COMMISSION STAFF WORKING DOCUMENT Investment Projects in Energy Infrastructure 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: biofuel, carbon capture and storage, electrical energy, energy grid, energy supply, energy transport, exchange of information, investment project, natural gas, petroleum, security of supply













EUR-Lex - 52014SC0313 - EN











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52014SC0313

COMMISSION STAFF WORKING DOCUMENT Investment Projects in Energy Infrastructure 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/2014/0313 final */









1.     
Introduction
Under Regulation
(EU) No 256/2014, replacing Council Regulation (EU/Euratom) 617/2010[1] Member
States are required to notify the Commission of their investment projects in
energy infrastructure. This Staff Working Document aims to assess the
notifications received by the Member States in order to comply with the
reporting obligation under Article 10 of the above mentioned Regulations, which
state that the Commission shall publish every two-year a cross-sector analysis
of the structural evolution and perspectives of the energy system of the Union
aimed at (i) identifying potential future gaps between energy demand and supply
that are of significance from an energy policy perspective of the Union; (ii) identifying
investment obstacles and promoting best practices to address them, hence increasing
transparency for market participants and potential market entrants.
1.1.   Political
and legal context
To meet the
ambitious targets of the 2020 Climate and Energy Package[2] and
live up to the objectives of the 2030 Framework for Climate and Energy Policies,
greater investments in the energy infrastructure will be required in all the sectors
that make up Europe's energy market. New investments in
energy infrastructure across the Union are also instrumental in ensuring integrated
and efficient internal energy market and security of energy supply.
Although
investments are needed in all energy sectors, the financial and economic crisis
has had a negative effect on the investment climate, particularly in new
technologies where investments are usually associated with bigger risks, such
as many renewables for which the technology and markets are still new. And
although the European Union as a whole is on track of reaching its 2020 RES
target[3],
in some Member States more investments are needed to reach the national
targets. Furthermore, the Fukushima nuclear disaster has led to nuclear policy
being rethought in several EU Member States, which directly influences power
generation capacities. 
In
2011, it was estimated that Europe’s energy system requires investment of EUR 1
trillion[4]
by 2020. Of this amount, EUR 540 billion are needed for power generation[5] and
EUR 210 billion are for electricity and gas networks of European importance[6]:
-      About
EUR 140 billion for high voltage electricity transmission systems, both onshore
and offshore, storage, and smart grid applications at transmission and
distribution level;
-      About
EUR 70 billion for high pressure gas transmission pipelines (coming into the EU
and between EU Member states), storage, liquefied/compressed natural gas
(LNG/CNG) terminals and reverse flow infrastructure;
The
volume of investment for the period 2011-2020 would need to increase by 30 %
for gas and by around 70 % for electricity compared to current levels.[7] 
1.2. Approach
and methodology
Member States
had to provide aggregated data and information on planned investments, projects
for which construction work is scheduled to start within five years as well as
energy infrastructure projects to be decommissioned within three years of a
certain size in the following sectors: 
-      Oil
(refining, transport and storage).
-      Gas
(transmission, LNG terminals and storage).
-      Electricity
(generation and transmission).
-      Biofuels
(production).
-      Carbon
Capture and Storage (transport and storage). 
In order to
ensure that the reporting obligation for the MS does not rise to a
disproportionate administrative burden, Article 2.3 of the Regulation allows MS
to exempt from the reporting obligations provided that equivalent information
is already reported to the Commission in response to other reporting
requirements (e.g. refer to Euratom, ENTSO-E or ENTSOG if they had
reported required data to these organisations already in the near past). 
A study by
Ramboll, ECN and Ecorys was commissioned by the services of DG Energy to
provide cross sector analysis of the energy infrastructure investments that are
planned and to identify potential future gaps between investment needs and
planned investments in energy infrastructure at the Union level. To reach this
objective the consultant compared notifications from the Member State's with selected benchmark data sources (i.e. independent data sources such as ENTSOG and
ENTSO-E databases, their respective Ten Year Network Development Plans (TYNDP)
and other commercial or public data providers for the specific sectors). Where
possible, the data was also compared to the previous notifications received
from the last reporting exercise in 2011. 
