Cross Border Electricity Trade in the Age of Renewables- New Trends and Developments

Trading in electricity, unlike what many people might know, has been an intrinsic part of trade for many regions of the world. After all, it is only a little different from the energy trading that we all understand, be it oil or gas. In markets like Europe, which have found ways to bring down barriers and make them as close to open as possible between countries, power trading has  been well established, between countries with a surplus like France with its abundant nuclear power, or others with wind energy for instance now.

Of course, power trading also demands level  of integration that is unusual, be it between national grids, the laying of power lines, the nature of contracts etc. As renewable sources of energy take centre stage, the market for power trading is also changing.  Let us take stock of last year’s trends to ascertain how they might be revolutionising the world’s electrical landscape.

Looking at the last two years’ data on Germany, France and Norway’s power production, it  shows that the supply from renewable energy resources can be both stupendous and irregular, making the exchange of power between the three countries necessary to ensure unrestricted supply of electricity. Germany is trying to phase out its 20 GW of fossil fuel coal plants. The country has steadily increased its solar power capacity and moved past its targets, but often by importing low-cost solar modules from China, thereby killing its domestic manufacturing industry. Rapidly growing wind energy has become the nation’s second largest fuel source and produced 126 TWh in 2019. Windy days produce excess power, enough to export some of it; in 2020, Germany became the biggest exporter of power in the world. Yet, nuclear-dependent France was the largest net-exporter of electricity in 2019 since winds are irregular, compelling Germany to import a lot of energy on non-windy days.

Hydropower-dependent Norway, however, displaced France as the largest net-exporter of power in 2020 as it received heavy rainfall which cut down its power prices and made it attractive to import from in the view of linked countries. Norway has been exporting large amounts to the countries on the Scandinavian grid-network like Netherlands, Sweden, Finland, and Denmark (its eastern islands). In 2020, Finland imported a net total of 20% of its power consumption from Norway. Due to limited connectivity with central Europe, Norway doesn’t export power there. But many projects are underway to solve connectivity issues between countries on the same as well as different grid-networks. For instance, Norway and Germany have recently connected their power grids for the first time via a 525kV subsea interconnector under the NordLink project which will carry up to 1.4GW of power between the countries, allowing Norway to absorb excess wind power from Germany and save its hydroelectric reserves for when supplies are low.

Covid-19 upset France’s power trade since the lockdowns suppressed the maintenance of its nuclear power plants, on which it depends for steady revenue from its importers (Italy and the UK mainly) and for fulfilling its own population’s power demand by 40%. As a result, France imported 4.5TWh from Spain to manage its energy needs.

Over In Australasia, SunCable, a Singapore-based consortium, announced its $22 billion Australia-ASEAN Power Link (AAPL) flagship project, whose express aim is to combine the world’s largest solar farm and battery storage facility in the Northern Territory in Australia, with a 4,500 km transmission system, to supply Darwin, Singapore and ASEAN markets with reliable and competitively priced renewable electricity.

We have also covered India’s power trade with its neighbours, or the missed opportunity vis a vis Pakistan, for instance.

The important thing to consider, however, is the moves being made worldwide, by large energy exporters, be it oil, gas or coal, like Saudi Arabia, Russia and Australia, to catch the Hydrogen bandwagon early, and ensure their earnings from energy exports do not falter, even if they come via Hydrogen exports.  For most, it is not a matter of choice. The covid hit has demonstrated the fragile nature of oil exports, and the bleak long term future for it. the most pessimistic scenarios even talk of a continuous decline starting 2025, while the most optimistic donot predict a bright future for most beyond 2035. Hydrogen, including green Hydrogen, where most expect serious progress on costs and generation by 2030,  could be the best fit for these countries.

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Soumya Duggal

Soumya Duggal

Soumya is a master's degree holder in English, with a passion for writing. It's an interest she has directed towards environmental writing recently, with a special emphasis on the progress being made in renewable energy.

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