Permits to build power lines the main obstacle to a single European energy market


Jukka Ruusunen,
Vice-President, ENTSO-E
and CEO, Fingrid
Interview with Jukka Ruusunen, Vice-President, ENTSO-E and CEO, Fingrid

What do you see are the main barriers to be overcome for a single market for energy in Europe?

The main problems of creating markets for electricity are related to the nature of electricity as a commodity – electricity cannot be stored. Supply and demand must meet each other all the time. This means two things. First, market rules for trading must be defined at a very detailed level covering all time horizons up to the exact time of delivery of electricity. This is very different if you compare this with trading cars, for instance.
Secondly, electricity must be transported from generation to end users via transmission (and distribution) lines in real time without any middle warehouses. In order to have a market, there has to be enough transmission capacity. So, coming back to the original question, a single market for electricity in Europe requires common rules agreed by all the European countries and enough transmission capacity to allow electricity trading across borders. Creating common European rules is a complex process with many stakeholders having different goals and opinions. The goal is to have this process completed by 2014. However, real integration requires a strong grid and building transmission lines is a long process. We are going to see bottlenecks in the European markets because today’s transmission infrastructure is too weak for market purposes.  

How can these be overcome?

The creation of European level market rules is part of the Third Energy Package and member states have committed themselves to implement the European target model by 2014. This is the year when we should have a functioning "software" in the European system. But we need more transmission lines; and  building a transmission line takes years. The main obstacle is to get permits to build lines: nobody wants to have transmission lines in their backyard. So, we cannot avoid the fact that the "hardware" does not have the capacity to run the "software" during this decade.    

What role is ENTSO-E playing in this process?

ENTSO-E is working very actively to make a single market for electricity possible. We are working on market related network codes in close cooperation with other stakeholders. We are also participating in actual market integration projects – one example is the North-West European project where we are actually developing the biggest electricity market in the world! And of course, TSOs have to develop the transmission infrastructure so that it can serve the various needs of the future. ENTSO-E is our vehicle to make the European level grid plans which are then implemented by the TSOs.   
What do you think will be the most important advantages to a  single market for energy in Europe?

A bigger market should create better competition and thus provide customers with competitive prices. On the other hand, it provides market-based investment signals for the generators. A single market will also help to increase the amount of renewable energy in Europe, since a bigger system can adapt more easily to the volatile variations in wind and solar generation. An open market also allows the entry of new market players. As a CEO of a TSO company, I would also like to emphasize that a functioning liquid European market enhances the security of supply.   

What surprises you about this industry?

I doubt many people would expect surprises in an industry where it takes so long to build lines, but I am frequently surprised – both positively and negative.  I am surprised at how effectively TSOs manage to work together to develop very significant projects and I am surprised at some of the technical innovations we’re seeing in the sector.  But I am also sometimes surprised that national and European energy policies aren’t always compatible and that the importance of reliable energy supplies to Europe’s prosperity isn’t always recognized

What will be the message from ENTSO-E to the Emart Energy meeting of energy traders?

Traders have an important role in electricity markets now and in the future. You are active in the markets all the time. You have also had an active role in the development of the European electricity market and we hope that you are going to be active also in the future. Traders complement well the viewpoints of other stakeholders in market related issues.We hope we can continue the fruitful cooperation with you to improve the single market for electricity in Europe – the biggest electricity market in the world!