The Commission's
assessment is based on the consultant's study, notifications received from the Member States and the conclusions of the 2011 Staff Working Document on Investment Projects
in Energy Infrastructure[8].

2.     
Notifications of the EU Member States
This
section provides an overview of the notifications received from Member States
concerning investments related to both existing and planned energy infrastructure
projects on the basis of the data received and the analysis provided by the consultant's
study. 
In general,
it has to be noted that the notifications by MS were often incomplete and
the data input provided was limited. Equally, it seems that there have been
some basic misunderstandings about the nature of the data to be included in the
notifications. For instance, many Member States have included projects that are
not listed as Final Investment Decisions (FIDs) in their 'infrastructure to be
commissioned' sections.
2.1.  
Oil
(refining, transport and storage)
In the oil
sector, according to the notifications, no significant investments are foreseen
in new refining capacities. This corresponds to the decreased demand for
refined products and a general over-capacity which has been prevalent in the
market for a number of years. It is notable that the investments in capacity
upgrading are also limited. 
Figure 1:  Existing
and planned capacity additions in Kton/y for Member States according to
notifications 
The main
development since the last notifications in 2011 has been in the decommissioning
of refining infrastructure. A considerable amount of refining capacity has
closed since 2011 and this is a trend expected to continue with a number of
refineries across Europe presently either idle or up for sale. In addition,
there is still a considerable imbalance in refined product production that
remains prevalent, namely decreased demand for refined products and a general
over-capacity. 
Figure 2: Closed refining
capacity 2008-2013 (mb/d)
Source: EU refining Fourm, IEA, April
2013
Regarding the
oil pipeline network, a number of projects in the East European Member States
that were aimed at diversifying supply and decreasing dependence on Russian
imports, have failed to make significant progress. 
Figure 3: Existing and planned additions for oil pipelines according to per
  Member State according to the notifications in kilometres (KM)
Member States
have however continued to invest in oil storage infrastructure and to develop
storage capacity. The main issue highlighted by the study in this respect is
that such storages should match the continuing changes in crude and/or
petroleum product demand. 
Council
Directive 2009/119/EC of 14 September 2009[9]
imposes an obligation on Member States to maintain minimum stocks of crude oil
and/or petroleum products. According to the Regulation, Member States must
maintain a total level of oil stocks corresponding, at the very least, to 90
days of average daily net imports or 61 days of average daily inland
consumption, whichever of the two quantities is greater. Given that overall
demand for oil products is falling in most Member States, notifications allow
to suggest that no major investments regarding storage capacity are planned. 
Figure 4: Existing
and planned additions for oil storage capacity per Member State according to
the notifications O4 (Gton)
Despite
the fact that a number of inputs for the oil section of the notifications were
not completed accurately or were missing, the consultant concluded that due to
the declining prospects of the European refining industry, in oil sector the EU
seems positioned to meet demand with the present and proposed capacity for the
next decade and only minor additional investments could be forecasted. 
2.2.  
Gas
(transmission, LNG terminals and storage)
For gas
sector in particular, many Member States have chosen to provide the ENTSO-G
data instead of filling in the notifications. Furthermore, in some cases the
data in the notifications is deficient compared to the ENTSOG data, which
includes both FID and non-FID projects and also identifies the specific
projects rather than listing aggregate numbers. 
The European
gas market has been characterised by sedate demand in the period 2011-2013.
Demand in Europe fell to 514 BCM in 2012, this is the second year of a decline
in gas demand and overall demand is down 10% since 2010.[10]
The share of natural gas in the European final energy consumption represents
21.9%[11].
Despite the decrease in demand, the imports of natural gas have increased,
leading to higher import dependency. The gas import dependency of the EU
increased from 43.5 % in 1995 to 62.4 % in 2010 and 67% in 2011[12].
As
indicated already in the 2011 Assessment of energy infrastructure, a single-source
dependency prevails in Northern and Eastern Europe, with varying degrees of import
dependency. Certain Member States find themselves on a ‘gas island’ as they
have no or insufficient infrastructure connections with the rest of the EU (in
particular the three Baltic States, Finland, Romania and Bulgaria). Consequently, gas sources and routes need to be diversified by building new
interconnectors. Investments in reverse-flow infrastructure, interconnections,  increased
storage capacity and additional LNG terminals are also needed to address the
security of supply challenges, as highlighted in the recent Communication by
the European Commission on European Energy Security Strategy[13].
