The EU energy infrastructure package

There are a number of infrastructure projects that are crucial for Europe to reach its energy and climate goals, to establish the Internal Energy Market and, in particular, to improve security of energy supply in the EU.

The European Commission sees a danger of investments being delayed or abandoned altogether because there are difficult permitting procedures, regulatory barriers or financing issues. To facilitate the implementation of investments that are necessary for the timely development and interoperability of trans-European energy infrastructure corridors and areas, the European institutions issued Regulation 347/2013 (the Infrastructure Regulation).

  • The EU's energy infrastructure package - overview
  • Projects of common interest (PCIs)
  • Cost benefit analysis (CBA)
  • Cross Border Cost Allocation (CBCA)
  • Risk-related incentives
  • Financing through the Connecting Europe Facility
  • Accelerated permit granting procedure
  • Transparency and public participation

Overview

On 1 June 2013, Regulation (EU) No 347/2013 on guidelines for trans-European energy infrastructure (Infrastructure Regulation) came into force. 
The Regulation defines twelve trans-European energy infrastructure priority corridors and areas, the implementation of which by 2020 is essential for the achievement of the Union’s energy and climate policy objectives. Take a look at the maps below to see where the gas and electricity priority corridors are and which priority areas are planned.

Electricity infrastructure priorities; source: European Commission 2012

Electricity infrastructure priorities; source: European Commission 2012click to enlarge

Gas, oil and CO2 transport infrastructure priorities; source: European Commission 2012

Gas, oil and CO2 transport infrastructure priorities; source: European Commission 2012click to enlarge

The Infrastructure Regulation contains a process for identifying projects of common interest (PCIs) that are a central piece for the realisation of the trans-European energy infrastructure priority corridors and areas. Under this framework, energy infrastructure includes in particular:

  • High-voltage overhead lines, underground and submarine transmission cables, and electricity storage facilities;
  • Gas transmission pipelines, along with reception, storage and regasification or decompression facilities for liquefied natural gas (LNG) and compressed natural gas (CNG); and
  • Infrastructure such as pipelines used to transport crude oil.


Projects that are granted PCI status potentially qualify for a variety of preferential treatment measures under the Infrastructure Regulation. These are briefly explained below.

Potential benefits resulting from PCI status

Potential benefits resulting from PCI status click to enlarge

 

Projects of common interest (PCIs)

The Infrastructure Regulation applies to all projects of common interest, as defined in Article 2(4) of the Regulation itself. PCI status is granted by including a project on a list pursuant to Article 3(4) of the Infrastructure Regulation. This list is annexed to a separate delegated regulation which is issued by the European Commission.
Only projects that fulfil the following criteria can be included in the PCI list:

  • A PCI must be necessary to implement one of the energy infrastructure corridors or areas set out in Annex I to the Regulation;
  • A PCI must concern at least two Member States (or one Member State and one EEA country); and
  • A PCI’s potential overall benefits must outweigh its costs.
  • Electricity and gas projects must, in addition, considerably contribute to market integration, competition (for gas projects only), sustainability or security of supply.


The list is updated every other year. The Infrastructure Regulation provides that in a first step towards the Union list, national regulators, member states, system operators, the Agency for the Cooperation of Energy Regulators (ACER) and the European Commission come together in regional groups to discuss PCI candidates on the basis of the Union-wide network development plans. Following a public consultation and an ACER opinion, European Commission and member states together decide which projects make it onto the final list. Then, the European Commission adopts the Union list as delegated act. Take a look at the figure below for an overview of the process.

Process to identify projects of common interest; source: European Commission 2014

Process to identify projects of common interest; source: European Commission 2016click to enlarge

On 18 November 2015, the European Commission presented the second Union list of projects of common interest, including a total of 195 priority infrastructure projects. The corresponding delegated regulation was published on 27 January 2016 and came into force on 16 February 2016.

For further information about PCIs, please consult the European Commission’s website: http://ec.europa.eu/energy/infrastructure/pci/pci_en.htm
The Commission’s website also contains an interactive map with an overview of PCIs and links for details on the individual projects: http://ec.europa.eu/energy/infrastructure/transparency_platform/map-viewer/ 

EC map of PCIs; source: European Commission 2015

EC map of PCIs; source: European Commission 2016click to enlarge

Cost-benefit analysis

Article 11 of the Infrastructure Regulation obliges ENTSO-E and ENTSOG (European Network of Transmission System Operators for Electricity and Gas respectively) to publish harmonised methodologies for energy-system-wide cost benefit analyses. These provide the basis for PCI selection, cross-border cost allocation and the selection of projects eligible for EU funding.

By 16 May 2015, the national regulatory authorities cooperating in the framework of ACER had to establish and publish a set of indicators and corresponding reference values for the comparison of unit investment costs for comparable projects in electricity and gas. The indicators and reference values were published on ACER's homepage.

Cross-border cost allocation

According to the Infrastructure Regulation, the costs for the development, construction, operation and maintenance of projects of common interest should in general be fully borne by the member states that benefit from the infrastructure. If a PC’s investment costs exceed its benefits in the investment country, the project might be eligible for cross-border cost allocation (CBCA). To this end, the project project promoters must jointly file a request for cross-border cost allocation with the national regulatory authorities concerned, the project must be sufficiently mature and the transmission system operators of the member states that benefit from the project must have been consulted (cf. Article 12 of the Infrastructure Regulation).

