Explanatory Memorandum to COM(2011)658 - Guidelines for trans-European energy infrastructure - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
| dossier | COM(2011)658 - Guidelines for trans-European energy infrastructure. |
|---|---|
| source | COM(2011)658  |
| date | 19-10-2011 |
Major efforts are needed to modernise and expand Europe's energy infrastructure and to interconnect networks across borders to meet the Union's core energy policy objectives of competitiveness, sustainability and security of supply.
The Commission's Communication on energy infrastructure priorities for 2020 and beyond i, adopted on 17 November 2010, therefore called for a new EU energy infrastructure policy to coordinate and optimise network development on a continental scale. It confirmed in particular the necessity to overhaul the existing Trans-European Networks for Energy (TEN-E) policy and financing framework.
Such a new policy is crucial to ensure that solidarity between Member States will become operational, that the internal energy market is completed and isolated regions are linked, that alternative supply or transmission routes and sources of energy will materialise and that renewables will develop and compete with traditional sources, as highlighted by the 4th of February 2011 European Council.
On 29 June 2011, the Commission adopted the Communication 'A Budget for Europe 2020' on the next multi-annual financial framework (2014-2020) i, which proposes the creation of a Connecting Europe Facility to promote the completion of priority energy, transport and digital infrastructures with a single fund of EUR 40 billion, out of which EUR 9.1 billion are dedicated to energy i.
The present proposal lays down rules for the timely development and interoperability of trans-European energy networks in order to achieve the energy policy objectives of the Treaty on the Functioning of the European Union to ensure the functioning of the internal energy market, to ensure security of supply in the Union, to promote energy efficiency and the development of new and renewable forms of energy, and to promote the interconnection of energy networks.
More specifically, this Regulation aims at the full integration of the internal energy market, including by ensuring that no Member State is isolated from the European network, contributes to sustainable development and protection of the environment by enabling the Union to achieve its targets of a 20% reduction of greenhouse gas emissions i, 20% increase in energy efficiency and 20% of renewable energy in final energy consumption by 2020, while ensuring security of supply and solidarity among Member States.
By pursuing these objectives, this proposal contributes to smart, sustainable and inclusive growth and brings forward benefits for the entire European Union in terms of competitiveness and economic, social and territorial cohesion.
To this effect, this initiative identifies, for the period up to 2020 and beyond, a limited number of trans-European priority corridors and areas covering electricity and gas networks as well as oil and carbon dioxide transport infrastructure, for which European Union action is most warranted. It then aims at implementing these priorities by:
– streamlining permit granting procedures to significantly reduce their duration for projects of common interest and increase public participation and acceptance for the implementation of such projects;
– facilitating the regulatory treatment of projects of common interest in electricity and gas by allocating costs depending on the benefits provided and ensuring allowed returns are in line with risks incurred;
– ensuring implementation of projects of common interest by providing necessary market-based and direct EU financial support. In this latter regard, the proposal provides the basis for eligibility of projects of common interest for EU financial assistance under the 'Connecting Europe Facility', which is subject to a separate legislative proposal.
The proposal is a strategic priority in the Commission Work Programme for 2011.
The challenge of interconnecting and adapting our energy infrastructure to the new needs is significant, urgent, and concerns all energy sectors.
Electricity networks must be upgraded and modernised to meet increasing electricity demand due to a major shift in the overall energy value chain and mix. The grids must also be urgently extended and upgraded, including through electricity highways, to foster market integration and maintain the existing levels of system's security, but especially to transport and balance electricity generated from renewable sources, which is expected to more than double in the period 2007-2020. At the same time, reaching the EU's 2020 energy efficiency and renewable energy targets will not be possible without more innovation and intelligence in the networks at both transmission and distribution level, in particular through information and communication technologies.
Natural gas will continue, provided its supply is secure, to play a key role in the EU's energy mix in the coming decades and will gain importance as the back-up fuel for variable electricity generation. In the medium term depleting indigenous conventional natural gas resources call for additional, diversified imports. Gas networks face additional flexibility requirements in the system, the need for bi-directional pipelines, enhanced storage capacities and flexible supply, including liquefied (LNG) and compressed natural gas (CNG).
