Merchant Interconnectors in the European Electricity System

H.P.A. Knops and H.M. De Jong

Competition and Regulation in Network Industries, 2005, vol. 6, issue 4, 261-293

Abstract: This paper considers the potential for merchant investment in interconnection in the European electricity system. As transmission is in Europe in principle a regulated business, it is analysed here under what conditions merchant interconnectors could be allowed. First, the general role of interconnectors in the process of the integration of the European electricity market is considered. Second, it is discussed why merchant interconnectors could be a valuable complement to regulated interconnectors. Third, the general European regulatory framework for transmission is given. Fourth, the economics of merchant interconnectors are considered and the consequences for the regime merchant investors wish to obtain. Fifth, an extensive overview is given of the special legal regime that can be granted to merchant interconnectors in Europe. Sixth, the decisions concerning the Estlink merchant interconnector are analysed. This interconnector between Estonia and Finland is the only example in which a special regime for a merchant interconnector for electricity has been granted to date. Seventh, the special regime for merchant interconnectors is analysed. Finally, it is concluded what the potential is for merchant interconnectors in the European electricity industry.

Date: 2005
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Persistent link: https://EconPapers.repec.org/RePEc:sen:journl:v:6:i:4:y:2005:p:261-293

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