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Where will investment in a future European grid come from?

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Utilities face dramatic upheaval as change sweeps across the European power industry and the integration of renewables gains pace. Members of POWER-GEN Europe’s Advisory Board address some of the key questions ahead of POWER-GEN Europe 2014, being held in Cologne on June 3-5.

The Roundtable participants are: Philippe Paelinck, VP portfolio and strategic positioning, Alstom; Risto Paldanius, director, business development, Wärtsilä; Dr. Franco Rosatelli, CTO, Ansaldo Energia; Dr. Tamer Turna, CEO, Yildirim Energy Holding Inc.

Where does the investment in the future European grid need to come from (for example, pension funds)?

Tamer Turna: I believe funding a ‘market central grid’ is the only solution to overcome the challenge of integrating intermittent (non time & capacity reliable) renewable energy sources such as wind and solar. We already see this in some of the liberal power markets, such as Turkey, where the transmission grid is not privatised and remains under governmental control and funding.

In more liberalised markets, the transmission system would be a solid investment for investors such as pension funds, due to the fact that technically, it is a monopolistic mode of operation and therefore a relatively secure investment that could be set on a fair long-term return.

Philippe Paelinck: The Europe power market is being held back by a number of recurring questions around regulation, scalability and replicability. Investment in the new grid will require new business models, and these will emerge from the demonstrators and pilot projects around Demand Response, storage, and distribution control currently underway.

Risto Paldanius: A well-developed grid is required to transport electricity to the areas where it is valued the most i.e. developing the grid alone is not enough to deal with the challenges of flexibility and capacity adequacy. In addition, electricity markets that signal the value of electricity across different timescales (short term balancing markets, spot markets, forward markets) will provide the incentives for investment in capacity and in the grid. If the incentives are there, investment will come forward.

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