COMMISSION STAFF WORKING DOCUMENT Implementation of TEN-E, EEPR and PCI Projects Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Progress towards completing the Internal Energy Market
Date: 2014-10-13
Institutions: European Commission
Subjects: EU financing, cost-benefit analysis, electricity supply, energy grid, gas, market access, project of common interest, trans-European network













EUR-Lex - 52014SC0314 - EN











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52014SC0314

COMMISSION STAFF WORKING DOCUMENT Implementation of TEN-E, EEPR and PCI Projects Accompanying the document COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS Progress towards completing the Internal Energy Market /* SWD/2014/0314 final */









1.         LEGAL
BASIS AND POLICY CONTEXT OF EU ACTION ON TRANS-EUROPEAN ENERGY NETWORKS
This
Commission Staff Working Document is part of the package of the Communication from
the Commission to the European Parliament, the Council, the European Economic
and Social Committee and the Committee of the Regions "Main Challenges for
Completing the Internal Energy Market". It aims at giving an overview of
the progress made under the main EU programs that have been providing financial
aid or a range of regulatory benefits to energy infrastructure projects: the
Trans-European Energy Networks (TEN-E), the European Energy Program for
Recovery (EEPR) and the Projects of Common Interest (PCI) exercise.
The
establishment and development of trans-European networks, including in the
energy sector, are set out in Article 154 of the Treaty establishing the
European Community. Following the legislation adopted in 1996 and 2003
respectively, the main EU instruments on trans-European energy networks (TEN-E)
were adopted in 2006 and 2007. These were Decision 1364/2006/EC laying down
guidelines for TEN-E and repealing Decision No 391/1996/EC and Decision No
1229/2003/EC, followed by Regulation 680/2007/EC (“TEN Financial Regulation”)
laying down general rules for the granting of Community financial aid in the
field of TEN-E. The aim of the guidelines was to list and rank, according to
the objectives and priorities laid down, projects eligible for Community
assistance. The objectives included the effective operation of the internal
energy market, ensuring the security and diversification of supply,
strengthening territorial cohesion in the energy sector of the European Union
and promoting sustainable development. The projects were ranked in three
categories: 
·       
Projects of Common Interest –
which related to the electricity and gas networks meeting the objectives and
priorities laid down in the Decision; they had to display potential economic
viability (assessed by means of a cost-benefit analysis in terms of the
environment, the security of supply and territorial cohesion);
·       
Priority Projects
– selected from among the projects of common interest and had to have a
significant impact on the proper functioning of the internal market, on the
security of supply and/or the use of renewable energy sources;
·       
Projects of European Interest
– priority projects of a cross-border nature or
which had a significant impact on cross-border transmission capacity; they had
priority for the granting of Community funding under the TEN-E budget and
particular attention was given to their funding under other Community budgets.
The
budget allocated to the TEN-E (around €20 million per year overall) was mainly
intended for financing feasibility studies. A total number of 111
projects were financed under the TEN-E Regulation, between 2007 and 2013 (€143
million). 
In
addition, in 2009 the European Energy Programme for Recovery was adopted with
the specific aim to make energy supplies more reliable and help reduce
greenhouse emissions, while simultaneously boosting Europe's economic recovery
after the gas crisis in Ukraine. Under this program, grants for works
were awarded to selected, highly strategic projects covering three broad
fields: gas and electricity infrastructure projects, offshore wind projects and
carbon capture and storage projects. Most of the budget available was allocated
to 59 promoters and 61 projects in the following sub-programmes: gas
infrastructure (€1363 million); electricity infrastructure (€904 million);
offshore wind energy (€565 million); and carbon capture and storage (€1000
million). 
In
2013, after 6 years of implementation, the TEN-E regulation was fundamentally
revised and replaced by Regulation 347/2013 on
guidelines for trans-European energy infrastructure (“TEN-E Guidelines”). Under
this regulation, a revolutionarily new approach was established, aimed at
identifying Projects of Common Interest in 12 energy infrastructure priority
corridors and areas. The new concept of project of common interest covers lines,
pipelines, facilities, equipment or installations falling under the energy
infrastructure categories and is defined by certain criteria: it is necessary
for at least one of the energy infrastructure priority corridors and areas; the
potential overall benefits of the project outweigh its costs, including in the
longer term; and the project has to either involve at least two Member States by
directly crossing the border of two or more Member States, be located on the
territory of one Member State and have a significant cross-border impact or
cross the border of at least one Member State and a European Economic Area
country.
Regarding
its reporting obligations covering the above mentioned programs, the Commission
shall first of all report to the European Parliament, the Council, the European
Economic and Social Committee and the Committee of the Regions on the
implementation of the Trans-European Energy Networks every two years (pursuant
to Article 17 of Regulation 680/2007/EC and Articles 9(2) and 15 of Decision
1364/2006/EC). The previous TEN-E implementation report covered the period
2007-2009. 
The
present report covers the period 2010-2014 until the repeal of the TEN-E
Guidelines and TEN Financial Regulation. The report will focus on those
projects which are considered to be Projects of European Interest – which are
of cross-border nature or have significant impact on cross-border transmission
capacity – and priority projects – i.e. projects with high European
significance that are established along the main corridors known as priority
axes and have been granted Community financial aid between 2010 and 2014. This report
on the implementation of the TEN-E projects highlights the progress in achieving
the original objectives of the TEN-E legislation. It also describes which
priorities have remained constant, or, on the contrary, have been adapted to
the changing realities of the energy environment.
