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One of the most important challenges for the South East Europe region will be replacing more than 30% of its presently installed fossil fuel generation capacity by the end of 2030, and more than 95% by 2050 if its age structure is considered. This requires a strong policy framework to incentivise new investments in a region currently lacking investors, but also presents an opportunity to shape the electricity sector over the long term according to the broader energy transition strategy of the EU and the Energy Community. The aim of this paper is to assess what type of long-term pathways exist for electricity sector development in the region if they follow the energy transition process of the EU. In this model-based scenario assessment, long term electricity sector futures are explored using a set of interlinked electricity models evaluating the level of renewable energy investment required in the region to reach a deep decarbonization target, assuming emission reduction above 94% by 2050 compared to 1990 in line with the long term market integration and climate policy goals of the EU. It also explores what are the most important system wide impacts of the high deployment of renewable energy concerning generation adequacy and security of supply. Key policy insights. Energy policies in the South East Europe (SEE) region, both at the national and regional level, should focus on enabling renewable energy integration, as this will be a key component of the future energy mix.. EU and Energy Community policies should be incorporated into national energy planning to ensure that SEE countries embark on the energy transition process at an early stage.. Stranded costs should be carefully considered in decision-making on new fossil-fuel generation and gas network investment in order to avoid lock-in to carbon intensive technologies.. If consistent decarbonization policy prevails, with a significant and persistent CO2 price signal, the role of natural gas remains transitory in the region.. The SEE region offers relatively cheap decarbonization options: the power sector can reduce GHG emissions above 94% by 2050 in the modelled scenarios.

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The European Commission has proposed the target of achieving an interconnection capacity of at least 10% of the installed electricity production capacity for each Member State by 2020 in the context of the envisaged Energy Union. The underlying objectives are to increase the security of supply at affordable prices via market integration and to contribute to decarbonization by accommodating an increasing level of renewable generation. In this article we have assessed whether this target could effectively fulfil these two objectives. Our main focus is on the assessment of the impacts of compliance with the 10% interconnection target on the carbon emission of the European electricity system. Our main research question concerns the impact of interconnection capacity increases on EU carbon emission due to the better market integration, disregarding the RES-E integration aspects. In order to arrive at workable scenarios for the future cross-border capacity extension, the security of supply and market integration impacts are also assessed. We concluded on the basis of our European dispatch model that full compliance would slightly increase carbon emission in the EU, ceteris paribus. This impact is due to increased coal-and lignite-based electricity production, mainly in Germany, Poland and the Czech Republic. By increasing the interconnections of these countries with their neighbours at the present low carbon price under the EU emissions trading scheme, these carbon-intensive electricity systems run on higher utilization rates and consequently increase carbon emission. It has to be emphasized that the increase is found for the current situation, and changes in other factors, such as increases in carbon prices or renewable generation, could modify this result. Policy relevance Our results demonstrate that EU network development and climate policies are highly interconnected. Changing patterns in the interconnections of the EU electricity systems connect diverse generation portfolios and in a low carbon price environment could increase carbon emission at the community level. Policy makers should be aware of the interactions between these areas and design policy tools that also consider negative synergies.

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