Such investments are also needed to increase market integration and competition.
While many
countries chose not to submit additional data concerning gas transmission
pipelines, having indicated that the data had been previously provided for
ENTSOG, for majority of countries notifications correspondent to the
benchmarking data from ENTSOG. Only exceptions are Italy, which reported
considerably shorted length of the existing infrastructure as in the ENTSOG
data (9.277 km according to the notifications; 32.093 km according to ENTSOG),
and France, which reported 33.309 km in its notification, while 37.121 km were
indicated in the ENTSOG database. 
The figure below
shows that according to the notifications there are relatively minor additions
to be expected in the gas transmission pipelines across the EU. Poland and France have indicated the largest increases, with Romania also indicating that there are
due to be capacity increases in the 5 year period.  
Figure 5: Existing and
planned additions for gas transmission pipelines per Member State according to the notifications (KM)
The
capacity additions correspond fairly well with the notifications for the
majority of the Member States; however there are significant differences
between the ENTSOG and notifications data regarding the additions. As the next
figure shows, there are considerable differences in terms of FID additions in
the cases of France, Poland, Portugal and Romania. 
Figure 6:
Comparison of notifications and ENTSOG planned additions for gas transmission
pipelines per Member State (KM)
As shown in
the table below, with regard to additions to the pipeline infrastructure since
the last notifications were undertaken in 2011 there has not been too much
additional capacity added to the gas transmission pipelines. France has notified the largest difference and appears to have decreased its national
transmission by 3891 km, what could be related to some reporting inaccuracies
or use of different definitions.
Figure 7:
Comparison of 2013 and 2011 notifications for existing pipeline length per Member State (KM)
In terms of
cross border transmission projects and, in particular, projects that are meant
to diversify Europe's gas supply, there are numerous projects listed in the
notifications, but few that appear to be at FID stage according to the
benchmark data. Due to insufficient data reported in the notifications, the
table below is based on the ENTSOG data.
Figure 8: Existing
and planned additions for cross-border gas transmission capacity into the Member
States according to ENTSO-G
Concerning
LNG facilities, the notifications show relatively small investments in the
period 2011-2013, which corresponds with the existing supressed demand and over
capacity in these markets. However, there is considerable LNG infrastructure
under construction at present - capacity additions are proposed or under
construction in Belgium, Spain, France, Greece, Italy, Lithuania, the Netherlands and Poland. A number of other countries mentioned LNG projects but these
appear not to have reached the FID stage. 
Figure 9: Existing
LNG capacities for Member States according to notifications and benchmark (BCM)
Gas
consumption for power production may bounce back and gas could have an
increased role as a complementary energy source for renewables, therefore
potential investments should be closely monitored. 
2.3.  
Electricity
(generation and transmission)
Electricity
demand across EU has not increased since 2007 largely due to the financial crisis.
According to the consultant's analysis, there is currently an overcapacity in
electricity generation of at least 10%. This is expected to maintain the electricity
wholesale prices at the same level for most of the rest of the decade.
Generation projects with renewables, particularly solar and wind energy are
substantially underreported in the notifications due to a minimum project size threshold
in the Regulation below which a project does not have to be notified.
According to the
notifications, most Member States are investing in their electricity generation
capacity. Total planned investments in 24 out of the EU-28 countries amount to
116 GW as compared with the 125 GW reported in the notifications of 2011. This
apparent decrease may be down to the fact that four countries have not reported
their investment plans in 2013.  
Figure 10:
Existing and planned electricity generation capacity (MW)
Existing
capacity at 1/1/2013. Investment projects at 31/3/2013.
Source:
Notifications from Member States under Council Regulation 617/2010 and Commission
Regulation 833/2010
Missing or
incomplete notifications from DK, EE, GR, IE, LT and LU were replaced by data
from ENTSO-E (2013).
The following
charts provide details on the energy source used for electricity generation.
Generation based on fossil fuels is shown in chart E1-1. It shows that Bulgaria, Germany, The Netherlands, Poland, Romania and especially the UK are planning to expand
their conventional generation capacity substantially in the coming years. This
is primarily due to replacing old and obsolete conventional power plants.