Secondly,
this report also informs on the implementation of Projects of Common Interest
(PCI) as identified under the TEN-E Guidelines, and the progress that has been
made in the energy infrastructure sector in view of the Internal Energy Market
completion. This report aims to establish early on in the process the main
difficulties that PCI's may encounter. It identifies possible solutions in
order to ensure their timely implementation and to avoid any obstacles and
delays that might jeopardize the achievement of their objectives. It will feed
into the comprehensive report on the implementation of projects of common
interest that the Commission will publish in 2017, pursuant to Article 17 of the
TEN-E Guidelines. Finally, the report  includes an overview on the
implementation of those projects that received funding under the European
Energy Programme for Recovery (EEPR) and that were subsequently granted PCI
status (for one section or for the whole project).
The
data in this report take into account the information provided by project
promoters during the monitoring process for the TEN-E projects, the information
that was submitted by project promoters in questionnaires collected on the
implementation of the PCIs during the first quarter of 2014 and a common
overview regarding the main potential difficulties or those already encountered
by projects from each priority corridor. 
Infrastructure
is at the heart of European energy policy, as its development and modernization
is a prerequisite for achieving competitiveness, security of supply and
sustainability. In the long term, the Union's energy security is inseparable
from and significantly fostered by its need to move to a competitive,
low-carbon economy which reduces the use of imported fossil fuels, in line with
its 2030 policy framework on climate and energy and also fully consistent with
its competitiveness and industrial policy objectives. The lessons learnt from
the application of current policies as well as from the effectiveness of the
Union's response to previous energy supply crises, as the ones from the winters
of 2006 and 2009, showed that the key to improved energy security lies first in
a more collective approach through a functioning internal market and greater
cooperation at regional and European levels, in particular for coordinating
network developments and opening up markets.
As
pointed out in its EU Energy Security Strategy (EESS), published in May 2014,
the Commission estimates that around €200 billion are required up to 2020 in
order to cover the necessary significant development of energy transmission
infrastructure, in particular cross-border interconnections between Member
States, that would contribute to achieving a truly integrated and competitive
internal energy market.
The
gas crisis of 2009 showed that, in light of security threats, an integrated
internal energy market should rely on diversified gas supplies. Moreover, taking
into account the evolution of the current events in Ukraine and the potential
for disruption to energy supplies, an increased focus was put on the short term
on those Member States that are dependent on one single gas supplier. In the
electricity sector, security can be achieved provided that grids are available
to transmit supplies from one place to the other. The integration of markets in
the Nordic countries into NordPool and the steps that have been taken towards
the coupling of electricity markets in several areas represent crucial
developments. Nevertheless, the development of competitive and well-integrated
markets in the Baltic States and the South East of Europe lags behind,
depriving those regions of the related security of supply advantages.
In
these circumstances, 27 projects in gas and 6 in electricity were identified as
critical for EU's energy security in the short and medium terms, according to
the Annex 2 of the EU Energy Security Strategy because their implementation is
expected to enhance diversification of supply possibilities and solidarity in
the most vulnerable parts of Europe. Most of these projects have a PCI status
under the TEN-E Guidelines, with different actions related to feasibility and
environmental studies having received financial aid under TEN-E, while three
others have been supported under the EEPR. Most of these projects are located
in Central and South-East Europe, as well as in the Baltic States. Other
projects will help to end the energy isolation of Portugal and Spain.
Beyond
the advantages related to the security of supply aspects, market integration
will also entail mechanisms promoting demand response and rewarding
flexibility, protecting vulnerable customers etc. Moreover, it will ensure the
convergence of energy prices, under the circumstances where, while wholesale
prices for both electricity and gas have significantly dropped over the last
years, retail prices have increased significantly, due to taxes and levies. The
implementation of the Regulation No 1227/2011 of 25 October 2011 on Energy
Market Integrity and Transparency (REMIT) is of key importance in order to
prevent market abuse.  
A
truly integrated and competitive internal energy market needs significant
development of the energy transmission infrastructure, in particular
cross-border interconnections between Member States. In March 2014, the
European Council conclusions called for "Speedy implementation of all the
measures to meet the target of achieving interconnection of at least 10% of
their installed electricity production capacity for all member States". Taking
into account the importance of interconnectors for strengthening security of
supply and the need to facilitate cross-border trade, the Commission proposed
the extension of the current target to 15% by 2030 while taking into account
the cost aspects and the potential of commercial exchanges in the relevant
regions. 
Lessons
from recent years showed that decisive steps have been taken in terms of
increasing cross-border capacity through development of new infrastructure and
enhancement of existing ones. Thus, the progress that has been made up to date
in relation to the Day-Ahead Market coupling in electricity can be considered a
successful achievement. In gas, an achievement of similar impact is the
establishment of the PRISMA platform in 2013, where interconnection capacity
for the networks of 28 TSOs responsible for transporting 70% of Europe's gas is auctioned in a transparent and uniform manner.
As
pointed out above, the Projects of European Interest selected under the TEN-E had
to have a cross-border nature or a significant impact on cross-border transmission
capacity. At the same time, the projects that acquire PCI status under the
TEN-E Guidelines have to prove, as a prerequisite, a significant cross-border
impact. All these projects have been contributing and will continue to make a
relevant difference in the upcoming years with regards to the interconnection
of energy markets in the European Union and, eventually, to the achievement of
the Internal Energy Market.
2.
