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Electric shocks: integrating renewable energy in
Europe’s electricity network
Author: Felipe van de Kerkhof (s1260391) Wordcount: 14,203
Supervised by: Dr A. F. Correljé
Thesis submitted in partial fulfillment of the requirements for a degree in: MA International Relation: European Union Studies from Universiteit Leiden, Leiden.
Handed in online: Bruges, Belgium August, 31st 2018 Abstract
In an effort to meet global climate change goals, a decarbonization of electricity generation is needed. Analyzing the integration volatile renewable sources of energy like wind and solar, this thesis sets out to determine the underlying structural differences in the developments of electricity networks within the European Union. This will be done using a Most Different System mixed-methods design combining short statistical analysis with a qualitative study of the most (Hungary and Luxembourg) and least integrated (United Kingdom and Ireland) electricity networks in the EU. Constructing a framework to analyze the historical development, policy goals, market system and geographic factors in the member states of the EU, this thesis suggests the most important structural differences between the well and poorly integrated electricity networks in the EU are the historical developments of the networks, and the financial and geographical accessibility of neighbors to trade with. Secondly, an important contribution of this thesis is methodologically, as it displays an innovative way to study the different countries in the EU which gives enough flexibility to do justice to the differences between the member states of the EU.
Keywords: European Union, Electricity networks, Renewable Energy Sources, Network integration, Mixed-Methods.
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Table of content
1. Introduction 3
2. Literature Review: electricity transmission between neighboring countries 4 2.1 History of European electricity networks and governance 4
2.2 Politics – Policy goals 7
2.3 Pricing systems 10
2.4 Geography 13
3. Theoretical Framework 14
4. Methodology 16
4.1 Simple linear regression 16
4.2 Most different system design 17
5. Results 18
5.1 Simple linear regression 18
5.2 Most different system design: results case studies 21
5.2.1 Case study 1: Luxembourg 21
5.2.2 Case Study 2: Hungary 25
5.2.3 Case Study 3: Ireland 29
5.2.4 Case study 4: United Kingdom 34
6. Discussion 38
7. Conclusion 42
8. Bibliography 43
Tables and figures
Figure 1 Relationship renewable energy capacity ~ trade 18
Figure 2 Relationship renewable energy capacity ~ transmission lines 19
Figure 3 Map EU Trade per installed renewable energy capacity 21
Figure 4 Map Luxembourg 23
Figure 5 Map Hungary 26
Figure 6 Map Ireland 31
Figure 7 Map United Kingdom 35
Table 1 Regression renewable energy capacity 18
Table 2 Trade per installed renewable energy capacity 20
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1. Introduction
If you are familiar with Dutch weather, you would not be surprised to find Amsterdam covered in layers of grey clouds on April 30th in the spring of 2018. It did, however, catch the electricity network operators by surprise, as this weather was different from the forecast. The decline in wind and solar generation caused a gap in electricity supply resulting in a massive blackout. It impacted households directly in the area and left thousands of passengers stranded on nearby Schiphol Airport (NOS 2018). Annoying as it might have been for those travelers, these types of scenarios are likely to occur more often due to the implementation of renewable sources of energy like wind and solar into electricity networks.
To battle climate change, member states of the European Union (EU) have committed collectively to increasing the share of renewable electricity generation in their electricity networks. In 2009, the member states of the EU implemented the Directive 2009/28/EC, promoting the implementation and development of renewable sources of energy such as wind- solar- and hydropower as well as biofuels. Collectively, the member states agreed to aim for a 20% of renewable energy produced by 2020 (European Commission 2009). Because weather dependent sources of renewable energy, such as wind and solar power, are not uniformly distributed across the EU, increased collaboration between member states is necessary. The financially feasible renewable resources are located on the periphery of the continent (solar in the south, and offshore-wind on the northern seas) while the largest demand centers (industry) are more land inward. Given this dispersion, it would be logical to expect an increase in trade of electricity generated from renewable sources of energy in the EU (Abrell and Rausch 2016, 87).
As energy policy is a shared competence in the EU, member states are free to take different approaches to adapting to these new levels of renewable sources into their networks. This means some have further advanced in integrating their networks than others. This thesis sets out to analyze the structural causes explaining the current-differences between the most and least integrated performers in the EU. The research question that will be answered is: what are the main structural differences that explain the variation in levels of electricity network integration between European member states? I will use a mixed-methods approach; after testing the assumption that an increased capacity for intermittent renewable sources leads to more trade with neighbors, cases are isolated to analyze the best and worst performers in depth. In applying this research technique, I can analyze the structural differences in European energy systems in the member states.
4 The thesis is split into two parts. In the first part, a wholistic approach is taken to generally establish the differences between members of the EU and the general levels of network integration. After that, case studies will help gaining an improved understanding in the structural historic, economic, geographical and political (governance) differences between country’s electricity networks, combining the history, economic, geographical and political insights to dissect several factors of the energy transition. These factors will function as entry points to analyze several case-studies of well and poorly performing countries within the EU.
2. Literature Review: electricity transmission between neighboring countries
This section synthesizes key academic literature on the development of a country’s energy policies and the integration of renewable energy. This simultaneously serves as the academic starting point of the in-depth qualitative analysis of renewable energy systems into European electricity networks.
2.1 History of European electricity networks and governance
In such a capital-intensive, infrastructure driven sector as the electricity market, the history and developments over time play an important part in understanding the the sector today. Much of energy infrastructure currently used in Europe has been around for over 50 years (Rubino and Cuomo 2015, 464). When it was developed, energy policies and priorities were very different, and the common force for European market integration was much weaker than it is today. Most important consequence of this lack of harmony is summarized as: “[d]espite the fact that European countries have access to (in principle) identical generation technologies (…) the existing technology mix of electricity production varies considerably by country (Abrell and Rausch 2016, 91).”
However, this does not mean integration of electricity networks is a new phenomenon. The transmission of electricity and integration of electricity networks across countries has been happening for a long time already. Even though this fact has been largely overlooked by specialists on European integration, countries have been integrating their networks since the end of World War I already (Schot and Lagendijk 2008). On the development of electricity networks in Europe, Lagendijk (2008, 24), a historian specialized in large infrastructure projects, writes that the “central actor[s] in promoting electrification” were the national governments of the 1920s. Millward (2006, 481) adds that development started very locally, as “properly integrated national networks” only started to be formed after the Second World War. European aid as part of the Truman Doctrine further encouraged international integration of
5 European electricity networks. This was deemed an important factor in ensuring wealth and prosperity for western European countries and a good safeguard against the Soviet threat.
