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Symposium 2010

Proposal - Towards a Global Electricity Market

The Challenge

In principle, solar and wind are more than enough to deliver any amount of energy that the world’s population might need. But these sources are usually best exploited in areas that are far from ce ...

In principle, solar and wind are more than enough to deliver any amount of energy that the world’s population might need. But these sources are usually best exploited in areas that are far from centers of demand. It is technologically challenging to transport electricity over large distances and even more to store it. As a consequence, electricity markets have tended to develop as regional markets.

Increase power grid capacity and interconnect national power grids.

A vigorous effort to increase power grid capacity and interlink national power grids would lead to larger electricity markets. Overall volatility in the provision of renewable electricity would be reduced, increasing renewable base load capacity. Power suppliers might at the same time be able to reduce overall reserve capacity, thus cutting costs for power from all sources, including fossil fuels.

Establish renewable large-scale projects.

Interconnected grids would not only allow for increased base load use of existing renewables, which are often of a small scale compared to fossil fuel plants. They would also set the stage for a spatial decoupling of electricity generation and consumption, including the option of large scale projects to generate electricity from renewable sources. These large scale projects include e.g. Concentrated Solar Power (CSP) plants in deserts or off-shore wind parks and could provide a significant contribution to the extension of renewable capacity.

Development of electricity storage capacity.

Electricity storage presents a natural solution to eliminate the central obstacles to the large scale use of renewable electricity sources, which is the problem of high volatility. However, despite significant research effort, cheap and efficient solutions are still not available on a sufficient scale – so far, pumped hydro facilities are the only option that is actually used on a large scale. Corresponding private and public research programs should be fostered, focussing on new approaches like the use of hydrogen as well as on intelligent application of existing technology. Programs for the promotion of E-Mobility play an important role in developing storage solutions as well, since batteries of electric cars may be used to cheaply store electricity in high supply-low demand periods.

Decentralization of electricity generation.

The strategy of decentralizing electricity generation by means of small-scale installations is discussed as well. These installations could e.g. be gas-fired and, once installed, are available on short notice. They could serve as reserve capacity and satisfy the demand for balancing energy, which will rise if renewable capacity is expanded – especially as long as regional interconnection between renewables is underdeveloped.

Making grids smart.

Current electricity grids lack digital communication channels between their interconnected elements. Generators only know how much electricity is demanded by all consumers but not by whom exactly and for what purpose. Making grids smart means to establish those communication channels, thus allowing for optimizing the operations of the interconnected elements. Possible benefits could include a reduction of peak load capacity and the optimal utilization of energy storage capacity.

Establish institutions to handle interconnected electricity markets.

Another side effect of larger interconnected grids may be an increase in competition in electricity markets. While this is probably beneficial for consumers, established power producers might be deterred from building up the necessary infrastructure. National grid regulation authorities are obliged to arrange for the necessary incentives and sanctions. The necessity of international cooperation between national authorities is obvious, preferably within existing frameworks, either on a regional (e.g. existing FTAs) or global (e.g. IEA, WTO) level. The European Union is already moving in that direction by building a supra-national Agency for the Cooperation of Energy Regulators (ACER), as well as a number of additional regulator cooperations.

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