Reaping the full benefits from cross-border interconnection typically requires reinforcement of national networks. When the relevant parts of the networks are complements, a lack of coordination between national transmission system operators results in investment below optimal levels in both interconnectors and national infrastructure. A subsidy to financially sustain interconnector building is not sufficient to restore optimality; indeed, even when possible, such subsidisation may have to be restrained so as not to encourage cross-border capacities that will not be fully utilised due to lack of investment in national systems.
Auriol, Emmanuelle, Claude Crampes, and Antonio Estache (2021). Regulating Public Services. Bridging the Gap between Theory and Practice. Cambridge University Press. https://doi.org/10.1017/9781108987660.
2.
Bloch, Francis and Unal Zenginobuz (2007). “The effect of spillovers on the provision of local public goods.” Review of Economic Design11: 199–216. https://doi.org/10.1007/s10058-006-0016-x.
3.
BohneE. (2011). “Conflicts between national regulatory cultures and EU energy regulations.” Utilities Policy 19(4): 255–69. https://doi.org/10.1016/j.jup.2011.05.003.
4.
BoskinMichael J. (1973). “Local government tax and product competition and the optimal provision of public goods.” Journal of Political Economy 81(1): 203–210. https://doi.org/10.1086/260017.
5.
BrainardWilliam C.TreneryF. Dolbear, Jr. (1967). “The possibility of oversupply of local ‘public’ goods: a critical note.” Journal of Political Economy 75(1): 86–90. https://doi.org/10.1086/259241.
6.
Brunekreeft, Gert, Karsten Neuhoff, and David Newbery (2005). “Electricity transmission: an overview of the current debate.” Utilities Policy 13( 2): 73–93. https://doi.org/10.1016/j.jup.2004.12.002.
7.
CaillaudB.JullienB.PicardP. (1996). “National vs. European incentive policies: bargaining, information and coordination.” European Economic Review40: 91–111. https://doi.org/10.1016/0014-2921(95)00045-3.
8.
CastanedaA.JamisonM.A.PhillipsM. (2015). Adaptive Regulatory Systems. PURC, University of Florida, December (https://www.aeaweb.org/aea/2016conference/program/retrieve.php?pdfid=602).
9.
CiupuligaA.R.CuppenE. (2013). “The role of dialogue in fostering acceptance of transmission lines: the case of a France-Spain interconnection project.” Energy Policy60: 224–233. https://doi.org/10.1016/j.enpol.2013.05.028.
10.
Crampes, Claude, Nils-Henrik M. von der Fehr and Graeme Steel (2017). “Review of the Electricity Market Design in the Context of the Energy Union: The Role of Regions.” Project Report, Centre on Regulation in Europe, 23 February (http://www.cerre.eu/sites/cerre/files/170223_CERRE_ElectricityRegions_Final_0.pdf).
11.
Crampes, Claude and Lucile Rives (2011). “Regulating electricity transmission in the European Union - how many agencies?” Chapter 4 in A. Estache (ed), Emerging Issues in Competition, Collusion, and Regulation of Network Industries. CEPR, 57-77 (http://www.tse-fr.eu/sites/default/files/TSE/documents/doc/by/crampes/rives_january_2011.pdf).
12.
Debia, Sébastien, David Benatia, and Pierre-Olivier Pineau (2018). “Evaluating an interconnection project: do strategic interactions matter?” The Energy Journal 39(6). https://doi.org/10.5547/01956574.39.6.sdeb.
13.
ENTSO-E (2014). “Fostering Electricity Transmission Investments to Achieve Europe’s Energy Goals: Towards a Future-Looking Regulation.” Policy Paper, European Network of Transmission System Operators for Electricity, 26 November.
14.
European Commission (2015). “Commission Regulation Establishing a Guideline on Capacity Allocation and Congestion Management.” Regulation 2015/1222 (http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32015R1222&-from=EN).
15.
European Commission (2016). Winter Package (https://ec.europa.eu/energy/en/news/commission-proposes-new-rules-consumer-centred-clean-energy-transition).
16.
European Council (2009a). Regulation (EC) No 713/2009 of the European Parliament and of the Council of 13July2009 establishing an Agency for the Cooperation of Energy Regulators (http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:211:0001:0014:EN:pdf)
17.
European Council (2009b). Regulation (EC) No 714/2009 of the European parliament and of the Council of 13July2009 on Conditions for Access to the Network for Cross-Border Exchanges in Electricity and Repealing Regulation (EC) No 1228/2003 (http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009R0714&from=EN).
