Revising the TEN-E Rules

Future-proofing Europe’s energy infrastructure

The European Commission (EC) has been making a concerted effort to make Europe the first climate-neutral continent by 2050. In line with this, it 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 detailed evaluation, as well as stakeholder inputs. The move is aimed at supporting the modernisation of the continent’s cross-border energy infrastructure and the European Green Deal – a road map for making the EU’s economy sustainable.

Europe’s breakthrough in creating 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 help achieve the EU’s emission reduction targets for 2030 and climate neutrality by 2050. The proposal to revise the 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.

Background

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, 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

Euro 4.7 billion in funding under the EU budget through the Connecting Europe Facility. The implementation of the TEN-E and the EU’s PCIs in all regions has increased energy interconnections across the EU. This has contributed to ending the isolation of the member states and improving market integration and price convergence across Europe.

Major investments in store

With the announcement of the proposal to revise the TEN-E rules, the EU has re-emphasised that agendas such as electrification, energy system integration, decarbonisation of gas, and digitalisation 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 over those in the last decade, to reach more than Euro 50 billion per year. For offshore grids alone, the continent needs Euro 530 billion in investments by 2050. Further, the union’s hydrogen strategy estimates that investments of around Euro 65 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 and the economic recovery fund of Euro 750 billion should be used to support green projects. For the same reason, the EC no longer wishes to support European PCIs concerning oil and natural gas.

The EC’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 scaling up of renewable electricity generation;
  • new provisions on smart grid investments for integrating clean gases (such as 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 for 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 Nations’ 2030 Agenda and the sustainable development goals. The proposal to revise the TEN-E Regulation has been drafted to complement the objectives of the Green Deal. Under the 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. Thus, better uptake of renewable and low-carbon gases, including hydrogen, is expected. A new approach to more integrated onshore and offshore infrastructure planning will support the scaling up of 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, the promoters will have to report on compliance with environmental legislations, and demonstrate that their 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, which is aimed at helping 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. The EC reportedly 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 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 for 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 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 mentioned plans, while oversight over the European Network of Transmission System Operators (ENTSOs) on the TYNDP process needs to be strengthened. The CEER has suggested 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 decisions across Europe.

Meanwhile, ACER has also shown appreciation for 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 suggested that scenario planning could 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 stated 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 the proposed TEN-E Regulation

The timeline for the enforcement of the new rules 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. Although it still follows the existing regulation, it is based on an improved sustainability assessment of projects. The intention is for the new regulation to be in place in time for the sixth PCI list.

Summing up

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, including gas networks that make use of digital solutions to integrate low-carbon and renewable gases.

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