This research provides a concise and in-depth information about the transmission and distribution infrastructure existing in Europe, legislations influencing the integration of renewables into the grid, examples of new and upcoming projects and overview of the energy and power market in Europe.

Increased Pressure to Reinforce Grid Infrastructure in Europe Due to the Mounting Share of Renewable Electricity

The increasing share of electricity generation from renewable sources such as wind, solar and biomass calls for a vital upgrade of the European T&D infrastructure. As most European transmission networks are more than 40-50 years old and were built without considering the impact of generation from renewable sources, there is mounting pressure to build new lines as well as upgrade old ones. "Increasing pressure on promoting generation from renewable sources is driving the need to upgrade existing T&D infrastructure as well as undertake the construction of new and efficient ones," notes the analyst of this research. "Around €4 billion investment is forecasted by European transmission system operators (TSOs) per annum." The European Commission’s (EC) 20-20 directive specifies 20 per cent energy generation from renewable sources by 2020. This implies that renewables would have to contribute to 34 per cent of electricity generation in 2020. The grid infrastructure put in place in Europe over 50 years back merely considered the inclusion of large-scale conventional power generation plants. However, the future is expected to witness the increased penetration of large- and small-scale renewable and other forms of distributed generation such as combined heat and power (CHP). This warrants the need for upgrade and new construction.

However, it is unclear about who should bear the costs of connection to the grid, renovations or extensions and reinforcements. The distribution of benefits arising from connecting renewables and other forms of distributed generation to the grid and allocation of profits is also a matter of contention. With stakeholders involved across the value chain, it is difficult to determine the allocation of profits. "It is difficult to quantify the benefits accruing to each party due to the new connection or upgrade," explains the analyst. "Hence, the allocation of costs also becomes complicated." For example, Belgium, Bulgaria, Hungary, Slovenia and Denmark follow ‘shallow’ connection charges, where the generator only pays for the cost of physical connection to the grid and reinforcement expenses are borne by the distribution network operators. On the other hand, countries such as Spain, Greece, Luxembourg, Sweden and Romania have ‘deep’ connection charges, where the generators pay for the connection to the grid as well as any upstream reinforcement costs.

There should be greater transparency regarding various charges and equitable distribution of costs after considering different criteria such as geographic location and network faults. "Transparency in the charging system is a prerequisite for driving the connection of renewables to the grid," concludes the analyst. "A cost-benefit analysis on each stakeholder group involved is necessary to develop a fair charging system."