This CEPS Special Report analyses the benefits that would result from more electricity trading in northern Europe – including the Nordic and Baltic states, Germany, the UK, Poland, the Netherlands and Belgium. It argues that trading electricity across national borders can bring down the cost of the EU’s transition to a competitive low-carbon economy, in particular by facilitating the integration of electricity generated from variable renewable sources, such as wind and solar energy. Yet, it also shows that insufficient grid infrastructure and regulatory obstacles prevent the positive effects of electricity trading from being fully reaped in practice.
The study finds that cross-border trading of electricity is also hampered by bottlenecks within member states. Thus, it does not suffice to build more interconnectors (transmission lines across countries’ borders); it is also necessary to improve transport capacity within member states. In addition, it is acknowledged that transmission could be optimised not only by building new lines and improving the regulatory framework, but also by deploying new technologies to improve existing transmission infrastructure. Still, new transmission lines are certainly needed.
In this regard, it is noted that, while many electricity transmission projects are under development, various barriers prevent the infrastructure build-up from taking place on time. The authors find that the European Commission’s proposed Energy Infrastructure Package released in October 2011 is an important step forward to overcome the barriers to transmission expansion. Yet, the scale and urgency of the infrastructure challenge call for further progress, especially in the regulatory field. Policy conclusions are formulated with a view to providing input to the ongoing discussions.
Jonas Teusch is a Research Assistant at CEPS, and Arno Behrens is Head of Energy and a Research Fellow at CEPS. Christian Egenhofer is Head of the Energy and Climate programme and Senior Research Fellow at CEPS, as well as Visiting Professor at the College of Europe in Bruges and Natolin in Warsaw, at SciencesPo in Paris and at the LUISS University in Rome.