COMMISSION STAFF WORKING PAPER Executive Summary of Impact Assessment
Date: 2011-10-19
Institutions: European Commission
Subjects: energy grid, financing method, gas supply, oil pipeline, project of common interest, trans-European network

EUROPEAN COMMISSION 

Brussels, 19.10.2011 
SEC(2011) 1234 final 

COMMISSION STAFF WORKING PAPER 

Executive Summary of Impact Assessment 

Accompanying the document 

REGULATION OF THE EUROPEAN PARLIAMENT AND OF THE COUNCIL 

on guidelines for the implementation of European energy infrastructure priorities 
repealing Decision No 1364/2006/EC 

{COM(2011) 658 final} 
{SEC(2011) 1233 final} 

 
 
 
 
  
 
 
 
1)  Problem definition 
The  Commission  Communication  on  energy  infrastructure  priorities  for  2020  and  beyond1 
confirmed the need to revise the TEN-E policy and financing framework, identified priority 
corridors  and  areas  to  be  implemented  by  2020  and  proposed  a  new  method  to  identify 
projects  of  common  interest  (PCIs)  to  implement  these  priorities.  The  supporting  impact 
assessment  highlighted  the  scale  change  in  investment  volumes  and  delivery  times  with 
investments worth about EUR 140 bn in electricity networks of European significance, about 
EUR  70  bn  in  gas  networks,  as  well  as  EUR  2.5  bn  for  CO2  transport  infrastructure  to  be 
delivered by 2020. It also identified obstacles with regard to permit granting. 

The  problem  analysis  is  further  refined  by  this  complementary  impact  assessment 
accompanying the legislative proposal on energy infrastructures. 

Problems with permit granting procedures and public opposition 

They  are  amongst  the  major  reasons  impeding  the  timely  implementation  of  energy 
infrastructure projects, in particular of electricity overhead lines. Administrative procedures 
are complex and  inefficient, notably with regard to the organisation of procedures and the 
competences  of  involved  parties,  remain  fragmented  and  lack  clear  time  limits  and  upfront 
planning  and  coordination  of  the  implementation  of  EU  environmental  legislation2.  The 
opposition of affected population relates to the unclarity about the added value of a project, 
real or perceived impacts on the environment and landscape, health and safety concerns, late 
and insufficient involvement of the public and stakeholders. 

Problems related to the regulatory framework 

The  existing  framework  is  not  geared  towards  delivering  the  identified  European 
infrastructure  priorities.  Tariff  setting  and  regulatory  incentives  remains  nationally  focussed 
on short-term cost efficiency without taking into account the corresponding long-term Europe 
2020 investment challenge. Key decisions on cross-border projects are taken on the basis of 
national  priorities  only.  This  is  in  particular  a  problem,  where  benefits  and  costs  are 
asymmetric  among  the  Member  States  with  cross-border  investment  approvals  resulting  in 
complex or delayed processes. 

Problems related to financing 

In  view  of  the  scale  change  in  investment  volumes  and  the  urgency  to  deliver  the  energy 
infrastructure  priorities  until  2020  network  operators  are  to  face  significant  financing 
challenges.  The  financial  crisis  puts  constraints  on  companies  to  raise  debt  capital  at 
favourable  terms,  while  country  risks  go  up  and  credit  ratings  down.  Current  regulation  or 
ownership  structures  make  it  difficult  for  TSOs  to  effectively  attract  new  institutional 
investors. At the EU level, the existing TEN-E programme with its limited focus on grants for 
feasibility studies and lack of adequate risk mitigation instruments is not suitable to facilitate 
access  of  to  debt/equity  finance  and  to  leverage  public  and  private  investment  in  energy 
networks for the future. 

2)  Analysis of subsidiarity and EU added value 

The EU's competence in the area of energy is enshrined in the Treaty on the Functioning of 
the  European  Union  (TFEU),  in  particular  in  the  energy  Article  194.  Energy  networks  are 
covered under Article 170 and 171 TFEU. Concerning permit granting, Article 171-2 TFEU 

1  
2  

COM/2010/0677 
Directives 2001/42/EC, 85/337/EEC, 92/43/EEC, 2009/147/EC, 2000/60/EC 

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stipulates  that  "Member  States  shall,  in  liaison  with  the  Commission,  coordinate  among 
themselves the policies pursued at national level which may have a significant impact on the 
achievement  of  the  objectives  referred  to  in  Article  170".  Moreover,  Article  194-2  TFEU 
allows the EU to establish the measures necessary to promote the interconnection of energy 
networks. 