Figure 11:
Existing and planned electricity generation capacity from fossil fuels (MW)
Existing
capacity at 1/1/2013. Investment projects at 31/3/2013
Source:
Notifications from Member States under Council Regulation 617/2010 and
Commission Regulation 833/2010. Missing notifications from EE, GR, IE LT and LU
were replaced by data from ENTSO-E (2013).
Concerning
renewables, the notifications show that planned investments in 2013 amounted to
32 GW. This decrease compared to the notifications of 2011 (40 GW) is expected
to be mainly due to the missing notifications in 2013. In both cases there is a
substantial underestimation of the total expected amounts. This is considered
to be an effect of the reporting thresholds in the notifications which are set
at 10 MW for PV projects and 20 MW for wind farms. 
According to
notifications, most Member States will expand their national transmission
network, which is in line with the announced grid reinforcements needed to cope
with increasing demand and supply, and the take-up of renewables and variable
generation. National transmission grid size will be increased by about 12% with
a total of around 22,000 km of additional lines. The total length of the
transmission line expansion is substantially below the 2011 figure of 28,000 km
probably down to a lack of reporting in case of a number of Member States. For
those countries which reported in 2013, the growth figure is in line with the
2011 notifications which showed an 11% increase. Large increases in the planned
additions compared to the previous notifications will take place in Italy (5500 km) and Sweden (5824 km).
Figure 1: Existing and
planned electricity transmission capacity per Member State (km)
Existing
capacity at 1/1/2013. Investment projects at 31/3/2013.
Source:
Notifications from Member States under Council Regulation 617/2010 and
Commission Regulation 833/2010. Missing notifications from DE, DK, LT and LU
were replaced by data from ENTSO-E (2013) 
The growth in
the total length of the planned transmission network expansions in the
notifications amount to 12% over a period of 6 years. This is slightly higher
than the growth rate which is expected by ENTSO-E for the European transmission
network in the TYNDP of 2012, which is 17% over 10 years. However, at the
level of the individual countries, the differences between the notifications
and the TYNDP findings are often large. Extensive analysis by ENTSO-E shows
that the network expansions as planned in the TYNDP are expected to keep
congestion in the European transmission network limited to an acceptable level.
From the notifications, the grid transfer capacity is expected to increase by
17% in the coming years.
Figure 13:
Existing and planned cross-border electricity transmission
Existing
capacity at 1/1/2013. Investment projects at 31/3/2013.
Source:
Notifications from Member States under Council Regulation 617/2010 and
Commission Regulation 833/2010, and ENTSO-E, YS&AR, 2012 replacing missing
notifications for: DE, DK, GR, IE, and LT
2.4.  
Biofuels
(production)
Notifications by
Member States indicate that the vast majority of biofuels are produced and
consumed in five countries; France, Germany, Italy, Spain and the UK. Investments are on a more modest scale than previous years and some countries, for
example Spain plan to decrease their capacity significantly due to overcapacity
in the market. 
The two main
types of biofuels used in the EU are bioethanol and biodiesel, with biodiesel
accounting for 79.1% of total energy content consumption and bioethanol
accounting for 19.9%[14]. 
Since the last notifications in 2011 production in the EU has only seen very
modest further expansion. Nevertheless, decommissioned capacity is limited to Hungary and number of countries plan to increase their capacity due to the 10% target for
the transport sector in the EU Renewable Energy Directive[15].. 
Figure 2: Existing and
planned additions for biofuel production capacity per Member State according to the notifications (B1)
2.5.  
Carbon
Capture and Storage (transport and storage).
Data on Carbon
Capture and Storage (CCS) projects in Europe was provided by only 2 countries, France and the Netherlands. These notifications were compared to the database of the Global CCS
Institute, which (apart from two active CCS projects in Norway) mentions
several planned CCS projects across Europe, namely in the United Kingdom, the
Netherlands, France, Italy, Spain and Romania. No projects, however, are stated
to have FID decisions to be made in 2014. Furthermore, according to this
database, operational CCS pipeline projects are limited to Lacq in France and the OCAP pipeline in the Netherlands, which, however, lists the OCAP pipeline as planned
FID in the notifications, but not as an existing infrastructure. 
3.     
