The European Commission (EC) has been making a concerted effort to make Europe the first climate neutral continent by 2050. In line with this, the EC has adopted a proposal to revise the European Union (EU) rules on Trans-European Networks for Energy (the TEN-E Regulation). The need for this revision of the TEN-E framework was confirmed by the results of a thorough evaluation and stakeholder input. The move is aimed at supporting the modernisation of the continent’s cross-border energy infrastructure and the European Green Deal—a roadmap for making the EU’s economy sustainable.
Europe’s breakthrough in relation to a climate-neutral economy driven by clean energy calls for new infrastructure adapted to new technologies. The TEN-E supports this transformation through projects of common interest (PCIs), which are expected to contribute to the achievement of the EU’s emission reduction targets for 2030 and climate neutrality by 2050. The proposal to revise EU’s rules on the regulation has been set out so as to ensure that the new projects also respond to market integration, competitiveness and security of supply objectives.
A major development with regard to the said proposal relates to the EC’s move to stop subsidisation of oil and natural gas as energy sources in Europe. The proposal focuses on offshore electricity grids with provisions to facilitate more integrated onshore and offshore infrastructure planning and implementation through the introduction of offshore one-stop-shops. It also includes a new focus on hydrogen infrastructure including transport and certain types of electrolysers; upgraded rules to promote the uptake of smart electricity grids to facilitate rapid electrification and scale up renewable electricity generation; provisions on smart grid investments for integrating clean gases into the existing networks; and continued attention to the modernisation of electricity grids, storage and carbon transportation networks.
The TEN-E Regulation, adopted in 2013, lays down rules for the timely development and interoperability of trans-European energy networks. So far, it has helped achieve the EU’s energy policy objectives related to the internal energy market and security of supply in the Union; energy efficiency and energy saving and the development of new and renewable forms of energy; and the interconnection of energy networks.
In the past 10 years, the EU has improved cross-border energy infrastructure thanks to the TEN-E. So far, 95 energy infrastructure projects or PCIs have received EUR4.7 billion in funding under the EU budget through the Connecting Europe Facility (CEF). The implementation of the TEN-E and EU’s PCIs in all regions has increased energy interconnections across the EU. This has contributed to ending Member States’ isolation, improving market integration and price convergence across Europe.
Major investments in store
With the announcement of the proposal to revise TEN-E rules, EU has re-emphasised that agendas such as electrification, energy system integration, decarbonisation of gas as well as digitisation are formative aspects of the Union’s future energy requirements.
According to the EU, in the upcoming decade, investments in electricity grids are expected to double compared to the last decade to reach more than EUR50 billion per year. For offshore grids alone, the continent needs EUR530 billion in investments by 2050. Further, the Union’s hydrogen strategy estimates that investments of around EUR65 billion will be needed by 2030. Given the required investments, the redesign of the TEN-E regulation was critical as it will help the EU in building future-proof infrastructure. The EC holds that at least one third of the money from both the EU’s new budget as well as the economic recovery fund of EUR750 billion should be used to support green projects. For that same reason, the EC no longer wishes to support European PCIs concerning oil and natural gas.
The Commission’s proposal includes:
- an obligation for all projects to meet mandatory sustainability criteria, which implies that each candidate project will have to contribute significantly to sustainability through the integration of renewable energy into the grid or the reduction of greenhouse gas emissions;
- an update of the infrastructure categories eligible for support through the TEN-E policy, ending support for oil and natural gas infrastructure;
- a new focus on offshore electricity grids with provisions facilitating more integrated onshore and offshore infrastructure planning and implementation through the introduction of offshore one-stop-shops;
- a new focus on hydrogen infrastructure including transport and certain types of electrolysers;
- upgraded rules to promote the uptake of smart electricity grids to facilitate rapid electrification and scale up renewable electricity generation;
- new provisions on smart grid investments for integrating clean gases (like biogas and renewable hydrogen) into the existing networks;
- continued attention to the modernisation of electricity grids and storage and carbon transportation networks;
- new provisions on support for projects connecting the EU with third countries, also called Projects of Mutual Interest (PMIs), that demonstrate their mutual benefit and contribution to the Union’s overall energy and climate objectives in terms of security of supply and decarbonisation;
- a revised governance framework to enhance the infrastructure planning process and ensure it is aligned with the continent’s climate goals and energy system integration principles, through increased stakeholder involvement throughout the process, a reinforced role of the EU Agency for the Cooperation of Energy Regulators (ACER) and improved oversight by the EC; and
- measures to simplify administrative procedures, accelerate project implementation, shorten permitting procedures for PCIs to avoid delays in projects that facilitate the energy transition, and strengthen transparency and participation in consultations.
Proposed TEN-E Regulation and European Green Deal
The European Green Deal is an integral part of the EC’s strategy to implement the United Nation’s 2030 Agenda and the sustainable development goals. As part of the Green Deal, the EC will refocus the European Semester process of macroeconomic coordination to integrate the United Nations’ sustainable development goals, to put sustainability and the well-being of citizens at the centre of economic policy, and the sustainable development goals at the heart of the EU’s policymaking and action.
