INTERVIEW: Time to stop legislating and focus on grid challenge: Eurelectric

Europe needs to honor its Green Deal commitment, avoid unnecessary legislation and use regional EU funds to support distribution grid investment, Eurelectric Secretary General Kristian Ruby told S&P Global Commodity Insights in an interview.

The Green Deal was approved in 2020 with the aim of making the EU climate neutral by 2050. Since then the war in Ukraine has only served to accentuate the security of supply benefits of the transition, the European power association official said on the sidelines of Reuters' energy transition conference in London Nov. 13-14.

"The bottom line is we're under intense pressure to meet our climate objectives and get out of Putin's grip," Ruby said. "We don't have time to rattle investor confidence."

In October Eurelectric called for an EU electrification target of 35% of final energy use by 2030, but the association did not want this to be enshrined in law.

"We're already facing unprecedented levels of legislation with unknown consequences -- CBAM, ETS II, stuff we've never seen before in action," he said.

On top of this, there were elements in the Electricity Market Design reform currently in trilogue in Brussels that raised too may questions and threatened delay.

"For instance, moving to a CFD-only support paradigm. If you are a Member State organizing a big tender based on a feed-in premium, guess what: this is going to slow you down," Ruby said.

Other proposals for a Single Legal Entity overseeing market coupling and a virtual trading hub were equally untested, and fell under Ruby's rule of "if in doubt, leave it out".

Unwelcome distractions

These elements of an otherwise sensible EMD reform package were unwelcome distractions from the most urgent job in hand -- boosting investment in distribution grids.

"The good news is this is becoming clear to decision makers," Ruby said, noting the EC was due to publish a grid action plan at the end of November.

Ruby hoped the plan would put forward structural ways to ramp up investment and offer guidance on national regulator mandates.

Many were stuck in a post-liberalization world of protecting customers from over-investment, he said.

"Now the task is so huge that the overarching risk is there will be too little investment, not too much," Ruby said.

One way forward would be to add delivery of net zero to regulatory mandates, as had been done for Ofgem in the UK, he said.

"There may have to be more investments, but they compensate for other costs," he said.

Anticipatory network investments went a step further -- but were a key part of a modern regulatory mandate.

"We need to move from the existing top down, command and control relationship between regulators and operators, and arrive at a more modern arrangement, a partnership-based philosophy," he said.

DNO connection speed

At any one time a distribution grid operator is juggling requests to connect batteries, merchant solar farms and fleets of high-speed EV chargers.

"If the operator plays by the book he has to say 'my investment plan was set three years ago, come back in three years' time' -- that's not going to work. He needs to act with agility for the transition to function smoothly."

The anticipatory grid investment clause in the draft EMD revision "is an absolutely crucial piece for us -- it needs to be agreed, and it needs to come with provisions that ensure positive incentives," Ruby said.

Alongside this, Eurelectric is lobbying for improved integration of distribution in grid planning processes, and an injection of targeted EU funds.

"The solution to distribution problems is not to build more transmission -- the focus has to move downstream. The problem is local, on your street," he said.

There was potential for EU funding to play a greater role here, notably in low income regions that might struggle to absorb a rise in unit cost.

"EU funds have been focused at transmission level, but now electrification is taking such a central role, you can argue that even at low voltage, the success of these projects are of strategic advantage to the whole continent," Ruby said.

A good example is the distribution-level charging infrastructure needed to allow e-trucks to traverse the continent.

While the EU's trans-European network (TEN) funding mechanism sprang to mind as a source, Ruby argued otherwise.

"We don't want to cannibalize TEN funding for this," he said. "The point is the cake needs to be bigger to deliver electrification. Let's look at the EU's regional funds," he said.

Regional policy is the EU's main investment target. Some Eur392 billion ($426 billion), almost a third of the total EU budget, was set aside for Cohesion Policy for 2021-2027.