Competitiveness, security, and the grids that bind it all

Welcome to the EU Energy Projects Podcast, a podcast series from Inglid and Friends, focusing on the Clean Energy Transition for the European Union and the EU Commission-funded Energy Projects that will help us achieve it. My name is Arity Dara Dhimu, I am the editor of the EU Energy Projects Podcast and your host. Hello everyone, I am joined today by Manuel Galvez, Senior European Affairs Advisor for Aelia Group and Vice-Convener for Policy within ANTO-ENTO-EAS Policy and Communications Group. Together, we'll explore how EU policy, funding and cross-border cooperation are shaping Europe's energy transition and the role of TSOs in delivering a secure, sustainable and integrated electricity system. Manuel, thank you for being here with me today and let me ask you what is Aelia Group's business and how it balances its national role as a TSO with its broader European responsibilities. Yeah, many things for having me, Arity, and so Aelia Group is an European Energy Company and so we are actively electricity transition system operations into countries, so Aelia and Belgium, but also 50 Hertz in the Northeast of Germany. So we are responsible for of course developing the grid, managing the grids, also balancing the grids 24/7 of course and as well as market facilitation. Beyond of mind it's of course a national level because the electricity system is very interconnected, so we also cooperate closely with our neighbours, those, also via the European Association and so A in different matters. So this is what how we do our business both locally and also at Panyu, Piave. What would you see as the most important and pressing priorities for EU Energy Policy in the next five years? Well I think that we have seen that today there's a clear focus on competitiveness and security compared to what we saw a couple of years ago. I think that's because of the recent geopolitical events. That doesn't mean that the organisation is lost and is forgotten, but it's today more and more seeing as a means to an end, so a means to competitiveness and security. For energy actually this is very important as energy and affordable energy but also secure energy is key to ensure both European competitiveness but also European security of supply. And so more concretely for the sectors what we see as priorities and actually that's also very much present in the commissions agenda is for instance how to ensure access to affordable grid technologies. Also how to accelerate the delivery of grids. Also ensuring financing both private but also public financing for grids. On the other end we also need to increase electrification so to be able to channel and to use optimally the renewals that are being integrated. We need also to ensure physical and cyber security for the entire energy system. And last but not least also we think that we need also to eliminate barriers for electricity trading with trust and neighbors for instance between the EU and UK. You already hinted on the geopolitical let's say issues that we're facing nowadays. And I wanted to ask you given this geopolitical uncertainty what should be the priorities for the EU to strengthen energy resilience. You mentioned also cybersecurity which is quite important. So perhaps first of all we believe that Europe should avoid backtracking on their carbonisation ambitions as an means to an end but also it's important for all the previous ambitions that I was just mentioned. So in particular in a business that needs a lot of capital investments and has a long term horizon we believe that we need stable goals in that term. So that's create a reliable framework for industry to invest. And so that's very important. So I avoid backtracking to under carbonisation ambitions on other sides of course that means that Europe needs to continue supporting and increasing deployment of renewables on the one side but also expand electrification. So you need both sides of the story and of course you need also the means to interconnect these two aspects and that's why the importance of investing in electricity grids not only onshore but also offshore. And last but not least of course we also need to manage more and more external threats. So security is not new for us. We have managing operational security in this part of DNA but we see more and more threats not only on this physical side but also on the side of the side. And so for this we need that joint cooperation between market actors, grid operators but also very much authorities, regulators and also collaboration with other critical sectors including defense for instance. Yes to be honest a few years back I visited tenants the Dutch DSOs not offices but it's working area let's say the actual area where everything takes place and it was more secure than fourth knocks I would say it really really impressed me and I have no reason to think that other DSOs in in Europe including of course AERA 50 Hertz are not the same but security is one thing there is also competitiveness that is quite important. So I wanted to ask you how do you see the role of electrification and grids to enable competitiveness of the European industry? Indeed so that was mentioned so the correlation is not forgot and this means to an end to achieve what competitive and secure to supply so if we are developing more and more homegrown renewables just as a step to achieve a bit more European independence we need also the means to use efficiency those kind of energy so and that's why electrification brings an important role we know that not all the energy man will be electrified but a very important part of it so in transport for instance there are a lot of advancements if the EVs not only for public but also private aspects we have also many industrial processes that can be electrified and so I believe that is something that where there should be a bit more support but also we need again to invest in electricity grids also we need to invest in digital infrastructure so in order for this electrification to absorb as much as possible the renewable energies we need also that a good part of this a man to be flexible meaning be able to respond to price signals but also to contribute to stability of the energy system so that's a bit very important of course as again grids at this DSO level but also transition level but onshore offshore as well as