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The rapid transition of CEE’s energy markets – interview with ACER’s Director Christian Zinglersen

On the sidelines of this year’s Budapest Climate Summit, we spoke to Christian Zinglersen, Director of the EU Agency for the Cooperation of Energy Regulators (ACER) about “more Europe” in the power sector, the growth of renewables and its impact on the grid and Ukraine’s integration within the EU’s electricity system.

Recently, Mr Zinglersen called for closer cooperation among EU countries’ energy regulators amid the unprecedented growth in renewables. Following up, we asked Mr Zinglersen about the areas that in his view are in particular need of “more Europe” in the short- to medium-term perspective (five years). “What I think is a key no-regret for most jurisdictions in Europe is try to enable a much more responsive demand side,” he says.

“What one can do at the pan European level is to harmonise some of the technical standards relevant for grid connectivity both to enhance system security but also to enable economies of scale, so business propositions which bring forward more demand responsive assets can enjoy economies of scale, meaning those solutions can be applied across multiple jurisdictions.”

However, as Mr Zinglersen notes, how to enable such assets to participate in demand responsive offerings and services very much takes place either at the national or local level and so does not necessarily have to be harmonised across the EU. It is more the issue of technical standardisation, he underlines, where there is a role for harmonisation.

“The other case for EU energy market integration I would say is one where I draw a lesson from the energy crisis,” says Mr Zinglersen. As he points out, the EU’s integrated energy market was a “huge resiliency enhancer” in cutting off dependence on Russian gas. “I think it holds a lesson for the future where we are in all likelihood going to see more volatility as opposed to less volatility in the electricity market. So enhancing energy market integration, not just in the sense of building physical infrastructure but also improving the market framework setting the rules for the flow of electrons and molecules, will help lower price volatility and also help lower our energy import dependence towards particular countries outside the EU.”

Roadblocks ahead for “more Europe”

Continuing this discussion, we asked about the challenges that Mr Zinglersen foresees in the short and long term when it comes to closer energy market integration. “If we start with the political challenge, for me, the key political discussion in the next couple of years is to what extent are our different domestic realities aligned with becoming more reliant on each other,” he highlights. The head of ACER adds that fruitful cooperation seen during the energy crisis may have laid the groundwork for such discussions at the political level.

“What that will come up against I think is the implications of being more reliant on each other – or if you will, being more interdependent so as to become more independent of particular third countries. If we become more interdependent, it means more how one’s actions affect one’s neighbours in the EU and vice versa. So, you need to coordinate more, you need to plan more, you need to collaborate more – and that may be seen in some quarters as an undue restriction on one’s national discretion.”

In recent months, ACER has been emphasising the need to step up cooperation among EU energy regulators amid the rapid growth in renewables. “A vast majority of NECPs [National Energy and Climate Plans], envisage an almost exponential increase in intermittent renewable generation,” the ACER Director notes. “[…] That brings with it a number of challenges and one of them is how to make the system more flexible in a situation where you have much more intermittent generation.”

“A lot of the balancing in let’s say the minute-by-minute or hour-by-hour time intervals will probably be provided by a more responsive demand side as we spoke of before – that in it itself may not require much more Europe except of this standardisation of technical connectivity standards, nurturing economies of scale. However, when we look at say more weekly, week-by-week fluctuations or more than that, there is a significant case for increased interconnection amongst jurisdictions as a means of such flexibility provision because it’s very rare that you have identical weatherisation patterns across all of Europe. You can basically make the system more flexible by virtue of having access to a greater geographical area.”

“That of course requires much more collaboration not just in in terms of building the physical infrastructure […] but in enhancing the market framework which will guide the flows of electrons in such a system,” Mr Zinglersen continues. “If you have a lot of new renewable generation coming online, including at the utility-scale, all things equal, the offtake risk or the volume risk of those assets will be lower if they have access to exporting their generation to a large geographical area. This means lower support or less governmental guarantee exposure.”

CEE: a success story

Bringing the scope to Central and Eastern Europe (CEE), we asked about the ACER Director’s assessment of regulators’ cooperation among countries in the region. “In the near term, there’s been a big premium on collaborating in facilitating a reverse flow of gas, certainly in terms of more West to East, which I think by in-large has functioned well […] that’s not to say the challenge is fully resolved, but maybe with a bit more investment here and there and some more updated congestion management practises I think it can be.”

“On the electricity side what I see is a lot of uptake in low-lead time generational, in particular solar PV. That I think is partially also a response to high electricity prices which of course had a detrimental impact on households, industry and the broader economy. That said, one positive side effect is that there was a big premium on getting new generation online very fast – a part of that is actually solar PV,” Mr Zinglersen says. “So there is a rapid transition story in this part of Europe in terms of solar PV uptake.”

Looking at potential gaps, Mr Zinglersen says that more attention needs to be paid to enhancing energy interconnection amongst countries in this region. “I know there are plans to enhance the connection with Serbia from Hungary and also other jurisdictions – Romania is also keen,” he says. “I think that that’s one of the priorities going forward to make sure that this is as well an electricity interconnected part of Europe as, say, maybe Northwestern Europe or my own region, Scandinavia.”

Ukraine’s energy ties with the EU

In November, the European Commission’s Energy Commissioner Kadri Simson said that the integration of Ukrainian and EU power markets is the “next stage” in both sides’ energy relations, following the Ukrainian power system’s synchronisation with Continental Europe last year.

We asked Mr Zinglersen about his assessment of EU-Ukraine energy ties and the room for closer bilateral cooperation in the short to medium term. “I think the relations in energy will be more of a two-way street so to speak – that there are benefits from the European side but also from the Ukrainian side above and beyond just resilience and security,” he says. “Ukraine’s power system is traditionally a very big one, it was and is a big industrial manufacturer with quite energy and electricity-intensive industry; I think it ranks in the top 25 electricity systems in the world in terms of generation capacity if we include those assets and areas temporarily under Russian control.”

“So, I think there is a proposition for Ukraine in the future to become a significant energy producer not just for the sake of their own consumption but also for exports and thus for the benefit of wider Europe. I also think that forms part of their plans and that it is credible. Whether that’s doable in the five-year timeframe in your question – I don’t know, but certainly beyond that timeframe, I think that makes sense.”

The Director of ACER said that considering Europe’s projected increase in power consumption in the upcoming years, Ukraine has “a lot” to offer. “I think that for electricity proper, but it may also be for molecular energy whether it’s gas per se but also hydrogen etc in the future, that would be a benefit for both,” he says.

“We have a pretty strong relationship with our Ukrainian regulator counterpart. I think there are some promising regulatory interactions between Hungary and Ukraine bilaterally, and indeed between Ukraine and other EU Member States so that we can take some steps also way ahead of possible EU accession of the country,” Mr Zinglersen concludes.

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