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Symposium 2010

Proposal - Sustainable Energy Transmission – Challenges and Visions

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.

Pathetic as it may sound, we should realise that our entire civilisation depends on energy services, especially electricity. In a recent edition, The Economist has published the following statement from America’s National Academy of Engineering: Neither the car nor the computer have been the biggest engineering accomplishments of the 20th century, but the large distribution of electricity via national grids (The Economist, 10.10.2009, pg. 69). Now, we are living in another century and this leads to me my 1st thesis: Today we are facing a fundamental change in the way grids are designed, built and managed.

The configuration of our electricity grid originates from the era of industrialisation, and is therefore over 100 years old. We now have to think about a grid for the 21st century. However, first of all let’s have a look at the “old world”, which still represents the status quo here in Germany.

Traditionally, the German system falls back upon so-called base-load, medium-load and peak-load electricity generation plants. Electricity flows from the power station to the consumer along a one-way street. That is the supply side. But what about demand?

If we want to face up to the challenges of the future, this one-way street must not become a dead-end-street. The electricity high way of the future will optimise the balance between supply and demand and thereby overcome traditional barriers. Renewables are unsteady and stochastic. An intelligent grid will stabilise them and optimise their economic value.

My 2nd thesis is: We need more intelligence within the grid. Let us merge the IT-world with the ET-world.

The grid can be called intelligent or “smart” for the first time, when these former one-way streets have been transformed into an intelligent communication network. In this grid, variable usage tariffs would be valid, car batteries would be used as storage capacity, electric appliances which are not needed would be automatically switched on and off and “virtual power plants” would come into being. The Energy Agency NRW has estimated the percentage of energy which could be saved to be between 20 and 25% per household (Earn money with Smart Metering, in: energiespektrum 10.2009, pg. 39). According to other calculations, demand peaks could be reduced by up to 30% (The Economist, 10.10.2009, pg. 70)

Admittedly the route to a Smart Grid is not easy. As one expert said:

“In the Smart Grid, we have to conduct a large, multi-faceted orchestra, which has a lot of individuality” (ABB, from wind to HVD via CHP). Polyphony instead of monotony. Sounds good to me.

A real problem is that in the electricity market “there are 360 different communication standards or protocols” (Dr. Christian Feißt, Cisco Industry Lead Utilities Internet Business Solutions Group). These are the hidden barriers and it is well-known that they are difficult to overcome.

My 3rd thesis: New international routes for electricity transport open up new perspectives for renewables.

A further type of technology is essential for modernising electricity distribution in Europe. the high-voltage direct current (HVDC) electric power transmission, which enables the transfer of energy over long distances with little loss of power. This technology has been a reality for a long time – especially in China and India where several projects have been implemented over the past few years. For example, electricity from the Three Gorges Dam is transported over hundreds of kilometres using the HVDC electric power transmission system. Currently, the most powerful HVDC long-distance transmission systems are in China (Wikipedia’s list of HVDC plants). In Europe the “North Sea Super Grid” is a promising project.

On an inter-regional, even a transcontinental level, the potential of HVDC is enormous. Desertec should be able to demonstrate this: Large companies such as Münchner Rück, Siemens, Deutsche Bank and RWE consider new grid infrastructures and energy generation to be feasible. Moreover, if the Desertec project is connected to a European Super Grid, solar power from the Sahara desert could be combined with off-shore wind power from the North Sea: Desert power plus coastal power. Hydropower from the Alps and Scandinavia can serve as storage capacity: there we have the batteries in the form of hydro-power our systems needs.

Not only does the north-south axis open up opportunities here. In the east-west direction, considerable energy resources are lying within the grids: Subsequently, “if we were to combine the European and Russian electricity grids, […] an exchange of power across ten time zones would be possible.”

If the technology is available and the potential is enormous, why are these things not yet large scale reality?

We are currently in a difficult situation because the word infrastructure comprises it already: There are established “structures”, not only in a physical form. We advocate change and naturally there is opposition towards this: too much money is made by too few power players.

The electricity grid is a natural monopoly. The strict separation of transportation and production of energy goods, the so-called “unbundling”, is an essential prerequisite for more competition and an open and transparent market. The transportation of electricity is a different business from the generation and sale of electricity.

However, the opportunities linked to the further development of the “Single European Market” are encouraging. Crucial – according to EWEA and EURELECTRIC – to the large scale deployment of renewable energy in this regard is a European approach to grid planning and the integration of wholesale markets.

A promising aspect in this regard is the proposal for an Energy Infrastructure Package that the Commission intends to present by the end of 2010. It will form the basis for future strategies to develop infrastructure and interconnections at the European level (Stock taking document – towards a new Energy Strategy for Europe 2011-2020). From my point of view, the objective for the European level should be an intelligent, European electricity grid, in the form of a holding company that would effectively promote competition, security and climate protection.

We need a truly European approach and solution.

There is a multitude of political arenas that we have to take into account. Look for example at the declaration to be found in the Federal Grid Agency’s policy document:

”Grid planning must therefore incorporate:

  • technological basic conditions for the grid;
  • technological developments and advancements in the field of energy transportation across long distances;
  • specifications and objectives related to regional planning policy;
  • environmental and nature protection targets and
  • economical criteria in terms of efficient, considerate and timely infrastructure investments, which are tailored to suit the market’s needs and balance fairly the interests involved” (citing Riese/Wilms: Overall idea for the planning of transmission grids and grid connections, pg. 108).

As a banker, I know that structural changes in particular require capital flows – in particular in times of financial crisis. This capital does not need to come from economic stimulus packages nor from development banks alone. The private sector has already discovered the renewable energy field. In 2008, private investments in renewable energy sources worldwide were, for the first time, larger than private investments in fossil fuels (Amory Lovins (RMI): Interview “It’s easy being green“, in: The American Interest, pg. 47). In Europe in 2009, wind power was the number one source for newly installed power plants, followed by gas; photovoltaic (solar power) was third.

So why don’t think of initiating a new, attractive investment opportunity? After all, everyone is an electricity customer! What would it be like with a “citizen’s grid”? Due to a legally fixed rate per kwh, the Renewable Energy Law was and is the driving force behind investments in wind, solar and biomass power plants in Germany. Citizen’s wind farms have offered an excellent investment opportunity and are not only extremely popular but a much admired model for the world. What you own you cherish and do not object to.

Grids are natural monopolies, they are reliable and beyond that, long-term profitable assets in a regulated market with definitive return: That is – especially in these days – much better than a savings account! And local resistance to grid extensions or new grids can be overcome by ownership involvement. Let’s talk `community grids`.

My 4th and last thesis is: New ownership, new technologies, new dimensions constitute a powerful challenge and an opportunity that must not be missed.

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