Given the role of oil in the energy mix of the coming decades, maintaining uninterrupted crude-oil supplies to land-locked EU countries in Central-Eastern Europe, currently dependent on limited supply routes, is of strategic importance.
Finally, carbon capture and storage (CCS) technologies would reduce carbon dioxide emissions on a large scale while allowing the use of fossil fuels, which will remain an important source for electricity generation over the next decades. The future development of a cross-border network for carbon dioxide transport requires steps to be taken now for European level infrastructure planning and development.
In its report to the June 2011 Energy Council i, the Commission has estimated total investment needs in energy infrastructures of European importance up to 2020 at about EUR 200 billion:
– About EUR 140 billion for high voltage electricity transmission systems, both onshore and offshore, storage, and smart grid applications at transmission and distribution level;
– About EUR 70 billion for high pressure gas transmission pipelines (coming into the EU and between EU Member states), storage, liquefied/compressed natural gas (LNG/CNG) terminals and reverse flow infrastructure;
– About EUR 2.5 billion for carbon dioxide transport infrastructure.
Investment volumes for the period from 2011 up to 2020 will increase by 30% for gas and up to 100% for electricity compared to current levels. This investment challenge and urgency clearly distinguishes energy infrastructures from infrastructures in other sectors, as energy networks are a precondition for reaching the 2020 energy and climate targets and the longer term climate objectives.
The main identified obstacles, which will under business-as-usual assumptions prevent these investments from taking place or delay them far beyond the 2020 deadline, are problems related to permit granting (lengthy and ineffective permit granting procedures, along with public opposition), regulation (framework not geared towards delivering European infrastructure priorities) and financing (limited financing capacities of operators, lack of adapted funding instruments and sufficient support).
The TEN-E framework has been developed and shaped in the 1990’s through the successive TEN-E Guidelines and the corresponding financing Regulation. The 2006 Guidelines for Trans-European Energy Networks i listed about 550 projects eligible for Community support, classifying them in the following three categories: projects of European interest (42 in total); priority projects and projects of common interest. These projects cover only electricity and gas infrastructure. The report on the implementation of the TEN-E framework in the period 2007-2009 i, published in April 2010, concluded that while making a positive contribution to selected projects by giving them political visibility, the policy lacks focus, flexibility and a top-down approach to fill identified infrastructure gaps.
The TEN financing Regulation i, adopted on 20 June 2007, sets out the conditions for co-funding of TEN-E projects, with a budget for the period 2007-2013 of EUR 155 million. The TEN-E Programme's financial resources and set-up have however proven to be inadequate in light of the paradigm shift to a low carbon energy system and hence the major evolution and investments needed in energy infrastructures in the coming years (limited budget, no risk mitigation instruments, no funding outside the EU, insufficient synergies with other EU funds).
Set up in the context of the economic and financial crisis, the European Energy Programme for Recovery i has, for the first time, allocated significant one-off amounts (about EUR 3.85 billion) to a limited number of eligible projects in the domain of electricity and gas infrastructures, off-shore wind and CCS demonstration projects.
This initiative is anchored in the Europe 2020 Strategy for smart, sustainable and inclusive growth i, which put energy infrastructures at the forefront as part of the flagship initiative 'Resource efficient Europe'. It underlined the need to urgently upgrade Europe's networks towards a European 'smart supergrid', interconnecting them at the continental level, in particular to integrate renewable energy sources. The priorities identified and the measures proposed in this initiative with regard to permit granting, regulation and financing are fully in line with these objectives.
The proposal aims at replacing the existing TEN-E Guidelines and forms a logical package with the “Connecting Europe Facility” (CEF) developed in view of replacing the current TEN financing Regulation.