This does not mean that that the development of electricity networks was an easy and straightforward process. Post-war efforts to prevent future continental conflict by integrating European markets put electricity in an odd position, with different treaties regulating different aspects of the market (Millward 2006). For example, after the signing of the Treaty of Rome in 1957, electricity and gas were seen as regular commodities, which meant that international trade in these goods was overseen and regulated by the European Economic Communities (EEC). At the same time, the European Coal and Steel Community (ECSC) was tasked to deal with the mining and trading of coal, then the primary source of electricity, whereas the development and application of nuclear energy was pooled a supervised by Euratom, a different organization. All three organizations were made up of the same members, but dealt with their piece of the puzzle independently. The establishment of the Directorate General for Energy (DG XVII) under the EC changed this situation in 1967 by making these approaches part of the same organization.
From the Single European Act (SEA, signed in 1985) on, the EC felt that to achieve a truly common market, the electricity sector needed to be integrated and started to pursue a strategy to liberalize European energy markets. To achieve this, Lagendijk (2008, 206) notes that the Commission “showed clear interest in conducting energy policy [emphasis added, red.].” This was contrary to the role of uninvolved bystander in years before. The publication of the Commission Report on The Internal Energy Market in 1988 was an important step (238/88). Its main message that energy markets needed to be opened up and ridded from dominant state monopolies was clear and would have large consequences later. As the EC evolved into the EU, the push for further deregulation of the energy market became stronger and louder. The implementation of several directives and regulations at EU level (1996, 2003, 2009) had the aim to “reduce the government’s role in the sector, to introduce competition when feasible, and to increase participation from the demand side” (Makkonen et al. 2012, 431). 96/92/EC established common rules for generation transmission and distribution of electricity, which arguably created a supranational market for electricity (Baldwin and Wyplosz 2015).
Tempering the EU common electricity market narrative, De Menezes and Houllier (2016, 132) point out that even though a common market exists on paper, “since decisions on electricity mixes and system capacity are made by individual states, they may conflict with the aims of competition prices and security of supply in connected markets.” This remains largely unobserved in studies on the European common electricity market, where nation-states are
6 predominantly taken as primary units of analysis through case-studies (e.g. Millward 2006). Huppmann and Egerer (2015, 192) explain why this focus on national networks is not simple negligence on the part of the academics, but instead:
“network expansion is still a national prerogative in Europe both regarding planning and financing. Grid investments are highly capital intensive and, once built, constitute a ‘lock in’ regarding the grid-topology for many decades to come. Funding for grid updates is usually guaranteed by the national regulator, who allows the [Transmission System Operator] to levy network usage fees to recover expansion costs.”
Taking this into account, it makes sense to analyze the electricity sector on a case-by-case basis (just member states), but due to connection it is worthwile to zoom-out and take a larger view of interconnected networks.
Arguments can still go both ways when it comes to assessing the EU’s role on creating electricity networks in member states. On the one hand, EU directives have indeed increased international energy flows, and they have played an important part in integrating the eastern and western electricity grids after the big enlargement in 2004. For example, Ehrenmann and Smeers (2005, 135) find that the EU regulation 1228/2003 has strongly advanced the notion of opening up access to networks and the management of congestions and interconnection between member states.1 But, as mentioned, despite efforts to create a common market, there has not been a sufficient increase in the transmission capacity across borders (Lagendijk 2008, 17). Therefore, electricity networks are still treated as a predominantly national prerogative.
Central to the governance of electricity networks are Transmission System Operators (TSOs). Pollitt (2012, 33) has identified four relevant structures found across the world for transmission system operation. First, an independent transmission system operator is responsible for the maintenance and ownership of the transmission system. Companies that want to use the network to deliver services have to pay a small fee, which is used to fund further network expansion. Second, in a system with a legally unbundled transmission system operator, there is a legal separation of operations between the companies that generate electricity and do the retail, but they collectively own the transmission assets. For example, France’s EdF, the former monopoly holder in electricity retail is the largest shareholder in France’s transmission
1 The two most important factors in electricity trade are supply (generation) and demand (consumption). These
have to be equal at all time – if not a disbalance in the network will cause a blackout. Interconnection of the network with neighbouring countries can help smoothen out these problems as both supply and demand are more flexible (see section 3). Congestion management refers to activity of managing transmission capacity so that there is no loss of electricity when exchanging between countries or different electricity networks.
7 operator RTE. Third, the independent system operator model is characterized by the fact that the system operator does not own the transmission assets, but controls them anyways. Most independent operators are state-owned. Fourth, the vertically integrated utility is the most traditional way of organizing transmission operations, and describes a situation in which one company owns (large parts) of the supply-chain and own both production and transmission capacity. As EU member states are slowly moving away from this last system, there are notable differences between the way networks are managed between member states, making this an important factor of analysis. The preferred alternative in Europe is that of competition among system operators. Pollitt (2012, 47) cites two trends for this: “further integration of system operation across existing transmission owner boundaries (…) and the emergence of independent transmission companies in response to competition in transmission asset provision.” Different methods of market governance lead to different levels of integration of electricity markets.
2.2 Politics – Policy goals
A secure and sufficient supply of and access to energy is deemed essential for the prosperity of countries. Gupta (2012, 430) argues that secure access to energy is considered a driver of economic growth as it allows for an economic climate in which domestic industries can develop. Furthermore, sufficient access to cheap sources of energy raises the standard of living of citizens. Next to that, access to energy sources is an important element to military success. An example of how vital access to energy or electricity can be: as early as the 1950s, it was suggested that an important factor in the German defeat in both World Wars was their deficit in access to energy sources such as oil and coal to fuel their country compared to the UK and the US (Sovacool et al. 2016). Summarizing the concept of energy security in general terms, Luft and Korin (2009, 5) explain it to be about issues of “reliability of supply, access to the energy resources in sufficient amounts, affordability, and protection from energy supply interruptions.”
It is no surprise then that achieving energy security has been an important policy goal for member states of the EU. As gas and oil are sources that appear locally, Umbach’s (2010) chapter on energy security finds a difference in the way energy security is understood in energy exporters (such as Russia, Persian Gulf countries) and energy importers (e.g. China, many EU member states). For exporters of energy it is important that there are strong and clear contracts with importing countries in which the exporting country can get as high a price for the exported energy as possible. When an exporting country can establish a monopoly over the energy
8 market of an importing country, it has more power to dictate its prices and security and revenues for said country increases. Importing countries on the other hand, find it more secure to have a situation in which they are not dependent on just one country for their energy supplies. To achieve energy security, importing countries try to diversify their distributers as much as possible (Scholten 2010). An additional benefit is that through diversifying imports, large consumers of energy can also secure low prices (Sovacool et al. 2016). Even though most research focuses on energy as a whole, it is important to point out that the same logic applies for its subset electricity.