PROGRESS MADE IN THE IMPLEMENTATION OF TEN-E PROJECTS 2010-2014
At
the end of this reporting period (2010-3 Q2014), around 85 TEN-E actions were
still ongoing and 3 new Award Decisions were to be potentially adopted
for different actions . Out of these actions, around 65 were granted financial
aid during the time interval 2010-2014, while the others had the Award
Decisions issued before 2010 and were thus, already subject to the Report on
the implementation of the TEN-E in the period 2007-2009. 
In
the time-interval 2010-2014, 42 actions were finalised and had received
their final payments under the TEN-E, 34 of them having the EU contribution
granted before 2010 (55,805,987 €) and 8 of them having the EU contribution
granted in 2010 and 2011 respectively, amounting to a total of 12,485,730 €.  
 Year of adoption of the Award Decision || Number of actions that were finalised and received their final payment || Total amount of the EU contribution to the finalised projects 
 2004 || 3 || 5,494,165 € 
 2005 || 4 || 7,144,987 € 
 2006 || 6 || 9,833,550 € 
 2007 || 6 || 8,090,000 € 
 2008 || 4 || 4,644,611 € 
 2009 || 11 || 20,598,674 € 
 2010 || 6 || 11,585,730 € 
 2011 || 2 || 900,000 € 
 2012 || 0 || 0 
 2013 || 0 || 0 
 2014 || 0 || 0 
Between
2010 and 2014, 73 actions (41 in electricity and 32 in gas) were granted
Community financial aid under the TEN-E guidelines. Moreover, up to 3 Award
Decisions are still to be adopted in the upcoming months. The total amount of funds
that was committed in the years 2010-2013 is 74,501,910 €, out of which, a
maximum of 12,200,000 € was committed for the year 2013 and includes the actions
for which the decisions are still to be adopted. 
 Year of adoption of the Award Decision   || Number of actions in electricity granted financial aid || Commitments || Number of actions in gas granted financial aid || Commitments || Total number of actions granted financial aid || Commitments 
 2010 || 13 || 11,015,131 € || 8 || 8,491,944 € || 21 || 19,507,075 € 
 2011 || 10 || 9,906,238 € || 11 || 13,724,541 € || 21 || 23,630,779 € 
 2012 || 10 || 9,797,793 € || 8 || 9,366,263 € || 18 || 19,164,056 € 
 2013 || 8 (up to this date) ||  8,544,914 € ||  5 (up to this date) ||  1,340,239 € || 13 (up to this date)  || 12,200,000 € 
   ||   ||   ||   ||   ||   || 74,501,910 € 
After
a general assessment of the projects that were granted Community financial aid between
2010–2014, one can notice that the main reported obstacles to projects
implementation are numerous and cover a range of issues. The reported
difficulties and obstacles vary from project to project, but some of them prove
to be common to more actions and seem to be of systematic nature. Thus, they
are occurring time and again in many of the TEN-E projects irrespective of
their location and type and cause delays in the planned time schedule. The main
common obstacles reported are related to:
·       
The legal and regulatory framework;
·       
Problems related to the initially chosen
route;
·       
Financial and technical constraints.
In
many cases, the legal and regulatory framework has proved to be an obstacle during
the necessary manifold authorisation and permitting procedures at different
administrative levels: federal, regional, local. The lack of harmonisation of these
procedures along the route of the projects, especially in the case of projects
crossing several countries, has also caused delays in the implementation.
Furthermore, changes required to the ownership structures of transmission and
distribution companies stemming from the third internal energy market package
have also caused delays to many projects.
Regarding
the problems related to the initially chosen route, project promoters have been
facing a risk of non-acceptance and hence delays when addressing the
expectations of NGOs and land owners and when closing an easement agreement
with owners of the land impacted by the construction of the projects. The
public consultations and negotiations with land owners or the public in
general, caused sometimes delays during the pre-construction phases of the
projects, while in other cases imposed a change of the chosen route. 
Certain
actions have suffered from a lack of financial resources or from technical challenges
due to the difficult implementation of innovative solutions. 
Other
issues encountered relate to bottlenecks in the engineering, manufacturing and
installation capacity of the manufacturers; many on-going projects are
competing for the supply and delivery of necessary materials (cables, converter
transformers etc.)
3.
THE CONTINUITY BETWEEN TEN-E, EEPR AND THE PCI PROCESS
This
part of the report describes how many projects adopted under the first TEN-E Regulation
and under the European Energy Program for Recovery have acquired Project of Common
Interest status in the first Union-wide list established under the new TEN-E Regulation
347/2013. It also explains why they still count among the priority energy
projects in Europe. 
In
electricity, 11 projects that had been included in the priority axis of the
"old" TEN-E have subsequently acquired PCI status (partially or in
their integrity) under
the new TEN-E Regulation. From EEPR, for 2 projects the transfer was made to
the PCI list of 2013. This continuity proves that they are still in line with
the main objectives of the energy policy. 
Most
of them are interconnection lines (between Italy and Slovenia, Ireland and the United Kingdom, Denmark and Germany, Poland and Lithuania, Hungary and Slovakia, for instance); others are internal lines that have an impact on the
interconnection capacity with neighbouring states. At the same time this
continuity is a sign of slow progress in project implementation. 
In
gas, 9 TEN-E projects have also become part of the first PCI list.  These
include pipelines that cross the territory of several Member States or third countries and several LNG terminal projects. From the EEPR, 4 projects were
also transferred – partially or entirely – to the PCI list. 