3)  Objectives of EU initiative 

The  general  objective  of  this  initiative  is  to  ensure  sufficient  and  timely  development  of 
energy  infrastructures  across  the  EU  and  in  its  neighbourhood  in  order  to  meet  the  EU's 
energy  policy  objectives  of  market  integration,  security  of  supply  and  sustainability.  The 
initiative aims specifically at implementing, by 2020, the trans-European energy infrastructure 
priority corridors by: 

interest  and 

−  streamlining permit granting procedures to significantly reduce their duration for projects 
the 

of  common 
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; 

involvement  and  acceptance  for 

increase  public 

− 

−  providing eligibility rules for Union financial aid in the form of market-based and direct 

EU financial support to projects of common interest. 

This initiative is to replace the existing TEN-E guidelines and complements the proposal for a 
Regulation  establishing  the  “Connecting  Europe  Facility”  (CEF)  covering  all  infrastructure 
sectors (energy, transport, telecommunications) and setting common rules for granting Union 
aid in form of both grants and new financial instruments. 

4)  Policy options 

The following policy options are discussed for the three policy areas covering the problems 
identified: 

Policy area A: Permit granting, stakeholder involvement and compensation 
Option A.0 

Business as usual 

Option A.1 

Option A.2 

Establishment of a regime of Common European Interest 

Organisation and limitation in time of the permit granting process 

Element A.2.1: Organisation of the permit granting process 

Suboption 
A.2.1.a 

A.2.1.b 

A.2.1.c 

Leading Authority without decision-making power at national level 
(“light one-stop shop”) 

Leading Authority with decision-making power (“full one-stop 
shop”) 

Cross-border Leading Authority with European Authority of Last 
Resort and European permit granting procedure 

Element A.2.2: Limitation in time of the permit granting process 
A.2.2.a 

Requirement for Member States to establish time limits for each 
individual PCI 
Legally-binding time limits established by stakeholders in the 
framework of regional cooperation 
Legally-binding time limit established by the EU legislative act 

A.2.2.b 

A.2.2.c 

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Option A.3 

Establishment of a regime of Common European Interest and organisation and 
limitation in time of the permit granting process 

Policy area B: Regulation 
Option B.0 

Business as usual 

Option B.1 

Option B.2 

Cost allocation 
B.1.a 

B.1.b 

B.1.c 

EU transmission tariff 

Ex-ante cost allocation 

Ex-ante cost allocation with ex-post adjustment 

Investment incentives 
B.2.a 

Risk-related incentives for PCIs 

B.2.b 

Penalty and enforcement action for PCIs 

Option B.3 

Ex-ante cost allocation and risk-related incentives for PCIs 

Policy area C: Financing 
Option C.0 

Business as usual 

Option C.1 

Option C.2 

Option C.3 

Option C.4 

Risk sharing instruments 

Risk capital instruments 

Grant support for project construction 

Combination of grants, risk sharing and risk capital instruments 

Following a preliminary analysis, the suboptions A.2.1.a, A.2.1.c, A.2.2.a, A.2.2.b and B.1.a 
were discarded as the related measures were considered to be ineffective or disproportionate 
compared to their impact. 

5)  Assessment of impacts 

Under  business  as  usual  (BAU)  persistent  delays  of  new  infrastructure  projects,  notably  in 
electricity,  will  persist  due  to  the  financing,  regulatory  and  permit  granting  problems. 
European priorities would not be addressed sufficiently by the market operators and Member 
States.  The  Commission  estimates  that  a  significant  share  of  the  needed  investment  of 
approximately  EUR  200  bn  until  2020  will  not  be  delivered  on  time  under  the  existing 
framework, jeopardizing the EU's ability to meet its energy and climate policy objectives by 
2020. Lack of interconnections will reduce opportunities for system optimisation, increase the 
risk of disruption and trigger additional costly back-up and balancing generation investments. 
Assuming their mere continuation, TEN-E and other EU funds would not be able to make a 
significant impact on the investment challenge. 

