Europe is currently developing a new climate and energy framework for 2030. A new E3G working paper argues that in order to succeed, this package must deliver the structural elements required for secure and cost-effective decarbonisation. A renewed approach to network infrastructure is needed to underpin deployment of low carbon generation resources within an integrated European power market.
Provision for infrastructure was largely absent from the 2020 climate and energy package. A continued disconnection between infrastructure and power generation policy would multiply risks for investment in both renewable and conventional plant, driving up costs and bills. It would also further exacerbate the pressures for subsidies for all forms of generation (both renewable support and fossil subsidies through capacity payments) – the opposite of what would be expected in a well-functioning market.
Conversely, a coherent framework covering both elements offers a major opportunity to strengthen the internal energy market, enabling significant cost savings and a more efficient and secure power system. This is a key issue for Europe's international competitiveness as well as for consumers.
While European policies for infrastructure have progressed significantly in recent years, deployment has not kept pace with even more rapid changes to power generation. Europe must become more pro-active in its approach to network infrastructure – or else infrastructure constraints will risk jeopardising the energy transition.
The E3G working paper proposes that the new 2030 climate and energy package should incorporate five key elements:
- Delivery of a core strategic European infrastructure network, through new infrastructure targets for 2030. Such targets must have clear delivery mechanisms and be better tailored than the long-standing existing objective for interconnection to represent 10% of national generation capacity.
- Targeted financial mechanisms to attract new sources of investment and to overcome organisational and financial capacity limitations.
- Increased forward visibility of future infrastructure need, through regional-level renewables deployment assessments. These will facilitate resource sharing and form key inputs into network development plans.
- Transparent evaluation of flexibility resources (including interconnection, demand-side response, storage and flexible generation) to enable best value investment across different infrastructure types. This will minimise the risk of costly underinvestment or stranded assets.
- Strengthened institutional capacity for regional collaboration on infrastructure development and cross-border trading. Regional initiatives can capture the value of resource sharing while continuing to reflect differing national circumstances. They need a clear institutional mandate in order to succeed.