An
assessment of the "old" TEN-E projects of the different categories
shows that most of the projects which have made it to the new Union list of
PCIs are those that had been given the status of Projects of European Interest and
thus have a significant cross-border impact. Those ones that were not selected
as PCIs under the new Guidelines were mostly part of the other project categories
(priority projects or projects of common interest) and were not answering to
this essential selection criterion of the PCI process. 
Other
projects have been in the meantime completed. A third category of projects
which were not retained are those that, given the developments since 2004 when
the first TEN-E decisions were adopted, were no longer in line with the main
priorities and objectives of the European energy policy. From the EEPR, 6 projects
have later answered to the PCI objectives and have been included in the new list.
The
lessons learned from the TEN-E and EEPR exercises have been taken into
consideration in the provisions of the new Regulation. 
Firstly,
the difficulties related to the lengthy and un-harmonised permitting procedures
- given the multiple institutions from different administrative levels involved
in the process - determined the need to establish a single competent authority or
authorities integrating or coordinating all permit granting processes (‘one-stop-shop’)
at national level, as well as the need to limit under normal circumstances the
time period of granting such permits to a maximum of 3.5 years. These
provisions became legal obligations for the Member States under Articles 8, 9
and 10 of Regulation 347/2013. 
Secondly
EEPR has demonstrated the leverage effect of EU financial assistance in obtaining
private funding for projects of European significance addressing in particular
the security of supply concerns in Central and Eastern Europe by providing for
the possibility to reverse the gas flows. Therefore, it has been decided that
under the new Regulation PCIs that demonstrate significant external benefits
and hence prove not to be economically viable under the existing regulatory
framework and market conditions may not only profit from grants for studies,
but also, under certain conditions, from grants for works and innovative
financial instruments under the Connecting Europe Facility (CEF). 
A
third lesson learned is the need to ensure increased transparency and enhanced
public participation in the PCI process. Experience in past exercises has
proved that in many cases, the increased sensitivity or strong opposition of
the public was due to lack of information with regards to the need, impact and
technological solutions of the projects. Therefore, under the new TEN-E
regulation ensuring a proper transparency on the implementation of PCIs is a
requirement. This will have a positive impact on the awareness of the public,
engage civil society in a constructive dialogue with the promoters of the projects
and the competent authorities, and contribute to finding better solutions,
which are adapted to the needs of that particular situation or region.
4.
CURRENT STATUS OF THE IMPLEMENTATION OF PCIs
In
2013 the first list of PCIs was established by delegated Regulation C(2013)6766.
It contains 248 projects, of which 132 in electricity and 107 in gas, 7 in oil
and 2 in smart grids. The main selection criteria for the projects were in line
with the EU's overall energy policy objectives. The projects are contributing
to:
-        
The realization of a pan-European
integrated grid; 
-        
Ending isolation and removing
bottlenecks in national grids;
-        
The achievement of the 10% electricity  interconnection
target advocated by the Barcelona Council Presidency in 2002  (only Spain will not achieve this objective
through implementation of the projects on the current list);
-        
The diversification of gas sources and
ending single source dependency of several Member States (as a result of the selected PCIs, all
Member States will have access to at least 2 supply sources, except for Cyprus
which will have indigenous resources);
-        
Ending single source dependency in oil
in Central-Eastern Europe (security of supply).
Under
the 'old' TEN-E exercise, the list of projects of common interest was fixed in
an Annex, becoming out dated over time and modifiable only through ordinary
legislative procedure. 
The
new TEN-E Guidelines established a revolutionarily new approach. First of all,
12 priority corridors were identified: 
·       
Northern
 Seas offshore electricity grid, 
·       
North-South electricity interconnections
in Western Europe, 
·       
North-South electricity interconnections
in Central Eastern and South Eastern Europe, 
·       
Baltic Energy Market Interconnection
Plan for the electricity sector, 
·       
Smart grids deployment,
·       
Long-term electricity highways, 
·       
North-South gas interconnections in Western Europe, 
·       
North-South gas interconnections in
Central Eastern and South Eastern Europe, 
·       
Southern Gas Corridor, 
·       
Baltic Energy Market Interconnection
Plan for the gas sector, 
·       
Supply connections in Central Eastern
 Europe for oil,
·       
Cross-border carbon dioxide networks
(CO2).
The
projects in the first Union list of projects of common interest - adopted in October
2013 - were identified in Regional Groups, based on these priority corridors. Member States and the Commission were the key drivers, while involving relevant
stakeholders such as national regulators, transmission system operators,
project promoters etc. The PCI identification is based on objective criteria
and a cost-benefit analysis. As of 2015 when the second Union list of PCIs will
be published, only projects included in the 10 Year Network Development Plans
prepared by the European Networks of Transmission System Operators for gas and
for electricity (ENTSO-E and ENTSO-G) can be selected. Exceptionally in the
first selection round also other projects could be considered. 
PCIs
are part of EU law – their monitoring will ensure that the projects are
implemented in a timely manner and that no delays will occur that could jeopardize
the achievement of the EU energy policy objectives. The European Commission and
ACER will therefore closely monitor the process. Article 5 sets out a number of
key tasks of the Regional Groups related to the implementation and monitoring
of the PCIs.