Over time, academic literature has started to incorporate the effects of climate change on energy security. However, these interpretations predominantly focus on the hard threats that climate change poses to international security, such as flood impacts on the supply of energy. The EU also focuses on this interpretation back in the energy green paper in 2006 (Umbach 2010). There, the European Commission argued that internal mechanisms should be set up to ensure a sustainable supply of energy. An important aspect of this is the common energy market, which is discussed above. Even though, the success of this approach can be questioned as Germany’s plans to construct the Nord Stream 2 pipeline with Russia bypassing many EU member states shows that member states still very much focus on individual approaches over common ones. Third and finally, internal and external steps to deal specifically with the protection of critical infrastructure should be taken (Sovacool 2013). Gupta observed that the last point is the only one that opens the door to achieving a more sustainable energy system, as it describes an evolving understanding of energy security beyond purely defense and economic terms (Gupta 2012).
For example, with regard to the development of electricity networks, Janda et al. (2017, 527) point out that this current pursuit of policy goals at European and national levels is nothing short of a contradiction: on the one hand renewable energy generation needs to increase and replace fossil fuels in order to meet the environmental targets that are set out. Yet, at the same time, a properly functioning internal market assumes and needs free competition. They illustrate their point with the example of Germany, where the industrious southern and western parts of the country has the highest demand for electricity. However, currently pursuing electricity network expansions through the Energiewende programme, most renewable electricity is generated in (offshore) wind farms in the north. Getting this energy from the north to the south requires long transportation capacity, which is both expensive, faces strong local opposition and will frequently reach capacity limits (congestion problems).
9 The problem Umbach (2010, 447) observed, is that “countries prioritize the national security framework, [and as such are] (…) unwilling to recognize or empower an international forum with the authority and legitimacy needed to address the diverse aspects of energy.” Lovaas (2009, 318) expanded on this observation by discussing the tension between “energy production and environmental protection.” Countries have to make difficult trade-offs, and each member state of the EU will make different decisions on how the trade-off works exactly based on their own historical and economic situation. Even within an integrated system such as the EU, the literature suggests that countries should be analyzed individually.
The injection of renewable sources of energy will profoundly change the nature and functioning of electricity networks (see section 3 for theoretical framework). Boie et al. (2014, 173) point out that, “[i]ntegration [of] Renewable Energy Sources is the main driver behind larger and more volatile power flows over long distances across the EU.” As there is a “lack of consistent goals and coordinated approach in infrastructure plans among European countries” (178), 80% of bottlenecks in transmission are related to the integration of renewable energy sources into the electricity grid. Electricity being a shared competence in the Union means that the situation is likely to change, but member states will keep taking their own approaches to the problem (Bhagawhat et al. 2017).
A 2012 study of potential problems with regards to the increased share of renewable energy for the European electricity network (Makkonen et al.), highlighted some genuine concerns about adequate transmission capacity in the EU, including significant bottleneck problems.2 The big concern, they found from a series of interviews with several authoritative energy net regulators, is that “national interests have an important influence for building cross-border infrastructure (435).” They noted that transmission companies have little to no incentive to build new cross-border lines because there is a loss of revenues due to congestion issues.3 As a result, discussions about capacity mechanisms have overall focused mostly on the national situation (Neuhoff et al. 2013). The attempted solution for an increase in electricity infrastructure at the EU level, therefore, (Regulation 714/2009), which involved a ten year network development plan to be updated every two years, was only marginally successful.
2 From the point of generation to the point of consumption, electricity is transported through transmission lines,
which are quite capital intensive meaning there are few. Bottlenecks are the intersections that bring together different lines.
3 See ft.1. One of the problems is that different electricity networks do not have sufficient transmission capacity.
So, not every unit of extra electricity that is demanded in country X can be supplied by country Y, resulting in foregone revenue.
10 Under this regulation, the European Network of Transmission System Operators for Electricity (ENTSO-E), “identifies expansion plans deemed necessary” to make sure that EU energy and climate policy goals will be met (Abrell and Rausch 2016, 88). This way, loss due to congestion management should be minimized. Kunz et al. (2013, 567) define congestion management as a “situation where technical constraints (e.g. current, thermal stability, voltage stability, etc.) or economic constraints (e.g. priority feed-in, contract enforcement, etc.) are violated and thus restrict the power transmission between regions.” Basically, the issue of congestion refers to the issue of how to regulate additional electricity when it cannot be dealt with within the primary market of production. The economic organization of the international electricity market will be dealt with more extensively below.
2.3 Pricing systems
So far, the academic literature has addressed the influence of history and politics on the level of electricity transmission between countries. Together with ‘geography’, which is discussed below, these two factors determine the large structural side of (international) electricity infrastructure. In the larger picture these make a different category of variable for analysis than history, politics, and geography (next subsection), as it does not construct a network, but tries to optimize electricity efficiency within a network. So, the pricing system is a factor in a later stage. There are two main ways of pricing electricity: zonal and nodal systems. In the nodal system, the price is derived from the costs of reaching the consumer allowing for a different price per consumer. This is the most common way of pricing electricity. Someone who lives in a remote place in the US, far away from a city, is likely to pay more for their electricity than a person living in a large residential area with a lot of other consumers. In this system electricity suppliers have an incentive to develop their own electricity networks, because they can charge the costumers for it. This is different in the zonal pricing system, which is used in the EU (Makkonen et al. 2012). In the zonal system, an independent operator takes care of the planning, expansion and maintenance of transmission, allowing for competition between different electricity suppliers within their networks. This is expected to drive down prices, taking out producer surplus, which is good for the consumers.
About this, Kunz (2013, 198) argued: “the increasing role of intermittent renewable generation demands for an efficient spatial exchange of electricity. (…) However, the technical characteristics of electricity transmission reduce the available cross-border capacity due to unscheduled flows in the zonal pricing framework.” The interesting aspect of a grid operation is that at any point in time, to function efficiently, supply should equal demand. To account for
11 this with the volatility that renewable sources of energy bring, larger bidding zones are set up. Janda et al. (2017, 534-5) conclude that the capacity of the German grid does not correspond to needs emerging from the Energiewende, and the only direct solution is to induce energy flow through neighboring states. Furthermore, the German-Austrian bidding zone market design further exacerbates problems.
Market splitting, or the introduction “of price zones in liberal electricity markets” (Grimm et al. 2016, 454), is a recent phenomenon in the electricity networks of the EU. Grimm et al. argue that in the short-run, under a fixed installed transmission capacity price zones are not harmful and that splitting is effective when networks connect large areas of people (459).
