EU Moves Toward Further Integration by Sharing Electricity

By Andy Tully:

What we now call the European Union began rather modestly in 1952 with the European Coal and Steel Community, at the time called “the first step towards a more united Europe.” Five years later, five European nations signed the Treaty of Rome and a true European Economic Community was born. Today it’s called the EU, and it has 28 member states, a European Parliament and a (somewhat) common currency. But it’s still not a kind of United States of Europe. Bit by bit, though, integration is happening, and the latest involves electricity.

In May, 16 EU member states, which consume three-quarters of the continent’s electricity, approved aunified system for trading electricity with one another and setting the wholesale price for power for the participants. This is possible thanks to a computer program called the Pan-European Hybrid Electricity Market Integration Algorithm, more succinctly, and mercifully, known as Euphemia.

Euphemia analyzes every bid to buy and sell electricity in the EU power markets, distributes the rights to international electricity transmission and sets the price for each market for the next day. The goal is to make sure EU countries increase their use of the most efficient power supplies in order to keep prices as low as possible for consumers.

Among the members of this EU electricity club is the UK, whose National Grid joined the project thanks in part to Mark Bartholomew, an energy specialist at the British law firm SGH Martineau. Bartholomew explains that the point of the exercise is to ensure full use of electrical transmission between any two given EU member countries to equalize any price differences between them. Euphemia began in 2011, based on a year-old power-sharing plan linking Belgium, France, Germany, Luxembourg and the Netherlands. The broader venture included features that would accommodate more EU countries, including Scandinavian nations as well as Britain and Spain.

The goal of the project is to meet the European Commission’s effort to unify the EU power market by 2015. That’s an enormous challenge. In 2013, EU countries generated 3,355 terawatt-hours of electricity, but only 11.5 percent of it crossed sovereign borders.

Still, Euphemia may be up to the task. The original trading system put in place in 2010 was fragmented. Utilities looking to trade electricity had to search for exchanges. Once that challenge was met, they had to place separate bids for energy and transmission.

Euphemia, however, automatically pairs bids with providers based on its specialized calculations. Bartholomew explains, “The traders just buy and sell on their national exchanges in the regular way, and all of the cross-border things happen automatically.”

The EC says that ultimately the common electrical system should be shared by all 28 EU member states. But snags from power sharing remain, including power overloads in countries such as the Czech Republic and Poland. These nations say they’d rather wait for upgrades to the project before they agree to join.

This piece is cross-posted from OilPrice.com with permission.