The CEO of Litgrid AB, Daivis Virbickas, is part of the new European Commission’s experts group on electrical interconnection targets and in this interview he explains his vision on the future of the power sector, the investments required and about finding a pragmatic and sustainable model for financing the interconnection projects.
Cristina Dascălu (CD): What is your vision for the future of our European energy system?
Daivis Virbickas (DV): European power consumption statistics and trends show that energy demand will continue growing, and electricity will remain the most convenient type of energy. Solutions that increase the level of comfort for businesses and households will increase the electricity demand, although at the same time, the consumption will become more effective. Due to innovations, consumers will increasingly produce electricity for their households, however, the demand to ensure power system stability will remain, and the tools for system balancing will grow ever more sophisticated.
CD: What challenges and opportunities in the power sector can we expect in the future?
DV: The major challenge for the system operators will be ensuring system stability and security of supply, whilst at the same time, the share of renewable sources will continue to grow in the generation mix. It is of crucial importance to ensure the balance within the generation, within a power system provided by renewables, and by the traditional resources enabling flexible generation. If this balance is not observed, the stability of the systems will be at risk.
CD: Where is the biggest innovation potential for electrical interconnectors?
DV: As far as the transmission grid is concerned, the high voltage technology is determined by pure physics, and I would not foresee a major revolution in the transmission grids, or the way they are interconnected. The distribution grids, however, may become the area of major innovation and development. The distribution grid must become smarter, also in terms of the ability to provide new types of services for the consumers – enabling demand side response amongst others.
CD: Some very serious transmission grid infrastructure investment will be required. Where should the money come from? The CEF has €5.35 billion, which is only 3% of the total investment needed, in other words, leaving a large financing gap.
DV: Interconnector projects require major investments, and are significant to economies across countries. However, every infrastructure project generates wealth, and this is always calculated as ‘social-economic welfare’. Some projects, especially those implemented by the TSOs of smaller countries, may show a negative net present value, yet, they are both significant and beneficial for the societies and businesses, as was shown in the ACER study of 2015, which for the first time, monetised the benefits of security of supply brought by the LitPol Link interconnector. The CEF serves as a significant financing facility, and there will be a need for another similar resource in the future.
[Tweet "main topic will be to find a pragmatic and sustainable model for financing the interconnection projects"]CD: We all agree that investment in power grids is crucial, but which type should get priority: interconnection, transmission, distribution, “smart”, or micro-grids?
DV: As long as natural conditions in Europe determine our ways of living, power generation will continue to be more concentrated in Northern Europe, and the heaviest consumption is to be found in the Southern part of the continent, so it will be important to enable the energy to flow from North to South. Grid interconnections are the pre-condition for this to happen; the power system operators’ function focusing on maintaining system stability, and this will surely have consequences for the distribution grid, and the requirements for its smartness, etc.
CD: The differences between Member States, in terms of geography and energy-mix, suggest a “case-by-case approach”, but instead, the Commission came up with a “one-size-fits-all” measure, a 10% electricity interconnection by 2020 (15% by 2030). What comments do you make about this?
DV: I would like to congratulate the Commission on setting clear goals and identifying measures. The expert group has only started the consultation, and we should wait for the conclusions. However, I would not be surprised if it appears, that the interconnection targets for some regions, may turn out to be far more ambitious.
CD: Is a 15% electricity interconnections target by 2030, likely to be reached by Central European countries?
DV: I am certain that a 15% electricity interconnections target by 2030, is a reachable target for Central Europe. What we need is political will and aligned efforts. If the Baltic and Central European countries were hesitating back in the 1990s, no economic sense would have grounded the decisions by the national parliaments to leave the Soviet bloc. The ultimate goal and the political will was the sovereign independence of these countries. We have seen many cases in the past, when the European countries joined forces and reached agreements based on political will, and a common European energy market is that sort of project, too.
CD: What are the main topics you intend to put on the agenda of the Commission’s expert group on electricity interconnection targets?
DV: The main topic will be to find a pragmatic and sustainable model for financing the interconnection projects, that will increase the connectivity of the European grids. This will require every related party – certainly, the European Commission, the Member States, and the regulators, to estimate the risks and benefits, and find the financial resources needed to implement a functioning and well-integrated European energy market.