ACER and CEER provide recommendations on anticipatory investments to accelerate electricity grid expansion for the energy transition

Today, ACER and the Council of European Energy Regulators (CEER) publish a paper reviewing the national treatment of anticipatory investments and proposing ways to facilitate the necessary electricity grid enforcement to meet the EU’s climate and energy targets.

Requested by the European Commission as a follow up of the 9th Energy Infrastructure Forum (June 2023), this paper analyses the main barriers to anticipatory investments and provides a set of recommendations to promote national incentive schemes to overcome them.

What are anticipatory investments?

Anticipatory investments reinforce the grid based on anticipated potential future needs, which go beyond confirmed generation and demand needs. On one hand, this will help ensure that the power grids are fit for the rapid uptake of renewable energy sources (RES), avoiding connection delays of RES caused by a slower grid capacity expansion. On the other hand, investing into anticipatory investments carry a risk that they may turn out be underused, at least until there are developments on the generation side.

What are the energy regulators’ key findings?

Reviewing the current national regulatory frameworks for energy infrastructure investment, ACER and CEER find that:

• The focus should be on implementation: several National Regulatory Authorities (NRAs) reported no need for further actions at national level with anticipatory investments but called for the already-foreseen measures to be properly implemented.

• System operators often adopt a forward-looking approach in planning and anticipate future generation and demand (including grid connection requests of renewable energy sources, electric vehicles’ charging infrastructure or other drivers of network expansion).

• The same regulatory treatment is applied to anticipatory investments as for other types of grid investments. Both are subject to the same regulatory incentives and penalties, as well as the same cost-recognition process.

What are the energy regulators’ recommendations?

Consistent with the recommendations in ACER’s Report on investment evaluation, risk assessment and regulatory incentives for energy network projects (June 2023), ACER and CEER  recommend:

• Reinforcing the role of energy regulators (and the tools at their disposal) in assessing energy infrastructure needs and projects; facilitate the NRA’s decision-making process by reducing uncertainties on the development of new network usages (e.g. such instruments include the identification of renewable acceleration areas, improved analysis of the electric recharging uptake in the network plan scenarios).

• Encouraging electricity network users (like generators) to flag their potential connection requests (including their capacity requirements and planned locations) as early as possible.

• Improving coordination and information exchange amongst future network users, network operators and energy regulators as a basis to speed-up the regulatory validation of grid investments. For example, better consultation is needed on the network planning scenarios and the priorities in addressing reinforcement needs.  

• Electricity Transmission System Operators (under oversight by the energy regulator) improving how electricity transmission needs are identified by providing detailed analysis (with higher spatial granularity at European and national level) and transparency of their results.

• Countries having separate regulatory approvals for permit granting and construction to expedite project implementation and minimise “sunk costs” in case the project will not be needed.

• Regulators evaluating the potential welfare loss from a “too early” or “too late” implementation of the projects.

What are the next steps? 

This paper aims to contribute to the discussions (and actions to be taken) on anticipatory investments foreseen in the framework of the European Commission’s Grid Action Plan to accelerate the development of smart electricity grids and support the rollout of renewables.

Access the ACER – CEER paper.