Introduction

Power transmission networks are the vital link in the electricity value chain, transporting power from generation suppliers to distribution for end users. By analysing the TSO operating environment it is possible to understand how they will fare in the face of ever increasing liberalisation.

Scope

An overview of the European TSO landscape, and the pivotal role the electricity transmission system plays in promoting competition within the sector. An understanding of the development of EU legislation and policies regarding transmission system operators. An in-depth analysis of the different stages of TSO independence development in key European markets. A comparison of the profitability of independent TSOs and those embedded in vertically-integrated utilities.

Highlights

Eleven of the twenty markets assessed have gone beyond the legal separation requirement of the Second EU Electricity Directive, with full ownership separation of power networks. The relatively high profitability of TSOs belonging to vertically integrated utilities is a strong disincentive to divest by vertically integrated utilities. Congestion management is one of the most important operational issues facing TSOs. It is forcing TSOs to become increasingly inter-linked, using a variety of mechanisms. For example, Belgium, the Netherlands and the UK use market coupling to synchronise their power imports and exports to manage transmission congestion.

Reasons to Purchase

Discern the consequences of network unbundling on vertically integrated utilities. Understand the potential conflicts of introducing a regional transmission organisation in Europe. Understand how national TSOs mitigate cross-border congestion by employing market based methods such as market coupling.

DATAMONITOR VIEW 1
CATALYST 1
EU energy liberalization and increasing inter-regional power trade are the major challenges facing transmission system operators 1
SUMMARY 1
ANALYSIS 2
Multi-regional cooperation will increase, yet transmission systems will retain their national identity 2
Congestion management is the single most important operational issue facing TSOs 2
Grid interconnection systems are used to enhance congestion management 3
Inter-TSO linkages will increase, but will maintain their separate identities 4
The Nordic region has achieved a high level of network harmonization 5
Vertically integrated utilities have no incentive to divest their network assets 6
The relative high profitability of TSO subsidiaries will be a strong disincentive to divest by the vertically integrated utilities 6
Ownership unbundling would have the highest impact on German and Austrian vertically integrated utilities 7
In the US, independent TSOs have merged into Regional Transmission Organizations 8
The RTO model is inconsistent with the goal of full market liberalization 9
Despite EU legislation, TSO independence is unresolved 10
EU energy policies seek to open grid networks to competition 10
EU legislation has consistently focused on stimulating electricity network competition 11
Structural network unbundling is the major catalyst for grid network reform 12
Full ownership unbundling is already common across Europe 13
Electricity transmission systems are key in achieving overall European power market liberalization 14
The Transmission system operator is the link between power supply and demand 14
Ownership and control of grid networks vary across Europe 15
Ownership and control of grid networks vary across Europe 16
TSOs belonging to vertically integrated utilities play little or no role in organized wholesale power markets 17
The models employed to regulate TSO tariffs by regulators are hardly uniform 18
APPENDIX 19
Definitions 19
Methodology 19
Further reading 19
Datamonitor Consultancy 20
Ask the Analyst 20
Disclaimer 20
List of Figures
Figure 1: European TSO organizations 3
Figure 2: 2005 Return on Assets 6
Figure 3: EU legislation has consistently focused on simulating electricity network competition 11
Figure 4: Transmission grid system independence 13
Figure 5: TSO ownership structure - Part I 15
Figure 6: TSO ownership structure - Part II 16