2. continuation of the article Decarbonisation natural or controlled
From generation to transmission, distribution and trade, the power system has grown and built over decades to deliver stable electricity to customers at the most optimal price. If I say that it grew, I mean that in the presence of limiting factors arising from the laws of physics, and respecting the laws of economics, a workable system was created.
The system was looking for its technical and economic optimum. The efficiency of the use of primary resources has increased substantially and the usable ones have gradually expanded.
By functional system, I mean a system of large power plants that supply power to the transmission system. From there, the electricity flows through the distribution systems to the customers. A system that ensures the continuity of supply and the parameters of the delivered energy. A system that is interconnected across Europe and where the direction of liberalisation of the electricity market has been pursued for three decades, with the aim of achieving the lowest possible market price through a transparent meeting of supply and demand.
A system that provides sufficient (surplus) energy. A system that has historically progressively used more concentrated sources of energy, from biomass to coal, oil, gas and nuclear power. A system that was geared towards building large resources and a robust system. And also a system that allowed the most developed countries to grow rapidly.
But it was also a system that placed a significant burden on the environment. On the basis of regulations, the system started to become greener (by dedusting, desulphurization, denitrification, demercurization) and further increased the efficiency of the use of primary resources, i.e. reducingCO2 emissions. I am referring to the regulation we know as BAT and BREF.
In the past, emission allowances and the building of low-emission sources, driven by massive subsidies, have become completely new elements that fundamentally affect the system. These two facts in turn influence the priority and deployment of resources and therefore the economics and composition of the production portfolio. In the end, they greatly influence the price of energy on the stock exchange, even for the final consumer.
There is no objection to the fact thatCO2 emitting (better “direct” emitting) sources are burdened with additional costs so that less emitting sources are favoured and thus total emissions are reduced. It is questionable whether the effect of emission reductions due to the introduction of allowances has actually occurred. But there was a way that could and should have financed the transformation of the energy sector.
Supporting the building of zero-emission sources is also fine, they simply wouldn’t be built without support. But for them to ultimately supply power to the grid, to be a full part of the system, it’s not just about building resources, it’s about making costly changes to the whole power system.
So far, the energy system is technically able to absorb the externalities introduced by emission-free sources, but the consequences are already being felt. And it’s the price fluctuations on the daily market that are the problem, not a stable low price. These are increased demands on system regulation, new bottlenecks in the transmission and distribution system. And last but not least, the haphazard displacement of indigenous resources from the market, so that they reach the limits of their economic viability. A common feature of these externalities is their randomness.
So the bottom line is that if we want to make a fundamental change in a long-growing system, we should know its basic rules of operation and think carefully about the consequences and try to eliminate them. In my opinion, that is not happening now.
The direction of decarbonisation, reducing the environmental burden, is right, necessary and feasible. Only, as is often the case, the road to hell is paved with good intentions…
Next time I will focus on the description of basic externalities from the perspective of natural laws.
Vladimír Hlavinka, owner of ORGREZ Group and founder of ORGREZ ECO