsandthe common management of those flowsamong the concernedcountries; •West:improvement of governanceonthe congestedFrench- Belgian,aswell asFrench-Germanborder; •South:the opening upofItalyviainterconnections; •Southeast:the improvement of the patchwork andislandized structure in the former Yugoslavia, with its impactonother states of the region suchasRomania, GreeceandTurkey.

Linkswiththe neighbors Inthe EU neighborhoodareas,generation sources should beofprime concern,andthe current preferencefor classical generation to the detriment of economicallyviable renewables, whichare abundant in the region,shouldbeoffset bygovern- ment incentives.The Unionfor the Mediterraneanprovides a usefulforumandinstrument forthis. Asfor the IPS/UPS-UCTE interconnection —along-term projectthathasbeen under studyformore thanfouryears now—afast solution is unthinkable,owing to insufficient grids thatrequire updating,butalso to politicaldissent on the oppor- tunityof the measure.Coupling using HVDC back-to-back stations andthe close examination of the out-of-order ColdWar infrastructure shouldbefirst steps in the right direction. The UCTE system,nowapart of the ENTSO-E, will continuetoenlarge andto contribute to homogenization and standardization even outsideofthe EU membership area.The MediterraneanRing will becompletedandIPS/UPS could then beinterconnected.Electricityhasahighlysymbolicchar- acter,equivalent to modernityandprogress.Electricitynetworks asaEuropeanpublicgoodshouldthusberegardedassymbols of asuccessfulEuropeanintegration.

Electrification and development Anestimated1.6 billion worldcitizens still lackaccess to electricity,most of them in sub-SaharanAfrica andSouth Asia, especiallyin India. 5 Inthe contextoftoday’s financialcrisis,the referencetoRoosevelt’sNewDealremindsusthatruralelectri- fication wasahuge concern between 1935 and1950asmuchas asignificant part of the overall problem. Today,asinthe past, modernizing the gridsofdevelopedcountries andintercon- necting them,butalso contributing to the electrification of other parts of the world, remains amajor concern. The newopportu- nities resulting from the huge publicengagement thatistypical of times of globalrecession shouldnot beleft unexploited.

5. Source:IEA, World EnergyOutlook 2008 ,quoted byEdCrooks,CurrentConcerns, Financial Times ,Energysupplement,October28 th 2008,p. 4. 20 1 0 I f r i , © Perspectives andPolicyRecommendations 133

PolicyRecommendations The following section offers policyrecommendations, viewedasnecessarysteps to arriveatanimprovedEUgridas well asimprovedEUelectricityinterconnection governance. Theyare not listedin anyorder of prioritybutrather constitute asummarythatisaresult from this study. Recommendationson the regulatory and institutionalside 1. The fourGermanTSOsmust beunitedin order to homogenizethe TSO landscape,diminish the complexityof interconnection governanceandavoidparallel projects among them. Asaconsequenceofthat,the role of the remaining GermanTSO wouldbestrengthened. 6 Inamore generalsense, the coordination of different coupling projects proves to beas crucialasitisdifficult to manage:if GermanyandDenmark want to engage in market coupling,forexample,theycannot dosowithouttaking into account the other countries or regions to whichtheyare alreadylinked: Central-West for Germany,andNordPool forDenmark. Sincethe TSOsdonot reallycoordinate sufficientlytoday,the regulators haveto assume animportant role.ERGEG set upaprojectcoordina- tion groupduring the FlorenceForuminNovember 2008, going in thatdirection. There is anurgent needto reinforce governanceonaEuropeanlevel in order to get projects going. 7 2.The reports of the CRE havetobeconsideredabench- mark andthe upcoming regionalreports must not lagbackin qualitybehindthose detailedanalysis.Inabroader sense,transparencyon the movements,evaluation,regionalbreakdownof supplyanddemandto identifynecessaryimprovements andprojects,are the verybasis foradvancement in EU interconnections. 3. Integration in CentralWest hastobeconsidereda benchmark. Lessons shouldbelearnt,andintegration in the other regions stimulated.

6.http://www.bmwi.de/English/Redaktion/Pdf/options-future-structure-german-electricitytransmission-grid,property=pdf,bereich=bmwi,sprache=en,rwb=true.pdf 7.The factthatthe marketcouplingattemptbetweenGermanyand Denmarkfailed in October 2008and hasnotbeenre-launchedeversince,stressesthe need forsuchacommon Europeanapproach. 20 1 0 I f r i , © 134 Atthe Speedof Light? ElectricityInterconnections forEurope

4. ACER andENTSO-Ecompetition hastobeavoided, and acleardefinition of eachone’stasks formulatedfrom the first dayof their existence.

Pricingand subsidies 1. The Czech-EU presidencyproposal(2009) of asingle tariff forEU electricitytransmission in the EU shouldbe adopted.The appropriate compensation forthird-country access to nationalgridsisclearlyaprime issueinimproving interconnections in Europe. 2.Asfor nationalandEUsubsidies,the risk of investing in outdatedinfrastructure hastobeassessedprojectbyproject, taking into account provisions concerning future consumption, energymixandefficient exchanges on the border. 3. The efficiencyof merchant lines hastobetestedin the years to come.Tobedeclaredefficient,theywill havetoincrease competition on the market,andbridge gaps.

Newinterconnections Newinterconnections must bedecidedon acase-by-case basis,considering the specificities of eachborder involved, andnot asthe result of some ‘romantic’attachment to the idea of interconnection itself.Inorder to assess the needforthem, the cooperation between TSOsandregulators is asdecisiveas Public-Private Partnership (PPP). Abetter fine-tuning of demand andsupply,andforwardplanning,are keyelements formoving forward.

EU and neighbors integration viaelectricity interconnection 1. The IPS/UPS-UCTE integration with MoldovaandUkraine bears animportant symbolicmeaning andmust bepromoted. Theyare also relevant from aneconomicpoint of view.Shouldit besynchronousorasynchronous? Ifthe decision is madeinfavor of anAC link,its development will havetobeaccompaniedby trust-building measures concerning Russia, andthe continuation of the dialogueonthe IPS/UPS-UCTE link. Unfortunatelytoday’s state of EU-Russiarelations is not verypromising in this sense. 20 1 0 I f r i , © Perspectives andPolicyRecommendations 135

The renegotiatedPartnership andCooperation Agreement,which will includeanenergychapter,couldbethe appropriate forum formoving further.Atthe same time,the regionaldimension underlying Ukraine’sandMoldova’s integration cannot be neglected: infrastructure will havetobeoverhauledboth in Polandandin Romania.Inthe case of Romania, institutions (regulator,etc.) aswell will needrevamping. 2.Experts agree thatenergypolicyrelating to the community market is fairlywell developed, even if it is spread across many institutions,whereasthe Foreign EnergyandClimate Policyis in its earlystages,andinstitutionallynot developedatall. Inlight of important negotiations with producers andtransit countries, aclarification of ‘who is in charge of what’ is necessary. 3. The MediterraneanRing:the promising Desertecproject, aprivate andmostlyGermaninitiative,shouldbeEuropeanized, andcouldbecome amain driver forthe setting upofthe MediterraneanRing portion in Northern Africa/Middle East.

