Assessment of the EU 10% interconnection target in the context of CO₂ mitigation

Abstract

The European Commission has proposed the target of achieving an interconnection capacity of at least 10% of the installed electricity production capacity for each Member State by 2020 in the context of the envisaged Energy Union. The underlying objectives are to increase the security of supply at affordable prices via market integration and to contribute to decarbonization by accommodating an increasing level of renewable generation. In this article we have assessed whether this target could effectively fulfil these two objectives. Our main focus is on the assessment of the impacts of compliance with the 10% interconnection target on the carbon emission of the European electricity system. Our main research question concerns the impact of interconnection capacity increases on EU carbon emission due to the better market integration, disregarding the RES-E integration aspects. In order to arrive at workable scenarios for the future cross-border capacity extension, the security of supply and market integration impacts are also assessed. We concluded on the basis of our European dispatch model that full compliance would slightly increase carbon emission in the EU, ceteris paribus. This impact is due to increased coal-and lignite-based electricity production, mainly in Germany, Poland and the Czech Republic. By increasing the interconnections of these countries with their neighbours at the present low carbon price under the EU emissions trading scheme, these carbon-intensive electricity systems run on higher utilization rates and consequently increase carbon emission. It has to be emphasized that the increase is found for the current situation, and changes in other factors, such as increases in carbon prices or renewable generation, could modify this result. Policy relevance Our results demonstrate that EU network development and climate policies are highly interconnected. Changing patterns in the interconnections of the EU electricity systems connect diverse generation portfolios and in a low carbon price environment could increase carbon emission at the community level. Policy makers should be aware of the interactions between these areas and design policy tools that also consider negative synergies.

Research on the effects of market integration on carbon emissions

“…This result is similar to some results reported by research on other countries. To strengthen the energy security of EU member states, the European Commission formulated the concept of building an energy alliance, however, Mezősi et al (2016) find that such an alliance will ultimately lead to an increase in carbon emissions. Moreover, filtering geographical distance would not change our conclusion that market integration significantly promotes a reduction in carbon emissions, while the coefficient of integ 1 decreases only 38.81 percent compared to integ 2.…”

Effect of the Emissions Trading Scheme on CO2 Abatement in China

“…Jaraite [8] claim that the EU ETS did not promote CO 2 emissions reduction, whereas it slightly reduced CO 2 intensity. Mezosi [9] demonstrate that the present low carbon price under the EU ETS makes carbon-intensive electricity systems run on higher utilization rates and consequently increases CO 2 emissions. Laing [10] point out that the effects of EU ETS on low-carbon technology innovation and investment remain uncertain.…”

Analyzing Brexit: Implications for the Electricity System of Great Britain

“…However, increasingly, there has been a focus on how interconnection can increase trade among member states and, in doing so, improve the efficiency of markets and, ultimately, social welfare [35]. A crucial argument in favor of interconnectors is that they further the integration of intermittent power resources [35][36][37], as they can help to reduce the impact of renewable penetration on price volatility [38,39].…”

“…There has already been an ongoing discussion of the impact of interconnection on electricity markets and CO 2 emissions [45][46][47]. Mezősi, Pató, and Szabó [38] argued that the effect of interconnectors on CO 2 emissions is dependent on the carbon price and the ratio between coal prices and gas prices. Indeed, they found that complying with the 10% interconnection target by 2020 would lead to an increase in CO 2 emissions, if the low CO 2 price environment prevailed.…”