Connecting Mediterranean countries through electricity corridors: New Institutional Economic and regulatory analysis

•A Mediterranean super grid would help to ensure a massive renewable integration.•The electricity corridors' infrastructure requires bilateral dependent investments.•Long term contracts are the optimal frame to support exchanges over the corridors.•A hybrid governance structure of the corridors is the most efficient structure.

A super grid connecting the two shores of the Mediterranean could help Europe meet its targets for integrating renewable energy. This paper assesses the business models for building a platform for wholesale renewable energy trade via electricity corridors linking the two regions of the Mediterranean basin. We demonstrate that the optimal framework for designing the corridor project is a long-term contractual agreement to coordinate bilaterally the necessary investments. Furthermore a hybrid governance structure requiring only limited regulatory adaptation seems to be the most efficient structure for facilitating investment in the corridor's infrastructure.