The European Energy Infrastructure Challenge

Alberto Pototschnig, Director

Funseam: Winter SeminarMadrid, 6 March 2015

President Junker’s PrioritiesThe European Energy Union.pool our resources, combine our infrastructures

and unite our negotiating power vis-à-vis third countries.diversify our energy sources, and reduce the energy

dependency of several of our Member States.keep our European energy market open to our

neighbours. However, if the price for energy from the East becomes too expensive, either in commercial or in political terms, Europe should be able to switch very swiftly to other supply channels. We need to be able to reverse energy flows when necessary.strengthen the share of renewable energies on our

continent. This is not only a matter of a responsible climate change policy.[…] Europe’s Energy Union to become the world number one in renewable energies

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The European Energy Union

Energy Union

Energy security,

solidarity and trust

A fully-integrated Internal EnergyMarket

Energy efficiency/

moderation of energy demand

Decarboni-sation of the economy

Research and Innovation

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EU Energy Policy and Infrastructure

Sustainability Competitiveness Security of

Supply

Support the penetration of renewable energy sources

The Three Pillars

Infrastructure

Support the integration of the Internal

Energy Market

Support the diversification of energy sources and routes and the cross-border

sharing of generation capacity

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European Council Conclusions – 4 Feb 2011

More Efficient Use of Existing

Infrastructure

Removal of Energy Islands

(by 2015)

Market Integration

(by 2014)

Infrastructure Expansion

Market Design Improvements

Efficient Infrastructure Planning and Development

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.Electricity transmission systems, storage and smart grid applications

€ 142 bnof which:

» Interconnections € 70 bn» Offshore connections € 32 bn» Smart grids € 40 bn

.Gas pipelines, storage, LNG terminals and reverse flow infrastructure

€ 70 bnof which

» Outside the EU € 12 bn

Energy Infrastructure InvestmentEuropean Commission’s estimates – November 2010(Energy Infrastructure Priorities for 2020 and beyond)

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.“Mid-term mature” projects € 35-42 bn(commissioning by 2019)

.“Long-term mature” projects€ 25-36 bn(commissioning in 2020-24)

.“Less mature” projects € 44-66 bn(commissioning beyond 2024)

Electricity Infrastructure InvestmentENTSO-E TYNDP 2014 as assessed and aggregated in the Agency’s Opinion No 01/2015 of 29.01.2015

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Project Cost Estimates (€bn)

Gas Infrastructure InvestmentENTSOG TYNDP 2013-2022

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Infrastructure Type FID Non-FID Total)

Transmission (incl. CS) 7.1 53.4 60.5

LNG Terminals 1.8 6.9 8.7

Storage Facilities 0.8 2.8 3.6

Total 9.7 63.1 72.8

Infrastructure Planning and Development

Third Energy Package (2009)

TYNDPs- Non-binding, … but reference for national NDPs

- EU dimension in Network Planning- TYNDPs updated every two years

TEN-E Regulation (2013)

Projects of Common Interest (PCI)

TEN-E Guidelines (2006)

Projects of Common/European Interest- Long list of approx. 550 projects- Selection based on political agreement- No revision of the list envisaged in 7 yrs

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.Objectives» Implementation of 12 priority corridors/areas …» necessary to meet EU’s energy and climate policy

goals by 2020 and beyond …» by providing policy and regulatory certainty …» through a stable and appropriate regulatory

framework …» to promote the necessary investments

TEN-E RegulationRegulation (EU) No 347/2013

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35

46

“Smart grids” and Electricity highways all MS concerned

Priority Electricity corridors

Baltic Energy Market Interconnection Plan in electricity

North South interconnections in Central and South Europe

Northen Seas Off-shore grid

North South interconnections in Western Europe

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109

87

Priority Gas corridors

North South gas interconnections in Central Eastern and South Europe

Southern Gas Corridor « SGC »

North South gas interconnections in Western Europe

Baltic Energy Market Interconnection Plan in gas

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Energy Infrastructure Investment“Connecting Europe – The energy infrastructure for tomorrow”

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Priority Corridor/Thematic AreaTotal

Investment Need (€ bn)

Estimated Investment Gap (€ bn)

North Seas O/S G 30 8

NSI West Elec. 30 6

NSI CEE-SEE Elec. 40 12

BEMIP Electricity 5 3

Smart Grids 40 20

Total Electricity 145 49 (34%)

NSI West Gas 20 1

NSI CEE-SEE Gas 26 5

Southern GC 22 8

BEMIP Gas 3 2

Total Gas 71 16 (23%)

Electricity Transmission Investment

Expected Investment Costs per country (€bn)(excluding smart grids)

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Source: ENTSO-E, 2012.

