Financing transmission investment and the role of public policy

Electricity transmission infrastructure remains an integral part of Europe delivering on its energy and climate objectives. The European Commission estimates that 140 billion Euros of investment in electricity transmission is required by 2020, implying a significant increase in current volumes of infrastructure investment as typically carried out by incumbent transmission system operators (TSOs). At the same time, investment can also be sourced by new entrants on concession- or merchant-basis. This raises the questions of who will finance, pursue and operate the new grid, what financing strategies exist for both incumbents and new entrants, and what role new entrants have in European electricity infrastructure investment. We use the different financial strategies that TSOs and third party investors can pursue as a framework to discuss the policy instruments that are currently proposed at EU and Member State level to support electricity grid investment, including the recently proposed Infrastructure Package. Particular focus is on the experience with different national regulatory frameworks.