interconnectors will help channeling the renewables connecting with the band centers and make efficient use of it. There is also the grids package that the European Commission will publish as they say before the end of of this year even if it takes a little bit more it should be in the close future so what do you see as the priorities in order to accelerate the delivery of electricity grids something that is very important and nowhere near finished. No definitely I think that if we see a numbers both at DSO and DSO level we are talking at hundreds of billions of investment in X5 to 10 years so what we believe that is that this package should really focus on the delivery and simplification of the frameworks so this should be for us the main points and I hope that the commission goes in that direction with their proposal and so we see four main points within those on the one side of course in terms of planning what we believe is that we should foster more regional coordination and cooperation a lot of projects are really well identified but there is a really a delay in the implementation of those projects and so a green project by project sometime is very difficult we don't see the complete picture but we have a better regional collaboration not only for unsure what in particular for offshore grids I think this can help to put all the different actors together technical actors such as DSOs but also member states and regulatory authorities to find solutions how to how to share costs what needs to be invested and how fast so actually from Aelia Group we are active in collaboration called offshore DSO collaboration so where we bring our technical views to decision makers and we hope that this can help making let's say conscious and informed decisions so that's one of the important points of course I just mentioned again a neat one look private and public financing in particular for instance a bit calling about the CFE funding that's happy to discuss a bit later on a streamlining permitting I think this is very important as well for us not only for us as DSO but also I think I at the ESO level. And perhaps two big points as well is we need to provide attention to supply chain of grid technologies. We have really as the ESOs, we mainly source actually from Europe. So it's not really an issue of a lack of competitiveness or that other manufacturers are invading the market. But actually, it's European technology. But of course, it's not only a require that European TSOs is also required by international TSOs. So on top of increasing capacity, of my current capacity, what we believe is also important to release stream line and allow it more flexibility in terms of procurement. And of course, last but not least, I think that the topic of grid connections is very hot, is very important. We see not only in some parts a lack of capacity, but also a lot of cues for accessing the grid. And there I think we believe that the commission guidance on grid connections is really important to allow and to give a bit of direction on how member states and regulatory authorities could use the existing provisions to adapt, for instance, to a more prioritized approach. A more prioritized approach, in terms of, for instance, what are the scenarios in network plans? And but also in the maturity of the projects. [MUSIC PLAYING] Hello, everyone. I'm Rete here. I would like to personally invite you to discover the EU project zone at Enlitte, Europe 2025 in Bilbao. Our event takes place from the 18th to the 20th of November. Can't say hi to me at the EU project zone. Manuela would like you to put your NSOE hat on now. And tell me how does NSOE's 10-year network development plan influence funding decisions and EU political priorities if it does? It's an important part of the process. So the T1DP is developed by NSOE, of course, in collaboration with other associations and SOG for gas, but also in the future with the area of paying association for network operator for hydrogen. So this and joint collaboration in different phases for developing scenarios for identifying later on by sector the needs, but also to look at whether the cross sector needs a bit in the different sectors. But that's what they do. It's only identification of needs. And then those needs are matched with the project of project developers. There can be TSOs, can be storage operators, et cetera. So this is a bit what this does. But of course, in order to get access to funding such as CFE, you need to get a label. And so this is the label of project of common interest. If it's between member states or projects of mutual interest, if it involves also a third country, for instance, the UK. And so this is very important in the process. So in terms of the identification of needs, in terms of matching projects with needs, and also to see which of those projects needs financing. And so this is very important and actually access to funding such as CFE is very important in an environment with increasing needs for projects in an environment where there's a lot of attention to costs of the projects. And so having European funding, but also national funding, of course, will help mitigating, of course, the impact of those projects in the budgets of companies, but also in the tariff that everybody is paying the end. Going back to projects of common interest, how important are they? And how are they positioned in ensuring that Europe meets its decarbonization and security of supply goals? Yeah, they're very important because in the end, we know that the dynamics is that the real generation is not really developed very close to sites. So you need you have a real board in offshore grid. You have a lot of sun in Spain, in close to Mediterranean. So we need to channel those energies and so the project of common interest and mutual interest, which is not only interconnectors. There are also internal lines in the backbone that help increasing the flows and it help increasing the transfer of this electricity towards the months. And so this is the, they play a very important role in connecting supply and demand. And actually, if we are talking about competitiveness, it's very important. So companies, industries can source not only available, renewable, but also affordable renewables beyond, for instance, the borders. You mentioned in their connectors and I was thinking that the EU, the Commission, emphasizes