This initiative is also a vital contribution to the cost-effective achievement of the two binding targets of 20% of renewables and 20%[11] of greenhouse gas emission reductions by 2020 and aims to be in line with the pathway set out in the Commission’s Communication on a Roadmap for moving to a competitive low-carbon economy in 2050 and the EU's long term objective of an 80-95% reduction in greenhouse gas emissions by 2050 compared to 1990 levels i.
In accordance with Article 11 TFEU, the proposal integrates the existing environmental protection requirements in the context of energy infrastructure.
Contents
- RESULTS OF CONSULTATIONS WITH THE INTERESTED PARTIES AND IMPACT ASSESSMENTS
- LEGAL ELEMENTS OF THE PROPOSAL
- BUDGETARY IMPLICATION
- Grounds for and objectives of the proposal
- General context
- Existing provisions
- Consistency with other EU policies and objectives
- Consultation, data collection and use of expertise
- Impact assessment
- Permit granting and public consultation
- Regulatory issues
- Financing
- Summary of proposed action
- Legal basis
- Subsidiarity principle
- Proportionality principle and choice of legal instrument
- 5. OPTIONAL ELEMENTS
- European Economic Area (EEA)
This proposal was developed on the basis of a broad range of contributions from Member States and interested parties provided on various occasions (high-level conferences, workshops, surveys), including two public consultations on permit granting and on the use of project bonds for infrastructure projects[13]. The impacts of the various policy options proposed were analysed in two impact assessments carried out in 2010 and 2011 using the results of various models and numerous studies, of which three were specifically commissioned to address investment needs, permit granting and financing issues. Both impact assessments addressed the economic, social and environmental impacts of the options, taking into account the subsidiarity and proportionality principles.
The first impact assessment (IA) in 2010 focused on the scope of the new initiative in terms of energy sectors covered, its design in terms of identifying priorities and selecting projects of common interest, the form of regional coordination and cooperation and general principles with regard to permit granting.
Based on this first analysis, the 2011 IA analyses in much more detail policy options in the fields of permit granting and public consultation, regulation and financing that should apply to projects of common interest selected for implementation of the previously identified infrastructure priorities. For each of the various obstacles identified, it assesses available, effective and cost-efficient solutions.
The analysis compares three options: establishment of a regime of common interest; rules on the organisation and duration of the permit granting process, notably a 'full one-stop shop' and a time limit; a combination of the two previous options.
As regards the measures related to the Habitats Directive, the impact on the local flora and fauna of the regime of common European interest is expected to be relevant for only a very small subset of projects of common interest identified as possibly in conflict with Natura2000 areas, which are, however, crucial for the achievement of energy and climate policy objectives.
The overall impact of the last policy option is considered to be the most positive of all, as it would lead to the on-time completion of almost all the needed projects of common interest by 2020, provided appropriate measures on regulation and financing are in place. Environmental impacts, social impacts on employment and economic impacts on GDP are expected to be stronger under this policy option as all projects of common interest would be completed, while administrative cost savings would be significant.
The analysis compares three options: cross-border cost allocation; investment incentives; a combination of the two previous options.
The analysis shows that both an ex ante cross-border cost allocation mechanism and incentives commensurate with the risks incurred by the operator are necessary to ensure implementation of projects of common interest facing challenges with regard to their viability. Their overall economic, social and environmental impact is large and positive.
For the purpose of assessing the full range of possible measures with regard to infrastructure development, the analysis also addresses four financing options, even if their translation in policy measures will take place in the CEF: use of risk sharing instruments (including project bonds and guarantees); use of risk capital instruments (including equity participations); use of grant support for project studies and construction; a combination of grants, risk sharing and risk capital instruments.
The overall impact of the last policy option is the most positive, as it cumulate the positive impacts of the individual options and provide a flexible toolbox of market-based instruments and direct financial support, leading to synergies and efficiency gains by offering the most cost-effective solution for specific project risks. This policy option also reflects the measures proposed under the Connecting Europe Facility.