Reporting obligations
3.1.   Future
gaps
Regulation 256/2014
obliges the EU Member States to report on planned and existing energy
infrastructure as it is crucial for identifying potential future
gaps between energy demand and supply at the Union level. Such analysis is key
in helping to steer the infrastructure investments where it most needed,
ensuring effective functioning of the internal market and increasing security
of supply across the EU. 
On the
basis of qualitative reasoning and supported by information in relevant
literature and related studies the consultant's report aimed at providing qualitative
gap analysis for energy investments in Europe. The gap analysis in the study focused
on the identified differences between the demands for the four energy fuels
from 2013-2025 with the exclusion of CCS, as these infrastructure projects are
not in enough advanced stage to be assessed in this manner. The gap was
analysed for oil, gas, electricity and biofuel sectors, and subsequently linked
to the planned additions to determine whether or not the gap is likely to be
bridged. Due to the insufficient data provided in the notifications and issues
in reliability of this data, the gap analysis obtained by the consultant was
more basic than the ones provided by ENTSOG’s or ENTSOE’s TYNDPs. Consequently
the notifications alone under the Regulation 256/2014 seem to be insufficient
to fully identify
potential future gaps between energy demand and supply.
3.1.1.      Oil
In Europe significant reduction in overall consumption for both crude oil and oil products is
forecasted over the medium term and into the longer term. At present, oil
consumption in 2012 accounted for 33% of overall gross inland energy
consumption in Europe.[16]
Overall crude demand is forecast to decrease by 14% over the period 2015-2025,
according to the latest PRIMES estimates.[17] This is
due to a number of factors such as more efficient vehicle consumption,
increased substitution of oil with other forms of transport fuel and reduced consumption
of oil for power generation. 
Most of the
oil transported into the EU is brought by means of tankers which account for
80% of imports and road distribution rather than by pipelines.[18]
Tankers and investments in port infrastructures and terminals, however, are not
included in the notifications. Pipeline transport in the EU is mostly used for
crude oil, whereas rail and trucks are used for the transport of refined
products.
With regard
to the refining sector the IEA report predicts a long reduction in refining
capacity over the 2013-2018 period by 112 thousand barrels a day.[19]
Refining margins are under pressure and a number of refineries in Europe lack the complexity that is needed to produce the product yields demanded by the
market. In addition, the traditional export markets are reducing their demand. There
are also a number of countries that have forecast considerable closures of
refining capacity which is in line with the continued low utilisation rates and
over-capacity. 
Overall
there do not appear to be major gaps in the investment needs in oil
infrastructure. There are however a number of areas of concern inclusive of
refinery disinvestments and continuing lack of diversification in oil supply in
the East of Europe. Additionally, a new reality of increased supply of refined
products in Europe will require adjustments in investments product storage in
the EU.
3.1.2.      Gas
With
regards to the gas sector, the information in the notifications is not clear
enough and not provided in the correct form, to make any strong conclusions
about future gaps in gas infrastructure. If only the available data from
notifications is analysed, it might seem that no additional investments are
required in the gas sector to meet demand over the next 10 years. Biennial ENTSOG
and TYNDP data is more fitted for such gap analysis for the next decade, as
information provided there is more accurate and complete. 
Over the
last decade European gas demand has not followed a clear trend. Gas demand
reached a peak in 2005 and has remained more or less stable. The ENTSOG TYNDP foresees
gas demand to grow on average 1% over the 10 year horizon with the majority of
this growth emanating from power generation. It expects that growth in gas
consumption in the electricity sector will increase by 33% during the next 10
years. The
only countries that at present remain self-sufficient in meeting the demand for
natural gas are Denmark and the Netherlands. Imports rise for all other
countries, and net European imports are expected to rise from 276,001 Ktoe in
2010 to 284,343 Ktoe in 2025.
The most
recent PRIMES report[20]
has indicated that gas will play a pivotal role in meeting emission reduction
targets and in the context of increased penetration of variable RES. Their
estimates have gas fired generation decreasing until 2020 and then increasing
and maintaining the same share until 2050. They estimate a total investment in
gas power plants from 2011-2050 of 335 GW with, gas having a key role in the
European energy transition to more RES.
In terms of
the assessment of overall gas infrastructure capacity and necessary investment
PRIMES report predicts that there will be a negative gap for gas demand over
the next decade. However, currently decreasing demand might give misleading
impression as infrastructure investments are needed to increase the functioning
of the EU internal gas market. 
