Step 3

Preliminary design of a project & Cost-benefit ­analysis

Performing the cost-benefit analysis of a project consists in assessing its benefits for society as a whole, considering its impacts in terms of reduction of generation costs and CO2 emissions, improved security of supply, etc. These benefits are then compared to the projects’ expected costs. The cost-benefit analysis is monitored through the lifecycle of the project development.

To evaluate the costs of the project, a preliminary design is required, involving engineering and environmental studies, analysis of alternatives both for the project and the technologies to be applied. It also requires in some cases a request for information to manufactures to try to incorporate the latest technology improvements. Each TSO has its own methodology to perform the CBA of its projects at the national level, developed with and approved by the national regulator, although the TYNDP CBA methodology provides an overall umbrella and it is usually applied for cross-border projects.

Because the transmission grid acts as the backbone of the pan-European power system, many projects entail benefits in more than one European country (both cross-border and internal projects). That is why the EU has foreseen a cost-benefit analysis at pan-European level, the TYNDP, where projects are assessed based on the Guideline for cost-benefit analysis of grid development projects (latest version of the 3rd Guideline from February 2020 available here).

Case Story

Biscay Gulf: Increased RES integration, reduced electricity prices and CO2 emissions

The electricity interconnection between Gatika (Spain) and Cubnezais (France) through the Biscay Gulf will be the first fundamentally submarine interconnection between Spain and France. This submarine and underground direct current dual connection will be 370 km in length. This project will increase the exchange capacity from 2,800 to 5,000 MW, increasing the safety, stability and quality of electricity supply between the two countries and also with the rest of Europe.

Despite the high cost of the project, the high benefits provided by increasing the capacity between France and Spain compensate this cost, as shown in each successive release of the TYNDP. CBA results show that the project allows mainly to take advantage of the cheapest and most sustainable energy in Southeastern Europe at any moment, reducing variable generation cost and energy prices in the region. As a result, it reduces energy curtailment and improves integration of renewable energy sources. This results in a high decrease in generation cost of electricity (up to 438 M€/year in the TYNDP 2018 for the Sustainable Transition 2030 scenario). Besides, the better integration of cheap low-carbon generation (RES and nuclear) reduces CO emissions and supports the fight against climate change. Finally, the TYNDP also demonstrated that the project contributes to improving security of supply in concerned countries.

Biscay Gulf project (REE, Rte)

The robust CBA analysis allowed the acceptance of the project during the decision of investment by the national regulators and the support of the High-Level Group. It was also complemented with a Cross-Border Costs Allocation following TEN-E recommendations. In 2018, the project obtained 578 M€ from the CEF programme. To date, this is the largest grant given by the EU for an energy Project of Common Interest, and it allowed the project to go on. Currently the project is in the permitting process, and it is expected to commission in 2027.

However the France-Spanish border is likely to still be congested and further investments might bring more benefits than costs. Madrid and Lisbon Declarations (2015 and 2018 respectively) reaffirmed the strategic role of future interconnections to achieve a fully operational, secure, competitive, clean and interconnected internal energy market, and pledge to increase energy sustainability in line with the European energy and climate commitments. Two additional projects included in the last PCI list beyond the Biscay Gulf are under assessment to improve the definition and consolidate their CBA analysis: Aragón-Atlantic Pyrenees and Navarra-Landes.

Step 1

Identifying the needs

Step 2

Identifying solutions to address the need

Step 3

Preliminary design of a project & Cost-benefit analysis

Step 4

Inclusion of the project in the National Development Plan and in the TYNDP

Step 5

Applying for European “Project of Common Interest” status

Step 6

Engineering design and permitting process

Step 7

Financing and Final investment decision

Step 8

Construction and commissioning

Step 9

Operation of the new infrastructure