Open Questions Where are weheading to? The traditional‘nothing replaces hydrocarbon’ scenario,the ‘more nuclear’ scenario,or the ‘renewable’ one? Ifacombination of these three is not unlikelyatleast in the mediumterm,no one canyet predictwhatthe exactenergy mixwouldbe. The answer to this question,however,will ulti- matelydetermine the characteristicsofthe finalEuropeangrid. Where dothe limits of synchronization lie? Canthe politicalintegration aspectbeseparatedfrom the electricityinterconnection issue? Issynchronization necessarilyapolitical issue? Whatisthe role of DC links in the future grids,considering thattheyare free from risk of chain disconnection down the line? Thus,in the veryend, andafter aninquiryon complex andtechnicalissues,the reader findshimself confrontedagain with the veryfundamentalquestion of the landscape of energy relations in Europe,andthusthe organization of its electricity market. Evolution in this field, unlikeelectricity,moves hardly atthe speedof light. 20 1 0 I f r i , © © Ifri, 2010 Map8.TEN-EPriority Projects

Source: Imera.

Map10.Frenchhigh-tension linesnearthe borderwithSpain

Note:in red: 400 kVlines; in green:225kVlines. Source: www.liaison-france-espagne.org/pdf/DossierPresentation.pdf. 20 1 0 I f r i , © Map11. Interconnectionsof Turkey

Source: Medelec. 20 1 0 I f r i , © Map12.RegionalForumCentral-West 20 1 0 I f r i , © Map13.RegionalForumCentral-East 20 1 0 I f r i , © Map14. RegionalForumCentral-South 20 1 0 I f r i , © Map15. RegionalForumSouth-East 20 1 0 I f r i , © Map16.RegionalForumSouth-West 20 1 0 I f r i , © Annex

1. Europe’sElectricity Regions ATSOI IrelandENTSO-Eby2009 BALTSO BalticStates ENTSO-Eby2009 CENTREL ContinentalCentralEast ENTSO-Eby2009 IPS/UPS Former Soviet Union Nordel Northern GridENTSO-Eby2009 UCTE ContinentalWest ENTSO-Eby2009 UKTSOAUKENTSO-Eby2009

2.Abbreviationsand Definitions AC:Alternating Current. Usuallyusedfortransmission lines:three-phase alternating current. Single-phase AC current is sometimes usedin railwayelectrification systems.The introduction of alternating current followedthe ‘WarofCurrents’ andis owedto NiclasTesla ACER: Agencyforthe Cooperation of EnergyRegulators (to followERGEG) BACK-TO-BACK STATION: Specialequipement capable of changing alternating current (AC)into DirectCurrent (DC) andagain DC into AC.Suchequipment allowsfor the connection of twopower systems thatdonot operate synchronously, asUCTE with IPS/UPS 20 1 0 I f r i , © 138 Atthe Speedof Light? ElectricityInterconnections forEurope

CCS: Carbon Capture andStorage CDO: CentralDispatchOrganization CEE: CentralandEastern EuropeanCountries CEEC: Committee of EuropeanEconomicCo-operation, from 1961 OECD CIGRE: Conseil Internationaldes GrandsRéseaux Electriques CMEA: Council forMutualEconomicAssistance(Former Soviet Bloc) COCOM: Coordination Committee forMultilateralExport Controls CONGESTION: Aninterconnection is congestedif the net flowon the line —exports andimports— exceeds99% CONGESTION MANAGEMENT:Atechniqueofoperating electricitygridsinsuchawaythatthe technicallimits are respected.Itrefers to the principles usedto handle the phys- icalflowof power through cuts in the transmission grid, either within anareaor between twoormore markets CPTE: Coordination delaProduction et duTransport de l’Energie électrique DC: DirectCurrent. Losses in directcurrent transmission are significant andthusrequire thickcables andlocalgenera- tors; in the earlyperiodof electrification this factlimitedthe sizeofthe gridto amaximumof2.4 km aroundthe generating plant. TodayDC is mostlyusedin undergrounding,espe- ciallysub-sealines.The DC system set upinthe US was inventedbyEDISON (see AC,NicolasTESLA, WarofCurrents) DEFENSE PLAN: Reaction to anextraordinarysituation beyondN-1,requiring the isolation of the incident andafast appropriate answer DISTRIBUTION: The finalstage in the electricitydelivery process before retail to endusers.Itincludes typicallymedium voltage with less than50kVlines aswell aselectricalsubsta- tions,transformers,andlow-voltage distribution wiring with less than1,000 V. 20 1 0 I f r i , © Annex 139

DG TREN: Directorate GeneralTransport andEnergy.To betransformedbyNovember 2009into twoseparate DGs:DG Transport andDGEnergy EIB: EuropeanInvestment Bank,Luxembourg ETS: Emission Trading Schemes ENTSO-E: 36 EuropeanTSOssignedon June 27 th 2008a letter of intent in order to set up,before the endof 2008,the EuropeanNetwork of Transmission System Operators for Electricity(ENTSO-E). ENTSO-Ewill facilitate the implementation of the ThirdLegislativePackage of the InternalElectricity Market. The purpose is to further strengthen the cooperation of TSOsinanumber of keyareas,suchastechnicalandmarket- relatednetwork codes aswell asthe coordination of system operation andgriddevelopment ETSO: EuropeanTransmission System Operators.ETSO includes 40TSOs EURELECTRIC: EuropeanElectricityIndustryAssociation EWEA: EuropeanWindEnergyAssociation EWIS: EuropeanWindIntegration Study GW/h:Gigawatt per hour HV:High Voltage HVDC: High Voltage DirectCurrent Hz:Hertz ICT:InformationandCommunication Technology IEA: InternationalEnergyAgency(OECD) IEM: InternalElectricityMarket IPS/UPS: IntegratedPower Systems/UnifiedPower Systems: the Gridof the Former Soviet Union (Russia, CIS,BalticStates) ITRE: Committee on Industry,Transport,Researchand Energy(EuropeanParliament) JOULE EFFECT:Losses during transmission owedto to resistanceandtension kV: Kilovolt 20 1 0 I f r i , © 140 Atthe Speedof Light? ElectricityInterconnections forEurope

