Electricity generation capacity in Europe – The Brussels perspective (Abstract/Draft)

Author: Thomas Sattich


The term capacity is on everybody’s lips these days regarding the dynamics in the power sector. In order to guarantee security of supply, several EU member states are currently developing and implementing mechanisms to assure generation adequacy. These mechanisms involve the typical risks of state intervention in the operation of (electricity) markets. Moreover, regarding the common aim of finalising the European Internal Electricity Market, and hypothetically large generation overcapacities in Europe, it is doubtful whether these national mechanisms are truly a move in the right direction. The article develops an overview over the current debate and provides the reader with several statistics and figures on installed, available, and excess capacity. As an alternative to the current trend to national capacity mechanisms it suggests the shared use of generation capacity in the finalised Internal Electricity Market. Comparing the existing excess generation capacities with Net Transfer Capacities by means of statistical and network analysis, the article concludes that a European approach to generation capacity would result in a more economical allocation of generation capacities, but observes that the necessary cross-border infrastructure is not yet in place at many boundaries. The latter should therefore remain in the focus of European policy makers

1. Introduction

With the electricity sector in transition, Europe’s energy map is changing: While central power utilities – nuclear or fossil – go offline, decentralized renewables have been on the rise for a number of years now and represent the sector’s fastest growing segment. But the political decisions on the European and national level to promote electricity generation from renewable sources did not only lead to a sharp increase of wind and solar power (whose operation in the existing power system is demanding), but increased the need for subsequent adaptations of all levels of the power system – generation, transmission, consumption.

Among the necessary steps for a working energy transition, the need for flexible power plants stands out, as these provide the vital backup for the operation of wind and solar power. Since several member states are implementing national policies to ensure generation adequacy at all times, the term capacity is on everyone’s lips these days. These national policies do not only include the planning of new generation capacity, but the implementation of capacity mechanisms in order to ensure that the growing demand is actually met. These policies involve the typical risks of any state intervention in the operation of (electricity) markets, which – if poorly designed – may exceed the given risk of market failure.

In view of the finalisation of the Internal Electricity Market (IEM) by this year and the fact, that there is no European approach to these capacity mechanisms, the European Commission therefore currently is probing into these policies, pointing out that incompatible capacity mechanisms could distort trade, production and investment decisions in the IEM [1]. What generally is not so well-known is the fact, that capacity as such is not the problem: in theory there is plenty of.  In the European Union (including Switzerland and Norway) it amounts to 923,603 GW[2] (Fig. 1), 133,32 GW[3] (or 29.79 per cent[4]) of which may be considered as reserve capacity in the annual average. What therefore is needed is a European approach how to make the best use of it.

The article intends to broaden the discussions about capacity mechanisms by adding a European perspective. In order to do so, it assesses the existing generation capacities in Europe and evaluates whether more cross-border use of these would result in a more efficient European energy system. Based on this evaluation the article identifies measures to achieve a better economic mix in the European power sector with less overcapacities and more security of supply at load peaks. It concludes with a discussion  of the policy options which derive from this analysis.

2. Materials and methods

In order to estimate free generation capacities in Europe, several data sets are analysed by a variety of quantitative, statistical methods: Generation capacity data from Eurelectric (2010) provides a first overview over the installed and available capacities in the European Union; according to Ofgem data on availability factors it is assumed that 65.2 per cent of installed capacity is available at all times. Hourly load values (2010) from Entso-e serve for the identification of monthly peak demand in the EU member states; together, available capacity and peak load data allows to estimate the monthly and annual average reserve capacity (in per cent of peak load) in member states and the European Union. The annual average shows free reserve capacities in most – but not all – member states.

Peak load data from January 2010, an unusually cold winter month, serves as the starting point for a more detailed analysis of free reserve and missing capacities: By a comparison of free generation capacities in the EU member states and Net Transfer Capacities of grid interconnections (winter 2009/2010, Entso-e), the capability of the individual EU members is assessed to put their free generation capacities to use for power export, or, where there generation capacity is short, to cover the winter peak load by power import. The results show large variations between grid integration of EU member states and their capability to import/export electricity.