Article
5.1 requires project promoters to draw up an implementation plan, including a
timetable regarding feasibility and design studies, approvals by the National Regulatory
Authorities (NRAs)  and others, permitting, construction and commissioning. Article
5.3 obliges ACER and the Regional Groups to monitor the progress achieved in
implementing the PCIs and, if necessary, make recommendations to facilitate
their implementation. The Groups may i.a. convene meetings with the relevant
parties and invite the Commission to verify the information provided on site. According
to Articles 5.4 and 5.5, by 31 March of each year following the year of
inclusion of a PCI in the Union list, project promoters shall submit an annual
progress report to the competent (permitting) authority and to ACER (or the
Regional Group, i.e. Commission, in case of oil and CCS), indicating the state
of play, delays and revised planning. ACER then submits a consolidated report
to the Regional Groups, including recommendations on how to overcome
difficulties and delays. The report will also contain an assessment of the
consistency between the ENTSOs, TYNDPs and the TEN-E priority corridors/areas. As
a general principle, the outcome of the progress reports should feed into the
work of the Regional Groups, including NRAs' and ACER's checks enshrined in the
PCI process, to select the next PCIs. And finally, Article 5.6 requires the
competent (permitting) authorities to report each year to the respective
Regional Groups on the progress, delays and reasons thereof in the permitting
process of the relevant PCIs.
The
graphs below provide an overview of the current implementation statistics for
the PCIs on the first Union list, according to the implementation plans
submitted by project promoters in line with Article 5.1 of the TEN-E Guidelines.
In the case of projects that are implemented per different sections, the phase
which has been completed or is currently on-going for all sections was
considered (the smallest common denominator). 
Electricity
At
the moment of reporting, out of the 132 PCI in electricity, one project has
already been completely finished and has entered the commissioning phase. Seven
projects have entered the construction phase, 51 were in permitting procedures and
5 have started the procedure in view of having the Final Investment Decision
awarded. With regards to those projects that are still in the study phase, 40
were subject to feasibility studies or Front End Engineering Design (FEED) and
28 were still in the pre-feasibility studies phase. 
Statistics
on the implementation of Projects of Common Interest in electricity
Regarding
the expected date of commissioning for the projects in the electricity sector,
18 of them are to be finalised and commissioned by 2017, 77 between 2017 and
2020 and 33 after 2020. In the case of 4 of them, project promoters indicated
that the commissioning date is still to be determined.
Statistics
on the expected timeframe of the commissioning of PCI in electricity
Gas
In
gas, out of the total number of 107 PCI, one was finished and has entered
commissioning and 4 were in the construction phase. For 33 gas projects the
permitting procedures have started and for 9 others the Final Investment
Decision (FID) is to be awarded. Out of the projects that were still in the
study phase, 24 were in the feasibility/FEED phase, while 36 were in the
pre-feasibility phase. 
Statistics
on the implementation of Projects of Common Interest in gas
In
gas, out of the 107 projects, 28 are expected to be commissioned by 2017, 50
between 2017 and 2020 and 23 within the time horizon after 2020. The
commissioning dates for 4 projects are still to be determined.
Statistics
on the expected timeframe of the commissioning of PCI in gas
Statistics
on the estimative timeframe of the commissioning of PCI in gas
4.
Obstacles in PCI project implementation
Main
challenges for electricity Projects of Common Interest 
In
their initial progress reports, project promoters have reported on the
difficulties they are encountering so far. There are recurring problematic
issues that affect a number of projects in all corridors. These are:
1.      Uncertainties
regarding the timely delivery of permits by the competent authorities. In some
cases these are exacerbated by the interdependencies with other projects or
internal reinforcements that carry their own separate permitting risks.
2.      Public
acceptance, related to concerns about optical impact/ impact on the landscape,
impairments due to electro-magnetic fields and environmental concerns (impact
on habitats and the overall need to respect related environmental legislation).
These concerns also have an impact on the duration of the permitting process,
so project promoters have to make sure that an adequate planning of these stages
will not cause delays in the implementation of the projects.
3.      Lack
of compatibility of regulatory regimes between Member States, in the case of
cross-border projects. 
4.      Lack
of access to finance, especially for projects in countries which have a long list
of PCI's and which are in a problematic financial situation.
Given
the long term nature of infrastructure projects, it is likely that more
difficulties will emerge in the coming years. As the commissioning dates get
closer, efforts on permitting procedures, regulatory approval and financing
solutions will intensify and political support will play a more important role.
Therefore, project promoters, Ministries and regulators need to report on
existing and potential difficulties on a constant basis. Progress of
implementation will be monitored closely in the regional groups established in
the TEN-E Regulation and remedial action will be proposed where necessary.
The
following paragraphs provide a more detailed look into the specific
difficulties that have been encountered or might be encountered in the future
in each of the priority corridors of the electricity and gas sectors.
Priority
corridor Northern Seas offshore grid ("NSOG")
The
majority of challenges encountered in the NSOG corridor are related to the
permit granting process or are of a regulatory nature. 
The
uncertainties regarding the adequate planning for and the timely delivery of
permits by the competent authorities are those that are raised most often in
this priority corridor. In certain cases, mitigation measures might be required
to address the opposition of shipping authorities, to reach an agreement on the
final route and progress towards a license application for the project. Addressing
properly the actions aimed at acquiring public acceptance is of key importance,
especially for grid projects on-shore; this also impacts on the permitting
process. The main reasons for the decreasing acceptance or strong opposition of
the population against the projects are: reasons of optical impact/ impact on
the landscape, impairments due to electro-magnetic fields and environmental
concerns (impact on habitats and the overall need to respect related
environmental legislation).
Regarding
the regulatory issues, arrangements against which a Final Investment Decision
is assessed are still on-going in certain cases (regulatory solution, tax
treatment etc.). That may thus influence the commercial viability of projects.