kWh:Kilowatt hour LNG: LiquefiedNaturalGas LOWTENSION: 38-230V METERING: The introduction of IT elements in the end of the distribution system in order to improvethe exploitation of the production in peakandnon-peakhours (smart grids) MPT:MaximumPermanentlyallowedTension MWh:Megawatt hour N-1:The referencefor system security;itmeans thatthe system must beable to support losses of one centralunit, generator,etc. NATURAL MONOPOLY: Electricitygeneration,transmission anddistribution hasbeen traditionallyconsideredanatural monopoly.Following liberalization,electricityhascome to be consideredacommodity,andthe setting upofatrueelectricity market vialiberalization aprime challenge andobjective. The question nevertheless remains astowhether liberalization will beable to create arealenergymarket NORDEL: ScandinavianGrid SMARTGRID: Power gridthatdelivers electricityfrom suppliers to consumers using digitaltechnology TEN: Trans EuropeanNetworks (set upbythe Maastricht Treaty) TEN-E: Trans EuropeanNetworks Energy TPAC:Triple-Phase Alternating Current TSO: Transmission System Operator.TSOsare responsible forthe bulk transmission of electricpower on the main high- voltage electricnetworks.Theyprovidegridaccess to the electricmarket players according to non-discriminatoryand transparent rules.Theyare chargedwith ensuring securityof supplyviathe safe operation andmaintenanceofthe system. Inmanycountries theyare in charge of griddevelopment as well. Theycooperate in the EU within ENTSO-Easwell as within the regionalnetworks,likeUCTE or Nordel 20 1 0 I f r i , © Annex 141

UCPTE: Union forthe Coordination of Production and Transmission of Electricity(transformedinto UCTE with unbundling) UCTE: Union forthe Coordination of Transmission of Electricity:Western continentalgrid UNIPEDE: Union Internationale des Producteurs et Distributeurs d’Energie Electrique WEC: WorldEnergyCouncil WPC: WorldPower Conference

3.References WebsitesforInstitutionsrelevanttothe EU electricity market ec.europa.eu/energy/index en.htm Etso-net.org Ucte.org www.energy-regulators.eu/portal/page/portal/EER HOME Cre.fr ec.europa.eu/energy/electricity/florence/index en.htm UCTE maponelectricityinterconnections: Ucte.org OfficialEU documents and statistics EU EnergySecurityandSolidarityAction Plan:Second StrategicEnergyReview,November 13st 2008,ec.europa.eu/ energy/strategies/2009/2009 07 ser2 en.htm. Communication from the Commission to the Council andthe EuropeanParliament:PriorityInterconnection Plan, January2007,COM (2006),846 final(insists on the 10% requirement,BarcelonaSummit). Communication from the Commission to the Council and the EuropeanParliament:Addressing the challenge of energy effiencythrough Information andCommunication Techno- logies,Brussels 13.5.2008,COM (2008) 241 Final. TEN-Eguildelines1346/2006. Energy/ElectricityStatisticsonEurostat, Ec.europa.eu/ eurostat. 20 1 0 I f r i , © 142 Atthe Speedof Light? ElectricityInterconnections forEurope

Reportsof the TEN-Epriority projectcoordinators

Adamowitsch,G.W.,‘Connection to offshore windpower in Northern Europe (North Sea—BalticSea)’,Brussels,First annualReport,2007-2008,Brussels,ec.europa.eu/ten/energy/ coordinators/doc/annual/2 adamowitsch en.pdf. Mielczarski,W.,‘Power Connection between Germany, PolandandLithuania’,ec.europa.eu/ten/energy/coordinators /doc/annual/3 mielczarski en.pdf. Monti,M.,‘High Voltage Connection France-Spain’,Brussels 2008,(in Spanish andFrench) ec.europa.eu/ten/energy/ coordinators/doc/annual/1 monti fr.pdf(Also Textofthe French-Spanish Agreement,Map,etc.,ec.europa.eu/ten/energy/ coordinators/index en.htm).

Selected references

Breuer,W.,Hartmann,V.,Povh,D.,Retzmann,D.&Teltsch,E., ‘Application of HVDC forlarge power system interconnections’.CIGRE report B4-106,session 2004,Paris 2004(available online at E-cigre.org). Coopersmith,J., The Electrification of Russia, 1880-1926, Ithaca, Cornell UniversityPress,1992. Coutard, O.(ed.), The governanceoflarge technological systems, London,Routledge,1998. CRE/Commission deRégulation del’Energie,‘Rapport sur lagestion et l’utilisation des interconnections électriques’. Paris,CRE, juin 2007(1 st report). CRE/Commission deRégulation del’Energie,‘Rapport sur lagestion et l’utilisation des interconnections électriques’. Paris,CRE, juin 2008(2 nd report,prefacedbyAndris Piebalgs, 67 p.),www.cre.fr/fr/content/download/5659/122775/file/ 080612RapportInterconnexion.pdf. DEWI (ed.),‘GridCompatibilityof WindTurbines’,report, 2009, Dewi.de. 20 1 0 I f r i , © Annex 143

EASACpolicyreport 11,‘Transforming Europe’sElectricity Supply—anInfrastructure StrategyforaReliable,Renewable andSecure Power System’,London,May2009. ERGEG,EuropeanEnergyRegulators’ Work Programme 2008,Ref C07-WPDC-10-03,January17th 2008, Energy- regulators.eu. ERGEG,Reports CoherenceandConvergence,2007,2008. EWIS/Europeanwindintegration study,‘Towardsa sucessfulintegration of windpower into Europeanelectricity grids’,Final-Report 2007. Ferron,A., Electricité. Naissanced’une Communauté. Collection L’Europe après l’Europe.Confrontations Europe, LeManuscrit,2006. Hughes,Th. P., Networks of Power:Electrification in Western Society,1880-1930 ,Baltimore,Johns Hopkins UniversityPress, 1983. Hughes,Th. P.,Pinch,T.J.&Bijker,W.E.(eds.), The Social Construction of TechnologicalSystems:NewDirections in the SociologyandHistoryof Technology ,Cambridge,MIT Press,1987. Hughes,Th. M.,Mayntz,R.(eds.), The Development of Large TechnologicalSystems,FrankfutamMain,CampusVerlag,1998. IEA EnergyPolicies Review:The EuropeanUnion 2008 ,2008 Review,Paris,IEA, 2008. IEA, ‘Lessons From LiberalisedElectricityMarkets’,Paris, 2005. IEA, ‘ElectricityTransmission:Getting the Best Electricity Investments’,Paris,summer 2009. Lagendijk,V., Electrifying Europe. The Power of Europe in the Construction of ElectricityNetworks.PhDThesis,Amsterdam, Aksant AcademicPublishers,2008. Meslier,F.,‘Evolution of the electricalinterconnections aroundthe MediterraneanSea, duetothe MediterraneanSolar Plan’,conferenceMarch19 th 2009,manuscript. 20 1 0 I f r i , © 144 Atthe Speedof Light? ElectricityInterconnections forEurope