The crisis
in Ukraine has showed how important for Europe's energy security is to increase
the number of interconnections between EU Member States to facilitate cross-border
trade and to provide grated energy stability. Connecting the so called 'gas
islands' to the rest of Europe remains priority which requires adequate
infrastructure investments, so are various interconnection projects in the
south of Europe aimed at increasing pipeline capacity. Equally, a number of EU
Member States need to diversify their gas supply. According to ENTSOG's Main
Report on the TYNDP 2013-2022, Member States in several regions are heavily reliant
on Russian gas with 10 regions in Eastern Europe having a supply dependency of
60% or more in 2013[21].

3.1.3.      Electricity
A phase-out
of nuclear energy has been decided in a number of European countries, notably Germany, leading to the planned closure of nuclear power plants over a period of more than
a decade. In some countries, the decrease in nuclear energy is compensated by a
more or less similar growth in renewable electricity generation. Over the last
years the share of RES in electricity has been increasing, reaching 23.5% in
2012. According to Eurelectric data, the average growth rate of installed wind
capacity was +11% and for solar +24%. However, the aftermath of the economic
crisis is causing a reduction in investment growth which is likely to
accelerate again in the coming years. Moreover uncertainty on the regulatory
framework and frequent changes to support mechanisms have negatively influenced
the investment climate in some MS. Even if the EU is so far on track further
efforts at improving the investment framework are therefore needed to meet the
20% RES target for 2020. 
While again
notifications from the Member States do not necessarily provide complete data, ENTSO-E’s
Ten Year Network Development Plan (TYNDP) serves as a rigorous exercise to
assess the network expansion need for the coming decade. 
The
notifications show an expected growth of 11.8% in the length of transmission
lines over a six-year period, based on the reported projects under construction
and planned projects. When taking into account decommission, the growth is
reduced slightly to 10.7%, or on average, 1.75% per year. According to the
ENTSO-E’s Ten Year Network Development Plan of 2012, 52,300 km of network
additions or refurbishments are foreseen for the coming 10 years, which is more
than indicated in the Member State notifications. With a total transmission
network length in 2012 of 305,000 km, this amounts to a growth rate of 1.71%
per year. Therefore these two sources are found to be very much in line with
each other. Most likely this is due to a common source for the underlying data
from most of the countries. 
Transmission
capacities foreseen for 2020 in the TYNDP of 2012 are deemed to be sufficient
to meet the 20-20-20 targets of the EU. Since the notifications were found to
be in line with the growth figure in the TYNDP, no substantial gap is foreseen
in case of transmission. Developments in cross-border capacities are an
integral part of the transmission grid expansion planning. Since the source of
the data is of similar origin as for cross-border transmission, and no
investment gap was foreseen for transmission, a similar conclusion can be drawn
for cross-border transmission. 
3.1.4.      Biofuels
For the
biofuels sector, according to the study, the gap remains positive for the time
frame of 2010-2025, as there is an increase in the use of biofuels from
2010-2025. As part of Renewable Energy Directive 2009/28/EC an EU target was
introduced requiring that 10% of energy in transport come from renewable
sources by 2020. 
3.2.   Investment
obstacles & best practices
On the basis of Member State notifications, Regulation 256/2014 requires the Commission to identify
investment obstacles and promote best practices to address them. The impact
assessment in 2011[22]
accompanying the Regulation on 'Guidelines for trans-European energy
infrastructure'[23],
highlighted that issues related to permit-granting procedures, financing,
regulatory framework and public opposition are the main barriers for energy
infrastructure investments across the EU. Analysis of the notifications
received in 2013 indicates that these obstacles are still present today.
Infrastructure
projects are primarily financed by the private sector, which has not fully
recovered from the economic crisis and the austerity measures imposed.
Consequently access to finance remains a continuing problem for infrastructure
development in the EU. Furthermore, lengthy permit granting periods often
unnecessarily impede projects or occasionally permanently block them.
To address this challenge, several
measures have been undertaken by the Commission to improve the investment
climate for energy infrastructure projects. Under the Energy Infrastructure
Regulation[24]
a new approach has been established, identifying Projects of Common Interest (PCIs)
in 12 energy infrastructure priority corridors and areas. A list of 248 key
energy infrastructure projects was adopted by the Commission on 14 October 2013
and will be updated every 2 years. Carrying the label "projects of common
interest" these projects will benefit from faster and more efficient
permit granting procedures and improved regulatory treatment. The agreed PCIs
should result in helping most Member States to meet the 10% level of
interconnectors agreed in 2002 as a share of installed production capacity.
