Briefings

Securing Grids for a Sustainable Future

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Securing Grids for a Sustainable Future

Establishing an integrated electricity system capable of delivering Europe’s long term energy policy goals will require substantial investment in transmission infrastructure. The Commission’s Blueprint for an integrated European energy network (See Note 1 below) estimates that some €142 billion will need to be invested in the electricity grid by 2020, while other estimates (See Note 2 below) suggest that the efficient delivery of Europe’s longer term decarbonisation goals may require investment in inter-regional transmission of some €200 billion by 2050. However, the Commission believes that current arrangements will only take up around half the capacity required by 2020, due in part to difficulties in accessing finance, an asymmetry of costs and benefits associated with cross border interconnection and the inability of existing arrangements to capture the benefits of interconnection from a “European” perspective.

Investment in interconnection will cause electricity prices to converge thereby creating winners and losers. Consumers in some Member States may be disadvantaged by increased interconnector capacity, but be expected to contribute to the costs of investment. Conversely, some Member States may see congestion reduce without being expected to contribute under existing rules. This asymmetry is likely to present a barrier to the investment in interconnector capacity necessary to deliver Europe’s energy policy goals. It is therefore essential that arrangements to allocate the costs of investment in an equitable fashion are developed.

Currently, Europe’s strategic transmission investment programme is defined by the Commission’s Energy Infrastructure Blueprint, together with the European Network of Transmission System Operators for Electricity (ENTSO-E) 10-year non-binding network development plan (TYNDP) process. ENTSO-E’sfirst TYNDP is essentially a collection of projects identified by national transmission system operators (TSOs). While the 2012 TYNDP will no doubt be an improvement, the extent to which the transmission development process achieves a pan-European rather than national focus remains to be seen.

To overcome these challenges and develop a European grid aligned with Europe’s decarbonisation goals while protecting the interests of consumers, new arrangements for electricity transmission planning and financing will be needed. Based on international examples of innovative arrangements or best practice, this Policy Brief sets out the key considerations needed to ensure that the evolving European approach for to infrastructure is coordinated, efficient, competitive, equitable and transparent.

Notes:

1. See “Energy infrastructure priorities for 2020 and beyond – a Blueprint for an integrated European energy network” (DG Energy, 2010), at http://ec.europa.eu/energy/energy2020/infrastructure/index_en.htm.

2. See “European Climate Foundation (ECF) 2050 Roadmap – A Practical Guide to a Prosperous, Low-carbon Europe” (ECF, 2010), at http://www.roadmap2050.eu.

The Policy Brief was written by RAP – Regulatory Assistance Project, with research assistance from E3G’s Jonathan Gaventa.

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