In recent years, the EU internal market for electricity has undergone some fundamental and significant changes. According to Ringler et al. (2017) a positive development, which is they defined as leading towards further integration change, has come with the implementation of market coupling solutions for cross-border congestion management. However, there are increasingly diverging market designs due to the uncoordinated introduction of RES. They note (629), “the plurality of energy policy targets, usually concerning security of supply, economic efficiency and environmental impact – and the predominance of national competences challenge the process in particular.” Even though the interconnection between different market zones, which usually coincide with the shape of the countries, is seen as a back-up in case it goes wrong (631), instead of an opportunity to make things better.
An important policy goal in this regard, as Ringler et al. (2017, 631) also note, is that of generation adequacy. This refers to the “ability of an electricity system to provide sufficient capacity to serve demand.” This policy goal is in line with the further goal of attaining energy/electricity security of supply which is an important goal within the EU and indeed individual countries. However, with the injection of RES, as they point out, it becomes equally important to start looking at the interconnector capacity between countries. They note the financial importance of this that when there is an unlimited capacity to transfer energy from A to B, the price at A and B need to be practically equal. This is standard market economics because at unlimited transfer capacity the supply and demands are an aggregate of the regions they represent (albeit demand is provided by the total buying power of the energy companies, who in turn sell their goods to consumers). However, if there is a limited interconnection capacity, there will be important price distortions in the market. In total, Ringler et al. estimate that the cumulative forgone welfare equal € 33 billion due to the limited interconnection within the EU.
12 The main challenge of RES integration is that an estimated 200 GW has to be integrated within the grid by 2020 (Neuhoff et al. 2013, 760). However, there is insufficient network capacity and congestions as a result of newly emerging flow patterns. The zonal pricing system that is predominant within the EU fails to “provide price signals that are needed to inform parties about need for transmission reinforcement and investment” (761). When addressing international transmissions, it is important to look at the Net Transfer Capacity (NTC), which is defined as the “maximum exchange between two areas compatible with security standards applicable to both areas and takes into account technical uncertainties and future network conditions” (762). In other words, this is equal to the total amount of electricity that can be exchanged between countries based on available infrastructure. When analyzing the US grid, Becker et al. (2015, 442) found that “towards a fully renewable system, the mismatch between load and generation grows. Once VRE [Variable Renewable Energy, red.] gross shares reach 30 – 50%, substantial VRE backup is required.”
In the academic literature, two effective branches of congestion management are mentioned. There is the option to optimize the allocation of transmission capacity through auctions. On the other hand, optimizing the network capacity, which would alleviate congestion, can solve the problem. Here, the introduction of renewable sources of energy onto the grid becomes interesting, as these cannot be solved by only one of these solutions (Kunz et al. 2013). However, as Neuhoff et al. (2013) find “most transmission constraints are not in association with lines between countries, but with lines within countries … incentives systems used by operators limit international flows to avoid domestic congestions that requires re-dispatching of power stations within their boundaries to resolve remaining constraints” (770). A negative development in the contribution towards a renewable driven market is that the development of the grid has not kept up with RES becoming cost-competitive at much faster rates than anyone could have expected (Singh et al. 2016).4 In their case-study of energy flows in central and eastern Europe, Singh et al. (2016, 288) define this as the “difference between commercial and physical flow that are due to transaction realized outside the cross-border capacity allocation mechanism at the border.” Due to the relative difficulty to predict RES, and the over-production at times, it might be the case that there is more physical electricity than the transmission system can handle. This problem is very prominent in Germany and their
4 To illustrate this point with an analogy from development in the tech-sector: the development of the software has
gone much faster than the hardware, which means that it is not possible to implement all the features of the new software. With regards to electricity transmission, this means that the system has very limited resistance against unplanned flows of energy.
13 neighboring states, where most of the RES is generated over the North-Sea, but used in the industrious southern Germany. However, there is no sufficient transmission capacity between the north and the south.
Important evidence supporting the idea that a lot of work is still to be done with regards to the European electricity market comes from Zachmann (2008, 1661), who notes that it is important to differentiate between the level of market integration, which he defines as “the static degree to which the single European market [for electricity] is attained” and the level of price convergence in the market; i.e. “the dynamic measure for the development of prices towards a single European price.” When analyzing the market situation over the period between 2002 – 2006, he concluded that a single market had not been attained by 2006, but differences in prices did diminish over time for some market pairs. However, this gave rise to a renewed effort by the European Commission to push for a more integrated and complete European energy market. The European market as such is still under construction as the level of integration is not complete because there is still a significant difference in day-ahead (wholesale) prices between different countries and electricity networks. Overtime, due to EU directives, De Menezes and Houllier (2016) expect month-ahead prices to further converge in the medium-term, making it easier to integrate different markets.
2.4 Geography
An evident structural factor sometimes overlooked in academic literature on energy systems is geography. Not surprisingly, a country’s resources, or lack thereof, have a big impact on how its energy system develops. The large natural gas resources found in Groningen, a Dutch province in the northern part of the country, had a massive impact on its energy system. With the abundance of cheap and secure gas, households all have gas connections for heating and cooking. This has lasting consequences to this day, as the country’s goal to move to electrical heating in houses will take more than thirty years to be realized (ENECO 2018).
Especially for a commodity that is dependent on local (weather) circumstances and is so difficult to transport over long distances like renewable energy, the likely availability of renewable resources can have a big impact on a country’s willingness to construct more infrastructure. More mountainous countries, for example, can use water reservoirs in the mountains to generate hydropower. These lakes can be used as some sort of battery for the more fluctuating and flexible wind and solar power. In another example, through its Energiewende Germany, is putting a lot of emphasis on wind power that can be generated on the North Sea, could lead to more transmission infrastructure.
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3. Theoretical framework
With the maturing of affordable renewable sources of energy, the electricity sector is undergoing important lasting changes that will upset the sector for a long time to come. Until now, the most widely spread method of exploiting energy has been to create power or motion through steam and heat. This was achieved by burning fossil fuels and extracting the released heat to move objects (Fouquet 2010).5 Famous examples of this are cooking on wood or the burning of candles for light. Encouraged by the state, electricity networks started to be constructed at the turn of the 19th century (discussed in Section 2.1). This was an important
development for many reasons, including that it meant a separation between the place of generation and consumption. The electricity, or electric power, that has now become commonplace in every household is an application of energy of which the electric current is used to power equipment. Importantly, coal, gas and oil, the dominant sources of electricity generation, were easily storable, which meant that with good estimates of consumption levels, supply would be set to meet demand.
