Bursting the Bubble

European Energy Infrastructure: A Grid Lesson from Germany

7 February 2014 | by

Last year, Germany extended its key power supply lines by only 32 kilometres. Yet, in 2009, the government committed itself by law to accelerating its grid expansion. Reasons for this stagnancy are diverse: low public acceptance, project modifications and inefficient cooperation between public authorities. What must the EU and its member states learn from this?

In October 2013, the European Commission finally adopted a list of 248 key energy infrastructure projects. These so called “projects of common interest” (PCI) are meant to contribute to market integration and competition, as well as to enhance security of supply and reduce CO2 emissions. Via the Connecting Europe Facility (CEF), a € 5.85 billion budget is allocated to these projects until 2020. Aside from the financial support, the projects are meant to benefit fast and efficient permitting procedures and an advanced regulatory framework. The map of projects looks quite ambitious, but also promising. Once completed, these projects have a high potential to fulfill their purposes.(To learn more about the PCI list, please read Olesia Ogryzko’s article on the European internal energy market here and her debate with Juan Antonio Pavon Losada here).

So far, so good – in theory, the projects ‘just’ need to be implemented, or in fact, to be built. But the current development in Germany can serve as a good example and warning for the inherent complexities of larger infrastructure projects.

Already back in 2009, the German parliament passed the Energy Line Expansion Act (EnLAG) and thereby set the floor for a national predecessor of the above mentioned PCI list. Very concisely, the act identifies 23 energy line projects that enjoy ‘absolute priority’ and play a central role for the future energy system of the country. The overarching goal of this political initiative was to accelerate the extension of the power grid. Since then, several additional laws have been adopted to further improve the processes involved in the planning and implementation of the projects.

Given the considerable political effort, the progress made in Germany in the last 5 years is absolutely disappointing. A few weeks ago, the President of the Federal Network Agency, Jochen Homann, had to admit in an interview that not a single kilometre of these 23 urgently needed power lines had been built by that point of the year. In absolute numbers, only 322 of the overall required 1876 kilometres have been put into operation since 2009, which is less than 15 percent. Originally, the agency had expected a large part of the projects to be in operation by 2015. The latest estimates from official monitoring now expect only 50 percent of the power lines to be finished by 2016. In defiance of the high political ambitions to extend the infrastructure, the reality tells a different story.

Apart from the alleged incapacity of German authorities to realize larger infrastructure projects (Berlin airport, Stuttgart main station) and the involved (inter-)national embarrassment, the deferral of the transmission system development also has direct consequences for the German and the European energy market;  Renewable energy is lost when it cannot be transported to consumers, producers face negative prices at the stock markets, power plant operators have to provide reserve capacities and neighbouring countries are affected by unwanted electricity spillovers that block their own power lines (read more here).

But what are the reasons for this considerable delay? The German network agency itself has identified three main problems:

First and foremost, low public acceptance remains the central issue for transmission system operators. Even after legislator and regulator have introduced a number of measures to counter the concerns of the population, people remain sceptical. A very recent example was the initiative of system operator Tennet, who had invited affected citizens in Schleswig-Holstein to invest small sums into a so-called ‘citizens line’ and to personally benefit from the profits made from the new power line. Due to a very complicated financial construction of the bond and a rather not transparent communication of the inherent risks, the project was an absolute failure, with only 142 investing citizens.

Secondly, on-going project modifications lead to endless planning and authorisation cycles. Partly due to the permanently changing requirements of the grid as a result of the German energy turnaround, partly due to the integration of citizen’s preferences, the authorities and system operators constantly have to change the concrete embodiment and routes of the power lines. Even slight changes in the projects sometimes require a reassessment of already finalised authorisation documents. Cynics are already saying that, due to a further decentralization of the German energy production, some of the power lines will have become obsolete by the time they are in operation.

Thirdly, inefficient cooperation between different public authorities is adding its part to an already complex setting. Due to the federal structure of Germany, a number of different Länder authorities have been responsible for the planning and authorisation of the projects. Inevitably, power lines have to cross the internal ‘borders’, which is why different authorities were involved in the same power line and system operators had to be prepared for different authorisation processes for the same project – a tremendous bureaucratic effort for every actor involved. To this end, the German parliament has reacted and transferred major responsibilities to a central authority, the Federal Network Agency. As the progress in 2013 shows, the success of this move has still to be proven.

In the end, the projects identified in the European PCI list will be confronted with comparable, if not identical problems. The EU and the other member states can and must learn from the German experiences to avoid similar delays that will in the end prevent the internal energy market from completion. Key lessons from the German dilemma must be integrated in the process at the European level:

–          Public participation for all infrastructure projects must be possible; however the scope must be limited in form, content and time. Citizens must have the possibility to make their point, but authorities also must have the chance to make a final decision. It should be ensured that minor changes in the planning of projects do not lead to the repetition and reassessment of major parts of the authorisation processes.

–          Good cooperation and coordination between the authorities of different countries is a central necessity for the success of the PCI implementation. That is especially true because one of the central requirements for projects to be listed was that ‘at least two countries’ would benefit from it. Having in mind the quite opposing energy political strategies of many neighboring member states (Germany vs. Poland is just one example), this issue becomes even more important. The diverse interests of the different countries should by no means affect the completion of the European energy infrastructure, and the EU should find ways to push that forward with a certain insistence.

–          Money is not always the issue – and not always the answer. The EU can underline its ambitions to complete the internal energy market with a budget of a € 5.85 billion, but allocating money to projects does not necessarily reduce their complexity when it comes to authorisation and participation issues. A major question is: for what will the money from the budget be used? Behind closed doors, system operators in the past have mentioned that delays were not a result of financial problems – “We have the money, but we are not allowed to start.” The same applies to citizens. It is legitimate to offer financial participation or compensation to communities or people, but these instruments must be well-developed and should not give the impression of companies trying to buy acceptance for their projects. In certain situations, it might be better to invest the money to reduce cross-border bureaucratic complexities and to increase the exchange between the authorities.

As Roy H. Williams said, ‘A smart man makes a mistake, learns from it, and never makes that mistake again. But a wise man finds a smart man and learns from him how to avoid the mistake altogether.’

One Comment

  1. UPDATE: Meanwhile, the Federal Network Agency published new figures that state: 32 km have actually been built at the end of the year. That does not change my argumentation, even if it sounds better than “zero”.

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