Policymakers urged not to ‘pull the rug’ on existing power assets

Kristian Ruby took up his new role as secretary-general of Eurelectric in January. A widely recognised expert in sustainability communication and political affairs, prior to taking up the position he was chief policy officer at the European Wind Energy Agency (Wind Europe) and worked for Danish consultancy Operate, where he was manager in the sustainability team, specialising in climate, environment and energy issues.

He also spent seven years as a public servant in the Danish Ministries of Environment, and Climate and Energy and in the European Commission in the cabinet of the former Climate Action chief, Connie Hedegaard.

He spoke to Power Engineering International about the ongoing challenges facing the European electric power sector and new challenges such as the impact of Brexit.

Power Engineering International (PEI): Your appointment as the secretary general of Eurelectric appears timely given your background in renewables and the ongoing transition of the EU towards a cleaner energy infrastructure- what would you like to achieve in your capacity as Eurelectric secretary?

Kristian Ruby (KR):
“I would like to contribute to ensuring that we take a balanced approach to the energy transition, where we balance environmental responsibility against economic responsibility, EU legislation against the subsidiarity principle and where we balance investor incentives against investor certainty.”

“We need to incentivise innovation in the electricity system. Meanwhile policymakers need to acknowledge that the utilities which own the current assets are a key part of the solution and that they are not helping the energy transition if they pull the rug on the existing assets in a way that is unsustainable and leaves these companies unable to make the necessary investment.”

PEI: The European Power Plant Suppliers Association last month spoke enthusiastically about their role in ‘facilitating’ the clean energy transition, but also called for a fair price for their fossil-based power. Do you think a capacity market similar to that operating in the UK could be the answer for many member state countries?

KR: “Essentially the fact that the plant owner has power readily available at any given time, that has an economic value, should be valued in the market.”

“Is the UK model the right one for Europe? That’s where we take a step back and say different EU member states have different energy system configurations, different macroeconomic configurations and hence different market failures in a sense.”

“So rather than prescribing one model for everybody we think there are central principles that should be respected when creating a capacity market mechanism. They should be technology neutral, they should be open to storage, to demand side response and renewables. Another crucial principle is that they should be open to interconnection participation from assets located abroad as well so we don’t build a lot of parallel power systems and a lot of idle, unnecessary plant.
Another principle is that we think it’s very important that they are market-based; and they shouldn’t be destroying or distorting the energy market unnecessarily.”

PEI: From your experience in your short time in this role as an advocate do you think your views are being heard and will those principles be applied?

KR: “Our views are shared by DG Competition (for energy) so no doubt they listen. I had a visit to (EU energy and climate action commissioner) Miguel Arias Caàƒ±ete today and communicated our views on these matters to him. It’s going to be a discussion that unfolds over the next two years. There’s going to be a wide variety of views. It’s no secret that this is a divisive issue amongst member states and within the sector.”

“There are those that think an energy market approach is the way to go. In Eurelectric we endorse a more diverse position or heterogeneous approach in that we see the business case for utilities emerge from different revenue sources, one being from energy market only, another from capacity mechanism and a third being revenues from ancillary services markets and on top of regulated income from distribution.” Eurelectric logo

PEI: The industry is waiting a long time to see clarity on this subject. Is two years an accurate timescale for completion?

KR: “This is the nature of EU process and we have a new set of uncertainties to work with, one being Brexit, which could potentially incur delays on the process here as well. Two years is a good scenario if we have the Clean Energy Package which Eurelectric supports. If adopted within two years that would be a good thing”

PEI: At the recent EPPSA evening in Brussels, European Commission energy chief Dominique Ristori appeared to pinpoint storage, demand response and electro-mobility as key technologies the EU would look to invest their vast sums of money in. Some of the delegates on the evening were privately not totally convinced about the prospects for electric vehicles and storage in particular. What is your position on these technologies as it appears the EU wants power firms to lead in terms of R&D in bringing them forward?

KR: “My view on electric vehicles (EVs) is clearly it would be a very good thing for the power sector for that to be rolled out, because that means increased demand. I am in no doubt that it’s a technology that’s coming, but not because we are going to push it as a sector.”

