Meeting of TEN-E Regional and Thematic Groups for electricity, gas, oil and smart grids

Meeting of TEN-E Regional and Thematic Groups for electricity, gas, oil and smart grids Brussels, 4 February 2016 Chaired by Catharina SIKOW-MAGNY, Head of Unit European Commission, DG ENERY Internal market, Networks & Regional initiatives

Agenda overview 09:30-10:00 Introduction: TEN-E framework and its state of play Part 1: Monitoring and implementation of the PCIs on the 2nd Union list 10:00-11:00 Permit granting 11:00 11:15 Coffee break 11:15-12:15 Public acceptance 12:15 13.30 Lunch break 13:30-14:30 Regulatory issues 14:30 14:45 Coffee break 14:45-16:00 Financing Part 2: Towards the 3rd PCI list 16:00-17:00 How to design the process in view of the 3rd PCI list to be adopted in 2017? 17.00-17.30 Next steps & meeting plan for 2016

INTRODUCTION AND CONTEXT European Commission DG Energy Networks and Regional Initiatives Milosz MOMOT and Tomasz JERZYNIAK

09:30-10:00 Introduction What is the TEN-E framework about, what is its state of play and what is its general context

Infrastructure is at the heart of the European energy policy Also the backbone of the European Energy Union And an apple of this Commission (investment oriented) eye.. TEN-E Guidelines Regulation (347/2013) - addressing infrastructure needs in a comprehensive way COMPETITIVE- NESS SECURITY OF SUPPLY SUSTAINABILITY Energy

TEN-E Guidelines Regulation +Delegated Regulations + CEF CO2 transport E-highways Smart grids Criteria / CBA 2nd list: 195 PCIs November 2015 Accelerated permit granting Regulatory measures http://eur-lex.europa.eu/legalcontent/en/txt/pdf/?uri=oj:jol_2016_019_r_0001&from=en Energy EU financial assistance CEF 5.35bn Regulation 1361/2013

Criteria / 195 PC Accelerated permit granting Regulatory m Energy

Permit granting Regime of common interest Priority status for PCIs Most preferential treatment in Member States Streamlining of EA procedures Competent Authority to manage permit granting process 3 and a half years time limit for the permit granting decision Increased transparency and enhanced public participation Energy

Criteria / CBA 195 PCIs ted permit nting Regulatory measures EU financial a Energy

Regulatory framework - measures Energy system-wide cost-benefit analysis equal footing for all network elements Enabling investments with cross-border impact: Cross-border cost allocation (CBCA) NRA joint decision on investments and cost allocation ACER decision if no agreement Long-term incentives for investment: Obligation on NRAs to grant appropriate risk-related incentives ACER guidance on best practices of NRAs and methodology Energy

iteria / CBA 95 PCIs tory measures EU financial assistance CEF Regulation 1361/2013 with 5.35bn; Structural Funds, EIB, EFSI, Marguerite Fund, EBRD Energy

Criteria / CBA Being one of the 195 PCIs Now what? Time to implement! Energy

Implementation TEN-E Regulation introduces BENEFITS for PCIs but also certain obligations on PCI promoters Your project (indeed) but part of a (common) network Delays may trigger call for proposals for an alternative project promoter - Art 5(7)(d) Energy

Reporting on the progress - information is key Submit an annual report on progress achieved, delays registered to ACER (reporting by 31 March) Draw up an implementation plan including a timetable for the major milestones of a project (Art 5(1)) - Transparency platform Keeping project websites up-to-date (Art 9(7)) Sharing information within Regional Groups Energy

Monitoring key to identify and tackle delays Regional group platform facilitating cooperation on cross-border projects bringing two (more) sides together "TSOs, DSOs and other operators shall co-operate with each other in order to facilitate the development of PCIs in their area"- Art 5(2) Also an opportunity to learn from each other Regional groups (and ACER) monitor progress achieved by PCIs and make recommendations to facilitate implementation of PCIs (Art 5(3)) "If a problem is not known it cannot be solved" (source: CIA) Possibility to organise specific support activities for PCIs; Technical Assistance; European Coordinators (Art 6) High Level Groups giving more political impetus in regions that need reinforced cooperation given a particular challenge Energy

Baltic Energy Market Interconnection Plan (BEMIP) BEMIP longstanding cooperation; its reform kicked off in autumn 2014 New MoU and Action Plan signed on 8 June 2015 Key goals include connecting Finland and the Baltic States to the continental European gas network and new gas supply sources and accelerating market opening in the Member States and synchronisation of the electricity grids of the Baltic states with the European grid LitPol (in operation), GIPL Energy 16

