Four Dutch managers with a background in the telecoms sector, led by former Chairman of KPN Royal Dutch Telecom Professor Wim Dik, have come up with a simple idea that would finally make possible a truly integrated EU electricity system. Under the name of EU PowerNet Initiative they propose the building of an ‘Overlay Network’ that would allow direct transmission of electricity between all countries even if they are not direct neighbours. The network should be built by a cooperative company owned by the national TSO’s (transmission system operators) in the same way that Intelsat (later Eutelsat) was created to allow direct communications between countries via satellite.
A single European electricity market – that has been for many years one of the great goals and dreams of the European Union. Indeed, the Internal Energy Market should have been realised already in 1992, according to plans that existed at the time. It took until 2009 before the Third Energy Package was adopted, which promised a true internal energy market by 2014. Yet today, despite unmistakable progress in the form of increased interconnections and increasingly integrated power trading markets, a true single energy market is still nowhere in sight.
There are many reasons for this, but one of the key problems is that there are limited possibilities for the transmission of electricity over long distances. TSO’s cannot import from or export to non-neighbouring countries. As a result, Europe cannot optimally make use of the possibilities some regions have to produce energy from wind, sun and water. Nor can other efficiencies and economies of scale be achieved that are characteristic of large integrated markets.
However, there may be a very practical solution to this seemingly intractable problem, according to four well-respected Dutch managers from the telecoms sector, who have set up the EU PowerNet Initiative. The idea in a nutshell is to create a high-voltage DC network that overlays the entire EU and which national high-voltage networks can connect up with.
They set out their plan below.
The EU PowerNet Initiative: how to create a single European electricity market at one stroke
In order to enable TSO’s to import and export electricity to and from any country in Europe we, the EU PowerNet team, propose the creation of an HVDC Overlay Network, which allows direct transmission of electricity between two countries even if they are no direct neighbours.
This network is to be designed, constructed and operated by a cooperative company, which will be jointly owned and governed by the TSO’s and jointly controlled by the governments.
The structure we propose fully recognises the responsibility national Governments feel for the provisioning of electricity, which is indeed of extreme importance to each country. Strategy with regard to production and transport of electricity, including connection of for example wind farms at sea, remains a national responsibility.
The new company would be responsible for the creation and operation of an HVDC Overlay Network, which would be connected to the existing networks of the TSO’s through special Connection Points
The kind of cooperative company we propose has functioned satisfactorily for decades in the telecommunications world: this is the way in which telecommunications satellites were operated.
The network will enable the creation of ‘one market’ for Europe, which would increase competition and hence lead to increased use of alternative energy sources like wind, sun, water, bio-energy and not yet known sources. This would lead to lower use of imported fuels, and to less emission of CO2.
At the moment, the possibilities for the transmission of electricity over long distances are limited. Therefore, TSO’s cannot import from or export to remote countries and it is not possible to optimally make use of the possibilities certain regions have to produce energy on the basis of wind, sun and water on a large scale. Locally, the use of sun and wind is increasing. Sun and wind are great sources of energy, but they do depend on climatological circumstances that (luckily!) cannot be influenced.
In fact, national markets still dominate in the EU. There are some cross-border interconnections between ‘national networks’ and more are being planned. But these mostly help to improve security of supply rather than create a single market.
Long distance transmission requires more than cross-border interconnections. It also requires a guaranteed availability of enough transmission capacity to enable transit through national networks, not only in country A where the electricity is produced and country B where it will be used but also in ‘third’ countries that lie between A and B. This requires complex operational arrangements.
If we created one large European Overlay Network, which connects all the national TSO-networks, we would:
- create an environment in which producers/suppliers of electricity can really compete
- see an increase in innovative ways to produce electricity
- decrease dependence on import of fuels
- decrease CO2 emissions
- stimulate employment
How to realise all this, while fully maintaining the responsibility of national governments for their national electricity markets?
We of the EU PowerNet team all have a background in telecommunications. What strikes us is that what is happening in today’s electricity market is not really different from what happened in the telecommunications environment during the second half of last century. More specifically: in the world of telecommunications via satellite, which became technically possible in the 1960s.
At that time, NASA developed the first telecommunications satellite. The USA planned to make this available for use by other nations, but such dependence was considered by the European countries as not desirable. They felt that telecommunications should remain their own national responsibility.
The solution was found in the creation of INTELSAT. This was a cooperative company, created on the basis of a Treaty. This treaty obliged the participating States to participate in a company that was to be owned and governed by the telecommunications operators of that time. The Board of Governors, which consisted of representatives from the operators, was responsible for all important business decisions which had to be executed by the staff of the organisation. The Board itself had to report on a yearly basis to an Assembly of Parties, which was the vehicle for the governments to ensure that the organisation met the requirements (like access for all countries on a non-discriminatory basis) specified by the Treaty.
