|Gibraltar rock – the Spain to Morocco interconnection under the Straits of Gibraltar is currently Europe’s only trans-Mediterranean power connection
The Arab Spring may have increased short-term doubts about the political stability of Europe’s southern and eastern Mediterranean neighbours, but the long-term case for energy cooperation between these regions is surely unarguable. Europe needs more energy than it can generate, and it has (for the time being at least) money to buy energy from North Africa and the Levant. And it wants to, to avoid over-reliance on Russian gas and Gulf-state oil.
Mediterranean Arab states need to develop economically to bring opportunity to their growing young populations. So building an energy export industry with Europe is a sound bet, and creating electricity import links is vital as these countries seek to overcome growing domestic energy shortages – which are especially acute in the summer.
So creating a Mediterranean energy market makes sense, but it will cost money and involve serious institutional and legal reforms. Two goals must be met: electricity transmission links must be built, and governments and private investors tapped for big bucks; and the energy regulations of the countries in North Africa and the Levant must develop energy market laws compatible with European regulations.
Progress on these issues was discussed in the European Parliament in Brussels on April 11 at a high-level conference, entitled “European Union / Union for the Mediterranean: A common sustainable energy future”. The conference heard that, while work needs to be done, there is significant goodwill, and progress is being made.
|André Merlin, president of Medgrid (right), meets EU energy commissioner Gàƒ¼nther Oettinger (left) in Brussels
Credit: European Commission
André Merlin, president of the Paris-based energy consortium Medgrid, formed to help create such links, said: “The ties between Europe and the countries of the Southern Mediterranean regarding energy are already very strong. Today, 20 per cent of the gas and 15 per cent of the oil consumed in Europe comes from North Africa, and 60 per cent of North Africa’s oil exports and 84 per cent of its gas exports are sent to Europe.”
He argued: “It is clear that in future this trade will increase very significantly because the north and south of the Mediterranean energy systems complement each other. Just remember the huge potential for renewable energy in the south (solar and onshore wind), and the peak demand for electricity in Europe’s winter and North Africa’s summer. Such exchanges are technically feasible and economically viable through electricity motorways by land and sea between the two shores of the Mediterranean.”
He cited the one existing interconnector between Europe and North Africa (through the Straits of Gibraltar). He noted that 5 billion kWh per year of power is exported from Spain to Morocco, meeting 5 per cent of the North African country’s electricity demand.
Speaking later to Power Engineering International, he said: “Already with the existing interconnection, it is very positive. There’s a lot of electricity exchanged between Spain and Morocco.” The interconnector is currently 50/50 owned by Spain’s REE and Morocco’s ONE. Morocco amended its energy legislation so that it could purchase electricity from Spain, on the open market, just like any other EU power player within Europe’s single energy market.
Looking ahead, he stressed that the existing 700 MW transmission capacity interconnector could also supply power from Morocco to Spain and Portugal, although the Maghreb kingdom would need to develop more renewable energy production first. His organization would like to see more capacity put in place, and a new link to allow electricity to be fed from Morocco to Algeria. And, he added: “When we consider the trade in electricity from Morocco to Europe, we don’t only consider transmission to Spain, but also to the south of France.” This is increasingly realistic given the work underway to improve electricity supplies between France and Spain. Subterranean power lines are being developed between Perpignan and Figueres, which could boost Franco-Spanish interconnection by 1,000-800 MW. And if plans to lay a submarine interconnector between Bilbao and Bordeaux are carried forward, this could rise to 4,000 MW. This could drastically increase the practical European market for Moroccan electricity, said Merlin.
However, the interconnection across the Straits of Gibraltar is all that there will be in terms of trans-Mediterranean power lines for some time, since more investment will be needed. Merlin is looking ahead to 2025 before other interconnectors are working in earnest. These would link Italy with North Africa, and two routes are in the frame: one linking mainland Italy via Sardinia to Algeria and Tunisia, and the other from the Italian mainland via Sicily to Libya. The interested parties are Italy’s transmission system operator Terna, Algeria’s Sonelgaz, Tunisia’s STEG and Libya’s GECOL.
The other potential corridor is in the Levant, linking Turkey with Egypt via Syria and Jordan. However, until peace is secured in Syria, previous discussions about a back-to-back connection between Turkey and Syria, and conventional connections onwards to Egypt, will have to wait. “As soon as the war is finished in Syria, there will be a stronger push from Turkey to have this interconnection in the south,” he said.
To make these major steps forward, the question arises over whether infrastructure or market regulatory reform needs to come first, and there is a good argument that both strands need to be developed simultaneously. There is certainly some progress, and this was highlighted at the conference.