South-West Europe High Level Group Madrid Declaration of 4 March 2015 on the setting up of the HLG MoU signed on 30 June 2015 Aims at increasing the interconnection level between the Iberian Peninsula and rest of Europe, at completion of the Eastern gas axis between Portugal, Spain and France and allowing bidirectional flows between the Iberian Peninsula and France Studies ongoing Energy 17

Central and South-Eastern European Gas Connectivity (CESEC) High Level Group MoU and Action Plan signed on 10 July 2015 Agreement between 15 EU and Energy Community countries on joint regional efforts to boost diversification and gas market integration Action Plan identifies priority infrastructure projects and sets out actions to tackle market integration issues Action Plan implementation up and running Energy 18

General Energy Policy context 2016 Adoption of the State of the Energy Union 18 November 2015 including 2 nd PCI list

February 2016 package Revision of the Security of Gas Supply Regulation LNG and Gas Storage Strategy Revision of the Transparency of Intergovernmental Agreement

Winter 2016 package (Q4/2016) Energy Union Governance initiative New RES Directive for 2030 EED & EPBD review Market Design initiative Electricity SoS review of the directive Vital infrastructure & 15% target Communication

PERMIT GRANTING FOR PCIs European Commission DG Energy Networks and Regional Initiatives Adam ROMANOWSKI

10:00-11:00 Permit granting Have the permitting procedures applied by MS changed/improved following the adoption of the TEN-E Regulation? Have you noticed any positive impact of the Regulation in this respect? Do the established one-stop-shops actively coordinate and streamline in real life the permitting procedures? Which specific permit granting measure(s) introduced by the TEN-E Regulation do you find particularly useful and thus should be given an absolute priority by the Member States and the Commission? Can you identify any particular provision related to the permit granting which should be improved or removed in the future revision of the Regulation? Would you agree with the following statement: "There is no need for any legal rules streamlining the permit granting procedure and/or these rules have limited impact on the permitting for PCIs because in real life the political importance of the project determines how fast the permit granting is carried out

Obstacle Binding law Compliance Streamlined procedure Challenges Check Unique framework Significant achievement Energy

Discussion Four questions In the context of the results of the study, but based on your experience, have the permit granting procedures applied by MS changed/improved (to a large/moderate/little extent?) following the adoption of the Regulation Have you noticed in the 2.5 years of the application of the Regulation any positive impact of the Regulation in this respect? Do the established one-stop-shops actively coordinate and streamline in real life the permitting procedures? Energy

Discussion Which specific permit granting measure(s) introduced by the Regulation do you find particularly useful and thus should be given an absolute priority by MS and EC? Is it for example (not exclusively): the powers of the one-stop-shop to establish time limits for issuing individual decision, the time limits, the manual of procedures, the need to prepare a concept for the public consultation? Energy

Discussion Can you identify any particular provision related to the permit granting which should be improved or removed in the future revision of the Regulation? Would you agree with the following statement: There is no need for any legal rules streamlining the permit granting procedure for PCIs and/or these rules have a limited impact in real life because the political importance of the project determines how fast the permit granting is carried out Energy

Permit granting process Key messages: We have in place the unique set of measures streamlining and accelerating the implementation of PCI. We need to take the full advantage of these measures. Further delays in the projects implementation are not acceptable. MS need to comply with the permit granting rules. Next steps: Dialog with the Member States; dedicated meeting with the one-stop-shops in September 2016. EU-Pilots against the non-complaint Member States (as of March-April 2016)

PUBLIC ACCEPTANCE European Commission DG Energy Networks and Regional Initiatives Sorina STATE

11:15-12:15 Public acceptance

Legislative Framework TEN-E Regulation (No 347/2013) Article 9: publish a manual of procedures for the permit granting process draw up and submit a concept for public participation one public consultation (at least) establish and regularly update a website with relevant information on PCIs

Commission's tools for a successful stakeholder engagement Based on article 18 of TEN-E Regulation: COM needs to provide an infrastructure transparency platform easily accessible to the general public, including via the internet. Therefore, we have created the following tools: PCI MAP Viewer (+ implementation plans + union list main page + funds allocated fiches) CIRCABC - regularly updated information on the progress of work, meeting agendas, as well as final conclusions and decisions of each Regional Group are published by the Commission on the transparency platform Additional tools and activities: Public Consultations Grid Infrastructure Communication Toolkit Stakeholders Workshop Communication activities ( Brochures, flyers, Press Releases, DG ENER website, replies to citizens enquiries/petitions etc.)

http://www.grid-communications-toolkit.eu/

Description of results achieved This toolkit helps citizens to gather important information about grid development projects in Europe. It supports environmental NGOs to have a stronger voice in all stages of a grid development project. It helps national or regional policy makers to better engage with their constituents. It supports transmission system operators to identify relevant aspects for communication and stakeholder involvement activities surrounding grid development projects.