The proposed Regulation grants priority to 12 strategic trans-European energy infrastructure corridors and areas. It sets rules to identify, within a set of defined energy infrastructure categories, projects of common interest (PCIs), which are necessary to implement these priorities. To this end, it establishes a selection process based on regional expert groups and an advisory role for the Agency for the Cooperation of Energy Regulators (ACER) in electricity and gas, the final decision, to be updated every two years, on a Union-wide list of projects of common interest being taken by the Commission. The regional expert groups and the Agency for the Cooperation of Energy are entrusted with the monitoring and evaluation of the implementation of PCIs. The Commission may nominate European coordinators for PCIs facing difficulties.
The proposal establishes a regime of common interest for PCIs, giving particular responsibilities to one national competent authority within each Member State to coordinate and oversee the permit granting process for PCIs, setting minimum standards for transparency and public participation and fixing the maximum allowed duration of the permit granting process. The proposal also clarifies that PCIs can be implemented under certain conditions for reasons of 'overriding public interest' as defined in Directives 92/43/EC and 2000/60/EC. These measures are proportionate as they aim at a minimum alignment of national administrative procedures necessary to facilitate the implementation of – mostly cross-border – PCIs. Member States are free to design their specific internal procedures in line with their national legal systems in order to comply with the requirements of this Regulation.
The proposed Regulation provides a methodology and a process for the elaboration of a harmonised energy system-wide cost-benefit analysis for PCIs in electricity and gas. On the basis of this methodology, it gives responsibility to national regulatory authorities and ACER to allocate costs across-border for PCIs in these sectors according to the benefits in the Member States directly or indirectly concerned by these PCIs. National regulatory authorities are also requested to grant appropriate incentives through tariffs for the implementation of PCIs facing higher risks for justified reasons.
Finally, the Regulation determines the conditions for eligibility of PCIs to Union financial assistance under the Connecting Europe Facility, for both studies (accessible to all PCIs except those in the oil sector) and works (accessible to all PCIs in the smart grids and carbon dioxide sector, and to PCIs in electricity and gas fulfilling certain conditions, notably having obtained a cross-border cost allocation decision).
The proposal is based on Article 172 of the Treaty on the Functioning of the European Union. According to Article 171 i, “the Union shall establish a series of guidelines covering the objectives, priorities and broad lines of measures envisaged in the sphere of trans-European networks; these guidelines shall identify projects of common interest”. Article 172 specifies that the guidelines and other measures referred to in Article 171 i shall be adopted under co-decision procedure.
The subsidiarity principle applies to this proposal insofar as energy policy does not fall under the exclusive competence of the Union. Energy transmission infrastructure has Trans-European or at least cross-border nature or impacts. Member State level regulation is not suited and individual national administrations have no competence to deal with these infrastructures as a whole. From an economic perspective, energy network developments can best be achieved when planned with a European perspective, encompassing both EU and Member State action while respecting their respective competences. The proposed Regulation therefore respects the subsidiarity principle.
The proposal does not go beyond what is necessary to achieve the objectives pursued, given the energy and climate policy objectives agreed at Union level and the obstacles to develop adequate energy infrastructures. The instrument chosen is a Regulation, which has direct application and is binding in its entirety. Such a measure is necessary to ensure timely implementation of the energy infrastructure priorities by 2020.
In particular, the establishment of a permit granting framework with competent authorities at national level and clear time limits, within which the permit granting process can be carried out according to national specificities, is proportional to the objective of accelerating the permit granting process.
All budgetary implications of this proposal are dealt with under the legislative financial statement of the Proposal for a Regulation establishing the Connecting Europe Facility.
Repeal of existing legislation
Adoption of the proposal will lead to repeal of Decision 1364/2006/EC as of 1 January 2014. However, this will not affect the granting, continuation or modification of financial aid awarded by the Commission on the basis of calls for proposals launched under the existing TEN financing Regulation for projects targeted by this Decision, or for TEN-E projects benefiting from support through structural funds.
The Proposal concerns an EEA matter and should therefore be applicable to it.