“It’s because the auto manufacturers are pushing it. In 2025 Volvo wants to bring out 1 million EVs per year. Also by that year Volkswagen wants to put out 2-3 million per year. And BMW wants to have shifted all their models to electric drive train by that year. That’s just three manufacturers so this is a megatrend in the auto sector and I think we are going to see millions of decentralised storage devices added to the grid through electro mobility. “

“But EVs are one element of the storage picture to emerge in the coming decades. Another element to this is utility scale storage.”-

“There was close to 3.3 GW of storage (500 MW from batteries) procured through one of the biggest auctions in the UK and I note that E.ON projects the market for storage batteries will reach 105 GW within the next 15 years. It’s a coming megatrend and will change the way we operate the power system and will change the business model and I think we should acknowledge that as a sector and get ready for taking it on.”

PEI: There is immense development initiatives across the storage space but is it developing quickly enough? Could the rate of research and development going on mean it happens much quicker?

KR: “The storage component coming into the electricity system will be constituted from a number of pillars. EVs will not alone do the trick but in my view there are a number of projects when it comes to utility scale projects that will add up. I am talking about big batteries, new solutions within the pumped hydro space, new thermal storage solutions which are currently not at the mature level but will reach technical maturity within 7-10 years.”

“It will come sooner than you think and the sector should brace itself for it.”

“We are looking at a future where this will be phased in over the next decade at utility scale and it will change the way we operate power systems and will change our business models so I think we should basically be ready for this.”

“There are two stages. There are technologies reaching maturity and then there is the deployment of these technologies. When we look at the utility scale it is still in the making and solutions are still being developed and that means when these reach maturity 5-10 years down the road there is going to be another period of time before they are rolled out across the entire energy system. But it’s coming and we need to be realistic about it.”

PEI: Ireland has last week voted to no longer invest in fossil fuels. Is it possible for a country in Europe to go completely fossil fuel free or will, in Ireland’s case for example, biomass and privately owned gas be vital for national energy security?
Do you see other countries in Europe following Ireland’s lead and what does that mean for Eurelectric members?

KR: “We have to acknowledge and we have made this position clear to policymakers; this energy transition is not going to happen overnight. It’s a long term process. Eurelectric has stated we will clear the power sector of emissions by 2050.We should be realistic about these timelines but as seen in Germany and other places it’s not a walk in the park.”

“If you make a decision based on phasing out one electricity wedge you are facing difficulties with security of supply and very quickly also in other economic centres. I must confess on the Irish regulations I can’t comment on whether it technically feasible and the costs involved.”

“Essentially I believe in a rational position mainly to advocate a balanced European approach. It’s not in the interest of investors that every country goes its own and takes its own road to decarbonisation. It provides certainty and provides clarity for investment if this is done with an EU level solution and we do it in a way where we gradually move to a well-functioning European market and an integrated energy union. So in essence we would advocate from the Eurelectric point of view for a European approach to decarbonisation.”

PEI: “If other countries follow the Irish example does that have a particular impact on your members?

KR: “It’s going to mean they are operating in a more complex space and a muddied regulatory environment. You have to remember these companies own assets across Europe. For example CEZ is in seven countries, Vattenfall and others across a number of markets Basically they need to deal with 28 sets of plans for decarbonisation, and 28 sets of different national regulations and policy tools.”

“It would be more difficult for them and will ultimately add to the costs, as there will need to be more resources put into understanding these complex regulatory environments.”

PEI: What do you think will be the likely impact of Brexit on the European power sector, from the perspective of the UK and the EU? Will Eurelectric continue to have UK members?

KR: “With regard to Eurelectric membership, I just visited the UK a couple of days ago and they were very clear they wish to continue to be part of Eurelectric.”

“What will be the consequence of Brexit for the EU power sector? We are going to lose a good partner here and I hope we can find a pragmatic solution as soon as possible. Facilitating trade in Ireland and the impact on Northern Ireland; these are concrete issues that needs to be solved and good pragmatic technical solutions are needed. We wish to continue trading in a sensible way and not shut out the UK completely.”

