Abstract

In Great Britain (GB) and across Europe significant investment in electricity transmission is expected over the coming years as decarbonisation and market integration efforts are intensified. However, there is also significant uncertainty with the amount, location and timing of new generation connection, which in turn will drive the transmission investment needs. Given the absence of efficient market design, we identify three key areas of concern with the current transmission investment arrangements: (i) a misaligned incentives framework for transmission investment and operation; (ii) lack of coordination of investment and operation; and (iii) conflicts of interest. We then propose three options for future evolution of transmission regimes, which cover the full spectrum of institutional arrangements with respect to transmission planning and delivery, i.e. how and who plans, owns, builds and operates the transmission system. For each option we present: key characteristics; evolution of the current regimes; the ability of the option to address the concerns; and key strengths and weaknesses. Overall, we conclude in the case of GB (this conclusion could be extended to other European countries) that the most appropriate option would be that of an Independent System Operator (ISO) who would be responsible for planning and operating the transmission system. (C) 2014 Elsevier Ltd. All rights reserved.