WEMO 2025 (complet) - Flipbook - Page 37
W E M O 202 5
O U T LO O K
(FERC) in the US or the National Energy Regulators
in Europe (as CRE in France), are levied on electricity
users based on usage (e.g., $/kWh and/or $/kW).
The asset base for calculating TSO tari昀昀s, known as the
Regulated Asset Base (RAB), includes the capital costs
of transmission infrastructure adjusted for depreciation
and approved investments. The allowed return rate on
the (RAB) varies by region and regulatory framework. It
is often calculated using the Weighted Average Cost of
Capital (WACC)279, balancing returns on equity and debt.
√ Funding: As seen above, by 2030, investment needs to reach
a 50% increase compared to 2024 investments276. Securing
this funding is critical for maintaining a reliable power system.
These investments can be funded through:
√ The merit order274, is a regulatory mechanism to dispatch
generation sources to meet the demand based on their
marginal costs. In Europe, EU regulations favour renewables
with near-zero marginal costs, pushing fossil fuel plants to
a backup role. However, this can lead to instability when
renewable output drops suddenly, requiring rapid ramp-up
of gas or coal plants, as observed in the UK’s 2019 blackout,
where insu昀케cient reserve capacity contributed to outages.275
As already pointed out in previous WEMO Outlooks, the
current merit order mechanism, prioritizing renewables, needs
re-evaluation to ensure grid stability.
a. Subsidies: For example, in 2023, U.S. Department of
Energy announced nearly $3.5 billion in awards under its
Grid Resilience and Innovation Partnerships program,
known as GRIP. 277
Tari昀昀 increases are capped by regulators to balance
investment needs with consumer a昀昀ordability.
For example, in July 2025, as part of its e昀昀orts to reduce
electricity costs, the European Commission directed
National Regulatory Authorities to evaluate the potential
for incentive-based regulation and adjust relevant
performance indicators and benchmarks accordingly280.
However, tari昀昀 structures prioritize hardware solutions
like new transmission lines, such as MISO’s 281 $22 billion
Midwest projects282, over cheaper GETs. Reforms like
FERC’s Order 1920283 aim to promote GETs but face slow
implementation.
b. Private funding: For example, Eleclink278 interconnector
between France and the UK has been 昀椀nanced entirely
through private funds, unlike other interconnector
projects, which are underwritten by electricity
consumers.
c. Grid Tari昀昀s are the main TSOs funding source in
Western countries. These regulated charges, set by
bodies like the Federal Energy Regulatory Commission
https://www.utilitydive.com/news/
doe-largest-ever-grid-investment-GRIP-xcel-miso-spp/697141/
https://www.eleclink.co.uk/about-us/who-we-are
279
Recent WACs varied from 4.65% in UK, 5.62% In Australia and 6-7% in the US.
280
https://energy.ec.europa.eu/news/commission-continues-action-lower-energy-bills-newguidance-renewables-grids-infrastructure-and-2025-07-02_en
277
https://www.squeaky.energy/blog/
understanding-power-markets-merit-order-and-marginal-pricing
275
https://www.ofgem.gov.uk/sites/default/昀椀les/docs/9_august_2019_power_outage_report.pdf
276
https://about.bnef.com/insights/clean-energy/signi昀椀cant-investment-needed-to-ready-theglobal-power-grid-for-net-zero-bloombergnef-report/
274
279=8
MISO: Midcontinent Independent System Operator
https://www.utilitydive.com/news/
miso-regional-transmission-expansion-plan-2024-mtep/735483/
283
https://www.ferc.gov/explainer-transmission-planning-and-cost-allocation-昀椀nal-rule
WEMO 2025
regulatory frameworks governing curtailment, merit order,
permitting, and grid tari昀昀s. These regulations shape how
Transmission System Operators (TSOs) and utilities manage
the integration of renewable energy sources. Below, we
explore the impacts of these regulatory aspects on grid
balancing.
√ Permitting regulations signi昀椀cantly impact grid balancing by
delaying the construction of new transmission lines needed
to alleviate congestion and integrate variable generation (see
above).
281
282
36
Regulatory and political measures impact on grid
balancings: Grid balancing is signi昀椀cantly in昀氀uenced by