Some member states seem to stay below the necessary grid integration threshold for an effective cross-border use of generation capacities in Europe. Network analysis offers further information on generation capacities and grid interconnections: Computed with Gephi graph visualisation software, using the Force Atlas algorithm which simulates attraction between interconnected, and repulsion between non-interconnected knots, the analysis provides a detailed overview over the European power system. Free and needed generation capacity is represented, as well as the capability of making use of the existing infrastructure. The resulting graph shows imbalances in the European power system: Generation overcapacities and shortages on the one hand, bottlenecks in the power transmission infrastructure on the other.

3. The European perspective on capacity

If one takes the European perspective, scarcity of generation capacity is much less of an issue; in this view it is rather reserve and excess capacity on the national level, which is noticable; the same is true for the uneven distribution of these reserve generation capacities: While a margin of 15 per cent of reserve generation capacity is adequate,[5] many member states largely exceed that number; the respective countries hence exhibit large overcapacities, even at peak hours. Others however have difficulties to meet demand on all days of the year. But this latter group is a minority, as – overall – electricity generation capacity is anything but scarce (Fig. 2).

However, reserve capacity varies largely over the year (Fig. 3): During winter times, when demand is highest and climatic conditions are harshest, reserves fall slightly below the above mentioned 15 per cent margin. This hits the North particularly hard, as winters there are coldest and darkest, and hydropower is scarce due to freeze. More southern regions on the other hand reach the limit of their reserves during summer times, when air conditioning is in use and cooling water is scarce. Even though reserve capacity in the European Union is free at any times, some countries hence touch the limits of their available electricity generation units, therefore being in danger of winter or summer brownouts[6].

More cross-border electricity transmission capacity between member states could bring about a better economic mix: better interconnection would help making more efficient use of generation units in place and would therefore allow to reduce excess generation capacities on the one hand, and increase security of supply on the other. Yet the availability of interconnection capacity differs largely along European borders: According to Net Transfer Capacity values[7], many interconnectors allow only for limited cross-border use of existing reserve capacities  (Fig. 4). For instance, existing power transmission infrastructure allows to cover only 4.3 per cent of the existing French winter shortage of capacity by Spanish power plants, even though the Iberian Peninsula exhibits large generation overcapacities (Fig. 5).

Increasing transmission capacity at the boundaries with underdeveloped interconnectors would hence highly increase security of supply. Apart from that, more interconnection capacity would also result in a more efficient allocation of power generation units, as the IEM’s[8] market forces would reduce capital-intensive excess capacities to a minimum, thereby saving large financial means for other investments. But the state of today’s power transmission infrastructure in Europe rather prevents the coming into effect of market forces at many borders. Existing gaps in the infrastructure therefore largely subvert the overall aims of European policy makers behind the attempt to finalise the Internal Electricity Market by this year.

Increasing the ability to use existing overcapacities in a more efficient way by increasing transmission capacities therefore is not only vital for security of supply, but also from an economic point of view. Hence policy makers should refrain from purely national solutions regarding capacity markets, and follow an European approach which allows the shared use of existing overcapacities: In contrast to national capacity markets such a policy would not only help to have generation capacity available at every time, but also correspond with the aims of the Internal Electricity Market, thereby helping to avoid redundant investments. Regarding the stagnation of Europe’s economy there should be better use for the financial resources which are now bonded in existing overcapacities.

Beyond, a policy of deeper integration of the power system would also help a to reach the EU’s goals with regard to renewables in two different ways: on the one hand volatile renewables such as wind and solar need flexible backup and bigger power systems to follow the ups and downs in grid frequency caused by their operation; the bigger, more diverse and more flexible the surrounding Verbundsystem[9] is, the better the integration of these forms of electricity generation can work. On the other hand the low generator availability of wind and solar power (due to the varying weather conditions) could be counterbalanced by  generators in countries, which do not put these forms of electricity production to the centre of their national policies.

A European approach therefore would help to cover peak demand in times of low electricity generation from renewables and to avoid investments into expensive capacities which are offline most of the time. But apparently intermittent renewables and generation capacities free for renewables backup are allocated differently in Europe, and the on-going transformation of the electricity sector will cause further decommissioning and relocation of generation means (mainly to less populated areas), resulting in larger, more volatile power flows over larger distances. In order to guarantee failure-free operation of the power system, both, renewables and backup capacity, therefore need to get closer together.

