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#Energy & Sustainability

Cross-Border Cost Allocation for Electricity Transmission Networks

  • June 24, 2025
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Document(s)
Read the "Cross-Border Cost Allocation for Electricity Transmission Networks" Report

Cross-border energy infrastructure plays a fundamental role in a well-integrated European internal energy market. It is a prerequisite for making full use of renewable energy production and for achieving Europe’s decarbonisation targets in the most cost-efficient way.

Cross-border grid infrastructure, however, raises important questions around the allocation of risks, costs, and benefits across countries. Besides investment risks for grid operators, there are uneven costs and benefits – such as higher resilience and security of supply – that cannot easily be covered by cost-sharing mechanisms.

Moreover, offshore wind infrastructure, which is often hybrid, combining generation and transmission, poses problems due to its sheer complexity and the need for coordination among several EU member states and their non-EU neighbours.

This multidisciplinary study examines the existing regulatory framework and its challenges, such as its short-term focus and lack of cross-sectoral coordination and harmonisation. It provides an economic analysis of the winners and losers of cross-border infrastructure, and discusses different mechanisms for cost-sharing, including congestion income handling, bidding zone design, cross-border capacity targets, inter-transmission system operator compensation (ITC), as well as network tariff structures – from full socialisation to different types of cost-splitting approaches. These models are illustrated by case studies from the Nordics, Germany, France, and Great Britain.

The authors conclude with the following recommendations:

  • Cross-border investment governance: The governance of new investments with multilateral effects should be layered at EU, bilateral, and regional levels to match the complexity of a given project. This approach should also allow for regulatory experimentation, such as long-term transmission rights for governments or asset co-ownership between TSOs.
  • Planning improvements: Rather than just informing the selection of projects for PCI status and CEF funding, the cost-benefit analysis (CBA) should be integrated better into the Ten-Year Network Development Plan (TYNDP) process and be organised centrally. Project-specific elements could be derived from such a system needs-based general CBA.
  • Reviewing the allocation and mitigation of risks: Investment risks could be addressed with explicit agreements that allow hedging against the evolution of generation and demand. Other risks could be reallocated via financial transmission corridors. Congestion rents, on the other hand, could be split differently to reflect the ex-ante division of investment costs.
  • Enhancing European financing mechanisms: Some benefits of cross-border infrastructure are hard to quantify in the project development phase – such as security of supply, increased grid resilience, or reduced dependency on fossil fuel imports – and require European financing support. To make this more effective, however, it would be beneficial to concentrate EU funds within a single entity.

The report was presented and debated on 24 June 2025, during the CERRE public webinar “Investing in Europe’s Cross-Border Infrastructure“.

Author(s)
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Bert Willems (2)
Bert Willems
Research Fellow
and Université catholique de Louvain

Professor Bert Willems, is a CERRE Research Fellow and a Professor of Economics at the Université catholique de Louvain where he studies and teaches energy management and environmental economics. He is affiliated with the Law and Economic Center at Tilburg University (TILEC), the Toulouse School of Economics and a board member of the Benelux Association for Energy Economics (BAEE).

Professor Bert Willems, is a CERRE Research Fellow and a Professor of Economics at the Université catholique de Louvain where he studies and teaches energy management and environmental economics. He is affiliated with the Law and Economic Center at Tilburg University (TILEC), the Toulouse School of Economics and a board member of the Benelux Association for Energy Economics (BAEE).

Bm0466 Econ Christine Brandstaett 0694 Websize
Christine Brandstätt
Assistant Professor
Copenhagen School of Energy Infrastructure (CSEI)

Christine is an Assistant Professor with the Copenhagen School of Energy Infrastructure (CSEI) at Copenhagen Business School. She is currently also a visiting fellow with the Oxford Institute for Energy Studies and a research associate with the Energy Policy and Regulation Group at the University of Cambridge. Her main research interest is in network regulation, pricing and market design. In her research, she analyses the interactions of different regulatory, market design and policy options in energy systems. Thus, she has participated in and led several research projects on flexible network users, smart grids and the integration of renewable energy sources into the energy systems.

She obtained her PhD in Energy Economics from Jacobs University Bremen and holds Master’s degrees from Kungliga Tekniska Högskolan in Stockholm, École des Mines in Nantes and Universidad Politécnica in Madrid as a result of the Erasmus Mundus joint Master course in Management and Engineering of Environment and Energy.

