Hardware and software paths toward further integration of European power systems

The European Union (EU) has launched several initiatives to foster further integration between power systems of member states. In practice, integrating neighboring systems requires both infrastructures and appropriate organizations to use these infrastructures, such as cross-border congestion management mechanisms. Sometimes, these two parts are referred as the hardware and software of the integration, highlighting with this metaphor that they complement each another. The guiding objective of this paper is to formalize this distinction to help analyze the integration process and strengthen economic assessment of any integration policy. This paper provides (a) a definition of the two modules and their common goal; (b) a proof through empirical observations that the distinction between the two modules is meaningful for policy assessment; (c) a description of the interactions between the two modules in a simple case; and (d) policy recommendations related to resource allocation for further integration.