The interconnector is due to be built to a capacity

The interconnector is due to be built to a capacity of at least 700 MW and enter into
operation by 2008.
Investment rationale
55. The case studies demonstrate that the rationale for transmission network investment varies
significantly between investment projects. In general, the rationale for network investment
can be broadly defined by three approaches :
 TSO investment (‘regulated approach’) for national planning and operational standards and
enhancing security of supply and effective market operation, which requires appropriate
regulation, supported by an economic case.
 Private investment (‘merchant approach’), motivated by gains from trade, which is generally
underpinned with contracts for use and financing, with little or no direct regulation 6 .
 Government intervention which aims to promote security of supply and tends not to be
primarily based on economic grounds.
6
The Finland – Estonia “Estlink” project is the only present example of a Merchant project with an exemption under
Regulation 1228/2003.
15/30

Ref: E06-REM-09-04
Cross Border Framework for Transmission Network Infrastructure
56. Other factors which are considered on an ad-hoc basis include for example: environmental
considerations; socio-economic issues and cost benefit analysis. Some projects were also
promoted and facilitated through the EU’s TENs programme.
Ownership/ Financing/ Remuneration
57. The case studies indicate that the majority of investment projects (to date) are owned and
operated by relevant TSOs, for example: Fenno Skan 2 is jointly owned by Svenska Kraftnät
(Swedish National Grid) and Fingrid Plc; and NorNed is owned jointly by the Norwegian and
Dutch TSOs, Statnett and (Norwegian Grid operator) and TenneT (Dutch TSO). In general
these investment projects demonstrate varying degrees of regulatory oversight and tend to
be financed by the regulator setting/ allowing an appropriate return on investment. The
investment projects that are financed on a commercial basis (e.g. Estlink) tend to be
remunerated according to the extent that they can charge users for access, under private
contracts. In general, these private contracts are not regulated. Arrangements for the Estlink
project were approved by the Finnish and Estonian regulators when the exemption was
granted, and monitoring will begin when the link is in operation.
Regulatory oversight
58. The case studies tend to demonstrate that a consistent cross border regulatory framework for
driving the transmission investment is in general not given, either by TSO’s or on a merchant
basis, although some elements of such a framework are sometimes applied. In general, the
oversight of the investment projects incorporates, in varying degrees, a combination of ad
hoc government and regulatory actions.
Realised projects and insight into factors promoting successful project realisation
59. Of the11 case studies listed above, 8 have not yet been built. One, the Aragon-Cazaril line,
has been abandoned for the time being as a viable project. Three – the Austrian