Reforming cost and benefit sharing to support Europe’s electricity grid expansion
What is it about?
Today, ACER publishes a policy paper exploring how Europe could improve the way costs and benefits of cross-border electricity infrastructure projects are shared. The paper aims to support the grid investments needed for a more integrated European electricity market and a more efficient use of Europe’s electricity system.
Why cost and benefit sharing of energy infrastructure matters
Building an integrated European electricity market requires substantial cross-border grid investments. An effective cost-sharing framework is a key enabler of such investments, especially when infrastructure in one country brings benefits beyond its borders.
However, the current framework does not always ensure that costs are shared fairly when a project benefits several countries (for example, when one country bears most of the investment costs while others receive a significant share of benefits).
As a result, projects with clear European or regional value might not be realised if costs are largely borne at national level while benefits are distributed more widely across borders.
Several mechanisms currently aim to address this challenge:
congestion income distribution, which shares revenues from cross-border congestion;
the inter-TSO compensation (ITC) mechanism, which compensates for costs related to hosting cross-border flows; and
cross-border cost allocation (CBCA), which allocates costs of new infrastructure based on expected cross-border benefits.
While each plays an important role, gaps and overlaps remain in how effectively they align costs with benefits. This can make it more difficult to develop infrastructure that is valuable from a European or regional perspective.
What is in ACER’s policy paper?
Already in July 2024, ACER committed to strengthening and improving the existing mechanisms to better reflect the costs and benefits of cross-border network infrastructure.
As part of this effort, ACER’s 2026 policy paper assesses the current mechanisms, their gaps and overlaps, and explores how they could be improved or redesigned to better align national investments with European and regional needs.
It sets out several policy options, ranging from targeted improvements to the existing mechanisms to broader changes to the overall cost-sharing framework. These include improving the current mechanisms separately, combining some of them into a single ex-post mechanism, or exploring a new framework with common EU financing for infrastructure used for cross-border trade.
The policy paper also provides a qualitative evaluation of these options, with the common objective of strengthening investment incentives for cross-border electricity infrastructure.
The policy paper does not provide definitive solutions to the identified challenges. Instead, it aims to inform and stimulate further discussion on how the cost-sharing framework can better support investment in projects of European and regional value.