Future perspectives on policy instruments and market coupling for integration of RES-e in regional supergrids

Dr Catalina  Spataru,UCL, United Kingdom

Ms Omotola Adeoye, UCL,United Kingdom

 Prof Raimund Bleischwitz, UCL, United Kingdom

This paper analyse the disruptive technology of super grids and their market development. We will look at options for enhanced regional cooperation among supergrid linking countries within three major regions of the world: Europe Union (EU), Middle East and North Africa (MENA), West Africa (WA). We consider supergrids a systematic and disruptive innovation linking the electricity networks of nations using high voltage direct current (HVDC) cables, and being able to accommodate variable spatio-temporal resources (solar, wind). By combining different technologies through super grids  will be able to meet a future demand for electricity along with a decarbonisation as pledged at the Paris agreement on climate change in 2015. During the transition however one has to develop innovation systems that include policies and markets.

HVDC transmission lines originally developed in the 1930s became a mature and reliable technology for transporting energy over long distances. Unlike traditional Alternating Current (AC) power lines, they work well underground and underwater with a loss of about 3% of the electricity for every 1,000 kilometers. A German study (DLR) on MENA-Europe show only 10% of the generated electricity will be lost by HVDC transmission from MENA to Europe over 3000 km distance. They predicted that in 2050, 20 power lines with 5000 MW capacity each could provide about 15% of the European electricity demand by solar imports.

Creating regional networks of national legislations to implement such solutions will require enhanced cooperation between government and institutions; in particular financial incentives to build up the supergrid. However, current electricity directives lay down a general framework for the integration, yet they didn’t specify a common market design. This policy deficit has resulted in  several non-harmonized submarkets that need to be reformed. Regional initiatives are an intermediate step in the development of these harmonized rules.

This paper analyses future perspectives on policy instruments and potential electricity markets coupling for integration of RES-e in EU, MENA and West Africa regions. First we will discuss different mechanisms – price-driven and quantity-driven policies. Secondly criteria and indicators based on efficiency, effectiveness and equity, institutional feasibility will be analysed to assess the performance of the support mechanisms.

Energy markets are constantly evolving, often in different directions and at different speeds. Altogether this  makes indicators for an energy transition important as they allow to track performance in a dynamic setting and will enable policy makers to adjust their support. A major challenge is that the same policy can have different impacts depending on where and how it is implemented. Nodal pricing, market splitting and market coupling models have been used in our research. We find that there are several regional markets where prices show a high degree of correlation. Moreover, large injections of variable RES-e have led to unwanted effects on wholesale markets while the amount of surcharge caused by the different mechanisms and usually passed on to final consumers have triggered social acceptance issues. The development of cross-border interconnections could be the key towards market coupling as it allows for a maximum of flexibility on the technology side and allows to grasp opportunities of comparative advantages.

Our current research leads to the conclusion that the adoption of harmonized rules could help in the development of a coupling market at regional level. From economic view it was estimated for example that the cost of an initial supergrid spanning the EU region could be €55 billion. If this were spread over 20 years, for 500 million people it would amount to less than €5 per person per year. This paper will end up discussing replicability of different EU policy instruments to MENA and West Africa regions.