Some PCI
projects with positive externalities that transcend the mere project and can
therefore not be financed completely by the market, will also have access to
financial support from the Connecting Europe Facility (CEF), under which a
€5.85 billion budget has been allocated to trans-European energy infrastructure
for the period 2014-20. The CEF, which is providing financial aid to complete
priority energy, transport and digital infrastructure, is aimed at leveraging
more funding from other private and public investors. The European
Regional Development Fund (ERDF) can also support investments in infrastructure
for smart energy distribution, storage and transmission systems, mainly in less
developed regions. This can cover investments related to both electricity and
gas, provided that they contribute to the development of smart systems and are
complementary to investments for supporting the shift towards a low-carbon
economy. Again, the aim is to leverage more funding from other private
and public investors.
Investments in
energy infrastructure are capital intensive projects that require stable and
predictable regulatory conditions and while investors are still risk averse,
lack of stable regulatory framework can risk investors' confidence. Regarding
policy and regulatory framework the tone has been set at the European level, by
presenting the Policy framework for Climate and Energy for the Period from 2020
to 2030[25].
The 2030 Framework, set in line with the objectives of the 2050 Roadmap[26], emphasised
the need of EU Member States to develop further their policy frameworks to
facilitate the transformation of energy infrastructure with more cross-border interconnections,
storage potential and smart grids to manage demand to ensure a secure energy
supply in a system with higher shares of variable renewable energy.
4.     
Conclusions
Although data provided
in the Member State notifications was often incomplete, it seems that investments
in energy infrastructure are being made mostly in electricity sector. Although
at present generation capacities seem to be adequate, focus on cross-border
infrastructure that would enhance the internal energy market and increase
security of supply as the transition of the energy sector takes shape, should
remain at the focus of Member States. 
There are no
major investments forecasted in oil sector, what reflects a significant decrease
in overall demand. Nevertheless, there remain a number of regions that require
focus on investments aimed at increasing security of supply and
diversification. While there are no obvious gaps in gas infrastructure
investments due to decreasing demand, future investments may be necessary, not
only to replace ageing networks, but also to connect isolated areas and to
prepare gas infrastructure for the application of gas in new areas, such as its
use as a flexible
source of power generation to complement variable renewables or its use as a
transport fuel.
This implies that investments aimed at enhancing the functioning of the
internal gas and electricity market as well as security of supply (e.g.
cross-border pipelines, reverse flows, increased storage capacities) are still highly
necessary. According to the notifications and the TYNDP, significant
investments have been made in the electricity sector. Nevertheless, the focus
on electricity infrastructure investments should remain on cross-border
connections. 
The reporting
exercise has demonstrated, that Regulation (EU) No 256/2014 has some limitations
that should be taken into account when it will be reviewed (by 31 December
2016) in order to avoid that the administrative burden of these notifications
is larger than the added value they bring. For instance, the high capacity
threshold for renewable electricity generation facilities to be reported in the
notifications leads to a situation where significant volumes of renewable
electricity generation infrastructure created in last years are not recognised by
and reported in the notifications. Equally, the majority of oil transported
into the EU is in the form of shipped oil, which again is not covered by the
notifications.  
Furthermore, it
is not always clear what kind of data should be reported in the notifications.
While they are meant to include only projects listed at FID stage, it often is
the case that Member States mix projects that are both FID and non-FID.
Nevertheless, inclusion of non-FID projects is in some cases relevant, for
instance to assess CCS infrastructure developments as in this area no projects
are listed as FID. The same applies for oil pipeline projects and LNG projects,
as there both FID and non-FID projects remain important for determining what
the possible outcome of energy investments may be and where further of projects
may be needed.   
In sum, given the quality of
notifications received by the Member States, Commission is only able to report
on the information provided in the notifications, but not to provide definite
conclusions and proper assessment of future gaps between energy infrastructure
and its potential to meet demand at all times. 
