The National Competition Commission (CNMC) and the French regulatory authority, the Energy Regulation Commission (CRE) have carried out a decision that will review the distribution of the financing of the electrical interconnection project that holds France and Spain together, better known as ‘Bay of Biscay’ and that it becomes more expensive up to 2,800 million euros, 1,000 million more than initially planned.
The extra costs expected above 2,390 million euros and up to 2,700 million euros will be borne by 62.5% by REE and 37.5% for TEN. Any extra cost foreseen over 2,700 million euros will be supported at 50% by each carrier. In the event that the European Union directly assigns additional aid to the project, it can be assigned first to REE until the distribution of the previous aid is compensated.
Despite the increase in project costs, due to a context of tension in commodity markets, the regulatory authorities have recognized that the project “continues to be beneficial” for both, in particular, for Europe. In addition, the project benefits from a European subsidy of 578 million from the European Interconnection Mechanism (MIE).
Increase in costs
The Bay of Biscay project consists of the construction of two independent electrical links, each with a capacity of 1,000 megawatts, between Cubnezais (France) and Gatica (Spain). It contemplates approximately 400 kilometers, including a maritime section of 300 kilometers.
The project is expected to enter service in 2028, doubling the interconnection capacity between Spain and France from 2.8 gigawatts to 5 gigawatts. The Bay of Biscay was the subject of a joint financing decision adopted by the Spanish and French authorities on September 21, 2017.
At that time, the cost was estimated at €1.75 billion. However, due to an unfavorable market context, the prices of the main components of these future links have increased “considerably”. Likewise, current forecasts foresee a cost of 2,850 million euros, with a risk margin of 250 million.
In turn, the expected benefits of the project have also been affected and have increased, due to the expected evolution of the energy mix and electricity consumption in European countries, in a context of accelerating energy transition.