MVV Consulting,‘Implementation of TEN-Eprojects (2004-6)’,FinalReport,Volume 1,November 2007,Brussels, website DG TREN. Myllyntaus,T., Electrifying Finland: The Transfer of aNew Technologyinto aLate Industrialising Economy ,London, Macmillan&ETLA, 1991. Nye,D., Electrifying Amercia: SocialMeanings of aNew Technology.1880-1940 ,Cambridge,MIT Press,1990. Persoz,Santucci,Lemoine,Sapet. La planification des réseaux électriques,Paris,Editions EDF,1984. UCTE, Transmission Development Report 2008 ,Brussels, 2008. UCTE Interim Report of the Investigation Committee on the 28September 2003BlackoutinItaly,www.aei.it/ucte press.pdf. UCTE, ‘FeasibilityStudy:SynchronousInterconnection of the Power Systems of IPS/UPS with UCTE’, Ucte-ipsups.org. Varaschin,D., Etats et électricité en Europe occidentale, HDR, Université Pierre Mendes,Grenoble,1997 (unpublished manuscript). 20 1 0 I f r i , © Annex 145

4. MapElectricity Consumption and Exchangesin Regions in Europe in 2005

5. Interconnectionsin Europe:ExistingInfrastructureand Projects

C e n t r a l-W e s t Border ProjectDriver ExpectedEffects BE —NL Congestion on the South The three Phase Shifting Transformers andNorth borders (PSTs) shall improvethe management of criticalsituations in the 380kVgrid causedbyhigh North-South or South- North power flowsandfacilitate allocation of anincreasedandless volatile interconnection capacity to the market parties NL —NO Market coupling Norway— After the projectiscompleted, Netherlands both Norway(hydro system) andthe Netherlands(thermalsystem) will be able to optimizethe use of production capacity

FR —LU Consumer connection SOTEL (Luxembourg) hasaskedRTE for a225kVline to feedits industrial consumption in Betvat

FR —BE Congestion on the 225kV The projectwill increase the electricity line between the Lorraine transmission capacitybetween France area(FR)andBelgium andBelgium,sincecongestion constraints will beidentifiedon the 225kVMoutaine—Aubange circuit due to N-1 contingencyon the 400 kV network

NL —UK Market coupling United Projectwill result in enhanceddiversity Kingdom—the Netherlands andsecurityof supplyfor both markets, open access for all market parties by explicit auction andmarket coupling increase of interconnection capacityand market transparency

LU —BE Securityof supply Newinterconnection between the for the publicgrid Cegedel Net publicgridin LU andElia in BE to improvesecurityof supply for the Cegedel Net grid

DE —NL Congestion in the area Overloadsduetohigh North-South aroundthe German-Dutch power flowsthrough the auctioned border frontier between the Netherlandsand Germanyin peakhours of windin-feed 20 1 0 I f r i , © Annex 147

ProjectPresent StatusExpectedDate Description of Project PSTs(located Under Spring 2008Installation of 3PST 380kV, on the construction 1,400 MVA, +25˚/–25˚•1at northern Zandvtiet •2atVanEyck. border) TSOsincharge:Elia

NorNedHVDC Construction 2008NewHVDC link between Norway link completed; (Feda)andthe Netherlands projectin (Eemshav-en),DCvoltage 450kV, testing phase transmission capacity700 MW, length 580km. TSOsincharge:TenneT TSO &Statnett Moutaine Permitting 2009Creation of a225kVMoutaine (FR)—Betvat (FR)—Betvat(LU)line. (LU)225kV TSOsincharge:RTE &SOTEL line Moutaine Permitting 2010The newprojectwill upgradethe (FR)— existing 225kVMoutaine (FR)— Aubange (BE) Aubange (BE)line (installation 225kVline of the 2ndcircuit andreplacement of conductors). Studies are being carriedoutinto further increasing this interconnection capacity. TSOsincharge:RTE &Elia BritNedHVDC Intention to 2010NewHVDC link between the UK link construct (Isle of Grain,Kent) and the Netherlands(Maasvtakte). Transmission capacity1,320 MW, length 260km. TSOsincharge:TenneTTSO & NationalGrid New Under study2011 New220 kVline between the interconnector substations of Bascharage (LU)and in the Aubange (BE). southern TSOsincharge:Cegedel Net &Elia section of the LU grid Line Preparing Earliest 60km newdouble circuit 40kV Doetichem of permitting in 2013 OHL. (NL)— procedure TSOsincharge:TenneT, RWE TSO Niederrhein (DE) 20 1 0 I f r i , © 148 Atthe Speedof Light? ElectricityInterconnections forEurope

C e n t r a l-W e s t (followed) Border ProjectDriver ExpectedEffects FR —BE Congestions on the France— Constraints appearonthe France— Belgiumborder Belgiuminterconnection,dueto development in generation in northern France

DE —NO Interconnection Norway— Statnett andE.ON Netzare carrying out Germany astudyinto the first Norway—Germany interconnector. The aim is coupling the hydro-dominatedNorwegianetectricity system andthe windandthermal- dominatedelectricitysystem in northern Germany BE —UK Establish adirectpower Create trading capacities bycoupling exchange capability the Belgiangrid(Elia)andthe British grid(NG) DE —BE Establish adirectpower Newinterconnection between exchange capability the 400 kVEliaandRWE TSO grids in Central-West DE —FR Increase the power exchange Identification of possibilities to improve capacityon the DE—FR the Ensdorf (DE)—St. Avold(FR) profile interconnection

C e nt r a l-E a s t Border ProjectDriver ExpectedEffects CZ —AT Toincrease the (N-1) The projectwill increase the (N-1) securityandtransmission securityandNorth-South transmission capacityof the existing V capacityatthe CEPS-APG 437 Slavetice(CEPS)- interconnection. Itwill also alleviate Durnrohr (APG)tie line severe transmission capacitylimitation on the CEPS-APG profile during maintenance

CZ —DE Increasing power exchange This projectwill increase the current capacitybetween the Czech power exchange capacitybetween RepublicandGermany the CzechRepublicandGermany 20 1 0 I f r i , © Annex 149

ProjectPresent StatusExpectedDate Description of Project Strengthening Under study2012–2015 Studyto launch. of present TSOsincharge:RTE &Elia interconnection or new interconnection project NORDLINK Feasibility ≥ 2015 HVDC transmission system study 700-1,400 MW.Feasibilitystudy performedbyStatnett andE.ON Netz.

