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Research Report / Electricity

EU Involvement in Electricity and Natural Gas Transmission Grid Tarification (THINK 6)

Author(s): RUESTER Sophia, VON HIRSCHHAUSEN Christian, HE Xian, EGERER Jonas, MARCANTONINI Claudio, GLACHANT Jean-Michel

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This report was produced as part of the THINK project. The current EU involvement in the regulation of TSO revenues and transmission grid tarification is limited and mainly addresses issues related to interconnection and supply security as well as the definition of underlying principles for third party grid access and capacity pricing. Heterogeneity among national, or even local, transmission tariffs might be an obstacle for functioning competition and adequate investments into the grids. Even though transmission tariffs account for only a small share of final industrial consumer electricity and natural gas prices, both their level and structure can have a strong impact on infrastructure investments and on how commodities are traded within and between countries. We investigate whether the current challenges in the energy sector, accompanying the move towards “2014”, “2020”, and “2050”, warrant a stronger harmonization in transmission tarification and, if yes, what form this should take and what the potential role of the EU could be in this process. To discover the need for further EU involvement and harmonization, we ask (1) whether the existing heterogeneities in regulatory practice might hamper adequate investments or impede efficient competition and, if yes, (2) whether new EU legislation in place and new EU instruments notably from the Third Package – once enforced – provide an efficient solution. Increased trans-national involvement may have benefits, such as the better functioning of markets and the facilitation of infrastructure development, but it also comes at a cost, such as increased information asymmetry between individual decision makers and higher-level coordinating or regulating institutions. Both have to be weighted carefully. Practical and political implementability of the proposed solutions (both in the near- and long-term) is one of our key concerns.

THINK Topic 6 was led by Christian von Hirschhausen