0

5

10

15

20

25

30

35

DE

UK FR IT

NO ES IE NL

PL

SE BE

CZ

PT

DK

AT FI LT RO LV EE

GR

LU SK SI BU

HR

HU CY

PCI Toolbox.Expedient permit granting procedures

» Priority status, including for EIA procedures» Competent authority to manage permitting» Time limits for procedures (3.5 years max)» Enhanced transparency and public participation

.Regulatory and other support measures» Cost-benefit analysis (CBA)» Cross-border cost allocation (CBCA):

“beneficiaries pay” principle» Risk-related incentives» Financial support (grants for studies and

financial instruments for all PCIs and grants for works for some)

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Importance of the Cost-Benefit Analysis

.The CBAs should represent the basis for:» Preparation of TYNDPs (including an

assessment of individual projects) by ENTSOs» PCI selection by Regional Groups (EC and

MSs)» CBCA decisions by NRAs (or ACER)» Decisions to extend grants for works support

under the Connecting Europe Facility.ENTSOs released draft CBA methodologies on

15 November 2013.Agency’s Opinions on 30 January 2014 (ENTSO-

E’s CBA) and 13 February 2014 (ENTSOG’s CBA)

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Projects of Common Interest (PCIs)

.General criteria:» Contribute to infrastructure priorities (corridors)» Economic, social, environmental viability» Involve at least two Member States» Have significant cross-border impact» Part of TYNDP (from the 2015 PCI list)

.Specific criteria:» Market integration (market, price convergence)» Security of supply» Sustainability» Competition (diversification – gas only)

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PCI Identification Process

Prepare

TYNDP for

E and G

ENTSOProject

Promoters

Submit

candidate

projects

Criteria

CBA for

mature

projects

NRAs

Check

criteria

application

and cross-

border

relevance

Regional Groups

Evaluate

Projects

Rank

Define

regional

lists

Opinion on

the draft

Regional

Lists and

cross-border

consistency

MSsEC

MSs and

EC decide

on

Regional

PCI Lists

EC

adopts PCI

list

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First Union PCI List.Approved by Member States on 24 Jul 2013.Adopted by the Commission on 14 Oct 2013

Commission Delegated Regulation (EU) No 1391/2013

ELECTRICITY PCIs Transm. Storage Sm. Grids Total

North Seas O/S G 24 3 27 (12)

NSI West Elec. 28 4 32 (21)

NSI CEE-SEE Elec. 57 4 61 (26)

BEMIP Electricity 10 2 12 (7)

Smart Grids 2 2 (2)

Total 119 13 2 134 (68)

GAS PCIs Pipelines LNG/CNG UGS Total

NSI West Gas 24 2 1 27 (20)

NSI CEE-SEE Gas 44 5 4 53 (23)

Southern GC 11 1 0 12 (4)

BEMIP Gas 8 3 1 12 (8)

Total 87 11 6 104 (55)19

Electricity and Smart Grids PCIs

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Gas PCIs

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PCIs involving Spain

PCI n. Description

2.6 Spain internal line between Santa Llogaia and Bescanó (ES) to increase capacity of the interconnection between Bescanó (ES) and Baixas (FR)

2.7 France - Spain interconnection between Aquitaine (FR) and the Basque country (ES)

2.8 Coordinated installation and operation of a phase-shift transformer in Arkale (ES) to increase capacity of the interconnection between Argia (FR) and Arkale (ES)

2.17 Portugal - Spain interconnection between Vila Fria - Vila do Conde – Recarei (PT) and Beariz - Fontefría (ES)

5.4 3rd interconnection point between Portugal and Spain

5.5 Eastern Axis Spain-France - interconnection point between Iberian Peninsula and France at Le Perthus– currently known as Midcat

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Main features of the Agency’s approach(Recommendation No 07/2013 of 25 September 2013)

.Economic, social and environmental costs and benefits of the projects to be taken into account.Compensation provided only if at least one hosting

country bears negative net benefit.Compensation should mainly aim at the “elimination

of the negative net benefit”.Compensation should be provided by countries to

which the project provides a “significant” positive net benefit. “significance threshold” equal to 10% of the sum of positive

net benefits of all net benefiting countries

Cross-border cost allocation (CBCA)

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Investment/CBCA Requests

Total investment requests (22) Electricity (5) Gas (17)

CBCA decisions taken by NRAs 3 10

CBCA decisions taken by ACER 0 1

CBCA decisions pending at ACER 1 0

Investment request still incomplete 0 1

Investment requests withdrawn 1 5

TOTAL 5 17

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PCI code Project name Status

4.2.1Interconnection between Kilingi-Nõmme (EE) and Riga CHP2 substation (LV)

Decision adopted by NRAs

4.2.2 Internal line between Harku and Sindi (EE)Decision adopted

by NRAs

4.4.1Internal line between Ventspils, Tume and Imanta (LV)

Decision adopted by NRAs

4.5.1LT part of interconnection between Alytus (LT) and LT/PL border

Referred to ACER

3.11.4 Internal line between Kocin and Mirovka (CZ) Withdrawn

Electricity CBCAsas of January 2015

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PCI code Project name Status

5.10Reverse flow interconnection on TENP pipeline in Germany

Decision adopted by NRAs

5.12Reverse flow interconnection on TENP pipeline to Eynatten (Germany)

Decision adopted by NRAs

5.18Reinforcement of the German network to reinforce interconnection capacities with Austria [Monaco pipeline phase I] (Haiming/ Burghausen-Finsing)