Christine is an Assistant Professor with the Copenhagen School of Energy Infrastructure (CSEI) at Copenhagen Business School. She is currently also a visiting fellow with the Oxford Institute for Energy Studies and a research associate with the Energy Policy and Regulation Group at the University of Cambridge. Her main research interest is in network regulation, pricing and market design. In her research, she analyses the interactions of different regulatory, market design and policy options in energy systems. Thus, she has participated in and led several research projects on flexible network users, smart grids and the integration of renewable energy sources into the energy systems.

She obtained her PhD in Energy Economics from Jacobs University Bremen and holds Master’s degrees from Kungliga Tekniska Högskolan in Stockholm, École des Mines in Nantes and Universidad Politécnica in Madrid as a result of the Erasmus Mundus joint Master course in Management and Engineering of Environment and Energy.

Ceciel Nieuwenhout
Ceciel Nieuwenhout
Assistant Professor
Groningen Centre of Energy Law and Sustainability
Faculty of Law, University of Groningen
dr. Ceciel Nieuwenhout is an expert in the legal and regulatory aspects of electricity infrastructure development. Her PhD focused on offshore electricity grids in the North Sea. She is currently assistant professor at the Groningen Centre of Energy Law and Sustainability, engaged in several offshore and onshore grid related legal research projects as well as teaching in the LLM programme ‘Energy and Climate Law’.
dr. Ceciel Nieuwenhout is an expert in the legal and regulatory aspects of electricity infrastructure development. Her PhD focused on offshore electricity grids in the North Sea. She is currently assistant professor at the Groningen Centre of Energy Law and Sustainability, engaged in several offshore and onshore grid related legal research projects as well as teaching in the LLM programme ‘Energy and Climate Law’.
Chloe Le Coq (2)
Chloé Le Coq
Research Fellow
and University Paris Panthéon-Assas (Dept. of Economics & CRED)

Chloé Le Coq is Professor of Economics at Université Paris-Panthéon-Assas (CRED) and Research Fellow at the Stockholm School of Economics (SITE). She is a Member of the Scientific Advisory Board DIW Berlin and a Member of the Scientific Committee Chair ETI LAB -Mines Paris (since 2022). She is involved in the university incubator AssasLab. She has held visiting positions at Purdue University, the University of California Energy Institute at Berkeley, and the National University of Singapore.

Her research investigates topics related to antitrust policy, industrial organization, and behavioral economics, with a particular focus on energy markets and social innovation. Her recent work includes empirical studies on cartel formation, information structure in electricity markets, and experimental studies of social entrepreneurs.

Chloé Le Coq is Professor of Economics at Université Paris-Panthéon-Assas (CRED) and Research Fellow at the Stockholm School of Economics (SITE). She is a Member of the Scientific Advisory Board DIW Berlin and a Member of the Scientific Committee Chair ETI LAB -Mines Paris (since 2022). She is involved in the university incubator AssasLab. She has held visiting positions at Purdue University, the University of California Energy Institute at Berkeley, and the National University of Singapore.

Her research investigates topics related to antitrust policy, industrial organization, and behavioral economics, with a particular focus on energy markets and social innovation. Her recent work includes empirical studies on cartel formation, information structure in electricity markets, and experimental studies of social entrepreneurs.

Floor Serrien
Floor Serrien
Université Catholique de Louvain

Floor Serrien is a Doctoral Candidate in Engineering at the Katholieke Universiteit Leuven and in Economics at the Université Catholique de Louvain. She holds a MSc in Energy Engineering from the Katholieke Universiteit Leuven. Her work focuses on the regulatory challenges of the offshore transmission grid expansion, with a focus on incentivising cross-border collaboration and ensuring a fair allocation of costs and benefits among stakeholders.

Floor Serrien is a Doctoral Candidate in Engineering at the Katholieke Universiteit Leuven and in Economics at the Université Catholique de Louvain. She holds a MSc in Energy Engineering from the Katholieke Universiteit Leuven. Her work focuses on the regulatory challenges of the offshore transmission grid expansion, with a focus on incentivising cross-border collaboration and ensuring a fair allocation of costs and benefits among stakeholders.

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Towards a More Dynamic Regulation for Energy Networks
26 March 2024
Scaling up Offshore Wind Energy in Europe
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