interconnection and cross-border projects. Where are we making, let's say, the fastest progress? And where do you see bottlenecks? We don't see a lack of identification of needs. The TYDP, actually in the, in the previous edition, 2024, provides already a lot of investments needs, a lot of investment needs. The problem is how to match those needs with, with real projects and all the decision making to realize them. So there is what we see a bit of bottleneck. You see, they're really the bridging needs with projects and the political decision to make them happen. Because many of these projects implicate and also have impact beyond the countries that are hosting us. So I need to be able to be causing A and B can have an impact and benefits, of course, with other countries. So there's this where I believe is one of the bottlenecks. So really agreeing on cost sharing, but also benefit sharing of these projects. And of course, on top of that, as mentioned, we need to find financing. Also, we need to streamline permitting. We have cases where a project takes perhaps two, three years to be really constructed, but it takes six, seven years just to go through all the processes of permitting at different levels. And so that's, I think, something that we expect and we hope that the grid package can help. Yes, because 10 years for just, for something that should happen way earlier and it's absolutely needed are perhaps a lot. And especially if we see how things are happening in China, in the US and et cetera. But speaking in general about the market, the EU electricity market, how do you see the evolving? And what are the upcoming, let's say, EU policy rules, regulations, files that will shape the discussion around markets? So perhaps looking back, there was a lot of an important revision of markets in the last few years. So for instance, the clean energy package already back in 2020, 2019. So that's already revamped the rules and main legislation for electricity markets. Then after the crisis, of course, in 2022, there was targeted updates via the so-called energy electricity market design reform. And so there are already important rules, not only to support, for instance, renewables, to support capacity, but capacity to also to unlock flexibility from different areas, also to improve the function of the market. So what we leave is that on the one hand, there's now the time for members to, of course, to transpose and implement those rules. Of course, there are some implementation still files that are ongoing. So you have, for instance, the development or update of new network codes or guidelines, which are ongoing. And there, what we believe is that the focus should be really on technical improvements, so really to improve on the technical level, how can we improve the markets, a market integration, access and competition for services, et cetera. And this is not really the place to, for instance, introduce changes in governance, or responsibilities, which should have its place, of course, in the political debate, but in the update of the main legislation. So that's kind of in the future. In the next step, for instance, actually, we are very curious to see what the European Commission will publish in the announced white paper on the deeper electricity market integration. So this is a white paper that was announced already, I believe, in the action plan for affordable energy, early this year. And so we are really curious to see what are the commission ideas into improving the function of the markets, and how these ideas will also influence the adaptation of the electricity legislation in the next years. Speaking of funding, that is also very important topic for projects, for the energy transition for Europe, which of the EU Commission funding mechanisms, like, for example, SAF, Horizon Europe, et cetera, are proving most effective in supporting large scale energy infrastructure? I would say the bread and butter of the funding for large scale infrastructure will be SAF. SAF energy, those are the, and the focus there is on cross-border energy infrastructure. Of course, not only electricity grid, let's face it. So it's also some gas, some hydrogen, some CO2. And so there's different energy carriers that can access to that. So that's the main point. Horizon Europe is more for research, innovation, also first of a kind of demonstration. So it helps to bridge the gaps, but it's not really the focus of Horizon Europe to develop large scale infrastructure. In innovation fund is really interesting, because originally, and I think, on the current edition, it was mainly focused on new technologies, the coverage of the industry, because of the political discussions, hydrogen was included. I think even support for wind manufacturing. And so perhaps, again, it's an idea. Could or should a innovation fund also be used? or at least a part of it to support not only grid technology but some of the grid projects. Let's see. On the other hand, I think we see also good evolutions in what the commission has proposed as part of the multi-ionnal financing framework in terms of the expansion of the budget of CFE, at least five foot. And where do you see the financing gaps? Where could EU policy, for example, do better address these gaps so the basis? Yes, so there are different points. So, indeed, so I was mentioning and before, so European funding is very key. CFE in the last multi-ionnal framework, it didn't actually increase the budget. So actually, it was the same and many other technologies had to come to it for that. So in that sense, I think we need to increase this budget and there's where I was mentioning there's a good proposal by the commission, including five for the amount of CFE compared to the previous financial framework. And we hope that this stays that way because in the end, it's some negotiation between the member states. But at least the direction is very good. There's also good, for instance, in terms of new funding instruments that have been proposed, for instance, a called Competitabis Fund, which will also include funding for what they call local transmission distribution grid. So not only cross-border, which should be taken care by CFE, but also some of the more distribution and transmission projects. Again, as mentioned, we believe that the innovation project could be also catered to some of the needs at a grid level, either