Decision adopted by NRAs

5.2Twinning of Southwest Scotland onshore system between Cluden and Brighouse Bay (UK)

Decision adopted by NRAs

5.3 (part)

Shannon pipeline connecting PCI Shannon LNG Terminal located between Tarbert and Ballylongford (IE) in Count Kerry to the national gas grid at Foynes

Decision adopted by NRAs

Gas CBCAs (1)as of January 2015

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PCI code Project name Status

5.7Reinforcement of the French network from South to North on the Bourgogne pipeline between Etrez and Voisines (France) [Val de Saone project]

Decision adopted by NRA

8.2.3Capacity enhancement of Klaipeda-Kiemenai pipeline in Lithuania

Decision adopted by NRA

8.2.4Modernisation & expansion of Incukalns Underground Gas Storage

Decision adopted by NRA

8.5 Gas Interconnection Poland-Lithuania (GIPL)Decision adopted

by ACER

6.1 (cluster)

Cluster Czech–Polish interconnection upgrade and related internal reinforcements in Western Poland, including 11 PCIs

Decision by NRAs appealed, but subsequently

confirmed

Gas CBCAs (2)as of January 2015

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PCI code Project name Status

6.2 (cluster)

Cluster Poland–Slovakia interconnection and related internal reinforcements in Eastern Poland, including 9 PCIs

Decision adopted by NRAs

6.3Slovakia–Hungary Gas Interconnection between Vel’ké Zlievce (SK) – Balassagyarmat border (SK/HU) – Vecsés (HU)

Withdrawn

7.1.5Gas pipeline from Bulgaria to Austria via Romania and Hungary

Incompleterequest

8.1.1Interconnector between Estonia and Finland “Balticconnector”

Withdrawn

8.1.2.1 Finngulf LNG Withdrawn

8.1.2.2 Paldiski LNG Withdrawn

8.1.2.3 Tallinn LNG Withdrawn

Gas CBCAs (3)as of January 2015

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Context.530 km pipeline with initial capacity

2.4 bcm/y, cost €558 m, net benefits €830 m.Aimed at ending isolation of Baltic

Member States from EU gas marketand at diversifying gas supply

GIPL CBCA Decision (1)

Process

.1 May: no NRA decision within 6 months deadline, investment request referred to ACER (Art. 12(6) TEN-E Regulation).May - July: consultations with NRAs and project

promoters.11 August: Decision No 01/2014 adopted and notified

to parties concerned. Decision published on 29 August

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Assessment.Admissibility, completeness

and maturity.Costs and benefits by Member

State

GIPL CBCA Decision (2)

Cross-Border Cost Allocation(ACER Recommendation No 07/2013 of 25 September 2013)

.Compensation payable upon project commissioning

GIPL Costs and Benefits (€m)

0

100

200

300

400

500

600

700

800

PL LT LV EE

Benefits

Costs

Payer TSO Recipient TSOCompensation Payment (€m)

AB Amber Grid (LT) Gaz-System S.A. (PL) 54.9 (64.0%)

JSC Latvijas Gāze (LV) Gaz-System S.A. (PL) 29.4 (34.3%)

AS EG Vorguteenus (EE) Gaz-System S.A. (PL) 1.5 (1.7%)

Total Compensation 85.8 (100%)

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CBCA Decisions: Main Features

.The vast majority of the CBCA decisions are on projects located in one country in which the relevant TSO will bear 100% of the costs.In half of the cases the NRAs accepted the CBCA

proposed by the Project Promoters.In all but one case, the NRAs have agreed not to

allocate costs to non-hosting beneficiaries .In the two cases where more than 7% of CAPEX

were proposed to be allocated to any non-hosting beneficiary, the concerned NRAs failed to reach an agreement. GIPL: ACER Decision 11 August 2014. LitPol: referred to ACER on 9 December 2014

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0

100

200

300

400

Work

Study

Type ofaction

€million

Connecting Europe Facility

.€ 5.85 bn of financial support to energy PCIs (2014-20)

.First round (21 November 2014): € 647 million

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CEF Funding: First Round

Corr./Area

PCI NameAction Type

€ m

BEMIP

GasPCI Poland-Lithuania interconnection Works 306.0

BEMIP

Elec

Interconnection between Kilingi-Nömme (EE)

and Riga CHP2Works 112.3

BEMIP

Elec

Internal line between Ventspils, Tume and

Imanta (LV)Works 55.1

NSI West

Gas

PCI Twinning of Southwest Scotland onshore

system between Cluden and Brighouse Bay (UK)Works 31.7

A G North Atlantic Green Zone Project (Ireland, UK) Works 31.7

NSOG PCI Norway-United Kingdom interconnection Study 31.3

BEMIP

Gas

Capacity enhancement of Klaipeda-Kiemenai

pipeline in LithuaniaWorks 27.6

Others 51.5

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Working towards the Second PCI List

.Expected to be adopted in Autumn 2015

.More robust CBA methodologies available

.Cross-border Cost Allocation.Application of the .“elimination of the negative net benefit” criterion.“significance threshold” criterion

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Thank you for your

attention

Thank youfor your attention

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www.acer.europa.eu