2014 Implementation of TEN E EEPR and PCI Projects communication.pdf

EUROPEAN
  COMMISSION
Brussels, 13.10.2014
SWD(2014) 314 final

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
{COM(2014) 634 final}
{SWD(2014) 310 final}
{SWD(2014) 311 final}
{SWD(2014) 312 final}
{SWD(2014) 313 final}
{SWD(2014) 315 final}

EN    EN

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
2

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
3

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
4

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,
5

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  Number of actions  Total amount of the EU contribution to the
of the Award that were finalised  finalised projects
Decision
and received their
final payment
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 Number of
ts  Number
ts  Total
ts
adoption  actions in
n of actions
n number of
n
of the
electricity
in gas
actions
Award
granted
granted
granted
Decision  financial aid
financial
financial

Commitme aid
Commitme aid
Commitme
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
5 (up to
13 (up to
date)
8,544,914 €  this date)   1,340,239 €  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
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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
7

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
8

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
9

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
10

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

11

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

12

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
13

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
14

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
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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
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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.

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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
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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.
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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.
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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.
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