Disagreement on the exchange of electricity between Member States

Nordic legislators would like to create a more integrated electricity market with a connected distribution system, in line with the growth of renewable energy. Berlin does not agree.

One of the last bones of contention in the European Union’s proposed reform of the electricity market is a proposal to limit cross-border flows of electricity.

Berlin wants to limit cross-border trade in produced electricity to 75%. This limit has gained momentum as European legislators began their final round of negotiations on 5 December to reform the continental electricity market.

Boosting electricity trade between Member States has become one of the key objectives of the reform. Cross-border infrastructure currently operates at only 30-35% of its service capacity, according to the European Agency for the Cooperation of Energy Regulators (ACER). You can visit ez-nergy.com and learn more about energy trading.

However, there is growing concern among Member States that their electricity is flowing to their neighbours. Capitals warn of the disruptive effects this could have on power grids still largely planned for national distribution.

Germany is therefore proposing in an amendment to limit transnational trade between transmission system operators (TSOs) to 75% of the electricity produced, according to a group of MEPs from northern countries.

This is a difficult point to accept for these countries, which consider the establishment of cross-border electricity cables as one of the key components of the European internal electricity market.

In their view, restricting trade between member states “is like building a motorway and then allowing motorists to drive on only half the lanes,” they wrote to Euractiv. It would be “a waste of money, including money from taxpayers, electricity consumers and the EU budget that financed the expansion of the network”.

Europe’s electricity sector needs to decarbonise, and quickly, MEPs stress, pointing the need for a connected electricity distribution system, in line with the strong growth of renewable energy, as illustrated by Nordic wind farms.

“We cannot continue to hinder the ecological transition to carbon-neutral electricity, and thus to a Europe with a sustainable energy system,” they argue.

Signatories of the declaration include Danish MEP Morten Helveg Petersen (Liberals), Finnish MEP Miapetra Kumpula-Natri (S&D), Swedish MEP Jakop Dalunde (Greens) and Bendt Bendtsen, a Danish MEP from the centre-right European People’s Party (EPP).

Free movement

The Commission was also concerned about unjustified restrictions on the free movement of electricity between Member States. In March, the competition authorities opened an investigation into whether the limits imposed by the German TSO TenneT on electricity flows with Denmark violated EU competition rules.

The Nordic countries are now concerned that Germany may in fact seek to enshrine these practices in European law. “For us, it is crucial that: 1) the calculation of the 75% is fully transparent, 2) the 75% cap is only temporary, 3) the TSOs justify the need for it, and that this justification is accessible to policy makers at national and transnational level,” write MEPs.

The Commission, for its part, acknowledged the problem and admitted that it was one of the last sticking points in the negotiations.

“This whim to set a flow limit” took the Commission “a bit by surprise” according to Florian Ermacora, a senior EU official in DG Energy at an event in the Parliament last week.

“The free movement of goods is an essential value in all EU treaties,” he said, adding that a derogation from these fundamental principles was only acceptable if justified on social, environmental or public health grounds.

German Realism

Germany raised the issue of interconnected flow limits last December when the European Council discussed its “general approach” to the Commission’s proposed reform of the electricity market.

“In order to interconnect the European grid, a realistic target value must be set”, said Rainer Baake, German State Secretary for Energy, who attended the meeting. He said that Berlin could support a target value of 65%. The 28 energy ministers finally agreed on 75%.

“You could say it’s too little too late, but we have to be realistic,” he said. Given that the use of cross-border interconnected electricity currently averages 30%, doubling this figure would already represent a considerable effort, especially for a country like Germany, “surrounded by many neighbours”.

The 75% threshold, a “minimum” for a country like Germany, is a “minimum”.

In an interview with Euractiv, a European diplomat said that the figure of 75% should not be seen as a maximum, but rather as a minimum target that all member states should try to exceed.

The remaining 25% could be used as a loop-flow to redistribute electricity within a market area, the diplomat said.

Florian Ermacora said there should be a “big discussion” on the subject during the trialogue negotiations on 5 December. On the whole, the legislators are, according to him, “very close” to a compromise on the proposed reform.

If accepted, the reform of the electricity market would complete the clean energy legislative package, which the Commission presented in November 2016, with the ambition of promoting renewables, energy efficiency and small-scale decentralised production.

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