Debate How could the process of public consultations be improved? What are your experiences regarding different obstacles in permitting procedures due to the public acceptance of some PCIs? What could the Commission do more to help stakeholders successfully engage? How would you like to be involved in future projects? Do you have ideas? Please contact us @ENER-B1-PROJECTS@ec.europa.eu

Conclusions on public acceptance session Well-designed and structured dialogue combined with sustained engagement will help build a common understanding and knowledge about a particular infrastructure proposal. Efficient use of best practices exchanges and existing tools to increase the public acceptance of PCIs and raise awareness around their importance. Next meetings: 13-17 June 2016 - European Sustainable Energy Week (EUSEW): - 3 dedicated sessions on: "How to improve stakeholders' dialogue & develop best practices on the common road towards cleaner and more affordable energy". September October 2016: series of workshops/meetings on best practices for enhancing the process of public consultation.

REGULATORY ISSUES European Commission DG Energy Networks and Regional Initiatives Sebastian GRAS

13:30-14:30 Regulatory issues - How can Article 13 be used to ensure and speed up the implementation of mature PCIs? - How to deal with underinvestment and how incentives can help for a timely and swift implementation of the PCIs? - Are the projects' and promoters' risks adequately addressed by the NRAs in the existing regulatory frameworks?

An incentive is something that motivates an individual to perform an action. https://en.wikipedia.org/wiki/incentive

Regulatory Treatment of PCIs Cost-Benefit- Analysis (Article 11) Identify most beneficial energy infrastructure projects for the European Union Cross-border cost-allocation (Article 12) Agree on cost sharing among Member States according to received benefits Incentives (Article 13) Ensure a suitable set-up to incentivise implementation decision

Dimensions of Incentives "Where a project promoter incurs higher risks compared to the risks normally incurred by a comparable infrastructure project" "The decision shall consider the results of the cost-benefit analysis and in particular the regional or Union-wide positive externalities generated by the project." Incentivise by adjusting Risk-Level Incentivise by Rewarding Enhanced Risk/Return- Ratio leads to suitable set-up for implementation decision

Example for Incentives risks related to new transmission technologies, both onshore and offshore risks related to under-recovery of costs and development risks rules for anticipatory investment rules for recognition of efficiently incurred costs before commissioning of the project rules for providing additional return on the capital invested for the project

Approaches on Incentives Riskier project Business as usual Regulating A dynamic environment Systematic Approach One defined risk-level for all operations, e.g. through CAPM and/or Individual Approach One risk-level projects set, e.g. approach of Article 13

Procedural Aspects & Next steps By 31 July 2013 NRAs shall submit to the Agency its methodology By 31 December 2013 the Agency shall facilitate the sharing of good practices and make recommendations By 31 March 2014 NRAs shall publish its [updated] methodology Where the measures not sufficient to ensure the timely implementation of projects of common interest, the Commission may issue guidelines regarding incentives ACER-Recommendation No 03/2014 on Article 13 (incentives) Study on regulatory incentives for investments in electricity and gas infrastructure projects EC received updated NRAmethodologies Study on compliance-check of national regulatory practice with Article 13 of Regulation (EU) 347/2013

FINANCING PCIs European Commission DG Energy Networks and Regional Initiatives Wioletta DUNIN-MAJEWSKA

14:45-16:00 Financing Available financing and accessing it by project promoters Technical assistance for PCIs from existing and new sources

Outline 1. Legal framework: TEN-E, CEF, and EFSI 2. Financial instruments available (in some detail) 3. Support tools : EIAH, EIPP 4. Financial screening exercise

Setting the stage TEN-E TEN-E (347/2013) Recalling general principles The three step logic (for investments)

Setting the stage FI Two Regulations establishing financial instruments: CEF (1316/2013) and EFSI (1017/2015) CEF (three sectors; grants and FI) FI debt instrument and equity instrument FI specific market needs, clear EU added value, no crowding out of private financing, improved leverage effect and higher multiplier effect (in attracting private-sector financing)