On the policy side, there is a range of initiatives, and it is not clear which of these will actually deliver the reforms that are needed – it could be that they will work together to deliver a hybrid solution.
There is a bottom line here, said Merlin, and that is for European energy trading partners to have regulations that will allow them to import electricity. “They should adapt regulations to exchange electricity with Europe,” he said. Morocco’s rules are operational, and Algeria is amending its regulations to allow cross-border trades.
Merlin noted that Tunisia has yet to make the necessary reforms, but the government was “conscious they need to consider changing the electricity law to allow exchangesà¢€¦” Energy reform in Libya “will come,” predicted Merlin.
But to what extent will these reforms involve agreements with European institutions or the transposition of European agreements or legislation? EU institutions, such as the European Commission, the European Investment Bank and the EU’s European External Action Service (EEAS) have the most legal, diplomatic and financial muscle. But the EU’s energy integration and liberalisation might be too comprehensive as a model for Maghreb and Levant countries, which mostly have one national energy organization.
|à‚||But Fabrizio Barbaso, Deputy Director-General of the European Commission’s Directorate-General for Energy, said the EU remained committed to building trans-Mediterranean power links, while expressing caution about North African and Levantine countries adopting EU-based energy market laws. There is a model for this: the EU’s Energy Community, which has exported EU energy legislation to non-EU Eastern European countries – but Southern and Eastern Mediterranean countries are not members. Barbaso noted that it was likely that a necessary minimum platform of common rules could develop in the coming years.|
|Fabrizio Barbaso, the deputy director general of the European Commission’s Directorate General Energy
Credit: European Commission
He noted that it was possible that: “The process of electricity market integration in the Maghreb could be re-launched at minister level in the coming months.” He also noted the Commission’s financial support for energy market reforms in countries such as Morocco, Jordan, Egypt and Tunisia.
The EU has also struck bilateral cooperation agreements with single countries in the region. But to create a comprehensive multilateral regional energy framework there has to be “a Mediterranean Energy Community that would provide a common political perspective as regards converging market reforms and market integrationà¢€¦ we need a strong commitment from the political authorities in the South,” he said.
Looser diplomatic initiatives
Because North African and Levantine countries have no prospect yet of EU membership, looser diplomatic initiatives that would avoid shackling independent Mediterranean countries to EU energy laws might have more success. One might come through the work of the Union for the Mediterranean (UfM), which was formed in 2008 to integrate European, North African and Levantine countries. Its deputy secretary general for energy, Sotiris Varouxakis, also addressed theconference: “Obviously there exist administrative barriers and institutional, legislative, political uncertainties. But the positive outlook is significant,” he argued. He also stressed that his secretariat had been charged with developing a Mediterranean Solar Plan, to promote this renewable energy through the “creation of a large-scale and sustainable market in renewable energy, promoting energy efficiency”. The plan will be presented to the union’s member states for approval by the end of this year.
It will set a target of ensuring that, by 2020, countries in the region achieve installed renewable energy production capacity of 20 GW – mainly through wind and solar – which will boost energy exports to Europe and create jobs and industrial plant in North Arica and the Levant. The plan will involve a set of common-policy and harmonised regulations, strengthen the availability of investment, promote the construction of new transmission systems and provide support for industrial development and job creation in the sector, as well as the transfer of know-how.
Since the focus is as much about creating renewable energy for North Africans and Eastern Mediterranean citizens as about securing European exports, it might get more political play in these non-EU governments. Varouxakis noted that the power generation in North Africa and the Levant is 80-per-cent sourced from fossil fuels, with the rest coming mainly from hydroelectric power. With these regions’ electricity demand rising at 6-7 per cent per year – a tripling of demand within 20 years – he said there would be a need to create extra production capacity of 200 GW by 2030, compared with 120 GW today. The Observatoire Meditérranéen de l’Energie (OME) has also estimated that power generation in the south and east Mediterranean will increase at an annual average rate of 3.8-4.9 per cent between 2010 and 2030, while EU growth would be just between 1.3 per cent and 1.7 per cent.The development of renewable energies and energy efficiency is “an absolute necessity in the [non-EU] Mediterranean region”, he noted, stressing the region’s “considerable potential for the development of renewable energy that can both help satisfy domestic demand for growth and the export of green electricity to Europe.”
Another international initiative that could deliver complementary energy reforms is the Energy Charter, an international treaty system in force since 1998, which was designed to strengthen the international rule of law on energy issues by creating common energy regulation principles for all participating governments. To date, the treaty has been signed or ratified by 51 states, the EU and the EU nuclear energy community Euratom.
