New EU electricity regulation sets scene for switch to renewables

New EU electricity regulation sets scene for switch to renewables

A new European Union regulation will govern the way electricity is traded and delivered across Europe in the years to come. Melle Kruisdijk, who heads Wärtsilä’s energy business in Europe, explains that, going forward, the required electricity capacity will be secured through an optimal mix of renewables and flexible power generation.

Text: Isabelle Kliger Photo: 123RF

A new European Union regulation will govern the way electricity is traded and delivered across Europe in the years to come. Melle Kruisdijk, who heads Wärtsilä’s energy business in Europe, explains that, going forward, the required electricity capacity will be secured through an optimal mix of renewables and flexible power generation.

“A renewable energy future is one in which most of our power comes from renewable energy sources, such as wind and solar, and produces far fewer emissions, or even no emissions,” explains Kruisdijk.

The challenge with renewable energy sources is that wind and solar energy are intermittent, producing volumes that vary as the weather changes. For this reason, a stable supply of electricity requires the presence of efficient, flexible back-up systems and greater flexibility in the market, allowing it to balance the mismatch between supply and demand. 

New regulation for a changing electricity market 

Late last year, the EU agreed on a new Electricity Market Regulation and Directive, which is intended to enable European energy providers to respond to a changing electricity market. While a shift to renewables and increased electrification are both set to play a crucial part in achieving the emission-reduction targets set out by the Paris Agreement, the existing set-up of the European electricity market would not have allowed Europe to make this transition in a cost-efficient, secure manner.

The new regulation makes the market fit for the 21st century, by recognising that modern electricity markets need to incorporate more renewable energy into the grid, ensure more competition and flexibility, and boost new investment. It also acknowledges the need for flexible solutions to compensate for variable energy generation. 

Driven by supply and demand

“While previous legislation was based on a market in which supply and demand could be predicted well in advance, the new regulation creates a foundation forpricing based on close-to real-time conditions. For example, when no wind or solar power is available and demand is high, the price of electricity will spike, whereas it will decrease when there is an abundance of wind and solar power, combined with low demand,” says Kruisdijk, adding that he believes the impact of the new regulation will be largely positive. 

“By providing a value to efficient flexibility through the market, it will lead to more investments in flexible power generation, energy storage and renewable energy sources. This will support a more sustainable, carbon-neutral future, while safeguarding the security of supply,” he says. 

So what is meant by flexibility and efficiency when it comes to electricity generation?

“In this context, a flexible, efficient solution is one that can provide an immediate source of back-up power when the wind suddenly stops blowing or the sun disappears behind a cloud,” explains Kruisdijk.

Engines offer the greatest flexibility

Whereas conventional turbines are costly and slow to start up, a plant that uses an engine-based technology, such as Wärtsilä’s Smart Power Generation technology, can reach full output from start-up in as little as two minutes. This makes an engine-based power plant ideal for a system that needs to be able to ramp up quickly, in order to deliver flexibility to the system. Following the new EU regulation, operators using this technology will be able to benefit from price fluctuations by being first to market in the event of sudden spikes. 

“While the regulation doesn’t favour any one technology over another, greater flexibility will be rewarded in the long run,” continues Kruisdijk. “When all technologies are able to compete on a level playing field, the most efficient will ultimately emerge as the ‘winner’.”

Although Wärtsilä’s engines currently run on fossil fuels, they have been developed with a sustainable future in mind.

“Down the line, synthetic fuels will be made from excess renewable electricity. Our engines have been designed to run entirely on green energy, once these synthetic fuels become more widely and readily available,” Kruisdijk explains.

Sustainable future for Europe 

Marko Vainikka is Wärtsilä’s Director of Corporate Relations and Sustainability. He explains that Wärtsilä played an active role in discussing and sharing studies and data when the new regulations were put together. Wärtsilä provided experiences of the markets around the world, in which the value of flexibility is recognised and rewarded.

“The objective of the market regulation is to provide a functioning setup for the modern electricity sector,” he says. “It will enable the EU’s overall objectives for the decarbonisation of the energy sector, affordable energy, and system reliability.”

While it will still take several years for the new regulation to be fully implemented, Vainikka believes it has created the foundation for the kind of renewable energy future envisaged by Wärtsilä.

“Going forward, the market will be increasingly designed to allow renewables to become the main source of electricity generation. Meanwhile, the electricity markets will gradually approach real-time trading, while also being better coupled with other energy markets, such as gas. We also believe the excess electricity from renewable sources will eventually be used to produce synthetic fuels, which can be used in transportation or to provide back-up power for power systems,” says Vainikka.

Kruisdijk is quick to agree:“Ultimately, this regulation supports the 100% renewable energy future vision that Wärtsilä has committed to, because it enables the European electricity market to increase its reliance of renewables with no concern for the future security of supply,” he concludes. 

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