Running on empty?

In the short term, the UK’s electricity links with Europe could help the country to avoid an electricity ‘capacity crunch’. The energy watchdog Ofgem has warned that the UK will see electricity capacity margins drop from around 14 per cent in 2012 to 4 per cent in 2015/16 as Britain replaces ageing infrastructure and retires old fossil- fuel power stations. As a result, Ofgem has warned that the UK could face energy shortfalls or, in extremis, blackouts, particularly in 2015/16 and 2016/17. Ofgem cautions against relying on interconnection with other countries to maintain security of supply, highlighting concerns about the level of security of supply in neighbouring European countries. However, our analysis of past performance shows that UK and international connectors are highly reliable, even at times of high demand.6

iii. Winning public support

Unlike some areas of European policy, such as immigration or the economy, cooperation on energy attracts significant public support. Almost 80 per cent of European citizens are in favour of their country sharing energy in the event of shortfalls and 60 per cent of Europeans think they would be better protected through a coordinated European approach to energy policy than by national measures alone.7
A 2012 YouGov poll found that tackling climate change is one of only two issues out of 16 where those surveyed in six European countries felt the EU rather than national governments should have control.8 In the UK, when asked whether countries in Europe should cooperate more closely on climate change or handle the issue at the national level, 51 per cent of respondents answered ‘more closely’ while 20 per cent said ‘less closely’.9

iv. Conclusions

A new purpose is needed to encourage growth across the continent and provide renewed legitimacy for European cooperation. Greater energy market integration meets shared goals on improving competitiveness, security of supply and sustainability while increasing trade and job creation. It is, therefore, a prize worth striving for.

If the UK is to reap the benefits of the single energy market and greater electricity connection with Europe, politicians will need to be prepared to explain why this is in Britain’s interests. At a time when trust in Europe’s institutions is at a low point, UK political leaders should be willing to argue that Britain’s self-interest can be served by working in Europe’s shared interest.

Greater energy market integration is needed to boost Europe’s competitiveness and improve levels of energy security

A single, interconnected energy market in Europe will reduce energy prices for

consumers and business and help accommodate an expansion of renewable energy. However, the construction of electricity connections between countries is not keeping pace with policy ambitions

Accelerating the deployment of electricity infrastructure should be a key aim of the EU 2030 climate and energy package. An ‘infrastructure target’ would help to define the level of transmission and distribution infrastructure needed to realise ambitions for a single energy market. This would need to reflect the different levels of electricity connection appropriate for different member states. EU 2030 negotiators should consider whether a target or alternative mechanism should be adopted for this.

Capacity mechanisms developed by member states, including the UK, to provide back-up capacity for renewable energy should be modified to ensure interconnection, electricity storage and demand-side responses are able to secure a significant proportion of capacity contracts as a means to ensure security of supply. The 2030 climate and energy package should ensure that capacity mechanisms in Europe are compatible, as far as possible.

This would also avoid the unintended consequences of introducing a capacity market early, which could include windfalls for existing generators, reducing the amount of low-carbon capacity which can be funded under the Levy Control Framework, and undermining the development of demand-side measures.

The UK needs interconnection with Europe to secure its short-term and long-term energy security

The UK does not currently rely on electricity connections with Europe to avoid electricity shortfalls. However, the UK should reassess this position given Ofgem’s warnings of an electricity capacity crunch over the next few years10 (particularly in 2015/16 and 2016/17) as generation capacity temporarily falls. Using electricity capacity from interconnectors would avoid the need to build expensive new generation capacity or interrupt industry energy supplies.

In the Energy Bill delivery plan, the UK government needs to set out clear objectives for the role interconnection will play in the energy system up to and beyond 2020. This should include setting out how interconnection, as well as other balancing technologies,11 will help to balance variable renewable power and ensure UK security of supply.