With the introduction of renewable energy sources, we are on the eve of the second long-lasting change in sector set-up. The most important sources of renewable energy for the 21st century, namely wind and solar energy, are weather dependent and therefore quite volatile.6 They are intermittent sources of energy, in that their generation capacity depends on local variables, such as incoming solar radiation or wind speed. If the wind is not blowing or blowing too strongly, or when clouds block the incoming radiation from the sun, their generation capacity is significantly impacted.
Politically, countries have committed to decarbonizing their economies. With economies still expected to grow globally, the 2015 Paris Accords determine that this will be achieved using energy more efficiently and generate it with less emissions. This means an increase in the electrification of goods and services to achieve climate goals. Boie et al. (2014)
5 In a very literal sense, there have been times when energy was extracted from water currents and through
windmills. However, these contribute marginally compared to burning of fossil fuels like wood.
6 The generation capacity of hydropower is much more regular. However, there, too, there are strong weather
impacts on their generation capacity. Think for example of massive droughts in southern Europe during the summer .
15 have calculated that within Europe, over half of all electricity must come from renewable energy sources. However, this cannot be achieved by signatories individually. Taking their analysis a step further, they conclude “[t]he development of integrated energy networks has been pointed out as essential for the achievements of the EU’s energy policy goals of competition, sustainability and security of supply” (170-1). Realizing this for the common market in line with the EU 2020 commitments, the EU Climate Foundation estimated that an additional 50-165 GW of transmission capacity needed to be installed. The effect of RES integration is already significant at the moment. ENTSO-E, the European Network of Transmission System Operators, estimates that approximately four out of every five bottlenecks in international transmission are related to the integration of renewable, volatile, sources of electricity (cited in Boie et al. 2014, 173).
An additional problem with the generation of renewable energy is that it is very difficult to store electricity. The literature on renewable energy is split over the specifics as they agree that battery storage is not a feasible solution for large-scale storage (e.g. Beniston and Stoffel 2014; Gaudard et al. 2014). First, a temporary solution used in Nordic countries is to use excess generated electricity to pump up water into reservoirs in the mountains and then generate electricity when there is a need. However, here too, the total capacity does not seem large enough (Seljom et al. 2011).
A second solution analyzed in the literature is to increase the demand of energy when the supply is high (Covert et al. 2016). This could mean an increase in interconnectedness of energy networks between geographically different places. Theorizing about the future of renewable energy Mideksa and Kallbekken (2010) noted that new markets had to be quite large and diverse with a large enough variety of weather to generate renewable energy. After all, when it is windless over southern France, it might be quiet and clouded in neighboring northern Italy but storming over the North Sea at the same time.
So, especially as the share of renewable energy in the energy mix of the EU could go as high as 80 to 100% by 2050, which would mean even more unpredictable energy production (Behrens 2015), this second solution has a lot of theoretical support. According to Bürgin (2015) this was the reason that the 2009 Renewable Energy Directive called for decreasing barriers to inter-European trade of renewable energy. However, as Amineh and Guang (2010) observe, energy cooperation within the EU is lower than one might expect given this nature of renewable energy.
16 The thesis is positioned at the crossroads of these two approaches to energy. On the one hand countries want to have a secure and controllable influx of energy to achieve energy security. On the other hand, they need to work together with other countries to achieve enough supply and demand of energy to achieve this security and economic prosperity.
The overall idea in this situation is that the increase in renewable energy sources on the grid creates an increase in the volatility of networks. The solution is easy: integrate electricity networks and trade with each other. Therefore, this thesis proposes two hypothesis that will be tested in section 5:
H1: EU countries with higher generation capacity of renewable energy sources
trade more electricity with their neighbors.
H2: EU countries with higher generation capacity of renewable energy sources
have more transmission interconnections.
4. Methodology
To gain the most valuable insights into the structural factors underlying the differences in the implementation of renewable energy sources between EU member states, this thesis will use a mixed-method approach. Electricity network integration will be measured through the amount of trade between neighboring countries. A simple quantitative analysis will help isolating four EU cases for a Small-n Most Different System Design. This approach is inspired by Ross’ (2001) research on the resource curse, in which simple quantitative analysis was applied to single out cases for further analysis.8 The
strength of this particular research design is that it allows the thesis to go in-depth and tell the story behind the statistical relationship to get a better, systemic understanding of the situation in member states. This methodology allows for the best of both worlds: general trends are specified by larger datasets, while case studies based on academic literature dissect differences between the European member states.
4.1 Simple linear regression
The structure means that the focus of the methodology is two-fold. Section 3 proposed a hypothesis with regards to the relationship between the capacity of
8 Scholten (2010) also takes this methodological approach when analyzing the EU and China’s energy sectors,
17 renewable energy generation within a country and the total exchange or flow of energy between countries. This will be tested using two straightforward linear regressions, based on the 2018 data from Europe’s electricity network operators (ENTSO-E 2018). For their reports, ENTSO-E uses the self-reported data from the individual net-operators. The first test will be to see the correlation between the net capacity to generate renewable electricity of a country (TW) and the total flow of electricity exchange with its neighbors (GWh). Secondly, the relationship between the renewable generation capacity and the number of international transmission connections will be tested. The data will yield important insights into the level of integration of the European electricity market. Even though the ENTSO-E network comprises of 41 states, the primary focus of this analysis is on the EU countries that can physically make interconnections – this means that Cyprus is omitted from this analysis, while the data includes Malta with Italy.9 Analysis will be
done in R (graphs in Microsoft Excel). The complete dataset can be requested with the author.
4.2 Most different system design
In the second half of this thesis I will analyze the two best and two worst performing countries to gain a better understanding in the structural differences between the countries. Through this qualitative component, the thesis can investigate structural phenomenon’s the data do not show. To compare the different cases and establish where they are most different in relation to their energy security, I will look at the determining variables explaining the current situation with regards to the introduction of renewable sources of energy in member states of the EU. Following Scholten (2010), I will rank the situations in the countries of the case studies on a five point scale, ranging from double negative (--) to double positive (++). Through generically scoring the countries on this scale, a more valuable and complete insight in the most important differences between the cases in the EU can be given. The case studies are based on secondary academic literature on the electricity sectors of this country.
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5. Results
5.1 Results simple regression
The hypothesis proposed in the previous section holds that there must be a strong correlation between the total volume of electricity trade from and into a country and the production capacity of renewable energy in said country.
There is a strong correlation between said variables. Analysis in R, as displayed in table 1 shows that there is a strong and statistically significant correlation between the net renewable generation capacity and its total trade volume.