4. Grid capacity

Yet as suggested above, bottlenecks in today’s cross-border power transmission infrastructure hamper the symbiotic interaction of different elements of Europe’s power system. According to ENTSO-E’s 2020 scenario[10], about 80 per cent of these bottlenecks are directly or indirectly related to the integration of renewable energies. Rather than building up purely national reserve capacities, policy makers therefore should become aware of the existing free generation capacities in Europe and need for new cross-border power lines as the necessary interconnection, which amount to over 100 transmission projects of European significance or 50.000 km of new power lines to be built over the following ten years, according to ENTSO-E.

With the 320.000 Volt power line between France and Spain one major link is – after years of negotiations – finally under construction. Another step would be to bring the Nordic power system closer to continental Europe; interconnections with Norway (such as NorNed between the Netherlands and Norway) and Sweden (such as the Baltic Cable between Germany and Sweden, or SwePol between Sweden and Poland) can be regarded as first steps in this direction, possibly followed by power lines between Norway and Great Britain. Geography is of course an issue in this regard, but with High-voltage direct current technology (HVDC) the relatively large distances are bridgeable.

In continental Europe, where distances are shorter, a better integration of the Eastern EU member states would be a promising step, as this group of countries is still somewhat isolated from the older EU members. Besides the better integration of the Baltic countries with Poland, Finland and Sweden, Bulgaria and Hungary should also increase their cross-border networks according to the European Commission.[11] Moreover, due to its weakly developed interconnectors and internal bottlenecks, Italy still constitutes a relatively isolated energy island, which demands better integration. And while Germany is pushing its Energiewende forward, France is holding on to its nuclear programme, which raises the question how wind and solar power on one bank of the Rhine, and mainly atomic energy on the other go together, and how these could be organised in a mutually beneficial manner.

5. Conclusions: Making shared use of generation capacity

Instead of seeing generation capacities and mechanism to ensure security of supply at all times as a purely national endeavour, policy makers in Europe should be aware of the fact that the power system has a growing pan-European dimension. Admittedly, the relevant markets and the task of security of supply still have a strong national basis; but the overall development does not only suggest a growing importance of the European level when it comes the power system, but – if Europeans manage to use their electricity generation capacity more efficiently and in a concerted manner – also promises to make free economic means for investments in other sectors.

Given the commissioning of new power transmission infrastructure according to existing plannings and the finalisation of the European Internal Electricity Market, existing overcapacities could be reduced and the build-up of – possibly unnecessary – new ones prevented. In view of the stagnation of Europe’s economy, such a truly European approach of making shared and therefore most economic use of existing and to be commissioned generation capacity is vital in order to prevent redundant investments in the energy sector – money Europeans could make better use of.

6. Policy Implications: Investing in Europe’s future

But of course he European approach would certainly not be cost free: On the contrary,  according to ENTSO-E the likely costs of the necessary grid development will amount to more than 104 billion EUR. Yet not only would the long-term result be beneficial, but be a welcome stimulus for Europe’s manufacturing base. Moreover, in return for a policy which makes the shared use of generation capacity the norm and underlines the dynamics of the Internal Electricity Market, Europe would not only get a power supply that is advanced, secure and low-carbon, but which would literally bind its citizens together in one system, thereby creating common interest and a sense of community.

A European approach to the use of generation capacity in one continental power system, to the transformation of the power sector, the future allocation of electricity generation and the relocation of generation units therefore could be one of the cornerstones of getting the European Union post-crisis. But as the example of the Nordic power system demonstrates, such an undertaking requires a high level of mutual trust, since a shared use of generation capacities implies the dependency on your neighbours. Unilateral steps in energy policy undermine this vital element for any progress in European energy policy, and should therefore be avoided.


Commission (2012). Commission Staff Working Document. Investment projects in energy infrastructure. SWD(2012) 367. Brussels: European Commission.

Commission (2012). Consultation Paper on generation adequacy, capacity mechanisms and the internal market in electricity. Brussels: European Commission.   http://ec.europa.eu/energy/gas_electricity/consultations/doc/20130207_generation_adequacy_consultation_document.pdf Accessed: 14 January 2014.

ENTSO-E (2009). NTC Values Winter 2009-2010. Brussels: European Network of Transmission System Operators. https://www.entsoe.eu/fileadmin/user_upload/_library/ntc/archive/NTC-Values-Winter-2009-2010.pdf Accessed: 14 January 2014.

