Recent years have seen a rise in major grid interconnection projects in Europe. Driven by liberalization and encouraged by the European Commission`s TEN programme, countries are realising the economic benefits to be gained from sharing capacity. PEI looks at recent developments of key projects.
In July 1997, SwePol Link signed an agreement with engineering group ABB for the supply of equipment to the high voltage direct current link between Sweden and Poland. Now, just over one-and-a-half years later, equipment manufacturing is well underway and the project partners will soon begin laying the 240 km long subsea cable.
When commissioned in 2000, the link will permit the exchange of power between Sweden and Poland, and more importantly, the Nordic and Baltic regions. It will help to smooth their differing electricity demands and ensure more efficient use of the area`s overall power generation capacity.
The SwePol link is just one of many interconnection projects underway in Europe. As the energy markets deregulate and liberalize, countries are realising the benefits to be gained from network interconnection.
Network development, through projects such as SwePol Link, can improve the operation of a network by enhancing security, quality and flexibility of supply. It can also reduce energy costs through economies of scale, particularly in a competitive environment. This in turn can improve the competitiveness of a region`s industry.
The economic benefits of interconnecting sources of power generation are gained by exchanging power during periods of high and low demand as well as during emergencies. With a more optimized system, environmental benefits are also realised.
The west European interconnected grid, the UCPTE, currently saves between three and ten per cent of the installed capacity of the member utilities. Further interconnection between European countries will therefore heighten the benefits, and this is a major aim within the European Union.
A single market
The overall objective of the European Commission`s (EC) energy policy is to ensure secure and reliable energy supplies for its member states in a way that enhances the region`s competitiveness in world markets while remaining environmentally compatible.
While attention is being increasingly focused on the environmental impacts of energy use, the Commission still sees security and competitiveness as major challenges for the future. Industry in Europe pays significantly more for energy than its counterparts in the USA (up to 45 per cent more in the case of the chemical industry). It therefore sees competitive energy prices as essential to the EU`s global economic position.
As a result, the creation of an internal market for energy is a priority area in current EC energy policy. This will be achieved for both electricity and gas markets through the implementation of competition rules, and through the establishment of networks for the transport of energy throughout Europe. In addition, to improve security of supply, the interconnection of energy networks with non-EU countries is also a priority.
On the socio-economic front, the EC is also aiming to reduce the isolation of less advantaged regions by increasing their access to competitively-priced energy.
These are the objectives underlying the EC`s trans-European network (TEN) energy programme. Under this programme, the EC identifies and also financially supports network projects both inside and outside the EU.
The TEN energy programme covers both electricity and natural gas networks. In terms of electricity networks, it applies to high voltage lines, submarine links, and protection, monitoring and control systems. It does not involve distribution networks. Its main objectives are:
– Promoting the effective operation of the internal energy market (and also the general internal market)
– Reinforcing security of energy supply
– Strengthening economic and social cohesion by reducing the isolation of less advantaged regions.
Projects identified for the TEN programme must correspond to these objectives, and must also display economic viability. The EC promotes and facilitates the programme in a number of ways, including the encouragement of technical co-operation between grid operators; easing authorization procedures; and providing financial support.
Financial aid under the TEN programme is usually awarded for the co-financing of feasibility studies. However, in some cases support is given through interest rate subsidies, loan guarantees or direct grants. A condition of financing is that EC support should not distort competition.
There are several financial instruments which can come into play for the TEN programme, including the TEN budget line, the European Regional Development Fund, the Phare, Tacis and Meda programmes, and loans from the European Investment Bank (EIB). As of September 1997, a total of Ecu29 million had been committed for the co-financing of feasibility studies from the TEN budget line, with a total of Ecu112 million set aside for the period of 1995 to 1999.
There are four types of projects under the TEN programme:
– Connection of isolated networks
– Improvement of the interconnections between member states
– Improvement of internal connections within member states
– Establishment or improvement of interconnections with “third” (non-EU) countries.
One of the most recent projects to be announced under the TEN programme falls under the first category, interconnecting Italy with the relatively isolated system of Greece.
A European link
In June last year a consortium of Italian ABB group companies and ABB Power Systems in Sweden was awarded the contract to supply electrical equipment to an HVDC link between Galatina in southeast Italy and Arachthos in northwest Greece.
ABB will supply the electrical equipment for the two converter stations while the cables will be manufactured by Pirelli. The utility on each side, Enel in Italy and PPC in Greece, are responsible for their own civil engineering works and also for the extensions to the 400 kV ac systems.
The two stations will be interconnected by a transmission system consisting of 40 km of land cable in Italy, a 160 km long sea cable, and a 110 km overhead line on the Greek side. The HVDC system will have a power rating of 500 MW and operate at a dc voltage of 400 kV.
The converter stations will have a conventional design with two shunt banks for filtering and reactive power support. In the Greek station that connects to a dc overhead line a dc filter will also be installed while on the Italian side the land cable connects to the station so no dc filter is needed.