Under study Under studyTbd HVDC link. with National TSOsincharge:Elia&NationalGrid Grid Under studyUnder studyTbd Investigation of gridextension options. TSOsincharge:Elia&RWE Ensdorf Under studyTbd TSOsincharge:RTE &RWE (DE)— St. Avold(FR) line

ProjectPresent StatusExpectedDate Description of Project V438: Decided, 2008This projectisthe result of a Slavetice budgetedand bilateralagreement thathasbeen (CZ)— preparedon reachedbetween CEPS andAPG to Durnrohr (AT) CEPS side. improvethe existing tie-line tie-line Authorization byinstalling the secondsystem. requiredon Projectparticipation wasagreed the Austrian to beproportionaltothe length side,type of of the line from the border. authorization TSOsincharge:CEPS &APG procedure agreedwith authorities (starting in 2008). Hradec(CZ)— Initial First planning Itresultedfrom the discussions Vernerov negotiations is dueon2016 between CEPS andE.ON Netzto (CZ)—Vitkov havebeen buildanew380kVdouble-circuit (CZ)— launched overhead interconnection line Mechlenreuth between the between Germanyandthe Czech (DE, E.ON twosides Republicthrough twonew400 kV Netz) substations. 20 1 0 I f r i , © 150 Atthe Speedof Light? ElectricityInterconnections forEurope

C e nt r a l-E a s t(followed) Border ProjectDriver ExpectedEffects

AT —DE Increasing power exchange This projectwill increase the current capacitybetween Austria power exchange capacitybetween andGermany AustriaandGermany

AT —DE Increasing power exchange Upgrading existing 220 kVgrids capacityon AT—DE profile in southern DE andwestern AT

HU —SK Improvethe securityand Increase the power exchange capacity reliabilityof the network on Hungary—Slovakiaprofile. Possible of both partners,increase effects will beevaluatedbyjoint studies transmission capacityin the North-South direction

PL —DE Increasing power ex-change Possible effects of this projectwill be capacityon PL—DE profile evaluatedbyjoint studies

PL —DE Increasing power exchange Possible effects of this projectwill be capabilityon PL—DE profile evaluatedbyjoint studies 20 1 0 I f r i , © Annex 151

ProjectPresent StatusExpectedDate Description of Project mutual TSOsincharge:E.ON Netz&CEPS. information The findings andrecommendations exchange of the abovementionedstudy of future will beusedasabasis for future network negotiations between three sides: development CEPS, E.ON NetzandVE-T plans. Ajoint study between E.ON NetzandVE-T on the impact of wind generating plants on the systems is expectedto be carriedout andreflected in this project 380kVtie-line Idea/Option 2017 New380kVdouble-circuit overhead St. Peter interconnection line between (APG)—Isar GermanyandAustria. (E.ON Netz) TSOsincharge:E.ON Netz&APG Line Idea/Option Long term 145 km-long new400 kVdouble- Oberbachern circuit overhead line (62km existing (DE)—Silz line alreadydesignedfor 400 kV). (AT) TSOsincharge:E.ON Netz& TIWAG-NetzAG Sajóivánka Idea, System After 2015 Depending on the decision (HU)— plan of both partners,this projectwill be Moldavaor Sajóivánka(HU)—Moldava Rimavská or RimavskáSobota(SK)400 kV Sobota(SK) double line. 400 kVdouble TSOsincharge:MAVIR &SEPS line Krajnik (PL)— IdeaAfter 2015 This projectisthe conversion of an Vierraden existing 220 kVdouble-circuit line (DE) into a400 kVline. TSOsincharge:VE-T(DE)&PSE Operator (PL) Financing scheme:not yet decided Baczyna IdeaAfter 2015 This is the 3 rd 400 kV (PL)—German interconnection between Poland border (DE) andGermanywith reinforcement of Polish internalgrid. TSOsincharge:VE-T(DE)&PSE- Operator (PL). Financing scheme:not yet decided 20 1 0 I f r i , © 152 Atthe Speedof Light? ElectricityInterconnections forEurope

C e nt r a l-E a s t(followed) Border ProjectDriver ExpectedEffects PL —SK Increasing power exchange Possible effects of this projectwill be capacityon PL—SK profile evaluatedbyjoint studies

PL —LT Incorporation of Baltic Possible effectshouldbeevaluatedby States into Internal joint studies ElectricityMarket (IEM) of EuropeanUnion

PL —UA Resumption of existing and Itwill increase the power exchange not usedinterconnection capacityon PL—UA profile. Possible additionalpower flowsfrom PL to SK are expected, causedbypower imports from UA

SK —UA Increasing power exchange Possible effects will beevaluatedby capabilityon SK— UA joint studies,aswell aswithin IPS /UPS profile,accommodation studyor UA /MD interconnection study of transits /imports (if applicable) of electricity

SK —AT Creating aninterconnection Possible effects will beevaluatedby line between Austriaand joint studies Slovakia

AT —HU Increasing the (N-1) security The projectwill increase the (N-1) andtransmission capacityof securityandtransmission capacity the existing tie-line Wien SO on Austria-Hungaryprofile (APG)-Györ (MAVIR) 20 1 0 I f r i , © Annex 153

ProjectPresent StatusExpectedDate Description of Project Byczyna Under studyAfter 2018 This is anew400 kV (PL)—Varin interconnection between Poland (SK) andSlovakiawith reinforcement of Polish internalgrid. TSOsincharge:SEPS (SK)&PSE- Operator (PL). Financing scheme:not yet decided Elk (PL)— Planning ≤ 2015 This is anew400 kVdouble-circuit Alytus(LT) interconnection between Poland andLithuaniatogether with back-to- back1,000 MW station in Alytus (LT)andreinforcement of Polish internalgrid. TSOsincharge:subjectofdecision. Financing scheme:not yet decided Modernization Planning ≥ 2010The projectconcerns the and modernization andresumption of resumption the existing 750kVinterconnection of 750kV between PolandandUkraine. Rzeszow TSOsincharge:Subjectofdecision. (PL)— Financing scheme:not yet decided Khmelnitskay a(UA)OHL and installation of back-to-back 2 × 600 MW converters in the Rzeszow 750kV(PL) substation 2 × 400 kV IdeaAfter 2012This newprojectwill strengthen line V. the existing 400 kVinterconnection Kapu š any between Ukraine andSlovakia (SK)— with circuit doubling. Mukachevo TSOsincharge:subjecttodecision. (UA) Financing scheme:not yet decided 2 × 400 kVtie- IdeaAfter 2020 New400 kVSK—AT double-circuit line Stupava interconnection. (SK)— TSOsincharge:SEPS (SK)&APG Bisamberg / (AT) Wien SO (AT) Tie-line Wien Planning 2010Installation of the 2ndsystem on SO (AT)—HU phase the tie-line from Wien SO (AT, APG) border (Györ), to the border (both systems 2 nd System havealreadybeen installed on the Hungarianside). TSO in charge:APG 20 1 0 I f r i , © 154 Atthe Speedof Light? ElectricityInterconnections forEurope

