- Email: [email protected]
Seams Issues in European Transmission Investments
Patrik Buijs is a member of the K.U. Leuven Energy Institute and of the Electrical Energy research group (ELECTA) of the Department of Electrical Engineering of the K.U. Leuven in Belgium, where he is working towards a Ph.D. on European transmission investments. His research interests include technoeconomic aspects of power systems, congestion management, and European energy market design. He holds an M.S. degree in Commercial Engineering from the K.U. Leuven, Belgium. Ronnie Belmans is a full professor with the K.U. Leuven, teaching electric power and energy systems. His research interests include technoeconomic aspects of power systems, power quality, and distributed generation. He is also guest professor at the Imperial College of Science, Medicine and Technology in London. He was chairman of the board of ELIA, the Belgian transmission grid operator, from June 2002 through May 2010 and now acts as honorary chairman. He received an M.Sc. degree in Electrical Engineering in 1979 and a Ph.D. degree in 1984, both from the K.U. Leuven, a Special Doctorate in 1989 and Habilitierung in 1993, both from RWTH in Aachen, Germany. David Bekaert Since 2006 he has served as a research assistant at K.U. Leuven’s department of electrical engineering, electrical energy division, where he is working towards a Ph.D. on reactive power management. His research interests include issues about operating and planning the transmission grid. He received an M.S. degree in electrical engineering in 2006 from the K.U. Leuven.
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Seams Issues in European Transmission Investments European policy goals are challenging for transmission networks, requiring investments in cross-border capacity. Despite those goals, an increased awareness of the need for investments and the voluntary cooperation among countries sharing the challenges, a regulatory gap between national and European interests persists. Further development of a European cross-border planning and financing framework is required. U.S. experiences may serve as food for thought. Patrik Buijs, David Bekaert and Ronnie Belmans
I. The European Cross-Border Investment Framework Historically European crossborder investments were mostly planned and financed bilaterally. Today’s scope in meeting the new challenges is wider than bilateral. According to a study from The Brattle Group, necessary conditions to be successful at the regional or European level are (1) ‘‘a strong central institution and mandatory participation by
network owners’’ and (2) ‘‘the ability to share costs of ‘regional’ investments.’’1 The former implies a call to move beyond national interests and to look outside traditional borders. The latter condition gives incentives to do so by introducing the ‘‘beneficiaries pay’’ principle. The position paper by the European Transmission System Operators (ETSO)2 supports this viewpoint, and also argues that the national scope of regulators should be widened towards cross-border investments
1040-6190/$–see front matter # 2010 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2010.10.014
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and that cost allocation across borders should be facilitated. Put simply, in order to overcome the seams issues now prevailing national interests should make place or at least tolerate the existence of higher-level interests, namely regional or European. luntly stated, two ways of incorporation of these higher-level interests can be identified: multilateral and supranational. Whereas the former takes the form of a negotiation between countries each defending its national interest, the latter takes on the European viewpoint and envisages a more global optimum, which is not necessarily constrained by all national interests. Whereas a supranational approach has more chances in meeting the European policy objectives in a welfaremaximizing way, today’s reality points towards a multilateral and sometimes voluntary approach where countries only move forward when they expect to benefit. The Third Package changed several elements bringing together different national and European interests, but it will be argued in detail that both at a planning and a financing level the regulatory framework remains stuck at a multilateral level and is not able to reach to superior supranational level.
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A. Planning The Third Package takes important steps towards a better
integration of European policy goals into future grid development. Firstly, two new European-wide institutions are given a crucial role. Regulation (EC) No 714/20093 creates the European Network of Transmission System Operators for Electricity (ENTSO-E) bringing together all transmission system operators (TSOs) who until now have been cooperating on a voluntary basis only within,
Bluntly stated, two ways of incorporation of these higher-level interests can be identified: multilateral and supranational.
for instance, UCTE, ETSO, and Nordel. Also, European Regulation (EC) No 713/20094 establishes the Agency for the Cooperation of Energy Regulators (ACER) and bundles all energy regulators. hereas there used to be no European-wide transmission development plan, Art. 8(3) of Regulation (EC) No 714/2009 gives ENTSO-E the task to publish every two years a nonbinding Community-wide 10year network development plan (TYNDP) including a European generation adequacy outlook that looks forward up to 15 years. According to the Regulation the
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TYNDP has to build on the annually published 10-year national investment plans. Art. 22 of Directive 2009/72/EC5 provides further details on these national plans. It has to take into account regional investment plans. Although not said in so many words in the Third Package itself, ENTSO-E considers the regional level and their development plans as the workhorses for the Communitywide plan.6 Furthermore, the TYNDP has to incorporate supranational aspects, the socalled Community aspects. Explicit referral is made to the guidelines for the trans-European energy networks (TEN-E).7 The latter guidelines including the TEN-E project lists and the Priority Interconnection Plan (PIP)8 can be considered as the most concrete realization of the supranational viewpoint (see further). Cross-border investments or the lack thereof should also be given sufficient attention in the TYNDP. It is clear that the bottom-up approach based on the national development plans has a multilateral flavor and the topdown approach based on the Community needs is supranationally oriented. The TYNDP combines both and is complemented with public consultations. An important question is whether either planning approaches can converge or not and whether they both have sufficient impact on the resulting plan and, ultimately, on the investments really done or
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not. Note that the TYNDP in itself is non-binding. Proper regulatory oversight at different levels is key. n March 2010 a Pilot TYNDP is published by ENTSO-E.9 So far it only takes into account the bottom-up approach, i.e., it is based on national development plans. This pilot intends to open the debate and start the loop of public consultations and consecutive publications of biannual TYNDPs also including the top-down approach. Additionally, it is interesting to note that throughout Europe different forms of voluntary cooperation are being established aiming at a regional approach of cross-border investments. There is an increased awareness of regional challenges. In Scandinavia there is already a longer tradition of cooperation in this field. The process is long and remains nationally inspired.10 More recently a Baltic energy market interconnection plan was agreed among the different countries in the region. The development of electricity interconnectors is part of the plan.11 Another recent example can be found in the North Sea region. Nine countries around the North Sea signed in December 2009 a political declaration concerning the development of an offshore grid in the North and Irish Seas.12 These cooperative efforts are an important step into the right direction, but based on voluntary cooperation it cannot be expected that the participants will abandon their national interests when they do not match
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the best solution from a European perspective. B. Regulatory approval Regulatory oversight with respect to the TYNDP is mainly a task of ACER. In Regulation (EC) No 714/2009 it is stipulated that ACER has to give its opinion on both the TYNDP (Art. 9(2)) and the national development plans (Art. 8(11)). The complete
Throughout Europe different forms of voluntary cooperation are being established aiming at a regional approach of crossborder investments.