Within six months, the regulatory authorities must decide on the cost allocation for the project and any impact the costs have on the system charges. To facilitate this process, ACER has issued a recommendation for a harmonised application of the criteria from the Regulation.

Several CBCA requests were filed across Europe. E-Control was involved in one CBCA procedure. The resulting official decision (in German) has been published.

The national regulatory authorities cooperating in the framework of ACER conducted a review process based on the first investment requests. The findings of this process were reflected in the revision of the ACER recommendation on cross-border cost allocation in 2015. The revised recommendation was published on ACER's homepage in December 2015.

The cost benefit analysis for each individual project drawn up in line with the ENTSO-E/ENTSOG methodology forms the basis for deciding appropriate cost allocation.

Risk-related incentives

Where project promoters incur higher risks for the development, construction, operation or maintenance of a PCI, compared to the risks normally incurred by a comparable infrastructure project, Article 13(1) of the Infrastructure Regulation stipulates that the member states and national regulatory authorities shall ensure that appropriate incentives are granted to the project.
According to Article 13(6) of the Infrastructure Regulation, each national regulatory authority must publish its methodology and the criteria used to evaluate investments in electricity and gas infrastructure projects and the higher risks incurred by them. E-Control's methodology for project evaluation is available at the following link:

Financing through the Connecting Europe Facility

Certain cross-border projects might have access to CBCA (as explained above) and, in addition, to partial EU financing. Articles 14 and 15 of the Infrastructure Regulation specify which projects are eligible for Union financial assistance, and contain guidance for the award criteria for such assistance. The criteria themselves are laid down in Regulation (EU) No 1316/2013 establishing the Connecting Europe Facility (CEF Regulation).

The figure below shows the award criteria for works and studies, including the weight accorded to each criterion.

Overview of award criteria; source: European Commission 2016

  Weighting (works) Weighting (studies)
Maturity of the action with regards to the developmental stage of the project, based on the implementation plan (Article 5(1) Infrastructure Regulation) 20% 25%
Cross-border dimension of the action, area or impact and number of member states involved in the action 10% 10%
Extent of the positive externality provided by the action involving works, impact of the action on solidarity 15% N/A
Need to overcome financial obstacles 15% 15%
Soundness of the implementation plan proposed for the action 10% 10%
Priority and urgency of the action, will the project remove bottlenecks, end energy isolation and contribute to the implementation of the internal energy market 15% 20%
Stimulating effect of the CEF financial assistance on the completion of the action 15% 20%

Basically, the Infrastructure Regulation specifies the following conditions for projects to be eligible for Union financial assistance:

  • the project specific cost-benefit analysis provides evidence concerning the existence of significant positive externalities, such as security of supply, solidarity or innovation;
  • the project has received a cross-border cost allocation decision pursuant to the Regulation; and
  • the project is commercially not viable according to the business plan and other assessments carried out, notably by possible investors or creditors or the national regulatory authority.

The body entrusted with administering the Connecting Europe Facility (CEF) is INEA (Innovation and Networks Executive Agency). The first call for proposals was launched in 2014.

In 2015 and 2016, two calls for proposals were launched under the Connecting Europe Facility.

Apart from CEF, there are several other European financing options, such as:

Accelerated permit granting procedure

The Infrastructure Regulation stipulates that the permit granting processes for infrastructure facilities should neither lead to disproportionate administrative burdens nor create barriers to the development of trans-European networks and market access. Barriers to investment are to be identified and removed, including by means of streamlining planning and consultation procedures. PCI permit procedures are to be granted preferential status also at national level, including when it comes to environmental impact analyses, as far as there are corresponding provisions in national law. This priority status is meant to simplify procedures and shorten the duration of proceedings.
In accordance with the Infrastructure Regulation, each member state must designate one national competent authority which is responsible for facilitating and coordinating the permit granting process for PCIs. For Austria, the Minister of Science, Research and Economy has been entrusted with this function.

As specified in Article 10 of the Infrastructure Regulation, permit granting is a two-stage process:

(a) The pre-application procedure, covering the period between the start of the permit granting process and the acceptance of the submitted application file by the competent authority. It takes place within an indicative period of two years.

(b) The statutory permit granting procedure, covering the period from the date of acceptance of the submitted application file until the comprehensive decision is taken. This stage must not exceed one and a half years.

Overall, the process should not take more than three and a half years.

Even during the pre-application procedure, the public must be heard, and there are additional obligations on transparency and public participation (Article 9 of the Infrastructure Regulation).

The implementation of these regulations into national law took place by issuing the Energie-Infrastruktur-Gesetz (Energy Infrastructure Act).

Transparency and public participation

Once a project is put on the Union list, it is dubbed crucial for the EU's energy policy. Giving projects such priority status is hoped to stop any discussions about their necessity during the permit granting process before they even start. As part of the efforts to speed up permitting procedures, the Infrastructure Regulation also provides particular rules for public participation.

First, the member states (or rather, their competent authorities) draw up a manual of procedures. This must contain information about the applicable law, the necessary decisions and opinions, the contact details of the competent authorities etc. In the interest of increased transparency, project promoters must hand in a concept for public participation at the beginning of the permit granting process. Before the final and complete application file is handed in, a public consultation must take place. This aims e.g. to identify the most suitable location or trajectory for the infrastructure to be built. As part of this public consultation, an information leaflet is published. Also, project promoters or competent authorities must provide a website that carries relevant information about the project of common interest..