C e n t r a l - South Border ProjectDriver ExpectedEffects FR —IT Take higher benefit from The congestion level on 220 kVTrinite existing 220 kVTrinite Victor Camporosso interconnection line Victor (FR)—Camporosso is expectedto increase with generation (IT)interconnection line projects in Marseille area, with the result thatthis line will havetobeopen most of the time. The projectisaiming atalleviating the congestion,allowing for closedoperation of this line FR —IT Increase of transfer capacity The 400 kVFrance—Italyinterconnection on France—Italyborder re-lies on the onlysubstation of Albertville on the Frenchside; it is madeupofarecentlyconstructeddouble circuit line with big section conductors Albertville (FR)—Rondissone (IT)andan older axis,Albertville (FR)—La Coche (FR)—La PrazSaint André (FR)—Villa- rodin (FR)—Venaus(IT)—Piossasco(IT). The projectaims to take best advantage of the existing network andincrease the capacityof the latter axis,whichlimits transmission capacitytowardsItaly IT —SI Congestions on Italian- Increase the capacityof the current Slovenianborder interconnection on the Northeastern Italianborder,whichhasalowlevel of securityandlowtransfer capacity.The 380kVRedipuglia(IT)—Divaca (SI)line is particularlycongested, limiting power exchanges with Slovenia.TEN-EProject IT —SI Congestions on Italian- Increase the capacityof the current Slovenianborder interconnection on the Northeastern Italianborder whichhasalowlevel of securityandlowtransfer capacity. Lowsecurityof supplyon the Slovenian network. TEN-EProject IT —SI Congestions on Italian- Increase the capacityof the current Slovenianborder interconnection on the Northeastern Italianborder thatfaces alowlevel of securityandtransfer capacity. The 220 kVPadriciano (IT)—Divaca (SI) line is particularlycongested, especially in N-1 condition IT —AT Constraints on Italian- Duetolowline capacities on the Austrianborder Northeastern Italianborder,there are limitations andcongestions in case of Italianpower import. The projectaims to increase the transfer capacity of this border 20 1 0 I f r i , © Annex 155

ProjectPresent StatusExpectedDate Description of Project PST on this Under study2011 Installation of aPST in France line or in Italy. TSOsincharge:RTE &TERNA

Upgradethe Under study2012Replacement of Albertville (FR)—La connection Coche (FR)—La Praz(FR),LaPraz atthe Italian- (FR)-Villarodin (FR),Villarodin Frenchborder (FR) — Venaus(FR)andVenaus (IT) — Piossasco(IT)circuits byhigh temperature conductors is planned. Rehabilitation of a400 kVline currentlyoutofvoltage [Albertville (FR) — GrandeIle (FR)], with high temperature conductors and connection to one existing Albertville (FR)—Rondissone (IT) circuit. New380kV Pre- 2013 New380kVdouble-circuit line line on the authorization between Udine Ovest (IT)and Northeastern phase Okroglo (SI). Italianborder TSOsincharge:TERNA &ELES with Slovenia

New400 kV Jointlyagreed2009400 /400 kVPST in Divaca (SI) PST substation. TSO in charge:ELES

New220 kV Under 2008220 /220 kVPST on Padriciano PST construction (IT)—Divaca (SI)Interconnection, in Padriciano (IT). TSO in charge:TERNA

New380kV IdeaLong term New380kVline between Cordignano Cordignano (IT)andLienz(AT). The (IT)—Lienz existing 220 kVSoverzene (IT)— (AT)line Lienz(AT)interconnection line wouldbedismantledto minimize the environmentalimpact. TSOsincharge:TERNA &APG 20 1 0 I f r i , © 156 Atthe Speedof Light? ElectricityInterconnections forEurope

C e n t r a l - South(followed) Border ProjectDriver ExpectedEffects IT —AT Increase of transfer capacity Inthe 2003TEN-EStudy,the possibility on Italian-Austrianborder of increasing transfer capacitybetween IT andATwithin the Brenner Base Tunnel projectwasinvestigated.The GIL solution seems the most feasible, using the plannedpilot tunnel of the Brenner Base Tunnel

IT —AT Constraints on Italian- Inorder to increase securityof supply Austrianborder andtransmission capacitybetween AustriaandItaly,anewtie-line at Reschenpass is currentlybeing studied

IT —AT Constraints on Italian- Inorder to increase transfer capacity Austrianborder between ItalyandAustria, anewlink across the Valicodel Brennero (Brennerpass) couldberenewed.

IT —CH Cross border Italy— Increase of current power exchange, Switzerland evacuation of future generation capacity in Switzerland

FR —CH Cross border France— Elimination of current bottlenecks Switzerland on the French-Swiss border,evacuation of future generation capacityin Switzerlandandincrease of current power exchange capacitybetween FranceandItaly

FR —IT Increasing transfer capacity Inthe 2005TEN-EStudy,the possibility on French-Italianborder of increasing the transfer capacity between ItalyandFrancewas investigated.The HVDC solution seems the most feasible,using existing infrastructure corridors 20 1 0 I f r i , © Annex 157

ProjectPresent StatusExpectedDate Description of Project GIL Under studyLong term New380kVGIL interconnection Innsbruck— through the plannedBrenner Base Bressanone Tunnel. TSOsincharge:TERNA &TIWAG- NetzAG

220 kVtie-line Under studyMid-term 380/220 kVsubstation directly Reschen-pass locatedatthe border anderection of 220 kVconnection till Graunand upgradeofthe existing Graun— Glorenzaline. Additionalconnection of 110kVdistribution gridin Austriaatthe newsubstation. TSOsincharge:TERNA, APG & TIWAG-NetzAG

110/132kV Under study2011 The projectonboth sides (Italyand line Prati di Austria)comprises the upgrading of Vizze(IT)— the existing Prati diVizze(IT)— Steinach(AT) Steinach(AT)line,currently operatedatmediumvoltage andthe installation of a110kV/132kV PST in Steinach(AT). TSOsincharge:TERNA &TIWAG- NetzAG

380kVline Idea2020 380kVline between Lavorgo (CH) Lavorgo andMorbegno (IT); different (CH)— options are on the table. Morbegno (IT) TSOsincharge:Swissgrid&TERNA

Different Under studyTbd Tbd projects are TSOsincharge:RTE, Swissgrid currently (&TERNA) studied

HVDC cable Under studyMidterm NewHVDC under-groundcable Piossasco interconnection between Piossasco (IT)—Grande 400 kV(IT)andGrandeIle 380kV Ile (FR) (FR),1,000 MW. TSOsincharge:TERNA &RTE 20 1 0 I f r i , © 158 Atthe Speedof Light? ElectricityInterconnections forEurope

C e n t r a l - South(followed) Border ProjectDriver ExpectedEffects IT —TU Interconnection line InJune 2007,anagreement wasreached between ItalyandTunisia between the ItalianMinister for EconomicDevelopment andthe TunisianMinister for Industryand Energy,appointing TERNA andthe TunisiancompanySTEG to set upa joint venture to create the electricity interconnection,manage international transits of electricityon the link and launchabidto buildapower plant in Tunisia