procedure for the development of the TYNDP by ENTSO-E and the involvement of all stakeholders (including ACER) is still under development.13 The latter opinion should assess to which extent there are inconsistencies between the national plans and the TYNDP. ACER can recommend amendments to the national plans which then have to find their way to the national regulators. At the same time the national regulators have to examine the national development plans and check their consistency with the TYNDP. Although it appears there is a lot of oversight on the development plans, it remains to
be seen whether the struggle between the bottom-up and topdown approaches converges to a result that is acceptable for both national and European parties. Indeed, national regulators still play a central role, even in the incorporation of higher-level viewpoints. Do they have sufficient incentives to do so? oreover, will ACER truly act as a European regulator and will it be as powerful as required to fulfill Community needs? According to Art. 2 of Regulation No 713/2009, ACER consists of four entities: an Administrative Board, a Board of Regulators, a Director and a Board of Appeal. The Board of Regulators and the Director are responsible for the opinions, recommendations, and decisions of ACER. These entities should make the difference in adopting the European viewpoint. The Board of Regulators copies the structure of ERGEG,14 i.e., one representative of the national regulator per member state and one non-voting member of the European Commission. Art. 13(5) of Regulation No 713/2009 requires that this board should act fully independently and should not be influenced by (among others) the member states. It remains to be seen how well this structure works. The members of this board are still clearly linked to the national regulators and the question is whether they will defend their national interest or draw the European card. This opens the door towards a more multilateral orientation where
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everyone separately has to benefit in order to progress. However, the Board of Regulators acts by a two-thirds majority (Art. 13(3)). Moving beyond unanimous decision-making is an important step towards a supranational ACER. Backed up with sufficient incentives to think across borders, this framework might work. In the next section on the financing framework, these incentives are analyzed from an investment funding point of view. C. The cross-border financing framework In European energy policy, funding of energy networks has always been based on selffinancing by private partners, mainly the different TSOs in their respective regions. This proved to be a successful way of working in a time without strong international power flows. The new challenges cause an increase in scale and force the cross-border investment framework to move from a bilateral context to a regional or even European context. The financing framework has not kept pace with this evolution. Supportive financing mechanisms for cross-border investments have been set up since the nineties, but until now they served more as a market fix. In fact, they have never been able to change the true nature of European network funding: nationally oriented self-financing via national transmission tariffs charged upon national grid users. Cost allocation across borders or
direct funding from the European level has been limited. Two frameworks exist with a special focus on the cross-border context: the TEN-E program and the InterTSO Compensation (ITC) mechanism. Although no clear framework is present congestion revenues have the potential to play a role on the cross-border scene. Additionally, a European Economic Recovery Program (EERP), being part of the program
In European energy policy, funding of energy networks has always been based on self-financing by private partners.
security of supply and improving economic and social cohesion throughout Europe. Together with the Priority Interconnection Plan (PIP) from 2007, mainly consisting of a subset of the TENE project list, it has been the most concrete European inspired framework for transmission investments for a long time. The merits of TEN-E with respect to financing have been limited. Although published at the European level, the TEN-E framework did not include funding for entire projects. Financial support was mainly limited to financing feasibility studies. Although several barriers were encountered for the different projects,16 the lack of European funding or a proper cost-sharing mechanism might have contributed to the slow progress. n November 2008 a Green Paper17 reconsidering the role of TEN-E was published and should result in a new infrastructure package in the second half of 2010. Whereas network policy used to ‘‘plug gaps’’ and foster ‘‘missing links,’’ a renewed energy infrastructure policy should be fully aligned with the new challenges and proactively promote network investments supporting security of supply, sustainability, and competitiveness. The TEN-E framework’s visibility and impact should be altered to be more compatible with energy policy and to increase its efficiency. Note that the TEN-E and PIP projects list do not entail any binding commitment on the EU member states.
I to overcome the recent economic crisis, provides a one-time opportunity for financing a limited number of projects. A brief discussion of these four elements is given, highlighting why they are not fully adapted to the new crossborder context and why they rather facilitate a nationally oriented multilateral cooperation instead of a supranationally inspired grid development. 1. The TEN-E program The TEN-E program15 was launched in 1996 to promote transmission investments enabling a European internal energy market, strengthening
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he Green Paper’s bottom line for financing energy network investments remains selffinancing by TSOs.18 The proposed improvements for financing investments are twofold. Firstly, an increased TEN-E budget is put forward. It should especially facilitate noncommercial investments, e.g., driven by security of supply. Secondly, TEN-E should be better aligned with other forms of EU funding, like the Structural and Cohesion Funds and RTD Framework Programs. Further coordination between TEN-E and the European Investment Bank and the European Bank for Reconstruction and Development should be explored. The World Bank Accelerated Programmatic Loan is also considered as a potential partner. Although it is clearly stated that self-financing remains the main driver for energy network investments, most attention in the Green Paper goes to the surrounding framework. No proposals are made to enhance the self-financing frameworks themselves, although it remains the core revenue stream. There is, however, one reference to the problem of financing cross-border investments by different member states. In the context of TEN-E projects it is stated in the Green Paper that: ‘‘Member States who benefit may also be expected to contribute.’’ This indeed addresses the root of the problem, but how it should be organized remains an open question.
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Although TEN-E fosters investments from a European rather than national point of view, it is unlikely that it can change investment behavior without arranging appropriate financing mechanisms and incentives. 2. The Inter-TSO Compensation mechanism The ITC mechanism19 stems from the beginning of European market integration. It has been
The different mechanisms themselves are also fundamentally flawed.
created so that countries receive compensation if their assets are used by transmission system operators that do not contribute to its financing. Participation by national TSOs in the mechanism is voluntary. It replaced tolling mechanisms at the different borders and thereby enabled international trade. The mechanism allows introducing an international element into the different non-harmonized national tariffs. However, ITC has been subject of a lot of debate and the allocation mechanisms changed many times. At the moment it is still considered as a temporary agreement among the
involved TSOs which is subject to yearly renewal. In this way it cannot serve as an adequate financing mechanism. The different mechanisms themselves are also fundamentally flawed. They draw on an ex post calculation based on energy-based measures during a year. Ex ante securing financing is crucial for investment decisions involving large sunk costs. Cost distribution should be agreed upon upfront. Moreover, transmission investment decisions are more often capacitybased (MW) rather than energybased (MWh). For instance, consider the connection of a wind farm where the connecting lines are dimensioned on the maximum flow (i.e., capacity) rather than on the energy flowing through the line during a period of time. lthough the intention of the ITC is laudable as it introduces a cost-sharing mechanism across borders, it has been found inadequate for fostering new investments. Additionally, the temporary and voluntary nature of the prevailing mechanism makes this tool less powerful than it could be.
