High-Level Energy Infrastructure Conference Summary of the Conference by the Hungarian Presidency The European Council of the 4 February, 2011 was a breakthrough for European energy policy. Member States acknowledged the scale of challenges ahead of us and set the path to follow towards a European energy policy that is secure, affordable and sustainable. The European Council called for the development of EU wide infrastructure and for the identification of adequate financing instruments and decided that no Member State should be isolated from the European market by 2015. For the very first time, the European Council has set a clear deadline for the completion of the internal energy market, which is key to our success in approaching our energy policy objectives. The Energy Council, in its conclusion adopted on 28 February, 2011 put forward policy proposals which followed the priorities and guidelines set by the Heads of State and Government. As recognised by the responsible ministers, infrastructure development by interconnection of the Member States is fundamental in the creation of the single market. Europe has to aim for stark improvements of the European energy infrastructure, which have to be planned with a long term perspective in mind. Significant further investments are also needed, in order to achieve EU decarbonisation goals to reduce our greenhouse gas emissions by 80-95% by 2050. The main goal of the Infrastructure Conference of May 2011 was to allow Member State governments, regulators, transmission system operators, energy companies, financial institutions and other key stakeholders to discuss the key challenges and possible solutions to problems related to the construction of energy infrastructures. On the first day of the debate, keynote speakers highlighted that in order to create the single market by 2014, relevant EU legislation, especially the rules of the 3rd package should be fully implemented and all technical and regulatory barriers should be removed. Security of supply must be promoted on the highest level possible and our dependence on fossil fuels must be reduced. Participants agreed that diversification is a key element in ensuring energy security, security of supply and competitiveness. Due emphasis shall also be 1
placed on investments into renewable energy sources in harmony with the development of grid infrastructure following an appropriate market analysis. Strengthening the role of renewable energies should also be highlighted when talking about tackling energy dependency. For all this, we need new, smarter energy infrastructures for our well-being as the key importance of energy infrastructure cannot be overlooked when talking about the energy mix. The proper development of energy infrastructure requires first and foremost an attractive regulatory and financing framework, the joint action of Member States and public acceptance, which are prerequisites to achieve our ambitious targets. The awareness regarding the size of the problem should be raised. The leading role for the large investments we should give to the market, but there needs to be also space for public and EU funding. Appropriate incentives are necessary to attract required investments and the identification of projects of common European interest should be done in a way to avoid discrimination between competing projects. It was noted that infrastructure for energy transmission and distribution will play in any case a catalyst role, despite the uncertainties arising in the energy sector, especially regarding the question of increasing energy demand. Such networks should be built which can answer the demands for both electricity and gas. The networks need to be more diversified and interconnected. European infrastructure priorities shall include the strengthening of existing internal infrastructure and not be limited to building new interconnectors with the aim to prevent bottlenecks. Many participants promoted the view that the interests and rights of transit countries should be respected with a view to proper compensation of transit. The first panel was held on the future technology development. In it, speakers explained that Europe is facing a huge challenge to meet its ambitious decarbonization goals for 2050. This task requires close cooperation of the stakeholders, including ministries, regulator, TSOs and private companies. One of the key issues is to establish smart grids which enable the network to integrate a vast amount of renewable energy sources, increase energy efficiency and strenghten the role of consumers, meanwhile promoting the electrification of the European economy. There are great potentials in innovative solutions such as the underground storage of CO2, Hydrogen or heat. Nevertheless, these technologies need further improvement which ensured by proper incentives as well as solid, long term and investment friendly legislative frameworks.
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In the second panel discussion of the Conference, speakers emphasized that according to our goals it is essential to improve the permitting processes regarding transmission infrastructures. This means the improvement of administrative procedures, of time commitment, and sometimes also improvement of the general approach. In connection with streamlining permitting procedures, it was mentioned that it is necessary to take into account the notion of subsidiarity and the very differing approaches to currently existing permitting procedures in the Member States. Cross-border interconnections are essential for achieving the EU goals: therefore rationalisation of consent procedures are of key importance for these projects. Multiple speakers and participants highlighted that the “one-stop-shop” approach is worth considering. Some said that this should rather be a coordinator involving in the process the competent authorities, the project developers and other stakeholders, rather than a decision maker in itself. Making permitting processes transparent and manageable by creating transparency and clear responsibilities is crucial. Many participants promoted the view that public debates should be taken seriously. The people should have the opportunity to get involved in the process early and their views heard and taken into account. In the third panel regarding cost allocation participants highlighted possible perspectives on European rules for cross-border cost allocation as a planning tool on the EU level of the Ten Year Network Development Plans, introduced by the 3rd package. It was mentioned by the speakers that the role of national regulators and ACER should potentially be strengthened further, because we need authorities to improve long-term European planning. Transparency should be a key principle for any cost allocation mechanism for projects with higher regional than national benefit, and the principles of “beneficiary,” “user” and “taxpayer pays” need to be balanced. Benefits of projects of common European interest should exceed costs, and both should be comprehensively measured in full social cost-benefit analysis. The cost benefit analysis as a planning tool is useful as support to investment planning. Regulators should optimally balance the interests of the grid users/consumers and the interest of grid operators by granting reasonable charges. The main question still remains: Who will pay the costs of the projects? Where beneficiaries cannot be identified or benefits not quantified, a commonly agreed EU cost allocation procedure should ensure that the completion of the integrated energy market is not jeopardized. As a main principle it was 3
mentioned that market based cost allocation should apply; the tariff impact should be clearly defined and analyzed within any common EU funding mechanism, and project selection criteria should be transparent and non discriminatory. In all, the great challenges identified are the complexity of the modelling to evaluate benefits and allocate costs to beneficiaries, but also to integrate the benefits from security or supply, renewables, more storage capacity and more efficient allocation. The more countries we introduce, the more the exercise becomes complex. There is clearly much work still to be done! In the last panel on financing energy infrastructure the most important message was that with long term, stable and transparent regulatory framework the investment challenge can be met. It is inevitable to facilitate access to capital for project developers in order to provide appropriate financial incentives for important projects. It was mentioned that community funding must be available for projects which may not be commercially viable but are important for security-of-supply, competitive threat or innovation considerations. Financial instruments and tools should take into account the geographic balance and the economic potential of Member States. To provide an extensive overview on the outcome of the debates the Hungarian Presidency will present the summary of the Conference at the Energy Council of 10 June.
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