Setting the stage CEF Commission should give priority to the use of FI within the ceiling of the CEF Energy project promoters should be encouraged to explore the possibility of using financial instruments before applying for grants for works. (possibly additional requirements in the AWP)

Setting the stage EFSI EFSI Regulation what is it about? EU Guarantee, EU Guarantee Fund, EIB funds EIAH EIPP

Setting the stage EFSI NO: a substitute for private market finance or products provided by national promotional banks or institutions (additional) YES: acting as a catalyst for private finance by addressing market failures; ensure the most effective and strategic use of public money

Setting the stage EFSI strategic, transformative and productive investments with high economic, environmental and societal added value contributing to EU policy objectives also for: PCI that complete the internal market in energy ( ) including energy interconnections No sectoral or regional pre-allocation Higher risk profile than projects supported by EIB normal operations

Setting the stage EFSI Consistent with EU policies Mature enough to be bankable Economically and technically viable (commercially sound) Priced in a manner commensurate with the risk taken

Financial instruments what are they? Common features: Entrusted entity (-ies) (DA to implement) Creating risk-bearing capacity (within EIB) Expected leverage effect for EU support (more investment) Expected multiplier effect (attracting private investors) Suitable for blending

Products under CEF DI Project bond credit enhancement (PBCE) (PBI) Senior debt credit enhancement (SDCE) (LGTT) Funded senior loan Hybrid securities

Combination with other sources of funding (DI) (a) other parts of the CEF; (b) other instruments, programmes and budget lines in the Union budget; (c) Member States, including regional and local authorities' contributions of own resources or resources available from the funds under the cohesion policy

EFSI instruments (EU Guarantee) loans guarantees counter-guarantees capital market instruments funding or credit enhancement instrument equity or quasi-equity participations (including in NPB or institutions, investment platforms or funds)

Infrastructure and innovation window

European Investment Advisory Hub Strengthen support for project development and preparation across the Union Additional to existing instruments A single entry point for technical assistance for investments; technical assistance for project promotors at the local level Free of charge (or costs capped)

European Investment Project Portal What: website with information on current and future investment projects in the Union (rolling) How: Project promoters looking for financing can upload information (with a small fee); minimum check by the Commission services (disclaimers) Goal: easily accessible database on investment opportunities to potential investors

Financial screening A fresh look at the new list Project phase? Is it a good time to start the bid? Sources of financing under consideration? Assistance needed? Financing ready? information on source We are happy to assist

Conclusions on financing For consideration: Grants are exceptional Financing and advisory services are available under CEF DI and EFSI Engage early: first come, first served basis Next steps: dedicated events on financing in April and November Case-by-case assistance and facilitation by the Commission (with IFIs and other investors

TOWARDS THE 3 rd PCI LIST European Commission DG Energy Networks and Regional Initiatives Milosz MOMOT

16:00-17:00 How to design the process in view of the 3rd PCI list Which concrete modifications could be introduced to the PCI assessment and selection process?

CO2 transport E-highways Smart grids Criteria / CBA 2nd list: 195 PCIs November 2015 108 Electricity transmission & storage (27 Electricity Highways) 77 Gas transmission, storage & LNG Energy 3 Smart Grids 7 Oil None yet in CCS http://eur-lex.europa.eu/legal-content/en/txt/pdf/?uri=oj:jol_2016_019_r_0001&from=en

Energy

Energy

Process to identify projects of common interest 2016 2017 2017 End of February -> <- - March - April - -> <- May-July -> October -> ENTSOs (G/E) Project promoters NRAs (G/E) Regional Groups ACER (G/E) European Commission Prepare TYNDPs for gas and electricity Submit projects Criteria (Art4)/CBA methodology PS CBA (ENTSOs) Check application of criteria Crossborder relevance Evaluate projects [against needs] Rank Adopt regional lists Opinion Crossregional consistency (in CBA application) Adopt Union-wide list of PCI (no ranking) PCI identification process Energy

Process to identify projects of common interest 2015 2016 <- - February <- - April - September - -> 2016 <- September December - -> ENTSOs (G/E) - Prepare TYNDPs for gas and electricity [Stakeholders' involvement] Cross-Regional meeting proposal for Needs' identification process - April Cross-Regional meeting launch of the process - June Regional groups Identification of Regional groups From needs infrastructure needs in Corridors to projects - Data requirements Cooperation Platform Improvements in the TYNDP, input to Regional Groups discussions Corridor meetings needs' discussion and validation July-September Preparation of the PCI identification process Energy

