International coordination on the provision of power generation capacity: An institutional economic assessment of decision-making competences in a union of states

Abstract

Transnational cooperation on the provision of power generation capacity can be of great benefit to EU member states. Whether this potential can be realised depends essentially on the allocation of decision-making competences between the EU and its member states, which remains a matter of controversial debate. This chapter is dedicated to studying different options for the allocation of responsibilities in a union of states from an institutional economic point of view. Based on a qualitative examination of different simplified governance models we identify general advantages and disadvantages of national and supranational competences related to the provision of power generation capacity. We find that in some areas such as resource adequacy planning, comprehensive action at the supranational level seems desirable, so as to make full use of cooperation potentials. In other areas, the requirements imposed upon member states can be considered as an ill-conceived use of central decision-making power; this includes, for instance, designing national RES-E instruments and capacity remuneration mechanisms or the use and extension of interconnection capacities. In such cases restrictive binding standards on a supranational level are likely to neglect national preferences and will often turn out to be detrimental to achieving common policy goals. A presumably favourable role of a supranational regulator could be to provide a framework for international coordination and support cooperation initiatives that are implemented on a bilateral or regional level.