Market integration, flexibility key in staving off threats to EU power sector: Eurelectric

Amid a barrage of physical and cyber threats aimed at Europe's energy system, the market needs better infrastructure planning, a push for more flexibility and better-functioning markets with effective price signals, trade group Eurelectric said in a report on the sidelines of the Munich security conference on Feb. 14.

"Right now the threats are literally piling up in our sector," Kristian Ruby, secretary-general of Eurelectric, said in a press briefing.

To shore up security of supply across the EU, the different resources across regions need to be more deeply interconnected, from Nordic hydro to Iberian solar and French nuclear, Eurelectric said.

"A critical part of security of supply is directly tied to well functioning electricity system in Europe," Ruby said.

To get there, EU member states need to implement more market directives and more interconnectors built must be across countries, Eurelectric suggested.

While the EU is aiming for deeper market integration, there are political concerns over higher prices in some regions.

Norway, not an EU member but part of the European Economic Area, recently decided to push back against further market integration and delayed planning for new power interconnectors into continental Europe over concerns that it would raise power prices in Norway.

"This is exactly the opposite of what we need," Ruby said, adding Eurelectric's industrial partners in Norway were "very unhappy" with the decision.

Ruby described the move as short-sighted, for instance when considering future benefits in access to European markets for new Norwegian offshore wind projects.

"Is it in your long-term interest to be cut off from the rest of Europe?," Ruby said.

Flexible storage capacity for daily, weekly and seasonal timeframes also needs further build-out. Daily energy and capacity flexibility needs are expected to grow the fastest by more than 100% from 2025 to 2030 and by around 100% from 2030 to 2050.

"Five years from now we need a completely different system with massive capacity additions across all flexibility vectors," Ruby said.

Cyber threats more imminent

Amid the energy transition, Europe continues to need diverse supply sources, including low-carbon fuels such as green hydrogen, Eurelectric said.

"Adversaries would love to see us divided and not being able to move forward because we can't agree on what technology is good enough," Ruby said.

Meanwhile, most European markets are not yet efficiently incentivizing demand response through price signals, the trade group said.

Even so, customer engagement is essential for a safe and affordable system, Eurelectric said in its report. While smart meters are usually needed for customers to engage with the market, only 54% of EU households had one in late 2021, according to the latest data available to Eurelectric.

The decentralization of the system inherently reduces infrastructure risks, but more needs to be done to prepare for attacks, Leonhard Birnbaum, CEO of grid utility E.ON, said.

"We need to prepare like we have never prepared before," he said in a virtual press conference on the sidelines of the Munich conference.

Across the industry, there have been suspected attacks on power cables and pipelines, and communication on best practices has been strong across the industry, Birnbaum said.

"We have an interest in helping each other to prevent attacks," Birnbaum said.

At this point, however, the cyber threat is more imminent than physical threats, and adversaries have already demonstrated the ability to do real damage, for instance via attacks on customer billing systems, Birnbaum said.

"We need functioning markets, better planning, and a better mindset to prepare for [security of electricity supply]," Birnbaum said. "We need new processes for cyber security, like those in place for authorities. In the EU, when you are attacked, you get additional reporting obligation with no support from authorities -- we need to change that."