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The interconnector is due to be built to a capacity

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The interconnector is due to be built to a capacity of at least 700 MW and enter intooperation by 2008.Investment rationale55.The case studies demonstrate that the rationale for transmission network investment variessignificantly between investment projects. In general, the rationale for network investmentcan be broadly defined by three approaches :TSO investment (‘regulated approach’) for national planning and operational standards andenhancing security of supply and effective market operation, which requires appropriateregulation, supported by an economic case.Private investment (‘merchant approach’), motivated by gains from trade, which is generallyunderpinned with contracts for use and financing, with little or no direct regulation6.Government intervention which aims to promote security of supply and tends not to beprimarily based on economic grounds.6The Finland – Estonia “Estlink” project is the only present example of a Merchant project with an exemption underRegulation 1228/2003.15/30
Ref: E06-REM-09-04Cross Border Framework for Transmission Network Infrastructure56.Other factors which are considered on an ad-hoc basis include for example: environmentalconsiderations; socio-economic issues and cost benefit analysis.Some projects were alsopromoted and facilitated through the EU’s TENs programme.Ownership/ Financing/ Remuneration57.The case studies indicate that the majority of investment projects (to date) are owned andoperated 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 andDutch TSOs, Statnett and (Norwegian Grid operator) and TenneT (Dutch TSO). In generalthese investment projects demonstrate varying degrees of regulatory oversight and tend tobe financed by the regulator setting/ allowing an appropriate return on investment. Theinvestment projects that are financed on a commercial basis (e.g. Estlink) tend to beremunerated according to the extent that they can charge users for access, under privatecontracts.In general, these private contracts are not regulated.Arrangements for the Estlinkproject were approved by the Finnish and Estonian regulators when the exemption wasgranted, and monitoring will begin when the link is in operation.Regulatory oversight58.The case studies tend to demonstrate that a consistent cross border regulatory framework fordriving the transmission investment is in general not given, either by TSO’s or on a merchantbasis, although some elements of such a framework are sometimes applied. In general, theoversight of the investment projects incorporates, in varying degrees, a combination of adhoc government and regulatory actions.Realised projects and insight into factors promoting successful project realisation59.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

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Term
Fall
Professor
JohnCarey
Tags
European Union, Electricity market, Transmission Network Infrastructure

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