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Lead North-West European integration

Electricity does not recognise borders – electrons simply flow to the point of least resistance. That is why a seamless cross-border energy market makes sense – it is the only way to ensure a secure, sustainable, efficient and cost-effective energy supply.

Interconnecting energy markets

The integration of the European energy market began many years ago, with the aim of creating a single market where gas and electricity can be traded and supplied across national borders, easily and efficiently. TenneT was one of the pioneers in this market model and is the world’s first cross-border grid operator, playing a leading role in interconnecting energy markets in NWE.

An integrated market is also better suited to provide a stable electricity supply in the unpredictable world of renewable energy. In recent years, we have seen a significant increase in the amount of renewable electricity generated using wind turbines and solar panels. This is obviously a positive development that we welcome, but it also makes our job more complex. If the wind isn’t blowing or the sun not shining, we have a challenge because we have less supply of electricity. In such situations, alternative sources must be deployed in order to meet the demand, and cross-border high-voltage connections are one of the solutions.

SDG 13 – Climate action

The United Nations Sustainable Development Goal 13, ‘Take urgent action to combat climate change and its impacts’, describes one of the highest priority actions on our societies "to do list". Because the realisation of the national and European targets for reducing CO2 emissions must come for a significant part from renewable electricity generation, solar and wind energy are widely needed. In addition, wind and sun are more or less complementary throughout the year; more sunshine from spring to autumn and a greater amount of wind in the colder and darker months. In short, a sustainable and stable energy system of the future will likely require both sun and wind - both on a large scale. Providing this sustainable and stable energy system is our job and therefore our contribution to reaching the world's ambition on climate action.

Results

With currently three connections between the Netherlands and Germany, one with the United Kingdom, two with Belgium, two with Austria, one with the Czech Republic, one with Sweden, two with Denmark and one with Norway, our grid forms a crucial link in the integrated Northwest European electricity system (see grid map on our website).

In 2017, we continued our work to boost interconnection capacity even further, by constructing our part of a new grid connection between Doetinchem in the Netherlands and Wesel in Germany. The Doetinchem–Wesel electricity connection will be the fourth interconnector between the Dutch and German high-voltage grids and is planned to be completed by the second quarter of 2018 and fully operational in the fourth quarter.

Our NordLink cable connecting the German and Norwegian grid, also known as 'the green cable', is another important new interconnection that reflects how we are supporting the development of an integrated European energy market, while simultaneously increasing the supply of renewable energy (especially hydroelectric power and wind power). Once it is fully operational in 2020, it will be the first direct connection between the two countries’ power markets. With its capacity of 1,400 MW, the interconnector can provide renewable energy for more than 3.6 million households and will be able to export for example wind energy generated by approximately 466 wind turbines of 3 megawatts, each. This is comparable to the capacity of three conventional power plants.

During 2017, we continued our construction activities on the COBRAcable, a high-voltage direct current (HVDC) sub-sea cable directly connecting the grids in the Netherlands and Denmark. The cable is designed in such a way that it is possible at a later stage to connect a wind farm at sea as well. This project contributes to a sustainable international energy landscape by stabilising electricity prices in both countries, while also further facilitating European market integration.

In 2017, our imported and exported volumes in the Netherlands decreased due to grid and market developments in our neighbouring countries. In Germany, our imported and exported volumes increased due to difference in supply and demand in the North and South of the country.

For real-time import/export figures, click here.

The ongoing market integration in Northwest Europe has led to an increased number of hours in the last years where wholesale electricity prices are equal across Central West Europe (CWE), also known as ‘price convergence’. In concrete terms, in 2017 35% of the time the price in the four countries in CWE was equal.  

TenneT has published its yearly 'Market Review' since 2014, outlining developments in the NWE market, particularly in the Netherlands and Germany. This publication presents the highlights of the past year and puts the most important developments into perspective. To read more, click here.

We anticipate that the CO2 reduction targets set in the Paris Climate Agreement will demand such a high level of renewable energy production capacity that the electricity grids of the individual countries will struggle to cope. Our ground-breaking vision, a North Sea Wind Power Hub, announced in 2016, could play an important role to alleviate this pressure. It describes a way of connecting ca. 70 – 100 GW of wind power and supplying renewable energy to 80 million people in Europe by 2050.

In 2017, this plan was well received by the EU, which stated that no European country can implement the CO2 ambitions on its own and that it makes a lot of sense to combine efforts. Three partners signed up to join in 2017, Energinet.dk, Gasunie and the Port of Rotterdam, adding up to five partners in total so far.

Energinet.dk also aims to make the energy transition viable and affordable. It embraces the central idea of the plan, the construction of one or more so-called Power Link islands with interconnections to the North Sea countries, in the middle of the North Sea (Doggersbank).

Gasunie, the Dutch gas TSO, has expertise in the field of gas transportation and storage via internationally connected networks. The company also has important knowledge about the use of renewable gases such as hydrogen and transformation processes such as Power-to-Gas. Power-to-Gas is expected to play an important role in the North Sea Wind Power Hub system. The volumes of offshore wind energy required for the energy transition are so large that solutions for gaseous transport and storage are likely to be needed in addition to power connections. Combining the strengths of power and gas systems can also give an important impetus to hydrogen as a sustainable solution in industry and the transport sector.

With the Port of Rotterdam as a partner, announced during the WindEurope conference and exhibition in Amsterdam in November, the consortium now also has important seaward land reclamation knowledge. Making industry more sustainable is a major issue for Europe. According to calculations by the Port of Rotterdam, enabling the sustainable operation of Rotterdam’s industry alone would require between 27 and 49 TWh of generation capacity. Volumes of that order of magnitude can only be achieved by offshore wind energy, at this stage. The concept of a North Sea Wind Power Hub is an appealing prospect for the development of a large-scale, sustainable energy system in the North Sea and ensures capacity is effectively integrated into the relevant plans of the North Sea countries.