The proposal to revise the TEN-E Regulation has been drafted to complement the objectives of the Green Deal. Under the said proposed rules , with natural gas infrastructure and oil pipelines no longer being eligible for PCI status, new and updated infrastructure categories will support smart electricity grids and thus a better uptake of renewable and low-carbon gases is expected, including hydrogen. A new approach to a more integrated onshore and offshore infrastructure planning will support the scale-up in offshore grid development across Europe’s seas.
With these provisions, the revised TEN-E Regulation will ensure that only infrastructure projects for which there are no reasonable alternative solutions and which contribute to the EU’s decarbonisation goals are selected as PCIs. In addition, all PCI project candidates will be subject to a mandatory sustainability assessment. Furthermore, during project implementation, project promoters will have to report on compliance with environmental legislation and demonstrate that projects do no significant harm to the environment in accordance with Article 17 of the Taxonomy Regulation.
Proposed TEN-E Regulation and EU Strategy on Offshore Renewable Energy
In November 2020, the EC presented the Strategy on Offshore Renewable Energy to help meet the EU’s goal of climate neutrality by 2050. The strategy proposes to increase Europe’s offshore wind capacity from 12 GW to at least 60 GW by 2030 and to 300 GW by 2050. As reported, the EC aims to complement this with 40 GW of ocean energy and other emerging technologies such as floating wind and solar by 2050.
Under the revised TEN-E Regulation, key provisions to upscale offshore renewable energy in Europe have been introduced. The EC has identified four offshore priority corridors around Europe’s sea basins and has laid down rules for a coordinated long-term integrated offshore and onshore grid planning.
The proposal builds on the regional cooperation strengths of the TEN-E framework and introduces integrated offshore development plans, which will be included in the Ten-Year Network Development Plans (TYNDP). Member States, with the support of the EC, will now jointly define and agree on the amount of offshore renewable generation to be deployed within each sea basin by 2050, with intermediate steps in 2030 and 2040. These objectives will be based on the national energy and climate plans, the offshore renewable potential of each sea basin, environmental protection, climate adaptation and other uses of the sea, as well as the EU’s decarbonisation targets. The proposed revision in the TEN-E Regulation introduces a one-stop-shop for each sea basin, a single point of contact for reducing complexity, increasing efficiency and accelerating the permitting process of offshore transmission infrastructure.
Regulator’s take on proposed TEN-E Regulation
The EU ACER and the Council of European Energy Regulators (CEER), the voice of Europe’s national regulatory authorities (NRAs), have welcomed the EC’s efforts to modernise the current TEN-E with a new focus on sustainability.
According to CEER, the European regulatory framework needs to be robust for the identification of the cross-border projects and investments needed for the energy transition, and for project funding and cost allocation to be subject to regulatory oversight by NRAs in line with the principles of the internal energy market/clean energy package frameworks. To ensure coherence of the TYNDP and the national development plans, national regulators should have the power to approve/amend the said plans, while oversight over European Network of Transmission System Operators (ENTSOs) on the TYNDP process needs to be strengthened. CEER has recommended that the regulators closest to the projects are best placed to decide how to allocate the costs of cross-border energy projects in a coordinated way within ACER, to support informed and consistent cross-border cost allocation (CBCA) decisions across Europe.
Meanwhile, ACER has also appreciated the EC’s new focus on sustainability and offshore renewables, including extending the scope of the PCIs to include hydrogen and electrolysers. However, ACER has outlined that scenario planning can become more neutral with the introduction of guidelines. In addition, it has recommended that in order to reach energy sector integration, scenario planning should be developed jointly for electricity and gas in a neutral way. In particular, ACER has pointed out that in the latest proposal the new process for cost-benefit analysis (CBA) methodologies is overly complicated, and hence it may not fit well with the agility needed for the TYNDP and PCI processes, which have a two-year cycle. To ensure proper regulatory scrutiny over the ENTSO-E’s proposals and for simple and timely processes, ACER should be given the power to approve the methodologies for the CBA and be able to issue binding guidelines, as CBAs are critical to the reliable and consistent assessment of the TYNDP projects and the selection of PCIs. The regulator has also highlighted that Europe’s legislators should not miss this opportunity to streamline the process and improve regulatory oversight so that the best projects are delivered.
Expected timeline for proposed TEN-E Regulation
The timings for the new rules to enter into force will depend on the process of negotiation with the European Parliament and the Council. In the meantime, preparation of the fifth PCI list, due at the end of 2021, has already started. It still follows the existing regulation, however, based on improved sustainability assessment of projects. The intention is for the new regulation to be in place in time for the sixth PCI list.
The key objective of the updated regulation is to put Europe on a path to achieve climate neutrality by 2050. While the proposal to revise the TEN-E Regulation eliminates oil and gas infrastructure from possible PCI eligibility for EU funding, it also creates space for smart grids, which includes gas networks that makes use of digital solutions to integrate low-carbon and renewable gases.