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Policy Brief / Electricity

Towards a more investment friendly economic incentive regime for offshore infrastructure projects

Author(s): BHAGWAT Pradyumna, LIND Leandro

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ABSTRACT

Offshore infrastructure projects will play a key role in enabling the EU to meet its renewable energy goals. Therefore, effective economic incentives must be in place to ensure adequate investments. • Since the liberalisation of the power sector, the use of ‘incentive regulation’ has become a standard practice among European regulators. This TSO incentive regulation is done in a ‘portfolio’ fashion. • In the countries analysed, different risk/remuneration profiles are set according to the general regulatory regimes. These risk/remuneration profiles have not changed significantly since the previous study conducted by Glachant et al. (2013). 1 • Nevertheless, in recent years, regulators are also providing dedicated incentives for specific strategically important or necessary investments, including offshore projects. • We observe that the trend of providing dedicated incentives appears to modify the risk/remuneration characteristics, leading to a more ‘investment friendly’ environment for TSOs, at least for certain types of assets, such as offshore transmission infrastructures.