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3. Congestion revenues In Europe, congestion revenues are mainly collected via the auctioning of transmission capacity at the borders between different countries (and sometimes between different zones within a country). Within a country uniform pricing is
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applied. As a consequence, congestion revenues are a direct result of international trade and the link with cross-border transmission infrastructure is easily made. Using these revenues as funding for crossborder investments seems an attractive solution. efore the Third Package, it was stipulated in EU Regulation 1228/2003 that congestion revenues could be used for three purposes20: (1) guaranteeing the actual availability of the allocated capacity, (2) network investments maintaining or increasing interconnection capacities, and (3) as income to be taken into account when approving transmission tariffs. It was not defined which option should be prioritized. The last option, reducing national transmission tariffs, has been frequently used.21 The Third Package has changed the formulation. Option (1) envisaging firmness of interconnection capacity has been retained; the wording of option (2) is altered in order to more greatly emphasize new interconnection investments. The new wording ensures that congestion revenues have to be used to either ensure or increase interconnection capacity. Only if congestion revenues cannot be efficiently used for options (1) and (2), they can be used to lower tariffs (the former option (3)). Therefore, implicitly a priority list for the use of congestion revenues is now enforced. This is clearly an improvement.
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Although more capital should now be on hand for interconnection investments, the regional or European viewpoint is not fully captured here. Congestion revenues are still kept by the national TSOs and they decide, after approval by the national regulator, on how to use them. The Third Package also gives no hints on the distribution
of the congestion revenues over different countries or how they can be used to foster interconnections that go beyond the bilateral cooperation between adjacent countries and serve the new grid challenges. 4. The European Economic Recovery Plan In the March 2009 Spring Summit of the European Council a proposal for the European Economic Recovery Plan (EERP) was adopted.22 Investments in energy infrastructure are financially supported. Several millions of Euros are assigned to specific projects for interconnectors for gas (1440 Ms) and electricity (910 Ms), offshore
wind projects (565 Ms) and carbon capture and storage (1050 Ms). This commitment will be spread over two years, i.e., 2009 and 2010. The list of selected interconnection projects is inspired by the PIP. With respect to electricity interconnectors the proposed amount is significant. For instance, for the envisaged link in Germany between Halle/Saale and Schweinfurt 110 Ms is budgeted. This is more than 50 percent of the required budget, according to estimated costs in the 2007 Priority Interconnection Plan. Although the extra money for interconnectors is welcome and can contribute significantly, this injection is a one-time opportunity for a limited set of projects. It does not change the investment incentives of TSOs and it remains to be seen whether all supported projects will be operational in due time and not blocked at national levels due to different interests.
II. Comparison with the U.S. Seams issues are not unique to the Europe constellation. Although market design and the political setup are somewhat different, the U.S. with different states and a federal level has a comparable structure and potential area of tension. In the U.S. nationwide policy goals such as a greenhouse gas emission reduction comparable to the
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European policy goals are being debated.23 Several states have already enacted mandatory renewable targets. The sharing of costs and benefits among the involved parties is also at stake in the U.S. When we compare the U.S. with Europe, there are similarities and differences. Seams issues are inherent to the U.S. constellation with different states as is the case in Europe with different countries. Whereas the electricity grid is not limited by state borders, market design and transmission pricing can be different in each state. In some states where the markets are integrated under the umbrella of a multistate regional transmission operator (RTO), like PJM, CAISO, or MISO, the regional nature of the grid challenges can be more easily tackled. PJM’s Regional Transmission Expansion Plan can be considered as such an example of bringing different states together.24 However, in MISO, the connection of renewable energy sources caused a debate on the allocation of costs over grid users in multiple states.25 Within RTOs cost-sharing over multiple states can be easier as a regional transmission tariff can be applied. For instance, PJM follows a ‘‘beneficiaries pay’’ principle, where costs of certain assets are borne by all PJM grid users and other costs are only allocated to local grid users.26 s siting approval for investments is still under state authority, such an RTO structure and a common tariff
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does not solve the problem entirely. By this authority, investment projects negatively affecting grid users can be hindered. One of the solutions dealing with this part of the seams issues can be found in the 2005 Energy Policy Act enabling the U.S. Department of Energy to define National Interest Electric Transmission Corridors
and the TYNDP are different. Whereas the TYNDP is a plan that via a chain of regulatory oversight should result in actual investments and has to be aligned with national development plans, NIETCs more serve as backstop authority when project approval is hindered at the state level. By identifying an area as an NIETC, applicants can take their case to FERC, the federal regulator, and obtain siting approval at the federal level. lthough the state level remains the most important – and even without concrete development plans at the federal level – it is believed by some that defining NIETC and proving a backstop authority at the federal has a potential to help transmission investments aiming to address regional challenges.28 How the FERC ruling will work in practice is not fully clear, but at least the threat of such ruling can already be useful in bringing states together and better cooperate.
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(NIETC).27 These corridors are geographic areas where consumers are negatively affected by transmission congestion. Until now, two NIETCs are identified: the Mid-Atlantic Area National Corridor covering nine states in the Northeast and the Southwest Area National Corridor covering Arizona and California. In contrast to Europe’s TYNDP, which encompasses rather concrete projects outlining possible trajectories and even voltage level, the NIETCs are nothing more than geographic areas. No referral to concrete projects is implied; this is left to the investors. Not only the level of detail but also the functions of the NIETCs
III. Conclusion The European cross-border investment scene has changed from a nationally oriented setup with bilateral cooperation between neighbors towards a regional or even European-wide context with challenges by far exceeding the national level. European policy requires a solid transmission backbone. Making it happen requires more cooperation among the different
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countries. It is argued in this article that at the moment the regulatory framework does fully support this transition with respect to planning and financing, both crucial when aiming at new investments. Although the Third Package initiated some laudable changes, e.g., the TYNDP and the creation of ENTSO-E and ACER, the regulatory gap is still open. ith respect to planning it remains to be seen whether the national TSOs manage to think to invest across borders and whether national regulators are able to draw the European card. The TYNDP makes European grid development more concrete, but it is too early to judge its true impact on investment projects. An interesting evolution towards a more regional approach in investment planning is the voluntary signing of agreements between countries promoting regional cooperation including transmission investments. It is the authors’ vision that at best a multilateral cooperation,
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voluntarily or not, is possible within today’s framework. Only when all different parties benefit individually is progress possible. As soon as one party fears to be negatively affected, necessary developments can be blocked. Supranational thinking, i.e., moving forward for the sake of European policy goals even when that brings a negative impact for some parties, is very unlikely in the current framework. An adequate cost-sharing mechanism and sufficient incentives for TSOs and regulators to think across borders and take up regional or European viewpoints within their decision-making are necessary to go beyond today’s suboptimal situation. The framework should provide means to broaden or align national interests with the European perspective. Although the U.S. solutions for coping with similar seams issues cannot be copied by Europe due to institutional differences, the approaches followed there can serve as useful food for thought when reshaping Europe’s
framework. Especially the idea of a backstop authority at the supranational level and the multistate cost-sharing mechanisms can prove valuable.& Endnotes: 1. See T. Brown, International Review of Transmission Planning, Brattle Group, March 2008, at http://www.brattle. com/Publications/Reports Presentations.asp?PublicationID=936. 2. European Parliament and the Council Decision No 1364/2006/EC of the European Parliament and of the Council of 6 September 2006 laying down guidelines for trans-European energy networks and repealing Decision 96/391/ EC and Decision No 1229/2003/EC, OFFICIAL J. OF EUROPEAN UNION, Vol. 262, Sept. 2006, at http://eur-lex.europa. eu/LexUriServ/LexUriServ.do?uri= CELEX:32006D1364:EN:HTML. 3. European Parliament and Council, Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (Text with EEA relevance), OFFICIAL J. OF EUROPEAN UNION, Vol. 211, Aug. 2009, at http:// eur-lex.europa.eu/LexUriServ/Lex UriServ.do?uri=CELEX:32009R0714: EN:NOT.
It is the authors’ vision that at best a multilateral cooperation, voluntarily or not, is possible within today’s framework.
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4. European Commission, Regulation (EC) No 713/2009 of the European Parliament and of the Council of July 13, 2009, establishing an Agency for the Cooperation of Energy Regulators (Text with EEA relevance), OFFICIAL J. OF EUROPEAN UNION, Vol. 211, Aug. 2009, at http://eur-lex.europa.eu/ LexUriServ/LexUriServ.do?uri= CELEX:32009R0713:EN:NOT. 5. European Parliament and Council, Directive 2009/72/EC of the European Parliament and of the Council of July 13, 2009, concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (Text with EEA relevance), OFFICIAL J. OF EUROPEAN UNION, Vol. 211, Aug. 2009, at http://eur-lex.europa.eu/ LexUriServ/LexUriServ.do?uri= CELEX:32009L0072:EN:NOT. 6. S. Lepy, ENTSO-E Perspective and Outlook for the TYNDP, ERGEG TYNDP Workshop, Feb. 2010, at http://www.energy-regulators.eu/ portal/page/portal/EER HOME/ EER CONSULT/OPEN%20PUBLIC% 20CONSULTATIONS/electricity% 2010-year%20ntwk%20dev%20plan/ Public%20Hearings/20100211 ERGEG%20electricity%20TYNDP%20 workshop ENTSO-E.pdf. 7. European Parliament and Council, supra note 2. 8. Supra note 4. 9. See ENTSO-E, Ten-Year Network Development Plan 2010-2020, March 2010, at http://www.entsoe.eu/ index.php?id=232. 10. An analysis is done by B. Moselle T. and Brown, International Review of Transmission Planning Arrangements, Brattle Group, Oct. 2007, at http:// www.aemc.gov.au/Market-Reviews/ Completed/National-TransmissionPlanner.html. 11. See http://europa.eu/rapid/ pressReleasesAction.do?reference= IP/09/945&format=HTML& language=en. 12. See http://www.ewea.org/ fileadmin/ewea_documents/ documents/policy/Offshore_Wind/ Political_declaration_on_the_North_ 26
Seas_Countries_Offshore_Grid_ Initiative.pdf. 13. For more information on this matter, consult the ERGEG Web site for an ongoing public consultation: http://www.energy-regulators.eu/ portal/page/portal/EER_HOME/ EER_CONSULT/OPEN%20 PUBLIC%20CONSULTATIONS/ electricity%2010-year%20ntwk% 20dev%20plan. 14. ERGEG is the European Regulators’ Group for Electricity and
20. See Art. 6, §6 of European Community Regulation 1228/2003/EC of the European Parliament and of the Council of 26 June 2003 on conditions for access to the network for cross-border exchanges in electricity, at http:// www.energy-community.org/portal/ page/portal/ENC_HOME/ AREAS_OF_WORK/ELECTRICITY/ Regional_Market/Regulation_1228. 21. See for instance the Sector Inquiry, a widespread investigation conducted by the European Commission in the process leading to the Third Package, at http://ec.europa.eu/competition/ sectors/energy/inquiry/index.html. 22. Presidency compromise proposal for financing of the infrastructure projects put forward by the Commission as part of the EERP, available at: http://register.consilium. europa.eu/pdf/en/09/st07/st07848re01.en09.pdf.
Gas. It has been the advisory group for the European Commission since 2003. 15. Supra note 3. 16. See the annex from the Priority Interconnection Plan (note 4), at http://ec.europa.eu/energy/ energy_policy/doc/12_priority_ interconnection_plan_annexe_en.pdf. 17. See Commission of the European Communities, Green Paper: Towards a Secure, Sustainable and Competitive European Energy Network, COM(2008) 782, Nov. 2008, at http://europa.eu/ legislation summaries/energy/ internal energy market/en0004 en. htm. 18. Note that several European TSOs are state-owned companies. 19. In Europe a redistribution mechanism exists among TSOs to allocate costs due to electrical losses and the use of infrastructure. In the remainder of the article, only the ITC mechanism with respect to infrastructure costs is referred to.
23. In the process leading to the Copenhagen Climate Summit, a U.S. emissions reduction target in the range of 17 percent below 2005 levels in 2020 is put forward. See for instance http:// www.uspolicy.be/Article.asp?ID= D56EA548-2F4A-4506-B81D-B15B2C ABD36C. 24. See http://pjm.com/planning/ rtep-development.aspx. 25. See J. Nicolas Puga and Jonathan A. Lesser, Public Policy and Private Interests: Why Transmission Planning and Cost-Allocation Methods Continue to Stifle Renewable Energy Policy Goals, ELEC. J., Dec. 2009, at 7–19. 26. See PJM, PJM Regional Transmission Expansion Planning Process, Nov. 2008, at http://ftp. pjm.com/planning//media/ documents/reports/20090611-rtepfoldout.ashx. 27. For more information on the NIETC, see http://nietc.anl.gov/. 28. See Gregory Basheda, Regional State Committees Can Help Provide a Regional Perspective to Planning and Siting Decisions, Reducing the Need for Federal Preemption, ELEC. J., March 2006, at 43–51.
1040-6190/$–see front matter # 2010 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2010.10.014
The Electricity Journal
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Seams Issues in European Transmission Investments European policy goals are challenging for transmission networks, requiring investments in cross-border capacity. Despite those goals, an increased awareness of the need for investments and the voluntary cooperation among countries sharing the challenges, a regulatory gap between national and European interests persists. Further development of a European cross-border planning and financing framework is required. U.S. experiences may serve as food for thought. Patrik Buijs, David Bekaert and Ronnie Belmans
I. The European Cross-Border Investment Framework Historically European crossborder investments were mostly planned and financed bilaterally. Today’s scope in meeting the new challenges is wider than bilateral. According to a study from The Brattle Group, necessary conditions to be successful at the regional or European level are (1) ‘‘a strong central institution and mandatory participation by
network owners’’ and (2) ‘‘the ability to share costs of ‘regional’ investments.’’1 The former implies a call to move beyond national interests and to look outside traditional borders. The latter condition gives incentives to do so by introducing the ‘‘beneficiaries pay’’ principle. The position paper by the European Transmission System Operators (ETSO)2 supports this viewpoint, and also argues that the national scope of regulators should be widened towards cross-border investments
1040-6190/$–see front matter # 2010 Elsevier Inc. All rights reserved., doi:/10.1016/j.tej.2010.10.014
The Electricity Journal
and that cost allocation across borders should be facilitated. Put simply, in order to overcome the seams issues now prevailing national interests should make place or at least tolerate the existence of higher-level interests, namely regional or European. luntly stated, two ways of incorporation of these higher-level interests can be identified: multilateral and supranational. Whereas the former takes the form of a negotiation between countries each defending its national interest, the latter takes on the European viewpoint and envisages a more global optimum, which is not necessarily constrained by all national interests. Whereas a supranational approach has more chances in meeting the European policy objectives in a welfaremaximizing way, today’s reality points towards a multilateral and sometimes voluntary approach where countries only move forward when they expect to benefit. The Third Package changed several elements bringing together different national and European interests, but it will be argued in detail that both at a planning and a financing level the regulatory framework remains stuck at a multilateral level and is not able to reach to superior supranational level.
B
A. Planning The Third Package takes important steps towards a better
integration of European policy goals into future grid development. Firstly, two new European-wide institutions are given a crucial role. Regulation (EC) No 714/20093 creates the European Network of Transmission System Operators for Electricity (ENTSO-E) bringing together all transmission system operators (TSOs) who until now have been cooperating on a voluntary basis only within,
Bluntly stated, two ways of incorporation of these higher-level interests can be identified: multilateral and supranational.
for instance, UCTE, ETSO, and Nordel. Also, European Regulation (EC) No 713/20094 establishes the Agency for the Cooperation of Energy Regulators (ACER) and bundles all energy regulators. hereas there used to be no European-wide transmission development plan, Art. 8(3) of Regulation (EC) No 714/2009 gives ENTSO-E the task to publish every two years a nonbinding Community-wide 10year network development plan (TYNDP) including a European generation adequacy outlook that looks forward up to 15 years. According to the Regulation the
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TYNDP has to build on the annually published 10-year national investment plans. Art. 22 of Directive 2009/72/EC5 provides further details on these national plans. It has to take into account regional investment plans. Although not said in so many words in the Third Package itself, ENTSO-E considers the regional level and their development plans as the workhorses for the Communitywide plan.6 Furthermore, the TYNDP has to incorporate supranational aspects, the socalled Community aspects. Explicit referral is made to the guidelines for the trans-European energy networks (TEN-E).7 The latter guidelines including the TEN-E project lists and the Priority Interconnection Plan (PIP)8 can be considered as the most concrete realization of the supranational viewpoint (see further). Cross-border investments or the lack thereof should also be given sufficient attention in the TYNDP. It is clear that the bottom-up approach based on the national development plans has a multilateral flavor and the topdown approach based on the Community needs is supranationally oriented. The TYNDP combines both and is complemented with public consultations. An important question is whether either planning approaches can converge or not and whether they both have sufficient impact on the resulting plan and, ultimately, on the investments really done or
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not. Note that the TYNDP in itself is non-binding. Proper regulatory oversight at different levels is key. n March 2010 a Pilot TYNDP is published by ENTSO-E.9 So far it only takes into account the bottom-up approach, i.e., it is based on national development plans. This pilot intends to open the debate and start the loop of public consultations and consecutive publications of biannual TYNDPs also including the top-down approach. Additionally, it is interesting to note that throughout Europe different forms of voluntary cooperation are being established aiming at a regional approach of cross-border investments. There is an increased awareness of regional challenges. In Scandinavia there is already a longer tradition of cooperation in this field. The process is long and remains nationally inspired.10 More recently a Baltic energy market interconnection plan was agreed among the different countries in the region. The development of electricity interconnectors is part of the plan.11 Another recent example can be found in the North Sea region. Nine countries around the North Sea signed in December 2009 a political declaration concerning the development of an offshore grid in the North and Irish Seas.12 These cooperative efforts are an important step into the right direction, but based on voluntary cooperation it cannot be expected that the participants will abandon their national interests when they do not match
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the best solution from a European perspective. B. Regulatory approval Regulatory oversight with respect to the TYNDP is mainly a task of ACER. In Regulation (EC) No 714/2009 it is stipulated that ACER has to give its opinion on both the TYNDP (Art. 9(2)) and the national development plans (Art. 8(11)). The complete
Throughout Europe different forms of voluntary cooperation are being established aiming at a regional approach of crossborder investments.
procedure for the development of the TYNDP by ENTSO-E and the involvement of all stakeholders (including ACER) is still under development.13 The latter opinion should assess to which extent there are inconsistencies between the national plans and the TYNDP. ACER can recommend amendments to the national plans which then have to find their way to the national regulators. At the same time the national regulators have to examine the national development plans and check their consistency with the TYNDP. Although it appears there is a lot of oversight on the development plans, it remains to
be seen whether the struggle between the bottom-up and topdown approaches converges to a result that is acceptable for both national and European parties. Indeed, national regulators still play a central role, even in the incorporation of higher-level viewpoints. Do they have sufficient incentives to do so? oreover, will ACER truly act as a European regulator and will it be as powerful as required to fulfill Community needs? According to Art. 2 of Regulation No 713/2009, ACER consists of four entities: an Administrative Board, a Board of Regulators, a Director and a Board of Appeal. The Board of Regulators and the Director are responsible for the opinions, recommendations, and decisions of ACER. These entities should make the difference in adopting the European viewpoint. The Board of Regulators copies the structure of ERGEG,14 i.e., one representative of the national regulator per member state and one non-voting member of the European Commission. Art. 13(5) of Regulation No 713/2009 requires that this board should act fully independently and should not be influenced by (among others) the member states. It remains to be seen how well this structure works. The members of this board are still clearly linked to the national regulators and the question is whether they will defend their national interest or draw the European card. This opens the door towards a more multilateral orientation where
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everyone separately has to benefit in order to progress. However, the Board of Regulators acts by a two-thirds majority (Art. 13(3)). Moving beyond unanimous decision-making is an important step towards a supranational ACER. Backed up with sufficient incentives to think across borders, this framework might work. In the next section on the financing framework, these incentives are analyzed from an investment funding point of view. C. The cross-border financing framework In European energy policy, funding of energy networks has always been based on selffinancing by private partners, mainly the different TSOs in their respective regions. This proved to be a successful way of working in a time without strong international power flows. The new challenges cause an increase in scale and force the cross-border investment framework to move from a bilateral context to a regional or even European context. The financing framework has not kept pace with this evolution. Supportive financing mechanisms for cross-border investments have been set up since the nineties, but until now they served more as a market fix. In fact, they have never been able to change the true nature of European network funding: nationally oriented self-financing via national transmission tariffs charged upon national grid users. Cost allocation across borders or
direct funding from the European level has been limited. Two frameworks exist with a special focus on the cross-border context: the TEN-E program and the InterTSO Compensation (ITC) mechanism. Although no clear framework is present congestion revenues have the potential to play a role on the cross-border scene. Additionally, a European Economic Recovery Program (EERP), being part of the program
In European energy policy, funding of energy networks has always been based on self-financing by private partners.
security of supply and improving economic and social cohesion throughout Europe. Together with the Priority Interconnection Plan (PIP) from 2007, mainly consisting of a subset of the TENE project list, it has been the most concrete European inspired framework for transmission investments for a long time. The merits of TEN-E with respect to financing have been limited. Although published at the European level, the TEN-E framework did not include funding for entire projects. Financial support was mainly limited to financing feasibility studies. Although several barriers were encountered for the different projects,16 the lack of European funding or a proper cost-sharing mechanism might have contributed to the slow progress. n November 2008 a Green Paper17 reconsidering the role of TEN-E was published and should result in a new infrastructure package in the second half of 2010. Whereas network policy used to ‘‘plug gaps’’ and foster ‘‘missing links,’’ a renewed energy infrastructure policy should be fully aligned with the new challenges and proactively promote network investments supporting security of supply, sustainability, and competitiveness. The TEN-E framework’s visibility and impact should be altered to be more compatible with energy policy and to increase its efficiency. Note that the TEN-E and PIP projects list do not entail any binding commitment on the EU member states.
I to overcome the recent economic crisis, provides a one-time opportunity for financing a limited number of projects. A brief discussion of these four elements is given, highlighting why they are not fully adapted to the new crossborder context and why they rather facilitate a nationally oriented multilateral cooperation instead of a supranationally inspired grid development. 1. The TEN-E program The TEN-E program15 was launched in 1996 to promote transmission investments enabling a European internal energy market, strengthening
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he Green Paper’s bottom line for financing energy network investments remains selffinancing by TSOs.18 The proposed improvements for financing investments are twofold. Firstly, an increased TEN-E budget is put forward. It should especially facilitate noncommercial investments, e.g., driven by security of supply. Secondly, TEN-E should be better aligned with other forms of EU funding, like the Structural and Cohesion Funds and RTD Framework Programs. Further coordination between TEN-E and the European Investment Bank and the European Bank for Reconstruction and Development should be explored. The World Bank Accelerated Programmatic Loan is also considered as a potential partner. Although it is clearly stated that self-financing remains the main driver for energy network investments, most attention in the Green Paper goes to the surrounding framework. No proposals are made to enhance the self-financing frameworks themselves, although it remains the core revenue stream. There is, however, one reference to the problem of financing cross-border investments by different member states. In the context of TEN-E projects it is stated in the Green Paper that: ‘‘Member States who benefit may also be expected to contribute.’’ This indeed addresses the root of the problem, but how it should be organized remains an open question.
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Although TEN-E fosters investments from a European rather than national point of view, it is unlikely that it can change investment behavior without arranging appropriate financing mechanisms and incentives. 2. The Inter-TSO Compensation mechanism The ITC mechanism19 stems from the beginning of European market integration. It has been
The different mechanisms themselves are also fundamentally flawed.
created so that countries receive compensation if their assets are used by transmission system operators that do not contribute to its financing. Participation by national TSOs in the mechanism is voluntary. It replaced tolling mechanisms at the different borders and thereby enabled international trade. The mechanism allows introducing an international element into the different non-harmonized national tariffs. However, ITC has been subject of a lot of debate and the allocation mechanisms changed many times. At the moment it is still considered as a temporary agreement among the
involved TSOs which is subject to yearly renewal. In this way it cannot serve as an adequate financing mechanism. The different mechanisms themselves are also fundamentally flawed. They draw on an ex post calculation based on energy-based measures during a year. Ex ante securing financing is crucial for investment decisions involving large sunk costs. Cost distribution should be agreed upon upfront. Moreover, transmission investment decisions are more often capacitybased (MW) rather than energybased (MWh). For instance, consider the connection of a wind farm where the connecting lines are dimensioned on the maximum flow (i.e., capacity) rather than on the energy flowing through the line during a period of time. lthough the intention of the ITC is laudable as it introduces a cost-sharing mechanism across borders, it has been found inadequate for fostering new investments. Additionally, the temporary and voluntary nature of the prevailing mechanism makes this tool less powerful than it could be.
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3. Congestion revenues In Europe, congestion revenues are mainly collected via the auctioning of transmission capacity at the borders between different countries (and sometimes between different zones within a country). Within a country uniform pricing is
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applied. As a consequence, congestion revenues are a direct result of international trade and the link with cross-border transmission infrastructure is easily made. Using these revenues as funding for crossborder investments seems an attractive solution. efore the Third Package, it was stipulated in EU Regulation 1228/2003 that congestion revenues could be used for three purposes20: (1) guaranteeing the actual availability of the allocated capacity, (2) network investments maintaining or increasing interconnection capacities, and (3) as income to be taken into account when approving transmission tariffs. It was not defined which option should be prioritized. The last option, reducing national transmission tariffs, has been frequently used.21 The Third Package has changed the formulation. Option (1) envisaging firmness of interconnection capacity has been retained; the wording of option (2) is altered in order to more greatly emphasize new interconnection investments. The new wording ensures that congestion revenues have to be used to either ensure or increase interconnection capacity. Only if congestion revenues cannot be efficiently used for options (1) and (2), they can be used to lower tariffs (the former option (3)). Therefore, implicitly a priority list for the use of congestion revenues is now enforced. This is clearly an improvement.
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Although more capital should now be on hand for interconnection investments, the regional or European viewpoint is not fully captured here. Congestion revenues are still kept by the national TSOs and they decide, after approval by the national regulator, on how to use them. The Third Package also gives no hints on the distribution
of the congestion revenues over different countries or how they can be used to foster interconnections that go beyond the bilateral cooperation between adjacent countries and serve the new grid challenges. 4. The European Economic Recovery Plan In the March 2009 Spring Summit of the European Council a proposal for the European Economic Recovery Plan (EERP) was adopted.22 Investments in energy infrastructure are financially supported. Several millions of Euros are assigned to specific projects for interconnectors for gas (1440 Ms) and electricity (910 Ms), offshore
wind projects (565 Ms) and carbon capture and storage (1050 Ms). This commitment will be spread over two years, i.e., 2009 and 2010. The list of selected interconnection projects is inspired by the PIP. With respect to electricity interconnectors the proposed amount is significant. For instance, for the envisaged link in Germany between Halle/Saale and Schweinfurt 110 Ms is budgeted. This is more than 50 percent of the required budget, according to estimated costs in the 2007 Priority Interconnection Plan. Although the extra money for interconnectors is welcome and can contribute significantly, this injection is a one-time opportunity for a limited set of projects. It does not change the investment incentives of TSOs and it remains to be seen whether all supported projects will be operational in due time and not blocked at national levels due to different interests.
II. Comparison with the U.S. Seams issues are not unique to the Europe constellation. Although market design and the political setup are somewhat different, the U.S. with different states and a federal level has a comparable structure and potential area of tension. In the U.S. nationwide policy goals such as a greenhouse gas emission reduction comparable to the
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European policy goals are being debated.23 Several states have already enacted mandatory renewable targets. The sharing of costs and benefits among the involved parties is also at stake in the U.S. When we compare the U.S. with Europe, there are similarities and differences. Seams issues are inherent to the U.S. constellation with different states as is the case in Europe with different countries. Whereas the electricity grid is not limited by state borders, market design and transmission pricing can be different in each state. In some states where the markets are integrated under the umbrella of a multistate regional transmission operator (RTO), like PJM, CAISO, or MISO, the regional nature of the grid challenges can be more easily tackled. PJM’s Regional Transmission Expansion Plan can be considered as such an example of bringing different states together.24 However, in MISO, the connection of renewable energy sources caused a debate on the allocation of costs over grid users in multiple states.25 Within RTOs cost-sharing over multiple states can be easier as a regional transmission tariff can be applied. For instance, PJM follows a ‘‘beneficiaries pay’’ principle, where costs of certain assets are borne by all PJM grid users and other costs are only allocated to local grid users.26 s siting approval for investments is still under state authority, such an RTO structure and a common tariff
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does not solve the problem entirely. By this authority, investment projects negatively affecting grid users can be hindered. One of the solutions dealing with this part of the seams issues can be found in the 2005 Energy Policy Act enabling the U.S. Department of Energy to define National Interest Electric Transmission Corridors
and the TYNDP are different. Whereas the TYNDP is a plan that via a chain of regulatory oversight should result in actual investments and has to be aligned with national development plans, NIETCs more serve as backstop authority when project approval is hindered at the state level. By identifying an area as an NIETC, applicants can take their case to FERC, the federal regulator, and obtain siting approval at the federal level. lthough the state level remains the most important – and even without concrete development plans at the federal level – it is believed by some that defining NIETC and proving a backstop authority at the federal has a potential to help transmission investments aiming to address regional challenges.28 How the FERC ruling will work in practice is not fully clear, but at least the threat of such ruling can already be useful in bringing states together and better cooperate.
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(NIETC).27 These corridors are geographic areas where consumers are negatively affected by transmission congestion. Until now, two NIETCs are identified: the Mid-Atlantic Area National Corridor covering nine states in the Northeast and the Southwest Area National Corridor covering Arizona and California. In contrast to Europe’s TYNDP, which encompasses rather concrete projects outlining possible trajectories and even voltage level, the NIETCs are nothing more than geographic areas. No referral to concrete projects is implied; this is left to the investors. Not only the level of detail but also the functions of the NIETCs
III. Conclusion The European cross-border investment scene has changed from a nationally oriented setup with bilateral cooperation between neighbors towards a regional or even European-wide context with challenges by far exceeding the national level. European policy requires a solid transmission backbone. Making it happen requires more cooperation among the different
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countries. It is argued in this article that at the moment the regulatory framework does fully support this transition with respect to planning and financing, both crucial when aiming at new investments. Although the Third Package initiated some laudable changes, e.g., the TYNDP and the creation of ENTSO-E and ACER, the regulatory gap is still open. ith respect to planning it remains to be seen whether the national TSOs manage to think to invest across borders and whether national regulators are able to draw the European card. The TYNDP makes European grid development more concrete, but it is too early to judge its true impact on investment projects. An interesting evolution towards a more regional approach in investment planning is the voluntary signing of agreements between countries promoting regional cooperation including transmission investments. It is the authors’ vision that at best a multilateral cooperation,
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voluntarily or not, is possible within today’s framework. Only when all different parties benefit individually is progress possible. As soon as one party fears to be negatively affected, necessary developments can be blocked. Supranational thinking, i.e., moving forward for the sake of European policy goals even when that brings a negative impact for some parties, is very unlikely in the current framework. An adequate cost-sharing mechanism and sufficient incentives for TSOs and regulators to think across borders and take up regional or European viewpoints within their decision-making are necessary to go beyond today’s suboptimal situation. The framework should provide means to broaden or align national interests with the European perspective. Although the U.S. solutions for coping with similar seams issues cannot be copied by Europe due to institutional differences, the approaches followed there can serve as useful food for thought when reshaping Europe’s
framework. Especially the idea of a backstop authority at the supranational level and the multistate cost-sharing mechanisms can prove valuable.& Endnotes: 1. See T. Brown, International Review of Transmission Planning, Brattle Group, March 2008, at http://www.brattle. com/Publications/Reports Presentations.asp?PublicationID=936. 2. European Parliament and the Council Decision No 1364/2006/EC of the European Parliament and of the Council of 6 September 2006 laying down guidelines for trans-European energy networks and repealing Decision 96/391/ EC and Decision No 1229/2003/EC, OFFICIAL J. OF EUROPEAN UNION, Vol. 262, Sept. 2006, at http://eur-lex.europa. eu/LexUriServ/LexUriServ.do?uri= CELEX:32006D1364:EN:HTML. 3. European Parliament and Council, Regulation (EC) No 714/2009 of the European Parliament and of the Council of 13 July 2009 on conditions for access to the network for cross-border exchanges in electricity and repealing Regulation (EC) No 1228/2003 (Text with EEA relevance), OFFICIAL J. OF EUROPEAN UNION, Vol. 211, Aug. 2009, at http:// eur-lex.europa.eu/LexUriServ/Lex UriServ.do?uri=CELEX:32009R0714: EN:NOT.
It is the authors’ vision that at best a multilateral cooperation, voluntarily or not, is possible within today’s framework.
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4. European Commission, Regulation (EC) No 713/2009 of the European Parliament and of the Council of July 13, 2009, establishing an Agency for the Cooperation of Energy Regulators (Text with EEA relevance), OFFICIAL J. OF EUROPEAN UNION, Vol. 211, Aug. 2009, at http://eur-lex.europa.eu/ LexUriServ/LexUriServ.do?uri= CELEX:32009R0713:EN:NOT. 5. European Parliament and Council, Directive 2009/72/EC of the European Parliament and of the Council of July 13, 2009, concerning common rules for the internal market in electricity and repealing Directive 2003/54/EC (Text with EEA relevance), OFFICIAL J. OF EUROPEAN UNION, Vol. 211, Aug. 2009, at http://eur-lex.europa.eu/ LexUriServ/LexUriServ.do?uri= CELEX:32009L0072:EN:NOT. 6. S. Lepy, ENTSO-E Perspective and Outlook for the TYNDP, ERGEG TYNDP Workshop, Feb. 2010, at http://www.energy-regulators.eu/ portal/page/portal/EER HOME/ EER CONSULT/OPEN%20PUBLIC% 20CONSULTATIONS/electricity% 2010-year%20ntwk%20dev%20plan/ Public%20Hearings/20100211 ERGEG%20electricity%20TYNDP%20 workshop ENTSO-E.pdf. 7. European Parliament and Council, supra note 2. 8. Supra note 4. 9. See ENTSO-E, Ten-Year Network Development Plan 2010-2020, March 2010, at http://www.entsoe.eu/ index.php?id=232. 10. An analysis is done by B. Moselle T. and Brown, International Review of Transmission Planning Arrangements, Brattle Group, Oct. 2007, at http:// www.aemc.gov.au/Market-Reviews/ Completed/National-TransmissionPlanner.html. 11. See http://europa.eu/rapid/ pressReleasesAction.do?reference= IP/09/945&format=HTML& language=en. 12. See http://www.ewea.org/ fileadmin/ewea_documents/ documents/policy/Offshore_Wind/ Political_declaration_on_the_North_ 26
Seas_Countries_Offshore_Grid_ Initiative.pdf. 13. For more information on this matter, consult the ERGEG Web site for an ongoing public consultation: http://www.energy-regulators.eu/ portal/page/portal/EER_HOME/ EER_CONSULT/OPEN%20 PUBLIC%20CONSULTATIONS/ electricity%2010-year%20ntwk% 20dev%20plan. 14. ERGEG is the European Regulators’ Group for Electricity and
20. See Art. 6, §6 of European Community Regulation 1228/2003/EC of the European Parliament and of the Council of 26 June 2003 on conditions for access to the network for cross-border exchanges in electricity, at http:// www.energy-community.org/portal/ page/portal/ENC_HOME/ AREAS_OF_WORK/ELECTRICITY/ Regional_Market/Regulation_1228. 21. See for instance the Sector Inquiry, a widespread investigation conducted by the European Commission in the process leading to the Third Package, at http://ec.europa.eu/competition/ sectors/energy/inquiry/index.html. 22. Presidency compromise proposal for financing of the infrastructure projects put forward by the Commission as part of the EERP, available at: http://register.consilium. europa.eu/pdf/en/09/st07/st07848re01.en09.pdf.
Gas. It has been the advisory group for the European Commission since 2003. 15. Supra note 3. 16. See the annex from the Priority Interconnection Plan (note 4), at http://ec.europa.eu/energy/ energy_policy/doc/12_priority_ interconnection_plan_annexe_en.pdf. 17. See Commission of the European Communities, Green Paper: Towards a Secure, Sustainable and Competitive European Energy Network, COM(2008) 782, Nov. 2008, at http://europa.eu/ legislation summaries/energy/ internal energy market/en0004 en. htm. 18. Note that several European TSOs are state-owned companies. 19. In Europe a redistribution mechanism exists among TSOs to allocate costs due to electrical losses and the use of infrastructure. In the remainder of the article, only the ITC mechanism with respect to infrastructure costs is referred to.
23. In the process leading to the Copenhagen Climate Summit, a U.S. emissions reduction target in the range of 17 percent below 2005 levels in 2020 is put forward. See for instance http:// www.uspolicy.be/Article.asp?ID= D56EA548-2F4A-4506-B81D-B15B2C ABD36C. 24. See http://pjm.com/planning/ rtep-development.aspx. 25. See J. Nicolas Puga and Jonathan A. Lesser, Public Policy and Private Interests: Why Transmission Planning and Cost-Allocation Methods Continue to Stifle Renewable Energy Policy Goals, ELEC. J., Dec. 2009, at 7–19. 26. See PJM, PJM Regional Transmission Expansion Planning Process, Nov. 2008, at http://ftp. pjm.com/planning//media/ documents/reports/20090611-rtepfoldout.ashx. 27. For more information on the NIETC, see http://nietc.anl.gov/. 28. See Gregory Basheda, Regional State Committees Can Help Provide a Regional Perspective to Planning and Siting Decisions, Reducing the Need for Federal Preemption, ELEC. J., March 2006, at 43–51.
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