The problem here is that no governments in the North Africa and Levant area have signed the treaty, and only Syria, Jordan and Morocco signed the 1991 charter that was a precursor to the agreement.
But the Energy Charter Director, Steivan Defilla, addressed the conference, and expressed confidence that the charter could deliver the regulatory changes needed to get power flowing across the Mediterranean.
He said: “The European Union does not seem to be the ideal political and institutional benchmark for the Mediterranean neighbouring countries. EU member states to a large extent implement at national level energy policy strategies and legislation that are adopted by the EU institutions in Brussels. This model cannot easily be exported to Mediterranean states who have no perspective of EU membership.”
Defilla argued that EU institutions such as the ACER (Agency for the Cooperation of Energy Regulators) would have to be adapted or specifically “re-invented” if they were to help coordinate energy markets across the Mediterranean Sea.
He thinks it is feasible for North African and Levant countries to sign the charter treaty and develop the complementary regulatory systems required to underpin electricity sales to and from Europe, partly because it “recognizes and protects the national sovereignty over energy resources”. He said the two-step process for accession is realistic, requiring a political commitment from signing the Energy Charter Declaration, and a legal one from signing the Energy Charter Treaty. This “facilitates the progressive involvement of new countries in the Energy Charter,” he said.
Defilla also stressed that the Energy Charter’s MENA Project (Middle East and North Africa) would promote this process. Funded by the German government, it involves charter members sharing the experience and best practices for energy policies and laws with MENA countries. It has spawned a series of meetings between their governments.
Merlin would be relaxed about any of these initiatives succeeding, and said that for electricity to be traded across the Mediterranean, independent transmission system operators (TSOs) in the Levant and the Maghreb are not vital.
“It’s not essential, but it would be helpful,” he said. “We have to be moderate in our vision,” he said.
One key issue that can been addressed now is to coordinate the wide variety of EU-based initiatives dedicated to the trans-Mediterranean cause. That, said Merlin, was one goal of the conference and a key aim of Medgrid – which is a collaborative organization, and involves industry leaders in electricity generation, transmission and distribution, plus infrastructure financing and climate change services.
The event unites 23 energy regulators from around the Mediterranean to encourage members to coordinate their regulations, to aid “market integration and infrastructure investments, as well as aiming to consumer protection and enhanced energy cooperation”. It uses an internal cooperation process, while collaborating with energy companies to help create what it calls a “Mediterranean Energy Community”. Unlike the EU (which is a supporter of MEDREG), its progress is “based on a bottom-up approach,” said a MEDREG note.
Its president Michel Thiolliàƒ¨re also addressed the conference. He stressed that $450 billion of investment was needed to create a truly effective Mediterranean energy market, and that effective coordinated regulation could help secure this money. “Regulation contributes to the definition of energy policy and security of supply,” he said, adding that for investors, ensuring a “satisfactory degree of openness to competition” and the “existence of stable and transparent rules” was important. In June 2012, MEDREG released a master plan for a Regional Electricity Market in the Mediterranean, which sought to use its members’ influence in creating three pre-requisites for progress on creating such a trading zone. This was: first creating the essential elements of the market – that is, institutions and rules; second: introducing a regional spot market and auction mechanisms for allocating capacity and interconnections; and third, implementing specific financial instruments and derivatives markets to improve market liquidity.
Med-TSO, (the Mediterranean Association of TSOs), which was launched last April (2012), with 13 members (not all unbundled), is working towards creating a Mediterranean energy market. It wants to harmonise planning criteria for exchanges, while “taking into account the peculiarities of each national electricity system.” Med-TSO wants to define the interconnection capacities needed for a functioning regional market and to assess the impact of growing renewable energy sources on existing electricity systems.
So this collection of energy players is left with the question of whether to invest in energy infrastructure anyway. Barbaso noted that developing trade in electricity across the Mediterranean is “a scenario which is attracting a lot of interest and of debate”. But as regards constructing the necessary interconnectors, he added: “The related financing needs are huge,” and market reforms would still need to follow. “The EU is the obvious political and financial partner in this process,” he said, but the bulk of financing would have to be private, with public money leveraging these funds and sharing risk.
In that regard, it could be that, initially, the real money is not in securing new energy supplies for Europe, but European electricity generators selling excess supplies to North Africa and the Levant, where prices are higher than in Europe.
Merlin told Power Engineering International that ultimately a successful trans-Mediterranean electricity market “is of very great importance, not just technically, but economically. It should be profitable for investors. This conference shows the political interest is there.”
Keith Nuthall is a freelancer writer.
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