South-East Border ProjectDriver ExpectedEffects MK —BG Establishing East-West Increase Italy’s imports from the Corridor in Southeastern Balkans (BG, RO). Strengthen the sparse Europe (SEE) structure of the Balkannetworks. A400 kVinterconnection MK—BG will increase transfer capacities in North– South direction in SEE.This line is also part of the East–West corridor in SEE andcreates opportunities for increased power exports towardsItalyfrom countries with surpluspower (BG, RO) MK —AL & AL —IT / ME —IT

AL —ME Alleviate congestion Toestablish astiff corridor from GR— in the region AL—ME uptothe Adriaticline 20 1 0 I f r i , © Annex 159

ProjectPresent StatusExpectedDate Description of Project NewHVDC Jointlyagreed 2011 Anewinterconnection cable submarine bythe will join the CapBon peninsula cable between Ministries in Tunisiawith Sicilyandcarry Tunisiaand electricitygeneratedbyanew Sicily power plant in ElHaouaria, Tunisia. The plant will generate 1,200 MW, 800 MW of whichwill bedirected towardsItalyand400 towards Tunisia.The submarine cable will beadouble cable,170km in length, andhavea1,000 MW capacity, 200 MW of whichwill be guaranteedto the free access share. TSO in charge:TERNA &STEG

ProjectPresent StatusExpectedDate Description of Project Stip (MK)—C. Under 2008Length 150km. Mogila(BG) construction TSOsincharge:MEPSO &NEK 400 kVline

Bitola(MK)— Under study2012OHL length ∼ 200 km cable length Elbasan ∼ 350km. (AL)—Tirana TSOsincharge:MEPSO (MK), (AL)—Durres ATSO (AL),TERNA (IT) (AL)—Foggia andpossiblyEPCG (ME) (IT)400 kV OHL &DC cable Montenegro— Italyis an alternativeto Albania—Italy Tirana(AL)— Under Thirdquarter 400 kVline Tirana2(AL)— Podgorica construction of 2009 Podgorica (ME)with alength of (ME)400 kV 157 km (128.5 km on Albanianside, line 76 km of whichwith double the circuit,and28.5 km on the Montenegrin side). The contract for the construction is signedwith DalekovodCompany. TSOsincharge:ATSO &EPCG 20 1 0 I f r i , © 160 Atthe Speedof Light? ElectricityInterconnections forEurope

South-East (followed) Border ProjectDriver ExpectedEffects HU —RO Strengthening East-West Strengthen the interconnection to the andNorth-South corridors South andincrease the transmission capacity

HU —HR

GR —TR Northern borders Alleviate the import limitations from the northern interconnections mainly duetothe sparse structure of the Balkan networks

GR —BG

SI —HU & East border Connection to newpower system and SI —HR increase of power exchange capability

GR —IT Increase of interconnection Increase the transfer capacitybetween capacity GreeceandItaly

HR —IT Create asubsea Create the 1 st directconnection between interconnection between CroatiaandItaly,whichisof CroatiaandItaly interregionalimportancefor Internal ElectricityMarket

MK —RS North-South Corridor in SEE MK, AL andGRimports from the North are currentlylimitedduetosparse structure of the Balkans networks. The projectaims atincreasing the transfer capacity 20 1 0 I f r i , © Annex 161

ProjectPresent StatusExpectedDate Description of Project 400 kVline Under 2008Increase exchange capability Bekescsaba construction between HU—RO. (HU)—Nadab TSOsincharge:MAVIR & (RO) Transelectrica 400 kVdouble Under 2010TSOsincharge:HEP-OPS &MAVIR line Pecs construction (HU)— Ernestinovo (HR) N.Santa Under Tobe Possible operation for temporary (GR)— construction commissioned localexchanges with anislanded Babaeski (TR) in 2008 part of the Turkish power system. 400 kVline Length 130km. TSOsincharge:HTSO &TEIAS N.Santa Under studyTbd Newinterconnection line between (GR)—Maritsa GR-BG, length 130km (BG) approximately. 400 kVline TSOsincharge:HTSO &NEK 400 kVdouble Preparation 2011 First 400 kVinterconnection line line Cirkovce for between SloveniaandHungary. (SI)—Pince authorization The line alreadyexist on Hungarian (HU)border andCroatiansides. for connection TSO in charge:ELES asCirkovce (SI)—Heviz (HU)and Cirkovce (SI)— Zerjavinec (HR) SecondHVDC Preliminary Tbd 400 kVDCinterconnection. link between studyforeseen TSOsincharge: Greeceand TERNA &HTSO Italy 400 kVHVDC Under study2014 500-1,000 MW. subseacable TSOsincharge:TERNA &HEP-OPS between Croatiaand Italy Stip (MK)— Under study2010Length ∼ 220 km. Nis (SR) TSOsincharge:MEPSO &EMS 400 kVline 20 1 0 I f r i , © 162 Atthe Speedof Light? ElectricityInterconnections forEurope

South-East (followed) Border ProjectDriver ExpectedEffects RO —TR South-East border Enable the power export to Turkey

RO —RS Eastern corridor Increase securityof entire interconnection operation

RS —HU Strengthening the Create anew400 kVline between interconnection between HU SerbiaandHungary andRS

South-West Border ProjectDriver ExpectedEffects PT —ES Portugal—Spain Duero Alleviate the congestion on the 220 kV Interconnection network in the Duero area

PT —ES Portugal—Spain Duero Alleviate the congestion in the 220 kV Interconnection network on the Duero area

PT —ES Portugal—Spain South Alleviate the congestion thatoccurs on Interconnection the existing 400 kVline Alqueva(PT)— Brovales (ES)andlowlevels of exportation from Spain to Portugal. Besides,the projectenables the total integration of Spain andPortugalinside MIBEL 20 1 0 I f r i , © Annex 163

ProjectPresent StatusExpectedDate Description of Project 400 kVDC Under study2018 Length 400 km. submarine TSOsincharge:Transelectrica & cable TEIAS Constanta (RO)— Pasakoy(TR) 400 kVline Under study2015 Length:128km. Sacalaz TSOsincharge:Transelectrica & (RO)—Novi EMS sad (RS) New400 kV IdeaTbd 400 kVsingle line. line Pecs This projectisinveryinitialstage. (HU)— TSOsincharge:MAVIR &EMS Sombor (RS)

