Quantifying the long-term economic benefits of European electricity system integration

Abstract

This paper aims to quantify the long-term economic benefits that arise from an increasing integration of the pan-European electricity system by means of comparing model-based decarbonization scenarios developed with the model LIMES-EU+. It explicitly accounts for the interplay between transmission infrastructure and renewable generation capacity expansion. We confirm earlier findings that, on aggregate, pan-European transmission capacity expansion constitutes a no-regret option for integrating increasing shares of variable renewables. It leads to positive social returns on investment in all mitigation scenarios under analysis. However, the reduction in total discounted system costs stemming from transmission capacity expansion is modest in magnitude. Over the period 2010–2050 it reaches a maximum of 3.5% for a case with massive expansion compared to one in which the status quo remains. In technical terms this means that the optimum is rather flat and taking into account regional and local benefits and distributional aspects could alter the evaluation of the economic benefits. A crucial finding is that the configuration of pan-European transmission infrastructure and the importance of specific country-connections, i.e. a “Southern” versus a “Northern” solution, hinges on the relative development of specific investment costs for solar and wind technologies over the next decades.