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Working paper / Electricity

Identifying and promoting missing EU power inter-connectors

Author(s): BEATO Paulina, VASILAKOS Nikolaos

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The level of inter-connector investment undertaken by countries individually are less than optimal, because of the interaction of three key elements, namely a) larger risks than other infrastructure projects, b) little information across countries about a project’s costs and benefits, and c) asymmetric distribution of costs and benefits within a country. Therefore, EU mechanisms for pushing the level of inter-connector investment toward optimal ones are advisable. Robust, sound and transparent EU electricity interconnection targets are needed, in order to identify the gap between the optimal and actual interconnection portfolio, and, at the same time, gather the necessary political and social support. These interconnection targets should be based on five methodological pillars, that can be summarised as follows: i) interconnection targets should have a triple dimension, measuring the degree of market integration, the capacity of inter-connectors for importing electricity, and the capacity of inter-connectors for exporting renewable electricity, ii) in order to avoid and reduce the incentive to propose inefficient inter-connector projects, the detailed, all encompassing, cost-benefit analysis should be a necessary (“sine qua non”) condition for implementing new inter-connectors, iii) attention to the efficiency of the functioning of the European electricity market should be a priority, in particular by recognising and rectifying the situation that “energy only” markets are not coherent with the EU’s prime goal of drastically reducing carbon emissions, iv) the EU network should be planned and operated in an integrated way, by harmonising the relevant rules, codes and regulations, but also through a different vision of responsibilities on the security of supply, v) to facilitate inter-connector development, citizens and relevant stakeholders should be involved in the identification and balancing of costs and benefits at an early stage.