European Electricity Infrastructure: Planning, Regulation, and Financing

The document outlines the financial and regulatory challenges of expanding the European electricity grid to accommodate renewable energy. It assesses five financing options for transmission system operators (TSOs) and third parties, evaluates the EU Infrastructure Package's role in aligning national and regional planning, and discusses mechanisms for international cost-allocation and EU financial support.

• The investment requirement for electricity transmission in Europe is estimated at 100 billion Euros, far exceeding the 9.1 billion Euros allocated from the EU budget for energy network infrastructure between 2013 and 2020.
• Transmission system operators (TSOs) face credit rating downgrades if their debt share exceeds 65% to 70%, limiting their ability to finance the required scale of investment through debt alone.
• Five financing options were identified to facilitate infrastructure: issuing additional equity, reducing investor risks through regulatory development, shifting to a growth model via retained earnings, merchant-based project finance against congestion revenue, and concession-based project finance against guaranteed payments.
• The EU Infrastructure Package aims to streamline grid expansion by identifying Projects of Common Interest (PCIs), shortening permitting procedures, removing regulatory barriers, and providing 9.1 billion Euros in financial support via the Connecting Europe Facility (CEF) starting in 2014.
• The Inter-TSO Compensation (ITC) mechanism, intended to share costs between grid users of different countries, is currently an imprecise mechanism of insufficient scale because existing lines dominate the allocation of the common pot over new lines.
• Effective international cost-sharing for PCIs requires resolving issues such as the disaggregation of system-wide benefits to the national level, the time period for cost recovery, and whether cost-allocation can be adjusted ex-post.

APA

Neuhoff, K., Boyd, R., & Glachant, J.-M. (2012). European Electricity Infrastructure: Planning, Regulation, and Financing. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2012/01/EU-Grid-Workshop-Summary-2012.01.25.pdf

Chicago

Neuhoff, Karsten, Rodney Boyd, and Jean-Michel Glachant. European Electricity Infrastructure: Planning, Regulation, and Financing. Climate Policy Initiative, 2012. https://www.climatepolicyinitiative.org/wp-content/uploads/2012/01/EU-Grid-Workshop-Summary-2012.01.25.pdf.

Wikipedia

{{cite report |last1=Neuhoff |first1=Karsten |last2=Boyd |first2=Rodney |last3=Glachant |first3=Jean-Michel |title=European Electricity Infrastructure: Planning, Regulation, and Financing |publisher=Climate Policy Initiative |date=24 January 2012 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2012/01/EU-Grid-Workshop-Summary-2012.01.25.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{neuhoff2012european, author = {Neuhoff, Karsten and Boyd, Rodney and Glachant, Jean-Michel}, title = {{European Electricity Infrastructure: Planning, Regulation, and Financing}}, institution = {Climate Policy Initiative}, year = {2012}, month = jan, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2012/01/EU-Grid-Workshop-Summary-2012.01.25.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }