A regulatory assessment of the Electricity Merchant Transmission Investment in EU

Current EU energy policy calls for a well-integrated Internal Energy Market by 2020 aimed at achieving interconnection of at least 10% of the installed electricity production capacity for all Member States (MS). In 2030, this target will increase to 15%, expanding to include the construction of electricity highways to connect MS and non-EU neighbouring countries in order to fulfil energy and climate goals. While most cross-borders interconnections are envisaged as regulated lines, private players will play a significant role in increasing interconnection via the Merchant Transmission Investment (MTI) exception. By reviewing the procedural and substantive treatment of the existing five MTI interconnectors, this paper evaluates whether the existing legal and regulatory framework adopted in the EU represents a suitable model for the development of cross border interconnections. Further, the paper explores the MTI exception as a potential model for cross-border interconnection with non-EU neighbouring countries. This analysis demonstrates that MTI's potential contribution would not significantly impact the achievement of the 2020 target. Moreover, the existing regulatory framework for merchant lines among MS is not apt for MTI developed between MS and non-EU countries, since the interconnection developed with non-EU neighbouring countries to date has necessitated non-market characteristics too extraordinary to be practical on a continuing basis.