European power grids head towards an ever closer union – and a new watchdog

Since the 1990s, European countries have been hard at work integrating their national electricity grids. Despite slow progress, flows between EU countries have become an important source of grid stability and lower consumer prices. 

The 2020s will prove another crucial decade. 

First, Ukraine connected to the European grid, linking the besieged country to “over 400 million Europeans in 24 countries”, as explained by Belgium’s energy minister, Tinne Van der Straeten, in Brussels on Wednesday (28 February).

When the energy crisis instigated by the Kremlin wracked Europe, cross-border flows came to the rescue. France relied on imports of German renewable electricity amid nuclear fleet outages, while supplying some natural gas in return.

“Cross-border energy infrastructure improves the stability and reliability of electricity supply,” stressed Van der Straeten, who currently chairs the EU’s energy minister meetings.

Next in line will be to link Europe’s north – where the potential for wind power is greatest – to the South, rich in sun.

“Interconnected grids facilitate the sharing of energy resources across borders,” explained the Belgian minister, adding that she would add the topic to the agenda of one of the upcoming EU energy minister meetings.

What is at stake? The think-tank Bruegel argues that deeper integration of European grids promises significant cost savings to consumers while increasing the stability of grids. 

When the sun is shining in Italy, that electricity could be directed towards overcast Germany – and vice versa. Mountainous countries offer massive natural batteries in the shape of pumped storage – Norway’s hydropower sector makes the country a massive reservoir for Northern Europe.

In 2030, integration of grids could slash fuel use by 21%, argues Bruegel. Price volatility within a day, ranging from the negatives to hundreds of euros per unit of power, could be slashed by more than two-thirds, they add.

The need for short and long-term electricity storage could be reduced by 25% at least. 

“The best storage we have, the best flexibility we have, is actually the cross-border and integrated market because you can benefit from others,” explained Ditte Juul Jørgensen, director of the European Commission’s energy department.

What comes next? “Enforcement is a critical point when it comes to the market integration in Europe,” she said.

For one, governments must be held accountable regarding EU grid connection targets – the bloc’s auditors have noted “slow progress” in 2023. But the companies whose playing field is extended will also be subject to greater scrutiny.

A boost for the boys in Ljubljana

Energy company scrutiny comes through the energy market integrity rules known as REMIT. These can sting. In February, Italy’s ENET was fined €1 million. France’s Engie has to pay €500,000 – because of market manipulation to their benefit and the detriment of consumers.

Energy markets are an opaque bazaar of electricity wholesalers, producers and demand forecasts that seek to match power plants to consumption across a whole country. Their opaque nature makes fraud both attractive and hard to detect.

The institutions tasked with keeping the bazaar in check are hitting their limits – prompting a revamp of the EU framework kicked off in 2023. 

Europe is home to 27 energy market regulators who so far have been giving out fines following a total of more than 550 investigations. Faster trades and increases in cross-border flows mean that an eye in the sky is needed.

Amid “new trading techniques such as algorithmic or high-frequency trading”, changes are needed so “the competent authorities have the means to monitor properly what is happening on a daily basis in the electricity market”, says Maria Carvalho, a Portuguese centre-right (EPP) lawmaker, who negotiated the updated law for European Parliament.

The new rules are a boost for the bloc’s energy agency ACER, which is based in Ljubljana, particularly “in the investigation of cross-border cases”, she added. 

Said new rules will be officially adopted by the hemicycle on Thursday, and strong support from all parties is expected. Afterwards, EU countries are expected to rubber-stamp them, too.

“We are already gearing up to take on the new tasks,” says ACER, who is already preparing “IT tools and manuals” as well as “setting up the investigatory work and recruiting staff as of 2025” for the “then firmly established ACER REMIT investigations department.”

A welcome boost to Ljubljana as skilled power market professionals may move there – and ACER.