Table 1. Results simple regression between Total Flow (GWh) and Renewable Generation
Capacity (TW), International Transmission Lines respectively. The significance of correlation coefficient at p<0.05 (*), 0.01 (**), 0.001 (***), at 24 degrees of freedom. Data from ENTSO-E (2018).
Renewable Generation Capacity (TW) International Transmission Lines
Total Flow (GWh) 1.01x10-7*** 4.72x10-5***
R2 0.7001 0.6247
Multiple R2 0.6876 0.609
Figure 1. Relationship between Renewable Generation Capacity and the Total Flow of
Electricity. y = 0,8247x + 15578 R² = 0,7001 0 20000 40000 60000 80000 100000 120000 0 20000 40000 60000 80000 100000 120000 To ta l fl ow (G Wh )
Net Renewable Generation capacity (TW)
19 Similarly, figure 2 shows the relationship between the total international transmission lines of member states of the EU, compared to the ‘Renewable Generation Capacity.’ This, too, has a statistically significant correlation.
Figure 2. Relationship between Renewable Generation Capacity and the number of Electricity
Transmission lines between countries. Data from ENTSO-E (2018).
As suggested in section 2, this means that there is a very strong relationship between a country’s capacity to generate renewable energy and how much they trade. This means that both H1 and H2 cannot be rejected, and seem to ring true. However, there are still large
differences between the trading levels of member states, which will be investigated in the second half of this thesis. Correcting for the size of the electricity networks of the member states, Table 2 displays the value of interconnectivity for each of the member states. This is further visualized in figure 3.
y = 0,0005x + 11,202 R² = 0,6247 0 10 20 30 40 50 60 70 80 90 0 20000 40000 60000 80000 100000 120000 Cr os s fr on tier t ra nmiss io n line s
Net Renewable Generation capacity (TW)
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Table 2. Trade per renewable generation capacity (GWh/TW). Data from ENTSO-E (2018).
Country
Total Flow (GWh) Renewable Generation Capacity (TW)
Flow per renewable generation capacity (GWh/TW) Great Britain 37 170 23 443 0.63 Ireland 3696 2 894 0.78 Spain 47 850 38 347 0.80 Italy 55 718 48 012 0.86 Romania 10 756 9 279 0.86 Germany 110 041 111 519 1.01 Portugal 13 397 13 697 1.02 Greece 8 220 11 145 1.36 France 48 653 82 486 1.70 Sweden 26 137 46 813 1.79 Austria 18 472 54 349 2.94 Poland 8 083 24 255 3.00 Belgium 7 115 22 368 3.14 Denmark 8 130 25 954 3.19 Bulgaria 4 032 12 891 3.20 Finland 7 127 24 737 3.47 Latvia 1 789 8 208 4.59 Netherlands 8 426 41 009 4.87 Croatia 2 760 16 937 6.14 Czech Republic 4 235 43 178 10.20 Slovakia 2 680 28 100 10.49 Slovenia 1 446 18 689 12.92 Estonia 452 7 387 16.34 Lithuania 821 15 175 18.48 Luxembourg 291 8 907 30.61 Hungary 811 26 725 32.95
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Figure 3. Visual representation of results in table 2. Trade per renewable generation capacity.
A greener color suggest more trade per renewable generation capacity.
5.2 Most different system analysis: results case studies
To analyze the structural differences between the results and answer the research question, this thesis will now compare and contrast the two EU member states with the most and fewest international electricity transmission. As drawn from the factors that came forward in the literature review (section 2), Luxembourg, Hungary, the UK and Ireland will be analyzed based on their geography, policies, market structure and historical development of their electricity networks. These will be discussed in section 6.
5.2.1 Luxembourg
The smallest country in this analysis, the Grand Duchy of Luxembourg is a landlocked country between Belgium, France and Germany. Its economy is service oriented, with a large banking sector and the European Court of Justice in the capital city, which is also called Luxembourg. At the moment, a little over 500,000 people live in Luxembourg, but many more
22 are working there, commuting from neighboring the Trier (Germany), Thionville/Metz (France) areas. Luxembourg is the richest country in Europe with average incomes of over 80,000 USD per year. Its central location in northwestern Europe also makes it an important transit for freight transportation over rail, air and road. Even though electricity demand is relatively low still, there are two major power plants in the country, a combined-cycle gas turbine (Twinerg), and a pumped storage hydro plant (in Vianden), which are connected to the electricity grids of Belgium and Germany (IEA 2014, 17). As it is a small country, the country does not have much installed renewable energy potential, but its electricity network is well-integrated with its neighbors. Overall, the country is the second best performer in the European Union.
5.2.1.1 Sustainable policy Luxembourg
Over the past fifteen years, the Government of Luxembourg has been at the forefront of setting ambitious targets for reducing greenhouse gases. For example, they successfully reduced their emissions by 28% over the 2008-2012 period compared to 1990 levels. This was the highest reduction of any member of the EU outside the EU-ETS (IEA 2014, 7). This has mostly been achieved by improving general energy efficiency (e.g. isolation), a decrease of emissions in the transportation sector and diversification in the fuel use in the transportation sector as proposed in their Global Mobility Strategy.
Energy related emissions have remained stable since 2008. Despite these efforts, the country still has some of the lowest shares of renewable energy generation among members of the EU and the International Energy Agency (IEA). According to the Luxembourgish Renewable Action Plan, the country will further develop the renewable energy generation capacity in the coming years. They have committed themselves to an 11% share of renewable energy in final consumption and 10% in the transport sector, which means that they expect their domestic production of renewable energy to remain small. Interestingly, at the same time, there have been few efforts to engage with other EU member states to use the co-operation mechanisms that were introduced in 2009/28/EC, and allow for member states to reach their climate goals by investing in, among other things, renewable energy production in other countries. Following the publication of a White Paper on the development of a Sustainable Luxembourg, the Ministry of Economic affairs started round-table discussions with the country’s relevant stakeholders from business, industry, NGO’s, trade unions and citizens in 2010. The meetings were held to “agree on a longer-term strategy for sustainable development [of Luxembourg, red.]” (IEA 2014, 23), which resulted in the 2011 Climate Pact, which pushes for municipalities to find solutions for energy generation problems locally. This is done at such
23 a low level of governance to make sure that everyone can participate in the process. As is the case in the majority of other EU member states, the responsibility for the climate lies with the central government of Luxembourg, which “aims to align all interests of the municipalities and cities in the fight against climate change” (IEA 2014, 23). Measurements and quality assurance of policies are carried out at municipal level, but the government provides financial and technical assistance.
