Trésor-Eco
Electricity Interconnections and their Contribution to the Energy Transition
Electricity interconnections play a vital role in the security of supply and the optimisation of the electricity grid. They provide consumers with access to more competitive and low-carbon electricity. However, they are costly assets that lead to significant distributional effects between consumers and producers. This paper focuses on the economic benefits and shortcomings of their development, and on their contribution to a changing European energy system.
Electricity interconnections between the French grid and those of neighbouring countries bolster security of supply and provide consumers with priority access to the most competitive and least carbon-intensive electricity.
During the energy price crises in 2022 and 2023, these interconnections enabled French consumers to avoid outages or even blackouts by offsetting the fall in production of French nuclear and hydropower plants.
The relevant interconnections also offer regional socio-economic benefits. However, they are uneven between countries, on the one hand, and between electricity producers and consumers, on the other. In order to safeguard incentives for stakeholders to build and use interconnections, it is necessary to have arrangements for redistribution between countries and, within countries, between economic players.
The expansion of internal domestic grids will play as important a role as interconnections in achieving European electricity integration targets. Investment in national grids helps optimise proper use of interconnections and prevents them from causing congestion in neighbouring power grids.
Interconnections enable several countries to pool their assets and thus ensure their electricity systems’ resilience: peaker power plants, batteries, demand-side flexibility mechanisms, etc. In a European energy system that is undergoing a sweeping transformation, interconnections provide reassurance against the uncertainties created by these changes.
This means that the expansion of interconnections and other flexibility assets is being considered in a coordinated manner at European level in order to rein in investment requirements and remunerate them at their fair social value.
