The Commission's energy infrastructure package
European Commission - MEMO/11/710 19/10/2011
Brussels, 19 October 2011
The Commission's energy infrastructure package
Why do we need new pipelines and electricity grids?
Energy infrastructure – pipelines, electricity grids – are key to all our climate and energy goals.
To increase the share of renewable energy to 20 percent of our final energy consumption by 2020, we need to bring the energy generated by wind parks and solar power stations to the consumers. For this, we need a more integrated and powerful network than exists today.
To save 20 percent of our estimated energy consumption in 2020 via technology, we need smart meters and smart grids, which allow consumers to control exactly their power consumption and to save money and energy by changing their habits.
To secure gas supply also in the event of a crisis, we need to diversify our sources and new pipelines which bring the gas from new regions directly to Europe.
To have a functioning internal market with competition and fair and competitive prizes, we need the interconnections between member states, allowing companies to offer their energy in all member states.
How much investment is needed in the EU?
In the next ten years, around Euro 200 billion (bn) are needed for the construction of gas pipelines and electricity grids. More specifically: € 140 bn for high-voltage electricity transmission systems, storage and smart grid applications, €70 bn for gas pipelines, storage, Liquefied Natural Gas (LNG) terminals and reverse flow infrastructure (to allow gas to flow in both directions), and € 2.5 bn for CO2 carbon dioxide transport infrastructure.
This means that current investment levels have to be increased considerably. Compared to the period 2000 to 2010, this would result in a 30% increase in investments in the gas sector, and a 100% increase in the electricity sector compared to the same period before.
Why is there a need for the EU to become active?
It is estimated that the investments needed to achieve the 2020 goals will not be made or not be made on time, mainly because of two reasons:
1. Building permits take too long to obtain. Currently, it can take more than 10 years to build an overhead electricity line.
2. Not all the investments needed are commercially viable. Some electricity lines and gas pipelines may not be commercially viable because the market alone does not offer a good return on investment. It makes a difference if you plan a gas pipeline for a region where annual gas consumption is only about 10bcm, as in the case of the three Baltic States and Finland or for a country such as Germany where annual consumption is about 80 bcm. Still, these countries should be linked to the European energy market to foster competition and fair prices for the consumer and guarantee that different gas suppliers can step in, in the event of a gas crisis.
In some cases, two countries are concerned: one has the costs, but the other the benefits. This is the case, when compressors are installed to make gas flow in two directions to help out the neighbouring country in the event of a gas crisis or when electricity lines are built in one country to accommodate excess wind generation from another country.
What is new?
The Commission proposes to select a number of projects of "Common Interest" which are important to reach its climate and energy goals. Projects having obtained this label have two advantages:
Did the EU finance energy infrastructure projects before?
This is the very first time that the EU is co-financing the construction of large energy infrastructure from its regular budget. In the past financial period (2007-2013), the EU financed mainly feasibility studies with a total amount of Euro 155 million. Euro 3.85 billion were invested into energy projects under the European Energy Plan for Recovery, set up in the context of the economic and financial crisis. These were one-off amounts.
Which are the selection criteria for projects of common interest?
They should display economic, social and environmental viability and involve at least two Member States. Additional sector-specific criteria will ensure that projects notably strengthen security of supply, enable market integration, foster competition, ensure system flexibility, and allow transmission of renewable generation to consumption centres and storage sites.
How are the projects of common interest selected?
The selection is done in a two stage process:
1. The Regional level: The project promoter will submit its proposal to the relevant regional group. These groups bringing together Member States, regulators, transmission system operators and project promoters draw up their proposed list.
2. The EU Level: The final decision on the Union-wide list of projects of common interest will be taken by the Commission. The first list will be adopted by 31 July 2013 and then updated every two years.
How much funding can a project get?
The EU will co-finance up to 50% of the costs for studies and works and in exceptional circumstances up to 80% for projects that are crucial for regional or EU-wide security of supply or solidarity, require innovative solutions or have cross-sector synergies.
Do all projects of common interest get automatically the EU funding?
No. Once they have the status, they can apply for EU funding. To be considered for grants for works, they will have to prove that they are commercially not viable. Being selected "project of common interest" is no guarantee for EU funding. It does however mean that the project will benefit from the faster permit granting procedures and specific regulatory treatment foreseen for these projects.
Can you give examples of projects financed in the future?
The EU could finance
What new instruments does the financial portfolio include for energy infrastructure projects?
The instruments will include equity instruments (e.g. investment funds) and risk-sharing instruments (e.g. loans and guarantees, and notably project bonds), which create a bigger multiplier effect than grants. By combining various forms of support, it will be possible to tailor the financial assistance provided to the particular needs of a project. Risk-sharing instruments are likely to be suitable for larger project-financed investments, such as big gas import pipelines involving numerous shareholders. Highly innovative projects with a significant technological risk, notably in offshore transmission, might require grant support to get off the ground.
How exactly would the permit granting procedure improve?
The completion of energy infrastructure projects, particularly in the electricity sector, can take more than ten years. This is mainly due to long and complex permit granting procedures which take up about 2/3 of this time. Projects of European interest will benefit from faster permit procedure which will not exceed 3 years. In addition, project developers will not have to address several authorities for permits but only one single national competent authority coordinating the permit granting process and issuing a comprehensive decision.
The proposed procedure will cut administrative costs for a given project throughout Europe by on average about 30% on the promoters' side and about 45% on the authorities' side.
If permits are given in 3 years, does that mean that citizens will not be heard?
The new rules improve the possibility of citizens to get involved in a project and their voice to be heard. The Regulation says that citizens have to be involved at a very early stage of the permit procedure. The regulation says that this needs to be done BEFORE the project developer submits his formal application for the permit. In this way, citizens concerns can still be taken into account in the planning phase of the project. In many Member States it is currently practice that public consultation is held AFTER the submission of the file to the authority.
Will the EU environmental standards, and in particular the protection of Natura 2000 sites be respected?
Environmental standards, in particular standards set by the Natura 2000 directive, will be fully respected, and in particular the need to carry out appropriate impact assessments and to minimise the impact on protected habitats. In addition, the new system will contribute to improve the quality of these assessments, as environmental concerns will, through better public and stakeholder involvement, be identified and taken into account at an earlier stage of the process.
When it comes to the preservation of biodiversity and the environment, existing standards will be maintained. Where there are crucial projects that need to be built despite adverse impacts on a site, it will be ensured that the least harmful route is granted the authorisation, that there are no alternative routes, and that the necessary compensation measures are taken, as foreseen in the Natura 2000 Directive.
What is the timeline for the adoption of the draft regulation and the related process of call for proposals?
The Regulation should be adopted by the European Parliament and the Council by the end of 2012 for an entry into force at the beginning of 2013. This will leave enough time for the establishment of the first Union-wide list of projects of common interest, in view of their possible financing under the CEF, which will enter into force in 2014.