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Figure 4. Overview of Electricity grid Luxembourg (IEA 2014)
5.2.1.2 Development Electricity Network
Luxembourg has always been a small country with a small electricity network. Therefore, they have always had their electricity systems integrated with their neighboring countries: Belgium, France and Germany. Uniquely, Luxembourg has two electricity networks that function separately from each other (Sotel and Creos) and the two largest power plants in Luxembourg (Twinerg and Vianden) service the German and Belgian grids. According to the IAE (2014, 59) “national reserve margins are tight and transmission capacity may approach its limits, as power demand is set to increase in the coming years” due to increases in domestic consumption and a growth in the number of households settling in Luxembourg city for work. Over time, the structure of Luxembourg’s economy has changed from one focused on manufacturing and heavy industry (cement, iron and steel) to services. Heavy industry requires steady and secure input of energy, different from the electricity supply that is required to maintain services, which is similar to domestic use. A very significant change in Luxembourg’s energy structure came, therefore, when the steel industry introduced electric furnaces, reducing the need for coal heating. This allowed the country to focus on electricity generation and further integrate their networks in the electricity networks of their neighboring states.
A nice example of this is the introduction of the Twinerg combined-cycle gas turbine (CCGT) in 2002, which changed the electricity landscape drastically. Total output three-folded (from 0.9 TWh in 2001 to 2.8 TWh in 2002), with the CCGT in Twinerg responsible for (on average) 90% of the total output in the past decade (IEA 2014, 105-6). Renewable power does not take up a big role in the country’s electricity profile. Wind power was only introduced in 1998, while the first solar installations were starting to be deployed in 2000. Hydropower, on the other hand, does play an important role with pumped storage Hydro plant in Vianden (capacity: 1.1 GW), which is directly connected to the German grid and allows to store extra electricity from the grid and deploy it when necessary.
As the country is dependent on its neighbors and the interconnection capacity that is in place, they are increasingly vulnerable to the developments of the grid in these countries. The phase-out of nuclear energy, decreased popularity of fossil fuel power and the rising shares of renewable energy flows have resulted in the planning of a new interconnection project with Belgium to be added by 2020. However, further embedment into neighboring grids means that exposure to developments in these countries also increases.
25 5.2.1.3 Market structure
As suggested above, Luxembourg’s network has always been integrated in their neighbors electricity networks. After the launch of a white paper to develop a new national energy strategy in 2009, Luxembourg has worked hard to integrate its markets into the Central-West European (CWE) energy region (IEA 2014), which has happened to various degrees of success. Key achievements have included the “legal unbundling of generation, supply and networks, the introduction of incentive-based economic regulation and full retail contestability as well as preparing to roll out smart meters by 2020” (IEA, 2014, 9). The Government of Luxembourg seems to believe that “open and competitive energy markets are the best guarantee to ensure security of supply” (IEA 2014, 9), if they are supported by well-designed emergency response mechanisms. Therefore, the government pushes for further integration of the EU energy market in Brussels on EU level.
A good example of this is Luxembourg’s participation in the development of the CWE and NWE wholesale electricity markets. This also aimed at harmonization of regulation, network codes and operating standards needed to coordinate and discuss the development of regional power systems. The launch of the latter one in 2014 was an important milestone. The flexibility of the hydro facility in Vianden, of course, plays an important role in establishing system power security in the region, however, due to current technical and contractual arrangements which were negotiated many years before the rise in system volatility, the facility is not necessary employed to its fullest potential, which means there is still potential for further growth once the system is fully integrated into the European electricity grid.
5.2.1.4 Geography
Luxembourg is a small landlocked country with two important characteristics that have an important impact on the electricity network: most people live in or around Luxembourg City in the south of the country, and the country is quite hilly in the north (Forest of Ardennes), which is where the Vianden hydropower facility can be found, and most of the industrial activity used to be. This allows for the country to be integrated into the grid of Germany and Belgium.
5.2.2 Hungary
Hungary is a landlocked country in central Europe bordering: Austria, Croatia, Romania, Serbia, Slovakia, Slovenia, and the Ukraine. There live are approximately 10 million people, most of which live in its capital city Budapest. It joined the EU as part of the large
26 eastern accession in 2004. However, especially since the refugee/migration crisis in 2015, Prime Minister Órban has voiced some very strong criticisms of the EU, even threatening to leave the Union. The country is a founding member of the Visegrad four group with Poland, Slovakia and the Czech Republic. Suffering massively in the Second World War, despite strong opposition (e.g. Budapest uprising 1956), Hungary was a satellite state of the Soviet Union until it broke up in the early 1990s. Following this, the country has functioned as a gateway between the East (Russia) and the West (EU). The economy mostly consists of service, which makes up around two-thirds of economic activity, industry also still plays an important role at 31%. ). The country is well connected with their neighbors, which allow it to trade freely. In fact, it is has the highest trade per installed renewable energy capacity in the entire European Union.
Figure 5. Overview of Electricity grid Hungary (IEA 2017)
5.2.2.1 Sustainable Policy goals
In 2012, per EU guidelines, Hungary published its new National Energy Strategy (NES), which details the policy goals up to the year 2030. In recent years, Greenhouse gas emissions have declined due to the decarbonization of several important sectors to the economy. In 2008, Hungary had adopted the National Climate Change Strategy 2008-2025 (NCCS), which set a
27 reduction target of 16-25% compared to 1990. This goal was achieved in booming fashion: in 2014, Hungary’s emissions were 40% down compared to 1990. Part of this is attributed to industrial restructuring following the end of Communist rule, but the other half is “the result of measures and policies applied over the past fifteen years” (as cited by IEA 2017, 10-11). With regards to the energy sector, much attention has gone to ensuring a sustainable and secure method of supply (IEA 2017, 9), however the National Energy Efficiency Action Plan (NEEAP) did propose to increase energy efficiency by decreasing energy imports. The second National Climate Change Strategy was submitted to parliament in 2017 and includes the measures and actions necessary to adhere to the Paris Agreement, which Hungary was one of the first countries to ratify (IEA 2017, 10-11).
In terms of electricity generation the NES 2030 presents a “joint effort vision”, which is the most realistic to implement in the country (IEA 2017, 22). Its goals can be outlined as: preservation of nuclear energy, maintenance of coal-based generation (2017 levels), which would lead to a reduction in electricity imports. These accounted for 13% of domestic consumptions on average, and even higher during the long and hot summers (IEA 2017, 22-23). Interestingly, household electricity prices “are regulated below cost and as a result are among the lowest in Europe” (IEA 2017, 67).