The company was responsible for investing in new satellites, for their operation and for ensuring that the national earth stations that allowed telecommunications via those satellites could work together. Later, in the 1980s, the global organisation INTELSAT was for industrial reasons followed by a comparable European company EUTELSAT.
With this as an example we propose to create, on the basis of an a new treaty (or amendment of an existing treaty), a cooperative company: EU PowerNet. It is to be owned and governed by the European TSO’s and jointly controlled by the participating governments.
The new company would be responsible for the creation and operation of an HVDC Overlay Network, which would be connected to the existing networks of the TSO’s through special Connection Points. These must be remotely controlled from the EU PowerNet’s Control Centre and they have to allow TSO’s and EU PowerNet to import and export electricity. They also must allow EU PowerNet to directly transport electricity, without involvement of the TSO in whose territory they are located, from one neighbouring country to another.
National governments would remain responsible for their own electricity markets and strategies. This implies, that they will also remain responsible for, e.g., connecting wind farms at sea.
The debate now around the concept of the Energy Union has made it clear that an integrated EU electricity market will not be achieved if we continue on the present course
In our original thinking we aimed at creating one large overlay network for the whole of the EU and Norway and Switzerland. However, based on discussions with the European Commission and other specialists, we have concluded that it is better to split up the project into several smaller ones.
We now propose to realise several (possibly five) overlay networks we call ‘Regional Rings’. The North Sea Ring project could be considered a pilot project. Since there is already a lot of coordination going on in this region the legal work (treaty), the technical design work and the preparations to organise the EU PowerNet company in this region would be relatively easy to implement.
Subsequently the other Regional Ring projects could be realised as and when required, with other countries joining the treaty as the projects progress. Eventually the EU PowerNet project should be completed by a ‘Europe Ring”, which will allow transmission of electricity between the Regional Rings.
The maps depict the concept of the Regional Rings and the Europe Ring.
A network such as EU PowerNet will require significant investments. The organisation Friends of the Supergrid are proposing an EU-wide network which they say will require a total investment of €200 billion. (Note that our concept differs in some essential ways from the idea of the Supergrid, notably in terms of governance and ownership and also in our concept of network rings.)
However: TSO’s are planning many interconnectors between their networks, and a large part of these will not have to be invested if our Overlay Network is realised.
Moreover, the investment will be spread over a period of at least 15 years and will be jointly made by 30 countries. What is more, the European Commission estimates the cost of not having a real common market to be € 40 billion per year!
We have discussed out proposal with Dutch TSO TenneT and with ENTSO-e, the European organisation of electricity TSO’s. Their reaction was that they are on the right track to achieve the goals of the EU’s legislation and no additional efforts are needed. However, most experts we talk to disagree. The debate now around the concept of the Energy Union has made it clear that an integrated EU electricity market will not be achieved if we continue on the present course.
We have also discussed our proposal with many other stakeholders, like the Dutch Ministry of Economic Affairs, the Belgian federal Government, the UK Department of Energy and Climate Change, several political parties represented in the European Parliament, the Technical University of Delft in The Netherlands and the University of Leuven (KU Leuven) in Belgium, and with the Bruegel Institute in Brussels. We have been very much encouraged by the response we got. Virtually everyone agreed that the EU PowerNet is a great idea.
Next we aim to make a formal presentation and proposal of our plan during the Dutch EU presidency in the first half of 2016. We are also looking at opportunities to discuss our plan with the North Sea countries.
About the authors
Prof Wim Dik, MSc, started his career at Unilever in 1964 and was Netherlands State Secretary for Foreign Trade in 1981-1982. After that, he became responsible for the privatisation of the Dutch PTT and served as CEO of Dutch telecoms company KPN for 12 years. He is a professor in management of ICT-companies.
Steven Hoonhout, LLM, participated in the foundation of the Eutelsat Treaty and in its Operational Agreement. He was a member of the Board of Governors of Eutelsat for 10 years and Director of Public Affairs at KPN Brussels for 11 years. He is a certified mediator.
Frans Rusting, MSc, is a telecommunications and satellites specialist who was responsible for technical and operational matters at all levels in the INTELSAT an EUTELSAT cooperatives. He represented both Belgium and the Netherlands on the INTELSAT Board of Governors.
What do you think of the plan for an Overlay Network?
We welcome responses to this article and would welcome informed contributions about the EU PowerNet plan. Please contact the editor Karel Beckman, email@example.com