5.1. Permit granting 

OPTION A.1: Establishment of a regime of common European interest 

This  option  is  expected  to  have  intermediate  positive  effects  by  contributing  to  the  timely 
delivery  of  more  projects  than  under  BAU.  Citizens  would  be  potentially  affected  in  the 
limited  opportunity  to  question  the  necessity  of  a  project  in  the  permit  granting  procedures. 
The  impacts  on  the  environment  are  not  expected  to  increase  greatly  under  the  new  regime 
vis-à-vis  the  current  one,  given  the  assumption  of  earlier  completion  of  projects.  With 
successful  project  delivery  strong  positive  effects  on  climate  objectives  are  expected. 
Investors'  certainty  will  be  increased  and  positively  contribute  to  the  projects'  viability. 
Regarding  administrative  costs,  the  reduction  of  resources  needed  for  processing  a  given 

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number  of  projects  is  estimated  at  about  3%  on  the  promoters'  side,  and  12%  on  the 
authorities' side. 

OPTION  A.2:  Rules  on  the  organisation  and  duration  of  the  permit  granting  process 
(suboptions A.2.1b "full one-stop shop" and A.2.2.c "time limit of 4 years") 

The impact of this option is expected to be strong and positive, allowing a large majority of 
projects  to  be  delivered  on  time.  The  number  of  projects  realised  on  time  would  be  higher 
than with option A.1, but not all PCIs would get the priority. The option would significantly 
improve conditions for citizens to participate in the decision-making process as the Leading 
Authority and/or promoters would need to ensure early consultation. Compliance costs would 
be higher than under option A.1. Positive impacts on administrative costs are also expected to 
be more significant under this policy option, with 26% of administrative cost savings. 

OPTION A.3 Establishment of a regime of common European interest and rules on the 
organisation and duration of the permit granting process 

The overall impact of this policy option, which combines the impacts of options A.1 and A.2, 
is considered to be the most positive of all options, as it would lead to the on-time completion 
of almost all the needed projects 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 would be 
completed, while administrative cost savings would amount to 31%. 

Resulting from this analysis, policy option A.3 is the preferred option. 

4.2. Regulatory measures 

OPTION B.1: Cost allocation 

Ex  ante  cost  allocation  would  enable  certain  investments,  for  which  no  viable  cost  sharing 
would  be  possible  under  the  BAU  with  distributional  and  social  impacts  on  market 
participants  and  final  consumers.  Limited  administrative  impacts  are  expected  with  the 
requirement for NRAs to cooperate with others and TSOs from different Member States. 

The impacts of ex ante cost allocation with ex post adjustment possibility would only differ 
in  the  final  economic  and  distributional  impacts.  While  it  would  render  more  precise  the 
allocation,  it  would  create  a  downside  revenue  risk  for  TSOs  and  external  investors.  The 
implementation could trigger additional administrative costs, as TSOs and NRAs could have 
to re-evaluate benefits and renegotiate cost allocation.  

As a result, suboption B.1.b is the preferred suboption. 

OPTION B.2: Investment incentives 

Incentives  for  PCIs  with  higher  risks  would  create  a  positive  economic  impact  for 
infrastructure  delivery  by  recognising  the  challenges  posed  by  certain  investments.  The 
financial impact of such an adder on network tariffs would remain very limited, given the low 
expected  volume  of  eligible  investments,  the  limited  administrative  impact  and  the  overall 
low share of transmission costs in the final energy prices.  

Penalties  and  enforcement  action  for  PCIs  by  forcing  TSOs  to  deliver  agreed  priority 
projects  could  potentially  increase  social  welfare  at  EU  level.  Such  measures would require 
conferring  new  powers  to  NRAs.  The  measures  could  also  trigger  strong  opposition  from 
TSOs, as the economic impact could be negative, either because of reduced revenues through 

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the penalties in case of non delivery, or because of additional uncovered risks taken up in case 
of project delivery. The added value of such a compulsory scheme compared to an incentive-
based scheme seems therefore limited.  

As a result, suboption B.2.a is the preferred suboption. 

OPTION B.3: Ex-ante cost allocation and risk-related incentives for PCIs 

This  option  would  be  the  preferred  option,  as  it  would  combine  the  positive  impacts  of 
both preferred suboptions and allow covering the largest number of PCIs. 

4.2. Financing 

OPTION C.1: Risk sharing instruments 

Introduction of risk sharing instruments  would  improve  access  to capital and new financing 
sources  and  risk  capital  (e.g.  bonds  or  guarantees)  at  more  adapted  terms,  improving  the 
commercial viability of projects towards a positive investment decision. Such support would 
come at a lower expense to the public budget than direct grants with a high multiplying effect 
(up  to  25).  This  option  requires  cooperation  with  financial  institutions  which  lowers  the 
administrative burden of the Commission.  