Another
issue often raised by the project promoters is the interdependence with other
projects or necessary internal network reinforcements that carry their own
separate risks related to permitting delays or incompatible regulatory regimes
(different feed-in tariffs for offshore wind farms between different Member
States). Other obstacles were also mentioned during the cooperation with other
users in the Northern Sea with impact on technical, financial and timing
aspects.
In
certain cases, the projects also encounter challenges related to the crossing
of private lands (and thus encountering issues related to the opposition of
landowners) or natural barriers (seabed, rivers) or of existing infrastructure
(tunnels, bridges, canals, motorways, railways). These last ones might raise
both technical difficulties and issues during negotiations with the authorities
in charge of the respective transports infrastructure. Possible technical
difficulties were also mentioned in the case of new or recently developing
solutions (e.g.: risks related to the HVDC supply chain).
Priority
corridor North-South electricity interconnections in Western Europe ("NSI
West Electricity")
Electricity
projects in NSI WEST are also confronted with uncertainties regarding the timely
delivery of permits by the authorities. Delays can occur due to long
negotiations with real estate owners regarding the routes of the grid or cable.
On specific cases, demonstrations, occupation of land and hostile and
destructive actions of organised opposition groups have been signalled by
project promoters to have taken place. In others, despite the possible granting
of planning consent by the competent authorities, private landowners along the
route have expressed their intention to block access to their lands for
construction. Besides this, public opposition and acceptance are therefore
quite common for new electricity lines, the range of reasons covering visual
impact, risks related to electro-magnetic fields, environmental concerns
(impact on birdlife), especially in the case of large scale projects.
Technical
difficulties arise in the case of projects crossing difficult terrain
conditions or natural barriers (e.g.: submarine canyons or high depth and
geological instability of the seabed, rivers). For certain projects, potential
delays can occur due to scarcity on the market for HVDC cable and converter
stations.
Given
the difficulty to predict the long run electricity market needs, the economic
viability of certain projects could be jeopardised.
Priority
corridor North-South electricity interconnections in Central Eastern and South Eastern Europe ("NSI East Electricity")
As
in the case of the other corridors, public acceptance of grid development also
raises risk of delays for the implementation of the projects in NSI EAST. The
main elements of concern or opposition relate to the routes of the projects
crossing densely populated areas, the general public “not in my back yard”
approach or elements of complexity related to expropriation. 
Delays
are encountered or likely to occur due to the lengthy permitting procedure due,
for instance, to the location of the project in Natura 2000 sites or
alternatively close to living areas. In a specific case, granting of permits
for multi-year sea-prospecting of hydrocarbons in the area of a cable lying
might require the change of the route.
Other
complexity element which was signalled by some project promoters was the
difficult coordination of the different sides involved in the implementation,
in adopting a harmonized approach regarding the priority of the project or its
feasibility and difficulties in public procurement due to parallel planning
processes in different countries. Moreover, the interdependence of a PCI on
other projects (construction of other interdependent grid expansion projects
and generation development projects) might also cause delays.
Baltic
Energy Market Interconnection Plan ("BEMIP Electricity")
Problems
with land owners are defined as the main difficulties for future permitting
process of several projects in the Baltic States region. 
Moreover,
financial difficulties could also raise problems given that more PCIs located
on the territory of the same country will be in construction phase at the same
time and will thus require high investments.
Priority
corridor North-South gas interconnections in Western Europe ("NSI West
Gas")
Projects
in NSI West Gas might encounter delays or stall while awaiting regulatory
clarity on tariffing decisions. In certain cases, the lack of progress on this
issue has been the most critical reason for the financial backers on the
projects not progressing with the next stages of investment or even withdrawing
from the project. In cases where long term commitments have the same tariff as
future short term booking, there is no incentive for shippers to go for long
term commitments that would reduce financial risk and keep tariff
competitiveness. 
Especially
in the case of projects of large scale and crossing several countries, permitting
procedures have proved to be complex and time-consuming. Interdependence with
other projects might also represent a challenge in the implementation of
certain PCIs. 
The
need for harmonization of the odorisation practices in certain Member States
might pose problems and be confronted with the reluctance of the operators or
national authorities. 
Moreover,
uncertainties in the market scenarios were elements of complexity in the
finalization of the commercial frameworks for certain projects.
Priority
corridor North-South gas interconnections in Central Eastern and South Eastern Europe ("NSI East Gas")
The
volatile regulatory and legal environment in several Member States has been
having negative consequences on the certainty of the investment return and
thus, on the willingness of shippers to book capacities on a long-term basis.
In other cases, delays in launching the open season occurred.
Projects
in NSI East Gas have also been encountering difficulties related to the
easement and land plots acquisition that caused delays in the implementation
and, in the case of LNG terminals, risks related to the disruption of the port
traffic have been raised as major issues. Unclear legislative requirements and
overlapping between the competent public authorities (national, regional, local
administration) regarding the permitting procedure have also proved to be
time-consuming. In certain cases, inadequate planning for the obtaining of environmental
permits in relation to the access to seashore, seabed and sea space or the
lengthy time required by the authorities for their issuance have been putting
challenges, while in others, the lack of agreement by the states concerned
regarding the location of the project  have actually frozen its implementation.

The
coordination of the countries involved in the project also raised problems
regarding the agreements related to routing and capacity allocation, especially
in the case of those which are EU non-Member States.  
Some
projects might encounter financial difficulties due to the potential cost
implications of the investments. 