“In terms of the impact on the power sector from a regulatory view, I have a clear concern about delays on current legislation. The ETS will need to be recalibrated, and the energy efficiency directive will need to be revisited in terms of how much energy needs to be saved essentially. There are a number of other different regulations that impact on the functioning of the power sector and a number of different regulations that need to be recalibrated as a consequence of the UK leaving.”

“Also the institutional set up – what does this mean for the composition of the European Parliament ” the weighting of votes in the European Council ” potential institutional reform that may also play into this whole process.”

“Finally of course I think that in the dynamic of the negotiations in the Council we are losing a voice of reason in the UK as they have always advocated a very cost-effective approach to decarbonisation and they have been supportive of a comprehensive set of meaningful EU policies when it comes to regulating the power sector.”

“For our members we want to see a clear road ahead but a pragmatic one too.”

PEI: Is there a place for clean coal technology in Europe’s power generation space?

“There is a place for clean coal technology in Europe today as we have significant amounts of coal providing baseload in Europe. But we have to be clear. We are moving towards decarbonisation by 2050 and there will be implications for coal based assets. Unless we find viable solutions such as carbon capture and storage to handle emissions coal is going to have an increasingly difficult time.”

PEI: “With the continued dependency of eastern European countries, as well as such as Poland and Germany on coal is it realistic to expect decarbonisation targets to be met?

KR: “The electricity industry in Europe has committed to this as its objective and it was reconfirmed most recently in the ETS discussions. We are quite clear on that but it will not be easy and we need to basically think hard on how we do this transition in the best possible and most economical way.

PEI: There appears to be some resistance as to the environmental credentials of biomass power. Would you share those concerns and do you think biomass can be important in the transition to cleaner energy?

KR: “Basically we think that biomass is part of the solution provided it lives up to fundamental sustainability criteria. It is very clear that if you just burn a lot of forests that will add emissions to the atmosphere. This won’t help the transition. If you add it in a sustainable way biomass can be part of the solution.”

“A question we are studying is how many countries can take the biomass conversion road to decarbonisation ” I know they are doing it in Denmark and it’s interesting to see how they reduce emissions by switching, but will this be a viable solution for baseload in Poland and Germany? I have doubts that it would work on a global level.”

PEI: Is there an issue about biomass regulations in different jurisdictions. On the face of it the switch to biomass appears a positive move but what about the ethical regulations in how the feed is sourced?

KR: “There are certainly challenges with biomass in some countries and that is why I stress the need for clear sustainability criteria with the use of biomass.

PEI: Do you anticipate the transition to cleaner energy taking longer than expected given the work that needs to be done across the bloc in terms of grid development in facilitating renewable power?

“We are firmly in favour of more grid where it makes economic sense. We see electricity as the key energy carrier of the energy transition so anything that can be done to support the increased use of electricity as the way to advance the transition is positive in our view. We also support the target set by the EU on advancing interconnectivity.”

PEI: There is a lot of conversation among policy makers about regional interconnection even though some countries are lagging behind target-wise.

KR: “Yes. There are a lot of quick wins there that would pave the way for us in getting better interconnected, more integrated and better functioning markets and also better use of existing power generation capacity.”

PEI: Germany, arguably, phased out nuclear too soon, therefore its emissions went up again in 2016, and household energy prices are getting more expensive all the time. Do you think Germany may be forced to reconsider its energy policy and have a more pragmatic approach without compromising its clean energy goal?

KR: “In terms of assessing Germany reconsidering strategy ” BDEW might be better placed to answer that. It basically underlines my point about the energy transition not being a walk in the park. We are going to need baseload capacity and significant amounts of that power over the next decade and we won’t be able to produce all that from renewables. We have to be quite frank about that.”

“We are seeing 30 per cent of EU power from renewables today going to to 50 per cent by 2030 ” it still leaves the question what about the other half so we will need the other energy wedges for a long time to come.”

“There are no easy solutions in this game- we have to support the introduction of the new components to the energy system but we are going to need the existing elements of the current electricity system for a long time to come.”

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