Industry urges boost for power networks

Date: 02/04/1998

By Chris Johnstone

THE lights could begin to go out across Europe if the infrastructure for carrying electricity is not improved to cope with rising cross-border power flows expected from liberalisation.

The warning from the continent's biggest electricity producers highlights the fact that many of the ground rules for the sector's liberalisation have still to be worked out. As a result, the pay-off for businesses in terms of cheaper energy might take longer than originally expected to deliver - or may not be delivered at all.

Electricity lobby Eurelectric says European governments need to act now to provide some certainty on the financial returns from building new power lines. It also argues that member states should cut the red tape and delays involved in obtaining the necessary construction permits.

If not, the existing network could easily become overloaded and black-outs could become an unwelcome feature of Europe's open energy market as cross-border purchase of cheaper power becomes more and more common.

Eurelectric president Niek Ketting says the electricity grid in Belgium and the Netherlands was on the verge of overloading last year when the European network was pushed to breaking-point by a large transfer of power between southern Germany and Switzerland.

"The existing network is aimed at ensuring a security of supply at a minimum cost with trade in electricity being a second function," he explained.

Failure to spend the billions of ecu necessary to boost energy flows around Europe will also mean less efficient use of the continent's generation capacity.

Older, less efficient and polluting power stations will be used more if there are obstacles to companies shopping across borders for the cheapest supplies.

Studies by Europe's energy companies have shown that efficient exchanges of energy between countries can reduce the number of local power stations needed by one-fifth to one-sixth.

Spain and Portugal look likely to be largely cut off from cheap energy supplies in the rest of Europe if no new infrastructure investments are made.

"A new line between France and Spain was envisaged, but has been stopped for environmental reasons. The Iberian peninsula is very poorly linked with the rest of Europe. There are also problems with the link between France and Italy," said Ketting, adding that the refusal of construction permits was "a real problem".

The failure of national regulators to spell out how much the owners of power lines and cables can charge for transporting electricity, and uncertainty over how much of networks they can reserve for their own use, is acting as a further brake on investment.

"To bring new overhead lines and high-voltage cables on line is a major problem at the moment. There is no certainty on what the return on investment will be or of the prices owners will be able to charge for use of the grid," said Ketting.

Dutch electricity company SEP is building a new sub-sea electricity cable to Norway in a 540-million-ecu joint venture, but it is not sure how much of the new cable's capacity it will be able to use for its own needs.

"If you have to accept a third party supplier for an unspecified amount, you do not even know how much of the cable you can use," said Eurelectric's president.