In 2017, the share of renewable energy capacity increased compared to 2016. Particularly noticeable is the decrease of hard coal generation capacity which is compensated mainly by the increase of solar and wind capacity.

Key to creating a fully-integrated European electricity market is the ‘Clean Energy For All Europeans’ package, launched by the European Commission in November 2016. This contains a vision for the EU to lead the clean energy transition, not merely adapt to it. The EU ambition is clear about its commitment to cut CO2 emissions by at least 40% by 2030 compared to 1990, while at the same time driving economic growth for all European citizens.

The past year the European Parliament proposed to refine the shape of the Clean Energy Package, clearing the way for the implementation of an Energy Union within the EU. TenneT is pleased to play an active role in this important work, co-ordinating closely with the Dutch and German governments. We provided detailed input to policy-makers during all ministry, council and parliament consultations and discussions. Especially on the plan to have regional control centres that manage the electricity grids, we emphasised that there is already close cooperation between the national grids in Europe. In fact, the European markets are physically and technically interconnected to guarantee security of supply.

All of these proposals are aimed to provide consumers across the EU with a better choice of supply, access to reliable energy price comparison tools and the possibility to produce and sell their own electricity. Increased transparency and better regulation allows customers to become more involved in the energy system and responsive to price. Importantly, the Clean Energy Package also contains a number of measures aimed at protecting the most vulnerable consumers.

Challenges

ChallengeAction
Lead North Western Energy Integration
1Large-scale international coordination is complex and can be delayed by opposing national interests, legislation and regulation. For instance, on the Danish-German border we are dealing with the question of whether producers in one nation are favoured over the other when transport capacity is tight. The European Commission is now investigation how much capacity shall be offered at that particular border. The Commission’s findings could create a precedent for all cross-border connections in Europe.We will make sure to explain what exactly happened, how we calculate capacity and why. With the ambitious plans and projects underway and competing in a large cross-border market, we realise we are working in a highly challenging environment.
2The current EU proposals are decoupling market development from the underlying physics. This has its limits. Not only does it carry a risk for security of supply, it could also lead to higher financial burdens for TSOs and increased electricity prices for end-users.We continue to invest a great deal of time on discussing how an integrated European market will need to function. We provided detailed input to policy-makers throughout all ministry, council and parliament consultations and discussions. Collaboration between national TSOs is vital in this respect.

Outlook

The future of the European energy market is fundamental to our business and something we work on day to day, as expressed by the interconnectors we operate and construct and the vision for the North Sea Wind Power Hub.

We observe that we are at a crossroads in the development of the European energy market. As we integrate ever-more and ever-faster, we are extending our grid infrastructure and we will need large investments to do so. As a result of further integration and cooperation, we expect energy price differences between the Netherlands and Germany to become smaller and imports and exports to play a more important role. All of this has ultimately been designed to increase the welfare of consumers across the EU.

In the short term, European grid operators will continue to work very closely together on improving their ways of steering the grid in the current dynamic environment. New network codes are agreed by TSOs across Europe and need to be implemented in the years ahead. This is an extensive operation that requires a lot of effort from our side.

North Sea Wind Power Hub

LEAD NORTH-WEST EUROPEAN INTEGRATION

As a company that always needs to prepare for the future, we predict that the CO2 reduction targets set in the Paris Climate Agreement will demand such a high level of renewable energy production capacity that individual countries will struggle to cope on their own. Our ground-breaking vision, the North Sea Wind Power Hub (NSWPH), announced in 2016, could play an important role in exploiting wind energy in the North Sea in the long term.

Mel Kroon, Chief Executive Officer TenneT: “It is our firm belief that the energy transition must be a truly international endeavour. It will transform the electricity system, making national borders irrelevant. Closer collaboration will allow the energy transition to be realised faster, more efficiently and at a lower cost.”

The North Sea provides optimal conditions for offshore wind power with shallow waters, strong and relatively stable wind speeds, proximity to consumption centres and bridging Scandinavia and the UK to Central Europe. In addition, we are seeing rapidly declining costs in offshore wind and projections now forecast cost-efficient deployment of up to 180 GW of offshore wind power in the North Sea in 2045.

Connecting large-scale offshore wind power to faraway central hubs or joining even-larger amounts to several inter-linked hubs, provides a unique opportunity for economies of scale. By building a hub on an artificial island, effectively creating a near-shore environment far out at sea, capital-intensive platforms for HVDC converter stations could be avoided. In addition, an island would serve as a permanent base for staff to construct and maintain surrounding wind farms as well as for possible synergy technologies such as Power2Gas.

A project the size of the NSWPH must build on strong international cooperation and coordination. The North Sea countries' political declaration on energy cooperation and the cost-efficient roll-out of offshore wind power is a starting point. The declaration shows the intention for internationally coordinated planning and the roll-out of offshore wind power in the North Sea could become reality. Meanwhile, a North Sea Wind Power Hub consortium has been formed, consisting of TenneT, Energienet, Gasunie and the Port of Rotterdam.

Maroš Šefčovič, Vice President of the European Commission, in charge of the Energy Union: “I welcome TenneT's ongoing efforts to further remove physical and infrastructural barriers in the European electricity system. The North Sea Wind Power Hub is a typical example of a genuinely European project; no single European country could implement it on its own, but it makes perfect business sense to do it together. This is what the European single market is all about."