One of the most important goals that the new European Commission has set is creating an Energy Union.
Initially the primary idea behind creating the Energy Union was to jointly purchase gas from third countries – especially to increase bargaining power in negotiations with Russia. However, over time the idea of an Energy Union has started to expand. The concept of the Energy Union is multifaceted, but here I would like to concentrate solely on the issue of electricity connections between countries – a means of creating a real single electricity market.
The media keeps talking about rising prices, whereas falling prices get much less attention. At the time when Estonia invested in the building of electricity connections between Estonia and Finland, there were many critics who said that this was a too big an investment to ever pay off. But thanks to those cables we actually did get connected to the power market of Nordic countries called Nord Pool Spot. Today Nord Pool Spot brings together the power markets of nine countries and the region covered by it is – somewhat surprisingly – the only region in Europe where power trading between countries really works. As a result of Estonia’s participation in the Nordic power market the electricity price in the country has fallen by 15%.
European Parliament’s Internal Market and Consumer Protection Committee commissioned a study to find out the cost of a non-functioning internal market to the countries and ultimately to the people, i.e the consumers. The study clearly pointed out that the European Union does not have a functioning energy market. From the electricity point of view it results from the fact that each Member State is building its own electricity kingdom or electricity island, so to speak. Security of supply is dealt with only in the context of a Member State and the lines are also built only nationally. The study draws attention to the fact that electricity connections between Member States are only built to cover the peaks in consumption, i.e for occasions when a country itself does not have enough electricity for some reason. They are not built with a goal to provide the consumers in different countries with an access to cheaper electricity.
It is only natural that when the shoe does not actually pinch yet, then nobody wants to make the big investments, because investments into energy connections are, as a rule, extremely time- and money-consuming and the governments of the Member States find it difficult to justify the expenditures to their voters. On the other hand, Central Europe is also starting to feel the need for functioning electricity connections. There have recently been some drastic examples. For example, in Belgium there was a serious fear during Christmas that there will be no electricity and heating, as the work of several of the country’s power plants was disrupted. At the same time in the Netherlands, only three kilometres from Belgian border, they had to close a power plant because of overproduction! In order to connect these networks, only 13 kilometres of high-voltage power lines need to be built. Technically it is feasible, but the problem lies in the limited powers of the authorities. Since in Belgium the shortages in electricity supply are predicted also in the future, the country is now looking for possibilities how to connect the networks more quickly. This is something that should have been done already a long time ago.
Another problem is also that nobody is seeing the bigger pan-European picture, as the Member States inevitably tend to set such market constraints that serve the interests of their companies. This, however, might not necessarily be in the interest of the consumers, as protectionist prices are higher. The one authority that could look at the bigger picture might be the Agency for the Cooperation of Energy Regulators (ACER) in cooperation with the European Network of Transmission System Operators for Electricity (ENTSO-E), but the Member States are not willing to yield their decision-making powers.