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EXECUTIVE FORUM : Security of Supply and Power Sector Investment
Mr Cesari foresaw a strong role for smart grids and storage technologies, which could “provide reduced risk of integrating RES-power”. Early implementation of this concept would see the use of dynamic demand-control systems for existing loads such as refrigeration, air-conditioning and heating. Although the energy sector has historically been one of the lowest spenders in R&D, he argued that utilities should play a strong role in developing smart grid technology internally, in order to “develop a strategic position in new markets.”
From left to right : Hans ten Berge, Luca Cesari, Klaus-Dieter Maubach, Teodor Chirica, Padraig McManus Moderated by EURELECTRIC Secretary-General Hans ten Berge, the Executive Forum featured top managers from the European electricity industry: Klaus-Dieter Maubach, Chief Executive of Germany-based E.ON Energie.Teodor Chirica, Senior Adviser at Romanian power company Nuclearelectrica; Padraig McManus, CEO of Irish major ESB; and Luca Cesari, Global Managing Director for Utilities at Accenture. Following on from an audience electronic voting session, Hans ten Berge introduced the Executive debate by drawing on the questions posed. Asked to name the most important challenge for the electricity industry to 2050, a majority of the audience had identified an “unclear regulatory framework”, followed by low prices. Padraig McManus agreed that low prices are a problem, given the challenging targets set by policymakers, not only for renewable energy expansion and CO2 mitigation, but also demands for smart grids and smart metering. The industry is positive about investing here, but “the real challenge is for us to manage the expectations of politicians vis-a-vis price. We have to get the message out: if you want all of this, it doesn't come cheap”, stressed Mr McManus. Teodor Chirica emphasised the consequence of regulated low prices constraining capital investment, referring to the difficulty of financing investments in a market like Romania, where over 50% of all electricity supply is based on regulated prices and the necessary “correlation between market price and investment” is missing. Klaus-Dieter Maubach identified access to capital as his biggest current challenge, even with the favourable investment ratings that his company enjoys. He also pointed out that “fuel poverty is a real issue in Eastern Europe” and wondered whether the energy-climate targets were affordable in those countries. The panel agreed that policymakers have a duty to be clear on the cost of energy sector innovation and development and communicate the facts honestly to the electorate. Surveyed on which technology they thought would play a key role in the decarbonisation of electricity, the audience clearly identified nuclear power followed by CCS and renewables. However, Nuclearelectrica CEO Teodor Chirica pointed out that obtaining financing for nuclear plants would be a challenge, particularly in the current conditions. “Innovative solutions”, such as using the “Finnish approach” of partnering with large power consumers would be needed, he told the audience. Mr Maubach hoped for change in the current German government policy of phasing-out the considerable existing nuclear capacity. Such policy is less a problem for the electricity companies than for German industrial customers, who will find it hard to secure low-priced electricity, he warned. Mr Cesari saw a “good probability” that Italy will reverse its anti-nuclear stance in the foreseeable future. Mr McManus stressed that, quite apart from Ireland’s official non-nuclear policy, it “would not make sense” to build a nuclear power plant. He saw windpower, plentiful in Ireland, as the way to go, although grid capacity would have to be developed, he explained. The discussion then moved to the question of the extent of the EU's formal jurisdiction in efforts to develop a common EU energy policy that balances the aims of environmental – notably climate change-oriented – care, supply security and market-based competition. The panel echoed the mixed view from the audience: Mr Maubach pointed out that despite the “urgent need for an EU- harmonised energy policy” some of the latest EU moves were going in the opposite direction, a case in point being the Member State-oriented approach to promoting renewable energies. The alternative to harmonisation on RES-support will be considerably higher costs and also potential network security issues, but “are governments actually ready to give up control over their energy policy” in the interests of coherence, Mr Maubach wondered.
The discussion on policy coherence led into the question of how the 20-20-20
targets will impact on supply security, on which the audience opinion was
inconclusive. The panellists expressed concern over the particular impact of
the RES Directive on supply security, especially the issue of retaining and
building back-up capacity for intermittent RES like windpower that would
operate for a limited number of hours per year. Mr Maubach argued
that if RES remained a “privileged closed shop with priority access and
dispatch” through to 2020 and beyond then there would be a real
conflict. “RES support is at the end of the day paid for by customers. We
should go for an EU-wide certificate system” he said. He raised the
question of who has final responsibility for supply security. “This is
not the responsibility of power companies, nor of the TSOs or the
politicians either”, he pointed out, calling on the governments to
clarify roles and responsibilities in this area. Mr McManus
highlighted the Irish system of making capacity payments for firms to keep
otherwise uneconomic plant available, which might also be a solution for
other countries, he suggested. Looking into the future, Mr McManus
stressed that “efforts in energy efficiency need to be properly rewarded.
Consumers will not pay for something just to save the planet”, he
warned. Incentive must therefore be provided for electricity companies to
work on energy efficiency. Mr Chirica argued that all low-carbon
power technologies, including nuclear power, should be promoted. Mr
Cesari pointed out that the R&D spending of electricity companies is in
general far too low. However, “it is not necessarily the quantity, but
especially the quality of spending that counts”, he underlined. |
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Luca Cesari, Global Managing Director of the Utilities Industry Group at Accenture,
posed the question “what are the policy, technology and investment priorities for
achieving the EU ‘2020’ energy-climate targets while ensuring security of supply?”
Pointing out that only a few countries in Europe were already strong in renewable
energy sources (RES), Mr Cesari underlined the fact that much of the existing old
power generation capacity needs to be replaced in the next few years and questioned
whether RES-power would replace this. In moving towards the target, Mr Cesari drew
attention to the “enormous mismatch between government and industry goals”.
RES-electricity production has grown by an average of 15TWh/year in the 1997-2009 period,
the announced plans of the power industry foresee no more than an additional 30TWh/year,
yet in order to achieve the 2020 targets, RES electricity would need to grow by 50TWh/year.
Meanwhile, the “financial environment is not encouraging” – with a global
decrease in RES investment from $175bn in 2007 to $109bn in 2008-09, a 38% drop. Moreover, RES capacity is
not being built in optimal locations, for example photovoltaics are being subsidized and
rolled out in Germany. We should instead “focus generation capacity according to regional
resource availability” - the best method being an EU-wide RES certificate scheme (although
this is unlikely to be possible until at least the review of the new Renewables Directive in
2014).
