Is Too Little Transmission Capacity Being Built? – If So, Why?

Abstract

The important role of transmission system operators (TSOs) in the development of the internal electricity market is the main issue in this paper. The key question is how to get the former national entities to broaden their scope, including the values that trade across former ‘closed’ borders may realize. Further, the incentives to take an active part in the ongoing structural change concerning generation are discussed: For example, more wind power in the system may require more generation (and transmission capacity in certain areas as well as generation capacity for regulation). On the regulatory side it is reasonable not only to state a supranational goal, but also to follow it with legislation and a European entity empowered to take action furthering the objectives. This paper attempts to emphasize the importance and tools for changing governance, making it aimed at accommodating a path towards a sustainable integrated European electricity market.

Notes

1. For example, the EU's Director‐General for Transport and Energy (2005).

2. The term reasonable can always be discussed. If investments occur we may note from the revealed behaviour of the market players that they consider the current level at least acceptable. From the regulatory viewpoint the problem is to balance the regulated entities needs with that of the public interest.

3. The seminal paper on this is by Averch and Johnson (1962).