ProjectPresent StatusExpectedDate Description of Project New400 kV Permitting 2009NewOHL interconnection line Duero (almost under Aldeadávila(ES)—Lagoaça (PT). interconnection construction) AC Voltage 400 kV.Transmission Aldeadávila capacity1,690MVA (winter),length (ES)—Lagoaça 1kminSpain,5inPortugal. (Duero TSOsincharge:REN &REE Internacional, PT) Changes in the Permitting 2009Changes in the topologyof the 220 kV topologyof (almost under lines in this area.These changes, the 220 kV construction) mainlyin the Portuguese 220 kV lines in this network,lead to substituting the area existing line Aldeadavila(ES)— Bemposta(PT),byasecondcircuit Aldeadavila(ES)—Pocinho (PT). TSOsincharge:REN &REE New400 kV Under 2010–2011 NewOHL double circuit line South construction between Guillena(ES)—Pueblade interconnection (Guillena(ES) Guz-man(ES)andTavira(PT). On Guillena —P.Guzman the section P.Guzman(ES)—Tavira (ES)—Puebla (ES) (PT)initiallyonlyone circuit will be deGuzman Defining fnal placed.AC voltage 400 kV, (ES)—Tavira route transmission capacity1,700 MVA (PT) (P.Guzman (winter),length 152km in Spain, (ES)—Tavira 40km in Portugal. (PT) TSOsincharge:REN &REE 20 1 0 I f r i , © 164 Atthe Speedof Light? ElectricityInterconnections forEurope

South-West (followed) Border ProjectDriver ExpectedEffects FR —ES Constraint on France— The totalinterconnection faces ahigh Spain border level of congestion limiting the transmission capacity.Limitations on production of windpower energy in the Iberiansystem. The projectaims ateliminating these constraints

PT —ES Portugal—Spain North Alleviate the congestion on the existing Interconnection 400 kVline Cartelle (ES)—Lindoso (PT) andlowlevels of exportation from Spain to Portugal. Besides,the project enables the totalintegration of Spain andPortugalinMIBEL 20 1 0 I f r i , © Annex 165

ProjectPresent StatusExpectedDate Description of Project New400 kV Defining final 2011 –2012Newdouble circuit line between interconnec- route Baixas(FR)andSantaLlogaia/ tion line in the Ramis or Vic(ES). AC voltage eastern part 400 kV, Transmission capacity2*2 of the border 160MVA (winter),length Strategy Baixas—Vic50km in Spain,57 in France. Or:StrategyBaixas— StaLlogaia28kminSpain,40in FranceIncludedin the Priority Interconnection Plan(TEN-E Guidelines). AEuropeanCoor- dinator hasbeen appointedbythe EuropeanUnion for this project. TSOsincharge:RTE &REE New400 kV Under 2013 –2014 NewOHL double circuit line North environmental between Carteffe—Pazos (ES)and interconnec- studies VifaFria(PT)—VifadoConde tion (PT)—Recarei (PT). Onthe section Pazos (ES)—Recarei (PT)onlyone circuit will beplaced.AC Voltage: 400 kV.Transmission capacity 1,700 MVA (winter); length 110km in Spain (uptoCarteffe),112km in Portugal(uptoRecarei). TSOsincharge:REN &REE 20 1 0 I f r i , © © Ifri, 2010 EuropeanGovernance and the Geopoliticsof Energy

The “EuropeanGovernanceandthe GeopoliticsofEnergy” programfocuses on emerging keyissues anddelivers insight andanalysis in order to educate policymakers andinfluence publicpolicy.The programobjectiveistopromote acoherent andsustainable Europeanenergypolicy.The programdelivers on aregularbasis high-qualitypolicypapers aimedatdecision makers andanalysts addressing economictopicsaswell than politicandstrategic.

Alreadypublished

Notesde l’Ifri (onlinecollection) ASEAN EnergyCooperation:AnIncreasing Daunting Challenge,Françoise Nicolas,October 2009 La Chine àlaveille deCopenhague ,Valérie Niquet, September 2009 Hausse des prixagricoles et del’énergie :quellesrelations et implications àmoyen terme et àlong terme,Tancrède Voituriez,June 2009 EnergySecurityof Russiaandthe EU Current Legal Problems,SergueySeliverstov,April 2009 Legazalgérien en passe dechanger dereligion,Ihsane El Kadi,April 2009 Investing the EnergySector AnIssuedof Governance ,Jan Horst Keppler,ChristianSchulke,February2009 20 1 0 I f r i , © 168 Atthe Speedof Light? ElectricityInterconnections forEurope

LesEtudes Energyin India’s Future:Insights,Jacques Lesourne and WilliamC.Ramsay(eds.),September 2009 GovernanceofOil in Africa: UnfinishedBusiness,Jacques Lesourne (ed.),May2009 La Gouvernancemondiale del’énergie :enjeux et perspectives,Cécile Kérébel andJanHorst Keppler (eds.),March2009 Gazet pétrole vers l’Europe. Perspectives pourles infrastructures,Susanne Nies,August 2008 The ExternalEnergyPolicyof the EuropeanUnion,Jacques Lesourne (ed.),August 2008 L’Énergie nucléaire et les opinions publiques européennes, Jacques Lesourne (ed.),April 2008

Abatment of CO2 Emissions in the EuropeanUnion,Jacques Lesourne andJanHorst Keppler (eds.),December 2007

The editorialofthe IFRI EnergyProgram is available at Ifri.org.

Atthe Speedof Light? ElectricityInterconnections forEurope GOUVERNANCE EUROPÉENNE ET GÉOPOLITIQUE DE L’ÉNERGIE

Electricitymoves almost atthe speedof light:273,000 km per second.The speedof electricitymakesitthe ultimate “just in time” commodity.Aproblem anywhere canbetransmittedeverywhere in ananosecond. Electricityinterconnection is aprominent issueinthe news,sometimes even featuredasapanaceaforthe shortcomings of the Europeanelectricitymarket –apanaceathatwill ensure securityof supply,solidarityandpavethe way forapromising use of renewables in the future. The present studyis devotedto electricityinterconnections in Europe,their current state andthe projects concerning them. The studyaddresses the following questions: – What is the role of interconnections in the development of asustainable gridthatcanemerge from the existing pieces,make optimumuse of existing generation capacity,ensure energysecurity,andoffer economies of scales? Whatistheir role in the process of building adifferent energyconcept,one thatwouldbeconcernedwith climate change andthusinfavor of the use of renewables? – How are existing interconnections exploitedandgoverned, andhow cantheir exploitation beimproved?Does the EU needmore andnew interconnections; andif so,where andwhy,andwho is going to finance them? Prominent projects assuchasDesertec, the debate on DC or AC lines,or the limits of synchronization,aswell asthe state of apotentialEast-West electricitylinkage between Former Soviet Union andEU, termedUCTE- UPS/IPS,are discussedin the volume. The studyfinishes with recommendations forpolicymakers.

Susanne Nies is aSenior ResearchFellowwith IFRI EnergyProgramandthe Head of IFRI Brussels Office.

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