Laurent Schmitt: Ukraine will surely benefit from integration into ENTSO - E amid growing share of renewables

Laurent Schmitt: Ukraine will surely benefit from integration into ENTSO - E amid growing share of renewables

One of the ambitious tasks for Ukrainian power sector is the integration of country’s energy system into the European Network of Transmission System Operators for Electricity (ENTSO-E). Last year the national system operator NEC Ukrenergo signed the agreement of further integration and for now the both sides work on details. The synchronisation of Ukrainian system with ENTSO-E will provide such adventures as free cross-border electricity trading, increased level of competition, higher reliability of energy system operating and possibility to raise renewables share in overall energy mix.

General Secretary of ENTSO-E Laurent Schmitt in the interview told about the features of Ukrainian integration into the energy system of European continental countries, another members’ experience, challenges, risks and adventures of such joining up.

To be clear, at this point in time a consortium of TSOs from ENTSO-E Regional Group Continental Europe are investigating the possibility of full synchronous interconnection with Ukraine. This is a pre-requisite but not sufficient to become an ENTSO-E member (see the case of Turkey).

Can you please make a brief excursion into how ENTSO-E began? What was the motivation for the interconnection?

This year we have our 10th anniversary. ENTSO-E was build up voluntarily by the TSOs who were organised in several regional associations. In the follow up, the EU Third Energy Package registered ENTSO-E in the European legislation and gave the association a series of legal mandates with regards to planning of power grids, harmonisation of market and technical rules and cooperation to support security of supply. Today we unite 43 members from 36 countries; all EU member states plus eight other countries for example Switzerland, Norway, Serbia, to name a few. Turkey is an observer member not a full member. The power system does not stop at EU borders and cooperation with non-EU countries is essential to maintain security of supply.

What are the benefits that the association brings to its members?

ENTSO-E is the platform where TSOs deliver important European mandates. It is also the place where TSOs exchange best practice. In ENTSO-E, TSOs unite to do security analysis, grid development plans, develop standards, methodologies and complex IT programmes, implement EU legislation, cooperate for innovation, etc. Our members achievements in ENTSO-E are impressive: 8 network codes and guidelines, dozens of methodologies, several pan-European development plans and security analysis, innovation projects, IT programmes, etc. In the last decade, our members have moved the energy transition forward while keeping the security of supply in Europe. We hope that ENTSO-E has helped them achieve all this.

One ENTSO-E member country is helping another to integrate more of the alternative generation that is hard to forecast?

That’s right. RES usually generate electricity in the place and at the time that do not correspond to the current consumption, so it is necessary to provide for the transmission of the electricity generated from one location to another, and a better operation of the grid as a whole. The direct consequence of the large share of RES is the increase in cross-border electricity flows, requiring greater coordination and integration as well as the reinforcement of the European grid.

In June 2017, Ukrenergo and ENTSO-E signed an Agreement on the conditions for the future integration of Ukraine’s power system with the grid of continental Europe. Ukraine’s power system is rather large in comparison with its neighbours, which difficulties can arise in this connection?

First of all, we should mention about the agreement that we signed. We have agreed to work together to determine the conditions under which further cooperation is possible. Today our efforts are focused on the analysis of the stability factors and potential risks related with the integration of Ukraine’s power system into the Continental Europe Power System.

The power system of continental Europe today is quite large; despite this, the integration of the Ukrainian system may carry risks for its stable operation.

Which measures should Ukrenergo and generating companies implement towards integration?

The usual process is for a catalogue of measures to be defined to make the connection possible. But many other steps are still required, we are only at the start.

When is it planned to reach an agreement and prepare a catalogue of measures?

We expect to get results of the first analysis by the end of 2020. But here more than just technical conditions need to be met. Our TSOs pointed out other important measures such as the introduction of a balancing market for instance.

Can Ukraine integrate into ENTSO-E without market liberalisation?

Membership of ENTSO-E requires several condition including unbundling and an alignment with EU market rules. In the end, it is for the ENTSO-E Assembly to decide.

Do all ENTSO-E members have a developed electricity market with all its segments, such as the balancing market and the ancillary services market?

Most of our members operate in countries with competitive markets facilitated by the TSOs.

Is it the best for Ukraine to move in the direction of the market reform and enter the ENTSO-E with a fully liberalised electricity market?

Again conditions of becoming an ENTSO-E member are manifold and convergence with EU market rules, TSO unbundling etc, are among the conditions. Being a member of the Energy Community is helping. Also Ukrenergo's participation to the ENTSO-E Cooperation Beyond Membership Programme supports capacity building.

We should create the market for bilateral agreements; arrange power exchanges, similar to those already operating in Poland or Hungary?

Yes, that is why your neighbours’ experience is essential. If you look at the history of the development of the EU electricity markets, you will see the following milestones: implementation of the Second Energy Package, development of the cross-border trade, coupling of the markets, and today' the implementation of the Clean energy package, increasing the share of RES with optimisation of electricity flows. You cannot start from just any stage; you have to go all the way step by step. That is why we are active in sharing our guidelines on how to go this way, with Ukrenergo. And, in turn, we see the company’s readiness and commitment to developing and successfully walking down this path.

What can you say about the pricing situation in the markets after their integration? Were there any cases of their decrease?

Integration of markets increase the social benefit for the whole area because the total cost of the system decreases as a result of a better use of resources and of the system as a whole. Sometimes some parties gains, sometimes they lose. But overall it is positive because the system is more efficiently used.

What are the main differences between the EU grid and the IPS of Ukraine that might pose difficulties?

Lack of market liberalisation and different rules and requirements with regards to system frequency and stability of the system. But this is part of the ongoing analysis.

What can you can say about the threat of cyber-attacks in general?

We are seeing a growing risk of cyberattacks on the European energy grid. The European Commission is setting new goals in the area of countering the cyber threats. And ENTSO-E is supporting that process.

Let’s talk about certain types of generation. Today, alternative generation in Ukraine is experiencing rapid growth...

That is why it is in the interests of Ukrenergo to establish this cooperation with ENTSO-E and fellow operators in order to settle the issue of integrating a significant number of RES in the conditions of limited interconnector capacity and the possible introduction of energy storages. This topic is actively studied in our association, so I am quite sure that Ukraine will definitely benefit from cooperation in this matter.

Ukraine has a strong nuclear sector; in your opinion, will there be a possibility in the future for Ukraine to export a relatively inexpensive nuclear energy to the EU?

Identifying the energy mix is a very specific matter for each country. Each country has its own way towards decarbonising its energy system.

Which countries are successfully mastering the V2G technology?

This technology is at its nascent stage. They are trying to apply it in the UK, Denmark, Germany, France and the Netherlands. This is an impressive technology, since the cost of using storage batteries for storing electricity is approaching zero. Power system operators (at distribution and transmission) can actually use the power of such batteries. If it is proven that such technology does not affect the life cycle of the battery, this will be a very cost-effective approach to ensure the grid flexibility. Studies show that is could be more cost efficient in some cases than using thermal power plants for balancing. Bringing new flexibility sources in the system requires foremost an adapted interface between transmission and distribution.

Dmytro Sydorov