OPTION C.2: Risk capital instruments 

Provision  of  equity  would  result  in  a  very  positive  impact  on  the  financial  capability  and 
attraction of new investors. By assisting projects in their early phase, the pipeline of mature 
projects would be accelerated, especially if they are more complex, innovative and involve a 
multitude  of  stakeholders.  A  high  leverage  of  the  EU  budget  could  be  expected  with  a 
multiplying factor between 1 and 10. If investments are outsourced to a financial institution, 
this will create substantial resource needs within these financial institutions. 

OPTION C.3: Grant support to project construction 

Grants would provide large positive economic and social impacts, supporting the delivery of 
PCIs which would not be developed by market forces or regulation alone, while mitigating the 
impact on network tariffs. Grant intervention would target those PCIs which are particularly 
vital  for  the  achievement  of  the  2020  energy  and  climate  policy  objectives  and  the  internal 
market  and  security  of  supply  of  the  Union.  The  administrative  impact  will  be  directly 
correlated with the number of projects and the EU budget available to support them. 

OPTION C.4: Combination of grants, risk sharing and risk capital instruments 

As this option combines options C.1, C.2 and C.3, it would cumulate the positive impacts of 
the  individual  options.  But  providing  a  toolbox  of  market-based  instruments  (C.1  and  C.2) 
and direct financial support (C.3) will also lead to synergies and efficiency gains, as it will be 
possible to flexibly provide the most cost-effective solution for specific project risks. 

As a result, option C.4 is the preferred one. It reflects the proposals concerning the future 
EU  budget  as  made  by  the  European  Commission  on  29  June  2011  and  fully  reflects  the 
proposed Connecting Europe Facility. 

6)  Comparison of options and final conclusions of the impact assessment 

As  a  result  of  the  analysis,  the  impact  assessment  presents  a  set  of  preferred  options:  1) 
establishment of a regime of common European interest, full one-stop shop and time limit of 

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4  years  for  projects  of  common  interest;  2)  ex  ante  cross-border  cost  allocation  and  risk-
specific  incentives  for  PCIs;  and  3)  a  combination  of  grants,  risk  sharing  and  risk  capital 
instruments. None of them alone is capable of delivering the necessary investments which 
calls for the coordination of policy action for the preferred options. 

Overall,  the  negative  impacts  on  the  environment,  individual  citizens  and  tariffs  will  be 
largely  outweighed  by  the  benefits  expected  from  the  completion  of  the  trans-European 
networks. This will allow the EU to achieve the energy and climate targets agreed at EU level, 
notably the 20% renewables share and the 20% GHG emission reduction by 2020. Adequate 
infrastructure will also facilitate the full integration of the internal energy market in electricity 
and  gas,  thereby  creating  new  opportunities  for  system  optimisation  and  efficiency, 
competition and choice for the final consumer and hence exerting an overall lowering effect 
on  energy  prices.  The  set  of  measures  will  also  make  our  energy  supplies  more  secure,  by 
providing  diversification  of  sources,  routes  and  counterparts  and  by  increasing  system 
stability, but also by improving the security and climate resilience of our networks.  

All  this  will  contribute  to  the  significant  positive  overall  effect  on  GDP  and  employment 
already identified in the 2010 impact assessment (+0.42% of growth and 410,000 additional 
jobs compared to the baseline scenario over the period 2011-2020).  

The table below summarises the impacts of all options and suboptions. 

Options 

Economic and social 
impacts 

Environmental 
impacts 

Other impacts 

A.1 

A.2 

A.3 

B.1 

B.2 

B.3 

C.1 

C.2 

C.3 

C.4 

+ 

++ 

+++ 

++ 

++ 

+++ 

+++ 

++ 

+++ 

+++ 

= 

+ 

++ 

+ 

+ 

++ 

+ 

+ 

++ 

++ 

Legal feasibility: - 

Legal feasibility: - 

Legal feasibility: - 

Administrative: - 

Tariff impact: - 

Administrative and tariff impact: - 

Administrative: - 

Administrative: - 

Administrative: - 

Tariff: + 

A.3 & B.3 & C.4  +++ 

+++ 

Legal, administrative: - 

Tariff: + 

Summary  of  impacts  (=  equivalent  to  baseline;  +  to  +++  improvement  compared  to  baseline;  -  to  -  -  - 
worsening compared to baseline) 

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