Investment choices imply examining all possible options for achieving a given goal and sorting them in order to select the most promising one. Two alternative approaches are commonly used: cost-benefit analysis (CBA) and multi-criteria approaches (MCA). The former relies on economic indicators from which a single scoring parameter is drawn, whereas in the latter dimensionless values are combined with different weights. CBA is used more often for assessing infrastructural investments while MCA is preferred for analyses of projects in which social and environmental aspects are prevailing. The project choice was to implement a comprehensive CBA approach trying to appraise in monetary terms several aspects that are usually only investigated in a qualitative manner. A toolbox is also being implemented allowing to apply the proposed methodology in an automatic way and will be put available as a public deliverable of the project.
Figure 1 below shows the main aspects of the CBA methodology.
The main socio-environmental aspects to be considered for the assessment of the socio-environmental impacts for transmission systems are land use and public acceptance (other aspects include for instance real estate prices, biodiversity and landscape, human health and well-being). Land use values can be estimated with a quantification of the rights-of-way compensation costs by means of a five-step approach: (i) Create a land taxonomy; (ii) Collect values for the European countries; (iii) Analyze average characteristics of clusters borders based on the ground taxonomy; (iv) Use a “brown field approach” in case of long borders with variable characteristics (v) Assume infrastructure length according to inter-distance between clusters centers. Public acceptance has an impact on the implementation time of a new transmission infrastructure. Statistics for selected countries are collected and then typical values for extra delays are assumed depending on the category of network infrastructures.
System resilience and security of supply
- Reliability costs are estimated as the cost of service interruptions under normal conditions, i.e. the amount of Energy not Served (ENS) times the unit Value of Lost Load (VoLL). VoLL levels are estimated here for all EU countries for a one-hour interruption per type of energy consumption and country.
- Resilience costs (service interruptions under extreme events). Here, the amount of ENS occurring as a result of an extreme event is calculated for each node which allows to compute the cost of the lack of resilience.
- “Reliability related” DSM costs (costs of mobilizing demand to preserve system security). The cost of DSM measures applied to avoid service interruptions is deemed equal to the cost for the system of interruptible contracts, or other reliability driven measures like regulating energy markets. It comprises the cost of procuring a load available to be interrupted if necessary and the cost of the use of this service. Both actions can be undertaken either through contracts or any reliability market scheme.
Financial and regulatory aspects
The interplay of regulation, financing and risk is at the heart of transmission network financing  and an integrated approach is necessary. The level of risk allocated to the firm by regulation design impacts the incentives and the market perception of the firm which translates into a specific cost of the capital provided by investors.
Individual systematic risks are identified, given equal weight and summed into a single overall systematic risk category. Typical asset beta values corresponding to each overall systematic risk category have been pre-identified by screening the cost of capital profiles in a European context . Then the asset beta value, as representative of cost of capital, is selected by matching the target regulation and risk model with the corresponding overall systematic risk .
Assembling all the CBA indicators
An algebraic sum of benefits and costs is constructed since all CBA components are expressed in monetary terms. A scoring parameter can then be used for selecting one solution among several investment alternatives.
A classification of CBA indicators is provided, cf. Table 1 below. Core indicators are the ones where a consolidated experience is available. Experimental indicators require further validation and assumptions due to a lack of data. Extra indicators are also given but not used in the CBA calculations since they provide additional information when performing sensitivity analyses.
Table 1 – Core, experimental and extra indicators
Sensitivity analyses are based upon the uncertainty over the different scenarios and possible modifications in the scoring due to a change in the reciprocal importance given to the costs and benefits.
A CBA toolbox has been developed as a public deliverable of the e-Highway2050 project to appraise the grid expansion architecture options for the 2050 time horizon, starting from the ENTSO-E 2020 planned network layout, for each of the five reference scenarios adopted by e-Highway2050.
This article is connected to the following e-Highway2050 knowledge articles :
 Rossi, S., Careri, F., Migliavacca, G., Özdemir, O., van Hout, M., “Linear Estimation Approach for Including Strategic Competition in Market Simulations”, 11th International Conference on the European Energy Market (EEM) May 2014
 Sheffrin, A.Y., Chen, J., Hobbs, B.F., “Watching watts to prevent abuse of power”, IEEE power & energy magazine, July/August 2004
 Losa, I., Bertoldi, O., “Regulation of continuity of supply in the electricity sector and cost of energy not supplied” International Energy Workshop 2009, June 2009. [Online].
 Council of European Energy Regulators (CEER, 2010), “Guidelines of Good Practice on Estimation of Costs due to Electricity Interruptions and Voltage Disturbances” Ref: C10-EQS-41-03, December 2010.
 Rabensteiner, P., 2013, “Multi-Dimensional Risk and Investment Return in the Energy Sector: The Case of Electric Transmission Networks”.
 ACER, “On Incentives for Projects of Common Interest and on a Common Methodology for Risk Evaluation”, Technical paper, 2014
 New South Wales Government, 2007, “Determination of Appropriate Discount Rates for the Evaluation of Private Financing Proposals”, Technical paper
 G. Sanchis, RTE et alia, “A methodology for the development of the pan-European Electricity Highways System for 2050”, CIGRE Paris, August 2014
 B. H. Bakken, M. Paun, R. Pestana, G. Sanchis, “e-Highway2050: A Modular Development Plan on Pan- European Electricity Highways System for 2050”, Cigre Lisbon, April 2013
- G. Migliavacca, S. Rossi, F. Careri (RSE)
- L. Olmos, A. Ramos, M. Rivier (IIT-UP Comillas)
- J. Sijm (ECN),
- D. Huang, D. Van Hertem (KU Leuven)