in the supply chain, but also perhaps in some demonstrations. But that's part of the the story. So, funding is part of the story. On the other side, you need also a lot of private capital. You need stakeholders, not only public, but also private stakeholders, big tickets that need to put money. And for that, you need to incentivize to invest in asset that will be there for next 30, 40 years. So there, you need a really unattractive regulatory investment. So this private funds, private companies, even for some TSOs or read operators that are in stock markets, that you and me can also invest in those. So you need a stable regulatory framework, but also the commission, I think, can also help there via, for instance, the risking instruments. So you reduce, for instance, the cost of loans that grid operators need to do vis-à-vis private banks. So there, for instance, you could have a role for a European investment bank, but also national development banks. It's the same for the support of the digitalization of the grid, because funding is needed there too, right? No, definitely. So that I was mentioned, I think, before, is not only putting copper or wires. It's also putting the needed digital infrastructure, and it goes from digital connectivity, of course. Also, digital capabilities to process a large amount of data that will come, but that's only at our level. If we go even deeper in the value chain, if we want to really unlock flexibility, what we need is also to invest and increase the pace, for instance, in the installation of smart meters. We need to also to give access to data at a smart meter, but also behind the meter in order to really incentivize competition for services. And this requires money. We know that in the past, SAF was also dedicated to digital infrastructure, according to the new commission proposal, I think that digitalization will go more in order type of funds. And so we believe that this is very important. So digital infrastructure, digital connectivity, capabilities to process, but also we need secure capabilities. We know that I was mentioned before, that security in particular service securities becoming a more and more attention point for grid operators, but also actors in the value chain. And so also investing in service security capabilities in AI digital things, I think these should be also parts of the funding. And I think there's already action that the commission is taking, but we believe that the level of expectation and of course the level of investments and therefore funding will only increase in next few years. You mentioned infrastructure. And I have discussed with many people that represent projects that are focusing on infrastructure. And they were telling me that this kind of projects often face resistance, especially from the public. How do you think policy and funding frameworks can support greater social acceptance? How can we let the people know that these projects are to their benefit? Yeah, we'd say one part of the story is of course the good communication. So often the correlation has been and still being linked with a lot of upfront costs, which is the case. So to the current eyes, the system you need upfront costs in renewables, in grates, in electrification. So there's a need. So definitely. So the second of course is permitting as I mentioned. So investment in capabilities, in communication, in I think is very important during the permitting process. So to go to the local communities to do to their zones where there will be development. So to really try to onboard the residents or the people that are on the air. So that's also part of where the policy can help. And so I think that can be part of the story behind the grid package. On the other hand, also I can also make the link with the previous topic on financing. So if we have big investments, if part of that investment can be taken by European funding, that also helps reducing the costs that are borne by citizens. If we can increase manufacturing capacities and decrease the difficulties to access those capacities via procurement, that will also reduce in red, in at least in affordable network charges. So that's part of the story. Of course, we can go beyond that as well. For instance, the electricity bill has a lot of taxes and levies that has nothing to do with electricity. So how can this be faced out or put in another packaging, not in the budget of electricity bills for companies and for citizens. So it's not really one single bullet solution. There are different solutions, that communication, permitting funding. I think those are part of solutions to help reducing later. I would say the social acceptance. I agree with everything you say, but having done this job for almost a decade now focusing on energy, I think that a nice robust marketing campaign on the behalf of the European Commission should be priority number one. Because a lot of good things are happening and I fear that the public doesn't know it. And of course, podcasts, podcasts and like this one and platforms like and later world are helping towards that direction, if I may say so myself. Now as we are approaching the end of our discussion Manuel, I would like to ask you to tell me if you could change only one aspect of the EU funding policy to better support the energy transition. What would that be? It's also linked with the way we want to manage the energy transition. I think it's also a lot of prioritization. So we know that we have different paths to reach the transition. We have some technologies that are more mature than others. And so for us, I think this is very much important when the Commission will give access to the current funding, also the future funding. So really, material technologies such as grid technologies are needed. They will unlock different parts of the value chain, not only in terms of direct clarification, but also indirect notifications. If we want to go and produce hydrogen from green or low carbon sources, you need access to vast amounts of electricity, affordable electricity. So in the end, for me, I would say, protest, prioritize if function of needs, if function of maturity, I think that could be, I would say, one of the ideas to improve and to the funding policy. Makes a sense. Manuel, thank you very much for this interesting conversation. Many thanks for your invitation and happy to continue this discussion.