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Transmission

As more electricity is generated to meet growing demand, transmission networks must upgraded and expanded to handle the increased volume and larger coverage areas. The increased investment and commitment to renewable energy generation capacity also requires extension of transmission networks to often remote areas where many renewable sources are found. Improving and extending transmission systems to keep pace with the expected growth in generation capacity and consumers’ heightened expectations of improved power supply will require significant investment, especially in emerging markets.

While transmission networks must be operated independently to ensure non-discriminatory access, the financing, construction and operation of transmission lines can be achieved with the involvement of many actors, both public and private. By formalizing this involvement through the use of public-private partnerships (PPPs) for transmission, the private sector can be contracted to finance, build, operate and maintain a part of the grid in exchange for a revenue stream from transmission fees.

Although PPPs in transmission are far less frequent than those in generation, there is evidence of growing private investment during the last decade, in particular in emerging markets. The success of private investment in transmission in the U.S. has led countries like Brazil (a country with large investment needs) to adapt this approach.

In Brazil’s case, the country needed to expand and reinforce its network and facilitate the construction of new renewable energy sources. Officials found that incorporating private investment in transmission was not only feasible, but beneficial to all parties.  Other countries such as Mexico, in their recent energy reform, have introduced a similar scheme now under regulatory implementation.

While long-term concessions have been used as the primary contracting structure for PPPs in transmission, other structures are possible. Large transmission line or cross-border interconnector projects are also showing real promise as PPPs, like those between Tasmania and Australia, England and the Isle of Man, and Ireland and Scotland, which involve a single, separate asset constructed to provide a definable service with an isolated revenue stream.

Issues

  • Land

    Unlike generation PPPs, transmission networks can extend over hundreds of miles. This land requirement adds a layer of complexity that is important for the public authority to plan and oversee when implementing transmission PPPs. Acquiring the...

    Unlike generation PPPs, transmission networks can extend over hundreds of miles. This land requirement adds a layer of complexity that is important for the public authority to plan and oversee when implementing transmission PPPs. Acquiring the right-of-way for transmission PPPs requires consideration of the potential political, economic, social and environmental effects the new system may have on the community. The issues that must be considered include a reduction in property value, the need for resettlement and the security required to safeguard both the public from the potentially hazardous infrastructure and the high-value equipment from any outside tampering or vandalism.

    A forward-looking design of the project can go a long way to reduce negative impacts by properly analyzing the line route and by considering various towering and technology options to reduce the required right-of-way.

  • Regulatory framework

    A successful transmission PPP requires a clear and stable regulatory framework that maintains a balance between investor and consumer interests. Interests of investors can be addressed by defining transmission fees and payment mechanisms to...

    A successful transmission PPP requires a clear and stable regulatory framework that maintains a balance between investor and consumer interests. Interests of investors can be addressed by defining transmission fees and payment mechanisms to create a revenue stream that allows investors to recover their investments. Different forms of regulation have been used effectively in transmission PPPs, including:

    • guaranteed annual revenues during the concession period with periodic review and reset of rate of return caps;
    • contractual guarantee to recover amount of bid in auction; or
    • a revenue cap based on revenue asset base. 
  • System planning

    A core piece of any transmission project is to ensure that it responds to consumer demand in the most reliable and effective manner; this requires meticulous planning of the entire system.

    The planning responsibility typically falls to a...

    A core piece of any transmission project is to ensure that it responds to consumer demand in the most reliable and effective manner; this requires meticulous planning of the entire system.

    The planning responsibility typically falls to a government agency, a planning agency, or a system operator. A comprehensive plan will proactively identify transmission needs and requirements to meet demand in the most reliable, cost effective manner. The agency that creates and executes this plan must do so in an integrated fashion by looking at the entire network and sensing the demands of all actors in the industry—including generators, demand centers, and renewable energy plants.

Tools & Guidance

    • 2015
    • Victor Loksha
    • World Bank Group (WBG)

    Private Sector Participation in Electricity Transmission and Distribution

    Experiences from Brazil, Peru, The Philippines, and Turkey

    In recent decades, many countries have embarked on structural reform programs involving private sector participation (PSP) across the entire value chain of the power sector. Often as part of a broader market oriented reform program, governments have resorted to PSP in transmission and distribution (T and D) for a variety of reasons, including to: (i) offset years of underinvestment and poor operating performance under public ownership; (ii) attract considerable private investment to fill the financing gap stemming from new T and D additions amid rapidly growing demand for electricity; and (iii) raise fiscal revenues by offloading state assets. In some cases (for example, Brazil and Peru), a prolonged electricity supply crisis prompted...

    • 2001
    • Asian Development Bank (ADB)

    Developing Best Practices for Promoting Private Sector Investment in Infrastructure: Power

    This five-volume set presents the findings of an ADB regional technical assistance study which developed sector-specific best practices for promoting private sector participation in key infrastructure sectors in ADB's developing member countries. The best practices cover the role of government, institutional reform, strategic planning, legal and regulatory frameworks, unbundling and competition, contractual arrangements, sources of financing, and the allocation of risk. This volume examines the optimum approaches for achieving benefits for consumers of electricity through power sector restructuring, unbundling, the introduction of competition, and privatization.  

Projects & Case Studies

    • 2014
    • International Finance Corporation (IFC)

    Handshake Issue #13: Power & PPPs

    Handshake Issue #13, Power PPPs focuses on public-private partnerships in the power sector and brings diverse expert voices together to discuss how to increase access to energy in emerging markets. Features on hydropower and renewables, alongside in-depth looks at Africa and Latin America, provide a fresh analysis of one of today's most important and rapidly evolving sectors.

Lessons & Analysis

    • 2013
    • Victor Loksha, Ashley Brown
    • World Bank Group (WBG)

    International Experience with Open Access to Power Grids

    Synthesis Report

    Reliable and affordable supply of electricity is a key driver of economic growth. In recent decades, many developing and emerging economies have embarked on efforts to enhance the efficiency of their electricity markets. The quest for efficiency often involves structural reforms such as unbundling and other measures designed to support greater competition in the power sector. Open Access (OA) to Transmission and Distribution (T&D) grids by market participants is an essential element in this reform process. The study has proceeded on two tracks: one based on empirical findings from specific country cases, and a generic one synthesizing the emerging global issues in OA. Reports for the country studies have been prepared for Brazil, Peru,...

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