18.
GautierAxel (2020). “Merchant Interconnectors in Europe: Merits and Value Drivers.” Policy Brief Issue 2020/05, Florence School of Regulation.
19.
Hagspiel, Simeon, Andreas Knaut, and Jakob Peter (2018). “Reliability in multi-regional power systems: capacity adequacy and the role of interconnectors.” The Energy Journal 39(5). https://doi.org/10.5547/01956574.39.5.shag.
20.
Höffler, Felix and Tobias Wittmann (2007). “Netting of capacity in interconnector auctions.” The Energy Journal (28)1: https://doi.org/10.5547/ISSN0195-6574-EJ-Vol28-No1-6.
21.
de Jong H.M., J C van der Lippe, and H.P.A. Knops (2007). “Investment in Cross Border Transmission Capacity: Economics or Politics? A European Case Study.” Delft University of Technology, (http://www.nextgenerationinfrastructures.eu/catalog/file/449424/USAEE_06_Knops.pdf).
22.
Joskow Paul LTiroleJean (2000). “Transmission rights and market power on electric power networks.” RAND Journal of Economics 31(3): 450–87. https://doi.org/10.2307/2600996.
23.
JoskowPaul L.TiroleJean (2005). “Merchant transmission investment.” The Journal of Industrial Economics, LIII (2): 233–64. https://doi.org/10.1111/j.0022-1821.2005.00253.x.
24.
Keppler, Jan Horst and William Meunier (2018). “Determining optimal interconnection capacity on the basis of hourly demand and supply functions of electricity.” The Energy Journal 39(3). https://doi.org/10.5547/01956574.39.3.jkep.
25.
KolkA.LindequeJ.van den BuuseD. (2014). “Regionalization strategies of EU electric utilities.” British Journal of Management 25(S1): S77–S99. https://doi.org/10.1111/1467-8551.12015.
26.
Laffont, Jean Jacques and J. Pouyet (2003). “The subsidiarity bias in regulation.” Journal of Public Economics88: 255–83. https://doi.org/10.1016/S0047-2727(02)00139-1.
27.
MaskinEric (1999). “Nash equilibrium and welfare optimality.” Review of Economic Studies 66(1): 23–38. https://doi.org/10.1111/1467-937X.00076.
28.
Massol, Olivier and Albert Banal-Estañol (2018). “Market power and spatial arbitrage between interconnected gas hubs.” The Energy Journal 39(2). https://doi.org/10.5547/01956574.39.SI2.omas.
29.
Mountain, Bruce and Jamie Carstairs (2018). “Batteries, interconnectors and institutions: the case of South Australia.” Economics of Energy &Environmental Policy 7(1). https://doi.org/10.5547/2160-5890.7.1.bmou.
30.
Newbery, David and Michael Grubb (2015). “Security of supply, the role of interconnectors and option values: insights from the GB capacity auction.” Economics of Energy &Environmental Policy 4(2): 65–82. https://doi.org/10.5547/2160-5890.4.2.dnew.
31.
Ofgem (2013). “Cap and Floor Regime for Regulated Electricity Interconnector Investment for application to project NEMO.” Consultation Document, Office of Gas and Electricity Markets, March 7 (https://www.ofgem.gov.uk/sites/default/files/docs/2013/03/cap-and-floor-regime-for-regulated-electricity-interconnector-investment--for-application-to-project-nemo_0.pdf).
32.
Ofgem (2020). “Decision on proposed changes to our electricity connector cap and floor regime to enable project finance solutions.” 6May2020.
33.
SalopSteven C.O’BrienDaniel (2000). “Competitive effects of partial ownership: financial interests and corporate control.” Antitrust Law Journal67: 559–614.
34.
Turvey Ralph (2006). “Interconnector economics.” Energy Policy34: 1457–72. https://doi.org/10.1016/j.enpol.2004.11.009.
35.
WilliamsAlan (1966). “The optimal provision of public goods in a system of local government.” Journal of Political Economy 74(1): 18–33. https://doi.org/10.1086/259106.
Supplementary Material
Please find the following supplemental material available below.
For Open Access articles published under a Creative Commons License, all supplemental material carries the same license as the article it is associated with.
For non-Open Access articles published, all supplemental material carries a non-exclusive license, and permission requests for re-use of supplemental material or any part of supplemental material shall be sent directly to the copyright owner as specified in the copyright notice associated with the article.
