Financing investment in the European electricity transmission network : consequences on long-term sustainability of the TSOs financial structure

– European electricity TSOs will have to achieve substantial capital expenditures over the next two decades. Their current financing strategy will not be adapted to these unprecedented costs. Even in a ‘best-case’ scenario of full cooperation between the different national and regional TSOs, it will result in constraints on the volume of investment achievable. – Under current trends in the evolution of transmission tariffs, the investment programs that are currently planned will be unsustainable in the long-term. To avoid severe degradation of the TSOs financial profile, a significant increase in tariffs will be required. – Alternative financing strategies, such as issuing additional equity, or restraining dividends, could help achieving the whole-scale investment volumes at a lower cost for consumers. However these financing strategies cannot substitute fully to an increase in tariffs. A very radical shift in the financing strategy would only allow a slightly higher share of the investment plans to be financed, at the expense of a reduced return-on-equity. Injecting capital in the transmission business would not remain attractive under such conditions.