ANNEXES
Table 1:
Existing capacity infrastructure according to notifications 2013 
Table 2:
Preliminary Planned additions in energy Infrastructure
Table 3:
Preliminary Planned additions in energy infrastructure (in % of existing
capacity)
[1] Regulation (EU) No 256/2014 of the
European Parliament and of the Council of 26 February 2014 concerning the
notification to the Commission of investment projects in energy infrastructure
within the European Union, replacing Council Regulation (EU, Euratom) No
617/2010 and repealing Council Regulation (EC) No 736/96. 
Note: Regulation 256/2014 was adopted
following the decision of the European Court of Justice of 6 September 2012 to
annul Council Regulation (EU, Euratom) N° 617/2010 concerning the notification
to the Commission of investment projects in energy infrastructure within the
European Union on
the grounds that it was based on an incorrect legal basis. The Court, however,
maintained the effects of Regulation 617/2010 until the adoption of the new Regulation.
In order to
comply with the Court's judgement and to ensure continuity in the observation
of investment projects in energy infrastructure, Member States were required to
communicate to the Commission by 31 July 2013 aggregated data and information
on their investment projects. Therefore, in this document, we refer to the new
Regulation 256/2014, even though notifications received from Member States were
based on the annulled Regulation 617/2010. It needs to be added that both
Regulations have a similar content. Main changes relate to the legal basis and
dates concerning the entry into force of the new Regulation and its review.
[2] The 2020 Climate and Energy Package sets
three key objectives:  (i) 20% reduction in EU greenhouse gas emissions from
1990 levels; (ii) raising the share of EU energy consumption produced from
renewable resources to 20%; (iii) a 20% improvement in the EU's energy
efficiency.
[3] http://iet.jrc.ec.europa.eu/eu-track-2020-renewable-energy-targets

[4] http://ec.europa.eu/energy/publications/doc/2011_energy2020_en.pdf

[5] In the Energy Roadmap 2050 scenarios http://ec.europa.eu/energy/energy2020/roadmap/index_en.htm,
total investment needs in power stations for the period 2011-2020 range between
EUR 452 and 487 bn (at 2005 prices). At 2011 prices, this amounts to around 540
bn € for power generation alone.
[6] SEC/2011/1233 final.
[7] SEC(2011) 1233 final. Note: More recent analysis by the International
Energy Agency in its World Energy Investment Outlook 2014 suggests that due to
the large electricity capacity additions that will be needed in Europe in next
two decades and with their relatively high unit investment costs (particularly
when it comes to renewables), total investment in the EU power sector is
expected to rise to $2.2 trillion (EUR 1.6 trillion) over 2014-2035. Roughly
30% of this investment is needed to replace and reinforce transmission and
distribution grids and to provide new connections. According to the IEA Report,
power infrastructure replacement costs make up almost $655 billion (EUR 480
billion) while about around $180 billion (EUR 132 billion) is needed to
integrate the growing shares of renewables.  http://www.iea.org/publications/freepublications/publication/WEIO2014.pdf,
p.110
[8] http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52012SC0367&from=EN

[9]
http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2009:265:0009:0023:EN:PDF
[10] IEA World Energy Outlook 2013.
[11] http://ec.europa.eu/energy/publications/doc/2013_pocketbook.pdf

[12] http://ec.europa.eu/energy/publications/doc/2013_pocketbook.pdf

[13]
http://ec.europa.eu/energy/doc/20140528_energy_security_communication.pdf
[14]  Biofuels barometer, 2013 (Full Study)
[15] http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:32009L0028&from=EN

[16] Eurostat, 2012
[17]
http://ec.europa.eu/energy/observatory/trends_2030/doc/trends_to_2050_update_2013.pdf
[18]
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52008SC2869&from=EN
[19] Medium Term Oil Market Report, IEA, 2013
[20] http://ec.europa.eu/energy/observatory/trends_2030/doc/trends_to_2050_update_2013.pdf
[21] http://www2.nationalgrid.com/assets/0/745/746/1632/5363/c5ee88ff-cd49-490f-b0ae-bcfafb0519c3.pdf

[22] SEC/2011/1233
final
[23] COM/2011/0658
final
[24] http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:115:0039:0075:en:PDF 
[25]
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52014DC0015&from=EN
[26]
http://eur-lex.europa.eu/legal-content/EN/TXT/PDF/?uri=CELEX:52011DC0885&from=EN