Main elements of the 3 rd PCI identification process Every proposed project (gas + el) shall be part of the latest TYNDP Electricity: 2016 Gas: 2017 Project Specific CBA in line with the approved CBA methodologies (developed by ENTSOs) Benefits to outweigh project costs Importance of input data quality and accuracy for TYNDP Projects that best address infrastructure needs/deficiencies/bottlenecks in a given corridor Energy

Needs identification Work in progress Possible sources of information Needs in terms of market integration, sustainability, security of supply and competition (Art 4(2)) Needs embedded in the definition of Priority Corridors and Areas (Annex I) Regional groups input qualitative requirements; relying on Stakeholders' expertise TYNDPs (previous) and Regional Plans for Gas and Electricity bottlenecks Gap analysis as part of the ongoing TYNDPs (electricity) Outcomes of network modelling Supply adequacy analysis / security of supply outlooks Intelligent process for assessing projects' response to identified needs Energy

Key features of the 3 nd PCI process Transparency Updated calendar of the PCI process available (CIRCAB?) Timely notification of activities and information sharing All stakeholders to have an overview of all the activities Stronger stakeholder involvement Meetings by default open to all stakeholders, including NGOs Keen to receive feedback on all steps of the process Public consultation on the list of candidate projects Rely on additional expertise to support Regional Groups, when needed Attention to the quality and reliability of data factoring in information from the monitoring of the 2 nd PCI list Energy

PLANNING AND NEXT STEPS European Commission DG Energy Networks and Regional Initiatives

17.00-17.30 Next steps & meeting plan for 2016 Key messages and outline of the next steps in 2016

RG Planning 2016 February March April Mai June July August September October November December Regional Groups meetings TEN-E Regional Groups meetings (all) Cross-RGs for gas Regional Groups for gas individually Cross-RGs for electricity Regional Groups for electricity individually Regional Group for oil Thematic group for Smart Grids Work streams: Permit granting Public acceptance Regulatory issues Financing High-Level Groups BEMIP CESEC South-West Europe NSOG? Kick-off meeting (04/02) Steering Group (senior officials) (16/02) Technical meeting (23/02) for Ministries RG meeting (PCI progress) RG meeting (PCI progress) RG meeting (PCI progress) RG meeting (PCI progress) Working level (10/03) Technical Technical meeting (04/03) for Ministries, TSOs, NRAs, ENTSOs TEN-E RGs on infrastructure needs Dedicated event on financing (Financial instruments) CEF Info day Technical, Steering Group (senior officials) RG meeting (PCI progress) RG meeting (PCI progress) RG meeting (PCI progress) RG meeting (PCI progress) TEN-E RGs on infrastructure needs EUSEW 13,17/06, 3 sessions on public acceptance Workshop (study results) Cross-Regional meeting infrastructure needs Cross-Regional meeting infrastructure needs RG meeting (PCI progress) RG meeting (PCI progress) RG meeting (PCI progress) RG meeting (PCI progress) Meeting for National Competent Authorities Workshops for project promoters and stakeholders Workshops for project promoters and stakeholders Workshop (Art 13) Launch of PCI Stock taking meeting application (provisional) Dedicated event on financing (Financial instruments) Working level Working level High Level High Level

+ Electricity highways (Tomasz JERZYNIAK) and smart grids (Sebastian GRAS) Priority corridors: electricity Northern Seas Offshore grid Nicole VERSIJP North-South interconnections Western EU Tomasz JERZYNIAK BEMIP Electricity Andreea TANASA North-South interconnections CEE Beatrice CODA Energy

+ carbon dioxide transport infrastructure (Beatrice CODA) Priority corridors: gas, oil, CO2 transport Southern gas corridor Milosz MOMOT North-South interconnections Western EU Sebastian GRAS BEMIP gas Adam ROMANOW SKI North-South interconnections CEE & oil Adam SZOLYAK Energy

Leaders of work streams and other responsibilities Permit granting Adam ROMANOWSKI Public acceptance Sorina STATE Regulatory issues Sebastian GRAS Financing Wioletta DUNIN-MAJEWSKA High Level Groups: HLG for South Western Europe Sorina STATE, Tomasz JERZYNIAK (electricity), Sebastian GRAS (gas); CESEC Mikko VAHA-SIPILA; BEMIP Andreea TANASA (electricity), Adam ROMANOWSKI (gas) Energy

To be continued