5.2.2.2 Development electricity network
As mentioned before, Hungary used to be part of the bloc of Soviet states in eastern Europe. Their initial energy-related infrastructure, dating pre-1990, is mostly oriented towards the east: former Yugoslavia (Serbia, Croatia, Slovenia), Ukraine and Romania. To this day, Hungary is an important transit country for electricity to its southern neighbors (with Croatia receiving 78% of Hungary’s exports and Serbia at 22%). Over half (52% in 2015) of the country’s domestic electricity generation comes from the nuclear power plant in Paks, right in the middle of the country. The remaining domestic generation comes from coal and natural gas. Renewable energy actually plays a very limited role in Hungary, in particular the variable kind such as wind and solar, as the majority of renewable energy is generated from biofuels – approximately 8% of total (IEA 2017, 67).
Interestingly, the share of wind power increased rapidly between 2003 and 2012, displaying an average annual growth rate of 115% (coming up to 0.8 TWh in 2012). In recent years, however, the increase in wind power electricity generation has not only slowed down, but in fact declined with 10% from 2012 – 2015. It is unclear why this is, but the regulator does not seem to be interested in variable sources of energy. Within the country there is no
28 hydropower electricity generation to speak of (see 6.2.4) and a growing but still insignificant share of solar power.
Despite small reductions when the country is facing economic downturns, the increase in electricity consumption is remarkably stable since the 1970s (IEA 2017, 69) As Hungary’s power generation is mostly plant driven, increases in demand are met by an increase in imports from neighboring states. This is expected to increase further as more power plants are expected to (be forced to) retire in the coming ten years due to advanced age and lack of financial competitiveness. The largest coal plant in the country, for example, called the Mátrai Erőmű lignite plant, is over fifty years old and expected to retire soon.
It is also important to note that domestic electricity demand fluctuates massively throughout the year as a result of seasonal temperature variations in the country. According to the IEA (2017, 50) the “production increases during wintertime to meet higher demand although this trend changed in 2015, when the summer peak exceeded the winter peak.” The only reasonable source of energy that is used to adjust for these variations in demand, apart from importing electricity is gas power.
5.2.2.3 Market structure
As Hungary’s electricity infrastructure is quite well embedded with its neighboring countries (see 5.2.2), it has coupled its market to many of them. Since 2012, Hungary has coupled its day-ahead electricity market with those of neighboring Slovakia and the Czech Republic. In 2014, Romania joined this coupling. The IEA (2017, 71) assesses that this has led to “a gradual convergence of wholesale prices in the region and more effective use of interconnector capacities.” Imports can compete with domestic power production because it is often a little cheaper. This has led to further increase in net electricity imports. Today, new interconnection project with Slovakia and Slovenia are pursued to facilitate international electricity trade and “strengthen system security” (IEA, 2017, 70). Growing (international) trade activity on the Hungarian Power Exchange (HUPX) for intraday and day-ahead markets shows that the country is open for business fueling speculation that the country might integrate further.
As the market for electricity has been opened per EU condition for accession in 2003, levels of competition of supply very much depends on the geographical area. The country is divided into six separate distribution zones in which three operate as universal provider, while another 83 smaller companies are licensed to supply electricity to homes. However, this competition might be for public display only as the MVM group, which used to be the former
29 monopoly power pre-breaking up the energy sector, still remains the dominant player in the wholesale market by quite a margin (IEA 2017, 72).
There are two types of consumers on the electricity retail market: the universal service segment and the competitive segment. As the IEA (2017 72) explains, “universal service providers are obliged to supply electricity to, and conclude contracts with, the consumers entitled to universal service (…) [others] must purchase energy on the competitive market (for example, small and medium-sized non-household consumers.” The MVM group is the dominant player in that market with a market share of over 80%.
5.2.2.4 Geography
A landlocked country in central Europe crossed by the Donau river (Danube), Hungary is relatively hilly. It has three distinct geographic regions: Transdanubia is the hilly region west of the Donau extending to the Austrian foothills of the Alps. Second, the northern Hungarian Mountains are a mountainous and hilly country north of Budapest and the Great Alfold lies east of the Donau which is relatively flat. The country does not have many mountains as mountain tops over 300 meter only cover less than 2% of the land. This makes the development of hydropower in the country more difficult. The average hours of sunshine in the country, especially in summer, and mid-sized wind energy are more attractive options. However, compared to the solar capacity of close-by Italy, or the wind generation capacity of the countries bordering a sea, it is relatively minimal.
5.2.3 Ireland
The Republic Ireland is the westernmost member state of the EU, on the Atlantic Ocean, sharing the island of Ireland with Northern-Ireland (UK). It has a long and complicated history with the United Kingdom with whom it shares a physical (Northern-Ireland) and sea border. Apart from farming and logging, much of its economy depends on the service and high-end retail industry in and around Dublin, the capital city of the Republic. The Republic of Ireland is home to approximately 5 million people, most of whom live in the main urban areas: Dublin (northwest), Cork (southwest) and Galway (east). Ireland has very large (installed) renewable energy potential, but no neighbors to trade with. Overall, it has the second-lowest trade per installed renewable energy capacity, before the United Kingdom.
5.2.3.1 Sustainable policy development
30 of the richest countries on the planet (in per capita purchasing power). Its gigantic potential for wind power deployment meant that the Republic has set some very ambitious targets for climate change mitigation. For example, it aims to produce 40% of its electricity from renewable sources by 2020. The Government of Ireland aims to achieve sustainable development of renewable energy by focusing on two pillars. These are outlined in the important policy paper Delivering a Sustainable Energy Future for Ireland, which described the government’s energy policy decision over the 2007-2020 period. This was expanded upon again with the publication of the Affordable Energy Strategy in 2011.
All in all, on the supply side, the country actively promotes the deployment of renewable energy by means of feed-in tariffs (REFIT), which tend to “favour the development of technologically mature wind power (IEA 2012a, 9). On the other hand, Ireland also aims to optimize energy efficiency by aiming to reach their decarbonization commitments through finding optimal allocation of energy through for example smart meters. Compared to the 2001-05 average, the government pushes for a 20% reduction of energy by 2020, committing to a 33% energy consumption reduction in the public sector themselves. All measures are outlined in the National Energy Efficiency Action plan (IEA 2012a, 10).
As in many rich EU countries, a challenge in the development of additional new wind farms is the local opposition against the construction. Often there is little social acceptance or understanding of the necessity for the construction of transmission and distribution lines to transport the generated electricity from the coastal areas to the key demand centers (urban areas such as Dublin). An important part of the sustainable policy development is therefore for the government to increase public awareness and acceptance, including all stakeholders. This is why it is important that a long consultation process at local levels was implemented in the Strategic Infrastructure Act (IEA 2012a, 10-11).
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