Priority
corridor Southern Gas Corridor ("SGC")
Permitting
related difficulties have been encountered, given that the routes of certain
projects cross archaeological sites, mine fields or are in the vicinity of
military bases. Land acquisition can be a complicated process, resulting in
certain circumstances, with court cases. In the case of obtaining environmental
permits, a more adequate planning should be envisaged, especially for offshore
pipeline sections, when the project might be crossing, for instance, a sea
strait or Natura 2000 sites.
Obstacles
during construction were also raised by the fact that the route of pipelines
cross natural barriers (mountainous regions where elevation is higher than 2000
m, water depth and the necessary length of the offshore sections of the
pipelines, rivers etc.), due to the geological structure of the ground or
unexpected severe weather conditions. 
The
interdependence with other projects might impact on the choice of the final
technical configuration of certain PCIs. Due to their cross-border character
and magnitude, certain projects encountered obstacles because of the difficult
coordination of the involved stakeholders.
Gas
deliveries under different Gas Supply Agreements in the case of projects
crossing several countries, uncertainties related to the securing of gas
supplies (upstream developments) have also been major risks impacting on the
proceedings for the FID of certain pipeline projects.
Large
investments amounts and the need to implement the projects in relatively short
timeframes and in parallel with other projects lead to strenuous financial
effort for the promoters.
Priority
corridor Baltic Energy Market Interconnection Plan in gas ("BEMIP
Gas")
In
some cases, the lengthy permit granting processes might be impacted by the
proximity with the border with other Member States. Land acquisition and right
of use issues have been delaying or even putting on hold the process of permit
granting, while in others, strong public opposition ("not-in-my-back-yard"
issues) determined the need to change the basic layout for pipelines routes or
compressor stations.
The
interdependency with other projects and their implementation might impact on
the sufficiency of gas demand and then leave under uncertainty the status of
certain projects in the Baltic region.
Project
promoters have been indicating that the regulations in the Baltic region for
LNG import, storage and re-gasification facilities are not sufficiently
effective. The regulatory principles vary significantly across the impacted
countries and therefore there are no clear regulatory grounds for the compilation
of the business plan of the projects.
Financing
of certain projects is challenging, given that they do not prove to be
financially viable.
5.
ADDRESSING THE IDENTIFIED CHALLENGES FOR THE IMPLEMENTATION OF THE PROJECTS
The
Commission is already pro-actively taking action in order to address the
difficulties that are or will be faced by PCIs. The Regulation itself foresees
ways to address the main problems reported by projects so far. 
I.
Permitting
Member
States are obliged to address the accelerated permit granting. According to Article
10 of the Regulation, he total duration of the permit granting can be maximum
3,5 years, except in duly justified exception. Member States also had to
established a 'one-stop shop' responsible for facilitating and coordinating the
permit granting process for projects of common interest (Article 8 of the
Regulation). The establishment of these one-stop shops was due by November 2013
and in 2014 and 2015 Member States will have to make sure that they are
functioning without any hurdles and that other measures, including the
publication of the manual on the permit granting process for project promoters,
and the adoption of legislative and non-legislative measures streamlining the
environmental assessment procedures are adopted timely.  
The
specific measures to be taken by the Member states to accelerate the permit
granting process and to streamline environmental assessment procedures
applicable to PCIs include: the designation of the one-stop-shops for PCIs, the
publication of the manuals of procedures for PCIs, the implementation of
non-legislative and legislative measures streamlining environmental assessment
procedures (if assessed as possible by the Member States). Establishment of the
one-stop-shops is of particular importance to ensure the lawfulness of the
permit granting process for PCIs and to avoid (legal) action brought against
Project Promoters and national authorities by third (natural and/or legal)
parties.
Regarding
these measures, the state of their adoption in 3Q2014 was the following:
•          17
Member states had established the one-stop-shops, while for the remaining 11
Member States, the EU Pilot (launched in March 2014) was still on-going, by
requesting further information; 
•          11
Member States had published their manuals;
•          No
  Member State had informed the Commission that it had identified as possible
any non-legislative measures that it needed to adopt to streamline the
application of the environmental assessment procedures. A thorough analysis is
planned for September 2015 by when the Member States are obliged to take the
necessary legislative measures.
II.
Public acceptance (or public concerns)
The
decreasing acceptance or strong local opposition of the general public or
interest groups to the development of grid infrastructure is one of the most
common problems for electricity projects. Early engagement with
citizens/consumers on diverse energy policy issues is crucial for meeting the
European climate and energy targets by 2020. It is necessary for all project
promoters to better engage with the affected population to foster more
widespread understanding and support for infrastructure projects. 
In
2014 the Commission initiated and published a study on ways to address concerns
surrounding grid infrastructure development: "Study regarding grid
infrastructure development: European strategy for raising public acceptance".
It produced inter alia a web-based toolkit allowing stakeholders, especially TSOs, NGOs, public authorities
and local communities to develop a targeted, effective communication approach
towards stakeholders in order to address concerns surrounding grid development.
The online "toolkit” was established as a website that contains
communication and stakeholder involvement elements with high potential to raise
public acceptance and participation for individual grid infrastructure
development projects in Europe. With this innovative approach, the framework
for such a toolkit both in technical form and structural content includes
tables for toolkit elements such as stakeholders, stages, communication contents,
channels, formats and practice examples. Moreover, it includes communication
messages and user guides for making it easier to be applied on the ground. The
Steering Committee that was established with the aim of contributing to the
publication of the Study acknowledged that the primary users of the toolkit
would likely be TSOs and other project promoters as most frequent initiators of
communication and stakeholder involvement activities to raise public
acceptance. Other stakeholders (e.g. NGOs and local stakeholders) are invited
to use the toolkit to engage in a multi-stakeholder dialogue, contribute their
expertise, and play a constructive part in the process.