ENTSO-E (2012). 10-Year Network Development Plan 2012. Brussels: European Network of Transmission System Operators.

Eurelectric (2012). Electricity capacity (Power Statistics 2012). Brussels: Eurelectric. http://www2.eurelectric.org/DocShareNoFrame/Docs/4/NLILLADCFCPHELGMEPEEBHOO51HLVTQLQOVCS919S6VB/Eurelectric/docs/DLS/Electricity_capacity_Power_Statistics_2012-2011-912-0003-03-E.xls Accessed: 14 January 2014.

ENTSO-E (2014). Hourly load values for all countries for a specific month (in MW). Brussels: European Network of Transmission System Operators. https://www.entsoe.eu/db-query/consumption/mhlv-all-countries-for-a-specific-month/ Accessed 14 January 2014.

Neuhoff, Karsten et al. (2013). Energiewende und Versorgungssicherheit: Deutschland braucht keinen Kapazitätsmarkt. Berlin: DIW (Wochenbericht Nr. 48).

OFGEM (2012). Electricity Capacity Assessment. Ofgem report to the government. London: OFGEM.

Wissenschaftlicher Beirat beim Bundesministerium für Wirtschaft und Technologie (2013). Langfristige Steuerung der Versorgungssicherheit im Stromsektor. Berlin: BMWi.  http://www.bmwi.de/BMWi/Redaktion/PDF/Publikationen/Studien/wissenschaftlicher-beirat-langfristige-steuerung-der-versorgungssicherheit-im-stromsektor,property=pdf,bereich=bmwi2012,sprache=de,rwb=true.pdf Accessed: 14. January 2014.

[1] See European Commission Consultation Paper on generation adequacy, capacity mechanisms and the internal market in electricity.

[2] In 2010; source: Eurelectric.

[3] Computed with a 65.2 per cent available capacity minus the monthly peak load of EU member states in 2010 (see Ofgem report, p. 27); 133,32 GW = roughly the installed capacity of IT and NL (133,125).

[4] Average free capacity of all member states (+ CH and NO) for 2010.

[6] Power shortage.

[7] Winter 2010, source: ENTSO-E.

[8] EU’s Internal Electricity Market.

[9] Interconnected system.

[10] Ten-Year Network Development Plan 2012, p. 56.

[11] See Commission Staff Working Document SWD(2012) 367.

Fig. 1: Installed capacity in the EU, NO and CH (2010, in GW)
Fig. 1: Installed capacity in the EU, NO and CH (2010, in GW)
Fig. 2: Average annual reserve capacity in the EU, NO and CH (2010; in per cent of peak load)
Fig. 2: Average annual reserve capacity in the EU, NO and CH (2010; in per cent of peak load)
Fig. 3: Accumulated reserve capacity of the EU, NO and CH in 2010 (in per cent of peak load; summer and winter lows in January, July and December)
Fig. 3: Accumulated reserve capacity of the EU, NO and CH in 2010 (in per cent of peak load; summer and winter lows in January, July and December)
Fig. 4: Reserve capacity (vertical, in per cent of national peak load) vs interconnection (horizontal, accumulated Net Transfer Capacity/reserve capacity) January 2010. Warning: Accumulated NTC values are hypothetical, this graph therefore is indicative, values may not be generalised!
Fig. 4: Reserve capacity (vertical, in per cent of national peak load) vs interconnection (horizontal, accumulated Net Transfer Capacity/reserve capacity) January 2010. Warning: Accumulated NTC values are hypothetical, this graph therefore is indicative, values may not be generalised!
Fig. 5: The grid and reserve generatin capacities (Net Transfer Capacity vs reserve capacity): knot size indicates unused (blue)/needed (pink) generation capacity (in GW), edges thickness indicates the ability of making use of existing reserve generation capacity for export via cross-border transmission infrastructure (blue) or compensating for missing generation capacity (pink)
Fig. 5: The grid and reserve generation capacities (Net Transfer Capacity vs reserve capacity): knot size indicates unused (blue)/needed (pink) generation capacity (in GW), edges thickness indicates the ability of making use of existing reserve generation capacity for export via cross-border transmission infrastructure (blue) or compensating for missing generation capacity (pink)

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