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.