What is the importance of resilient power grids, especially now that so much of our life and work are happening on digital platforms?

#CriticalThinking

Peace, Security & Defence

Picture of Christophe Vanhove
Christophe Vanhove

CEO of NeuConnect

The word ‘unprecedented’ has perhaps been overused over the last year but nonetheless offers a fitting definition for the seismic global changes we have experienced in recent times.

Nowhere is this more apparent than in the energy sector where traditional patterns of energy use have been transformed almost overnight by COVID-19.

Millions swapping the morning commute for working from home has created the most fundamental change, with commercial energy demand falling significantly, but domestic demand now greater and more sustained. But even simpler factors such as ‘lockdown lie-ins’ and a later start to the day for many have also created small but significant shifts in morning peaks of electricity use.

Some traditional routines will return post-COVID, but it is clear that a ‘new normal’ is emerging in our work and home life. Creating more flexible and resilient energy grids will be critical if we are to ‘keep the lights on’ across Europe – no matter what the future brings.

The NeuConnect interconnector will reduce Europe-wide CO2 emissions by 16mn tonnes over 25 years

It is also widely recognised that resilience needs to cross borders, with countries working together to tackle the challenges ahead. It is for this reason that energy interconnectors will continue to be a central piece of European policy, allowing energy to be quickly and efficiently moved across borders to wherever it is needed most at any given time.

Moreover, interconnectors offer flexibility that will also help support the huge investment in renewable energy infrastructure across Europe. By their very nature, renewable energies are intermittent and the electricity they produce can be difficult to store, so it is crucial to be able to transport electricity to areas of demand to avoid its loss. Interconnectors make this possible by offering a ‘clean energy highway’, taking the energy created by Europe’s growing renewables infrastructure and transporting it to areas of highest demand.

Interconnectors are already a firm fixture in the European energy mix but there are clear opportunities to go further and faster, creating new links and new integration with other parts of the energy grid to create a more resilient and sustainable future.

NeuConnect will create the first interconnector between the United Kingdom and Germany, connecting two of Europe’s largest energy markets for the very first time and offering significant benefits. Both the German and UK networks will benefit from increased security of supply. Germany will have an important new market to export excess renewable energy, whilst avoiding costly curtailments, and the UK will have access to surplus power from Germany’s vast renewables infrastructure.

The benefits will also reverberate throughout Europe, making a significant contribution to EU net-zero targets. Analysis shows that the NeuConnect interconnector will reduce Europe-wide CO2 emissions by 16mn tonnes over 25 years – the equivalent of planting 28mn new trees or removing 400,000 cars from the road in a year.

European energy policies will need to continue to adapt

A new generation of ‘multi-purpose interconnectors’ is also emerging, where new links between countries will also connect to offshore wind farms. This clustering of mainland and offshore energy grids would help create a major ‘green energy hub’, the resilience benefits of which could be exponential.

Interconnectors will continue to offer new and innovative solutions to Europe’s need for more resilient and sustainable energy, but this will only be possible if they are underpinned by strong political and regulatory support.

The EU’s Projects of Common Interest (PCI) is an important example of how political support can help developers tackle the planning, financial and regulatory hurdles that major projects inevitably face. PCI status is invaluable and offers huge momentum for new projects.

But while good mechanisms of support are already in place, European energy policies will need to continue to adapt in order to ensure that we can tackle the challenges and harness the investment opportunities ahead.

NeuConnect, for example, is one of the first interconnectors being delivered using ‘project finance’, where the scheme is financed through the future cash flows of the new link, rather than the existing balance sheets of its investors. But while ‘project financed’ infrastructure is widely recognised to boost market competition, many existing regulations currently lack the right measures to support this type of financing.

The outcome of these regulatory changes will be of huge significance

Fortunately, in this instance, the UK and German governments have carried out a huge amount of work to install greater regulatory support to ‘project finance’ schemes. In the UK, energy regulator Ofgem was early to spot that a ‘variations’ process was needed to allow developers to make changes to existing regulations if it was clearly in the consumer interest. Similarly, in Germany, new draft laws recognising ‘project financed’ energy schemes have been introduced and will be considered by the German parliament in the next few months.

The outcome of these regulatory changes will be of huge significance, not just for individual developers but across the wider industry, setting an important precedent and opening the door to future ‘project financed’ interconnectors in the UK and Germany, which will help to create a more resilient, better integrated European grid.

So, in summary, what emerges from Europe’s future energy challenges is a three-way predicament: Firstly, there is a clear need for a more flexible, resilient energy networks across Europe. Secondly, interconnectors offer a ready-made solution to the energy challenges ahead. And thirdly, strong political and regulatory support is needed if these solutions are to be delivered.

As Europe emerges from an unprecedented period, there will be a clear focus on ‘building back better’ from COVID-19 while also continuing to deliver on net-zero ambitions, both of which will place a premium on creating more secure power grids. It is a time of huge opportunity and with the right political support, we can pave the way for a more resilient, sustainable energy future for Europe.

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