The European Commission’s proposal is supposed to deliver more cross-border
electricity transmission.It is an extension of the current system of
national-welfare centred regulations, a system which does not target the
optimisation of the EU electricity network, and as such is inconsistent with a
truly single market. However, the integrated first-best solution – a single
European system operator, regulated by a single regulator, which develops the
network in coordination with generators and consumers – appears politically
infeasible. To overcome this, we propose a bold blueprint for a European system
to fund andincentivise infrastructure development. The approach is fourfold:
(1) implement vertical unbundling; (2) add a European system-management layer;
(3) establish a stringent planningprocess; and (4) phase-in European
cost-sharing.
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