This project has been declared a `priority project` and is undergoing authorization procedures. It has received financing from several sources and EC programmes, including Regen (Ecu35 million), Interreg II (Ecu78.5 million), and the European Investment Bank (Ecu100 million loan). The link is expected to be commissioned at the end of 2000.
The Eastern connection
The prospects for intensifying cooperation between western Europe and other states increased after the demise of the Soviet Union and the associated changes in eastern Europe. Between the Atlantic coast and the Ural mountains, there are four time zones and as many as 40 countries with differing demand profiles that could be interconnected in an extended European transmission network.
The EC sees the benefits of interconnection with third countries as:
– Access to energy resources and diversification of supply
– Downward pressure on energy prices through competition
– Integration of the candidate third countries
– Trade and industrial co-operation
– Social and economic cohesion in a wider geographical area.
The third countries can also benefit from improved operation of their electricity networks, revenues from electricity sales, and contribution to political stability and economic reforms.
Existing interconnections between EU and third countries include links between Norway, Denmark and Sweden, Finland and Russia, UCPTE and Centrel (the eastern European interconnected system), and Greece with some neighbouring countries. One major area where new links need to be established with western Europe is the Baltic region.
One major project currently under development is the Baltic Ring which will eventually interconnect the transmission systems of Germany, Poland, Russia, Estonia, Latvia, Lithuania, Sweden, Finland, Denmark and Belarus. The SwePol Link is part of this major development, as is the East-West Power Bridge.
The East-West Power Bridge project will enable the efficient and economic exchange of power between east, central and west European utilities. The 4000 MW transmission system will run from the town of Borken, near Frankfurt-am-main, across the eastern regions of Germany and Poland into Belarus and on into the west Russian town of Smolensk. The TEN programme provided co-financing of the feasibility studies in 1996.
A consortium known as the Power Bridge Group has been formed to implement the project. This consortium includes US company CalEnergy, Siguler Guff, and Duke Engineering & Services. Exports of power are expected to begin in 2002.
The 1800 km route transverses the UCPTE, Centrel and Russian UPS systems, with four interconnections with national ac networks. When complete, Power Bridge will allow the pooling of capacity and power reserve in the region, and allow old and environmentally hazardous power plants to be refurbished or replaced.
Five electrical utilities will use the Power Bridge line: Germany`s Veag and PreussenElektra; the Polish Power Grid Company; and the Russian and Belarus utilities. The line will save them an estimated 1600 MW of reserve capacity, and their investment in the project will be less than the construction of new capacity within their own systems.
The projected transmission costs of the line will be considerably less than the fixed capital costs of additional plant, particularly in the case of German and Polish utilities. Additional benefits include spot price savings. Estimates indicate that German utilities could make peak demand savings of over $10 million per year when importing power from the east.
The line also presents other opportunities with telecommunications: the communications circuits used to control the line could be used to carry commercial voice and data traffic, earning revenue for the line operators.
The Power Bridge project is of particular significance due to its interconnection with Russia, and the access this gives to the country`s extensive but unexploited primary energy sources. This brings the possibility of lower generation costs for the region`s system, as does the prospect for interconnection with the hydropower reserves of Siberia.
Studies about the network planning of Siemens have shown that stable operating conditions can be expected.
A Baltic link
Another power link project in the Baltic region, currently in the feasibility stage, is the Estonia-Finland link. The major partners here include Eesti Energia of Estonia, Helsinki Energy, Pohjolan Voima Oy (PVO), and Ekono Energy.
Helsinki Energy and its partners are currently studying the economic feasibility and environmental implications of the project, the aim of which will be to transmit electricity to Finland from Estonian power plants.
The project will involve construction of a high voltage subsea cable with a capacity of either 200,400, or 600 MW across the Gulf of Finland with two converter stations. The partners in the project are also examining the feasibility of building a natural gas fired combined cycle power plant in Tallinn, Estonia. The feasibility studies began at the beginning of this year and are expected to be completed by this spring.
Helsinki Energy says that if the feasibility study shows that the construction of a new power plant is not feasible, then it will not take part in the project because of the environmental implications. Estonian power plants burn mainly oil and solid fuels. However, some are equipped with flue gas desulphurization equipment, and power sold to the Nordic grid will have to conform to the environmental requirements of the EU.
If the project goes ahead without a new combined cycle power plant, PVO will import the power from Estonia.
Swiss-Swedish engineering group ABB is also a partner in the project, lending engineering expertise. Ekono Energy is the independent engineer for the project. Contracts for power purchase and equipment supply could be signed in the middle of this year, with construction starting in 2000. Financing for the project has not yet been finalised but there are several possibilities, including the EC.
By linking into the Nordic Grid, Estonia will be able to export electricity and generate revenues for improving the operation and performance of its power plants. The link will also be another step in improving the efficiency and reliability of the Nordic and Baltic electricity grids.
Figure 1. The recently announced link between Greece and Italy will be commissioned in 2000
Figure 2. The Baltic Ring projects include the SwePol Link and the East-West Power Bridge