Maintaining the Power Balance in Europe
The age-old challenge of finding a balance between affordable, clean and reliable electricity has become ever more acute for the European power sector in recent years. Only now, however, are the costs and strategic implications of meeting this challenge becoming apparent. Navigating the transition to a low carbon future for the power industry provides the pressing theme for energy professionals gathering at POWER-GEN Europe 2014, writes Conference Director Nigel Blackaby.
CHANGE IS SWEEPING the European power industry as the integration of renewables gains pace. How Europe eventually navigates through these dramatic changes will fascinate power decision makers globally. The debate over whether renewables would form a significant
part of
the future power generation infrastructure has moved on considerably within the last two years: the question is no longer ‘if’ the transition will take place, but ‘how’ an industry traditionally comprised of large units of coal, gas or nuclear power generation running 24/7 as baseload is going to adapt to accommodate it. Renewables and low carbon technologies are
only going to increase as a proportion of the installed base, yet genuine integration of these onto European grids has been relatively slow and the practical implications of this industry transformation are becoming ever more evident.
... the European power industry has so far failed to put in place the necessary framework to support renewed investment in its aging infrastructure
Moreover, many European nations are actually burning more coal now than they have been in recent years, due largely to the drop in coal relative to gas prices (the shale boom in the US leading to a flood of cheap coal on world markets) and also because the collapse of the EU’s emissions trading scheme has enabled nations to rely more heavily on older, less clean and efficient coal plants still in operation. As such, Europe is struggling both on the delivery its clean energy goal and the provision
of of
affordable power. Although the debate surrounding the recent price hikes by large utilities in countries such as the UK and Germany is somewhat ill- informed and politicised, there is no doubt that consumers are feeling the pain and all indicators are that this may get worse before it gets any better. The lights may not have gone out yet, but experts
46 March 2014
are predicting that within the next year or two, some European countries will see power cuts, brownouts or rolling blackouts because of aging infrastructure no longer being available to cover the intermittency of renewable power. The fact is that the European power industry has
so far failed to put in place the necessary framework to support renewed investment in its aging infrastructure. Add in the perverse situation that modern, often relatively new gas fired power plants across Europe are being mothballed or closed down because they don’t fit the current market model and it becomes very clear that the industry urgently needs renewed focus.
German Microcosm Nowhere has the scale and complexity of the
challenge been more apparent than in Germany, where the politically driven ‘Energiewende’ (Energy Transition) has placed the delicate balancing act that Europe’s power industry must perform at the heart of business and political discussion: on the one hand, consumers want clean and affordable energy, politicians want reliable supply, greater interconnection and a single market for electricity; on the other, the rise in renewables is placing the margins of established utilities under immense pressure, whilst replacing conventional power with intermittent sources that ultimately are less reliable and more costly for the electricity system as a whole. Germany’s mandated phase-out of nuclear power and boom in renewable energy has cut dependency on major utilities to the extent that some have seen the value of their balance sheet drop by half since 2008. This brings with it a significant impact on the ability of these established players to invest in the infrastructure required to support for example, the transmission of electricity to heavy load areas in the South of the country from the offshore wind turbines being constructed in the North. To address this challenge, one of Germany’s
major utilities, RWE, is looking to adopt a new ‘capital-light’ approach under which it will partner
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