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Policy Brief / Energy

EU Electricity Interconnector Policy: Shedding Some Light on the European Commission's Approach to Exemptions

Author(s): CUOMO Michael, GLACHANT Jean-Michel

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ABSTRACT

–– In order to foster infrastructure investment, National Regulatory Authorities (NRAs) may exempt privately funded electricity interconnectors from one or more of the following:
(i) regulated third party access (TPA),
(ii) restrictions on the use of congestion revenues,
(iii) tariff regulation and (iv) ownership unbundling.

–– National exemption decisions are reviewed by the European Commission (EC) when interconnectors touch two or more Member States. So far, four so-called “merchant” projects have reached the EC (all were approved): EstLink (2005), BritNed (2007), Imera/East-West Cables (2008) and Arnoldstein-Tarvisio (2010).

–– Without explanation, the EC has been gradually tightening the reins on the exemption regime since first approving an exemption in 2005. Yet analysis of these cases reveals an implicit set of preferences narrowly tailored to enable the development of a high-risk project without unduly advantaging its sponsor.

–– By analysing the existing EU exemption cases, this policy brief aims to uncover the EC’s implicit preferences with regards to exemptions from the regulatory provisions governing cross-border interconnector development and operation