Transparency on project implementation will make an important
contribution to improved public acceptance. Transparency is an essential
provision of the TEN-E Guidelines Regulation (Article 18). The Commission has
established a Transparency Platform - including an
interactive map "PCI Viewer" - that will be providing essential information
on the projects (location, implementation plan, progress report, results of Cost
Benefit Analysis, funds allocated to projects – if any). Project promoters are
also legally obliged to submit a concept for public participation for approval
of the competent authority.
III.
Financial difficulties 
The
primary objective of the EU infrastructure policy is now to ensure the timely
implementation of the PCIs. Together with the streamlined permit granting
procedures and the common regulatory framework, the €5.8 billion of the
Connecting Europe Facility (CEF) will help to achieve this. All PCIs can get
grants for studies or have access to financial instruments under this programme.
However, only projects that can prove they have externalities for which neither
the market, nor the users (through tariffs) are willing to pay, may be
considered for grants for construction.
The
CEF represents only 3% of the €200 billion investment needed up to 2020, but it
can leverage other funds through using financial instruments. For the CEF to
make a difference it must be targeted at few critical projects and it must also
be combined with the efforts of regulators to finance part of the
infrastructure through network tariffs and of Member States making use of the
European Structural and Investment Funds, where relevant.  Therefore, a special
focus will be given to the project identified as key from a security of supply
point of view, according to Annex II of the EESS. The cost of these projects is
estimated at around €17 billion. The critical PCIs are mainly large scale
projects, except a few LNG terminals and storage projects, and are inherently
complex and prone to delays. Hence, the possibilities to speed up their
implementation require more than just early CEF support. The Commission
therefore intends to intensify its support for the critical projects by
bringing together the project promoters to discuss technical possibilities to
speed up project implementation and National Regulatory Authorities to agree on
cross-border cost allocation and financing as well as the relevant Ministries
to ensure strong political support both in view of the first but also the later
calls. The development of responsible public-private partnerships to increase
the leverage effect of EU spending is also encouraged.
In
other words, the CEF will provide some of the necessary financial support, acting
as a catalyst for further funding from the private and public sector by giving
infrastructure projects credibility and lowering their risk profiles.
Nevertheless, it is evident that the large majority of financing will need to
come from other sources. The reduced lead times and improved regulatory
framework will by themselves reduce the project risk, and thus bring down the
cost of financing.
As
project implementation progresses and more information on the encountered
problems emerge, the Commission will develop complimentary approaches and tools
to address these problems in their early stages.
IV.
Regulatory difficulties
Next
to challenges related to ensuring an adequate duration of permit granting
procedures and providing adequate financing instruments, the design of a stable
and incentivising regulatory framework is one of the crucial elements in
delivering the necessary investments in energy infrastructure.
Electricity
and gas transmission, liquefied natural gas and compressed gas (in some Member
States also storage) infrastructures are regulated sectors, in which costs for
their installation, operation and maintenance are recovered through tariffs
approved by national regulatory authorities and paid by users. It is a
challenge for NRAs to find an optimal balance to keep tariffs affordable for
users and to avoid inefficient investments, and at the same time provide for
returns that are sufficiently attractive for investors, particularly for
certain projects with positive externalities but for which the promoter faces
higher risks.
Such
projects include for instance those related to increased security of supply
(e.g. gas reverse flows), those where new technologies are applied or where
advance capacity investments are necessary (e.g. offshore grid), and
interconnectors which are more complex than purely national projects due to the
involvement of at least two Member States. Challenges have also been mentioned
for gas projects where the commitment horizon of shippers may be relatively
short compared to the depreciation periods used. Yet, the regulatory framework
has a strong influence on the attractiveness for financial institutions to lend
or for external financial investors and TSOs to invest in the project, as it
determines the return on an investment. However, in the past, TSOs and
investors have repeatedly indicated that especially for projects for which they
face higher risks, including cross-border investments, the regulatory framework
is not suited to deliver on the investment challenges ahead.
In
this context, regulatory incentives refer to providing a sufficiently
attractive framework for long-term investors (focus on risk/remuneration) and
to enabling the delivery of the European energy policy goals (focus on CBA and
internalising positive externalities in the business case for project
promoters). Articles 11-13 of the TEN-E Regulation address improved regulatory
treatment. The TEN-E Guidelines establish rules to ensure that, where a project
of common interest faces higher risks than comparable infrastructure projects,
appropriate incentives are granted. To this end, the risk profile of the
respective project has to be considered in the context of the net positive
impact of the project, the latter being provided through a cost-benefit
analysis carried out based on the methodology drawn up pursuant to Article 11.
Possible incentives may include, but are not restricted to, rules for
anticipatory investments, early recognition of costs in the regulatory asset
base, and priority premiums. Where appropriate, the Commission may engage in
finding tailor-made solutions, in particular for corridors where this type of
challenge is more prevalent. With this aim, a study on regulatory incentives
for investments in electricity and gas infrastructure projects is currently
being carried out at the initiative of the Commission and will be finalised in
the upcoming months. Moreover, a study on Regulatory issues and associated
risks in developing the Northern Seas off-shore grid is planned to be carried
out and finalised in 2015.