A new paper published by the European Network of Transmission System Operators for Electricity (ENTSO-E) highlights the challenges which Transmission System Operators (TSOs) are increasingly facing and the barriers to effectively tackle those challenges posed by currently applied remuneration models.
While recognising individual differences across countries and that there is no one-size-fits-all solution, the paper also proposes a range of available tools in order for TSOs to be valuable enablers of the European Green Deal.
A strong and secure transmission network is a widely recognised prerequisite to meet European energy and climate policy goals. Missing grid capacity not only hinders further integration of renewable energy sources; it also puts system security and sustainability goals at risk. Without the necessary investments in European power transmission infrastructure, the energy and climate targets will stay beyond reach.
To cope with the huge investment demands, ENTSO-E is calling for an adaptable and fit-for-purpose framework that allows for sufficient capital remuneration but also sets adequate long-term incentives for performance and innovation.
Currently, most European regulatory frameworks only remunerate capital-related activities. Non-capital-related activities – those aimed at system management and market development – are covered at a cost in most regulations. These TSO activities will become essential for unlocking the potential of the energy transition, therefore sustained innovation and the development of digital solutions are required.
ENTSO-E recognised that TSOs are eager and ready to take on the challenges they face as one of the most important enablers of this energy transition. To this end, the regulatory framework should be made fit for the purpose. TSOs will need to continue investing substantially in traditional transmission grid assets, with the aim of further integrating renewable energy resources, increasing cross-border exchanges and strengthening the Internal Energy Market.