EC focuses on interconnection

By Cillian Donnelly

The European Commission's long anticipated
new energy strategy, unveiled on February 25, heralded the
creation of an 'Energy Union', complete with
a proposed European Union (EU) electricity
regulator wielding considerable powers. The
announcement also outlined how the European
Commission wants to achieve the European
Council goal set last of October (2014) for
all member states to have interconnection
capacity, enabling the export of at least 10% of
their domestically-produced electricity.
The Commission vice-president for energy
union, Maroš Šefc?ovic?, proposed the package.
He said the free-flow of energy should be
regarded as the 'fifth freedom' of the EU,
alongside established rights such as the
freedom of goods, movement, services and
capital. According to Šefc?ovic?, the Energy
Union would 'integrate all 28 energy markets
into one.' According to the proposals, building
cross-border infrastructure, and connecting
isolated electricity systems, is essential for
security of supply and will help achieve a truly
integrated EU-wide energy market.
One element of the Energy Union plan is
that the Commission uses the trans-European
Energy Network (TEN-E) regulation to impose
a binding time limit of 3.5 years on planning
authorities and regulators for approving
infrastructure permits. These decisions would
be funnelled through previously proposed
national competent authorities acting 'as a onestop-
shop for all permit-granting procedures'.

Infrastructure regulation
Later in 2015, the Commission will convene
a dedicated infrastructure forum to discuss
major projects, including interconnections,
with member states. Other electricity-related
proposals included that the current EU Agency
for the Co-operation of Energy Regulators
(ACER) have fuller powers to oversee the
internal energy market, including the ability
to actively intervene when there is a breach
of EU energy market rules. At present,
ACER is responsible for overseeing national
infrastructures, and can offer an opinion on
whether or not an agreement between two
member states complies with existing EU rules,
or whether a decision taken by a regulatory
authority in a member state breaches existing
competition or internal market rules.
A legally binding review of ACER's role
and the energy regulatory framework will
be published in late 2015. And Brussels
announced its intention to establish regional
operational centres to plan and manage crossborder
electricity and gas flows.
The Commission also plans to produce twiceyearly
reports on energy prices, which will
examine the place of taxes and subsidies
in pricing, as well as aiming to phase-out
regulated prices in Europe. To give greater
power to consumers in lowering their average
power bills, the Commission will encourage the
use of smart grids and technologies. Its officials
will also draft further measures on eco-design.
Other electricity-related proposals within
the plan include a commitment to maintain
diverse sources of electricity in Europe, such
as wind and other renewables. There are also
plans to target the transport and building
sectors with regard to energy efficiency and decarbonisation.
Some of these proposals build on
earlier announcements and many have a long
way to go before implementation, and will
require the drafting of detailed legislative and
policy proposals, many of which will need to be
approved by the EU Council of Ministers and
the European Parliament.

Political and cross-border issues
The creation of a European energy regulator is
likely to be politically controversial. Days before
the policy was launched, Hungary's prime
minister Viktor Orbán publicly denounced the
enterprise as something that "hinders national
sovereignty". Orbán's government is pursuing
closer ties with Russia on energy matters. A
deal with Russia to build and maintain two
nuclear reactors in Hungary is currently being
investigated under the EU's competition rules.
Asked about such problems, Šefc?ovic?
seemed confident: 'We will be able to convince
the Hungarian prime minister of the value of
the Commission's policy', he told journalists.
EU electricity association EURELECTRIC
believes that an EU regulator could help
solve EU cross-border transmission problems.
A spokeswoman said it 'believes that the
role of ACER should be to realise seamless
co-operation of national regulators as one
regarding especially cross-border issues. The
ACER should act upon objectively observed
disagreements among national regulatory
authorities [NRAs]. Furthermore, market
players, and not only NRAs, should be entitled
to notify observed disagreements among
NRAs to ACER, in particular when these
disagreements are detrimental to market
participants' interests.'
With regard to transmission system
operators, the spokeswoman said that they
'should also act with a clear European focus
and act as one'. The European Network of
Transmission System Operators for Electricity
(ENTSO-E) should be the driver to ensure such
a goal. 'Establishing regional system operators
could be a first step towards more operational
coordination of TSOs in the future.'

Interconnection
The Commission's Energy Union documents
stressed that there are 12 EU member states
considered to be insufficiently connected to
the EU electricity market. Two of these, Spain
and Cyprus, are not expected to meet the
10% target by 2020. Under current EU funding
schemes, there is €5.35 billion available
from the Connecting Europe Facility to meet
interconnection challenges until 2020. A list
of 248 projects of common interest (PCIs) has
been drawn-up with the specific intention
of completing the EU's internal energy
market, tapping this funding. According to
the Commission, these projects may benefit
from accelerated licensing procedures. As of
21 November 2014, under the first round of
funding, 30 energy projects have been selected
to receive a total of €647 million. Most of these
were for electricity interconnection studies or
projects, across the EU, including connections
between, France and Spain, Italy and Cyprus,
and Hungary and Slovakia.
A total of €650 million in grants has been
earmarked for PCIs in 2015 with the first of
two calls for proposals currently running until
9 April 2015. A recent example of cross-border
co-operation is the Santa Llogaia-Baixàs power
line that runs 64.5 km between France and
Spain. At a total cost of €700 million, this will
double the existing electricity interconnection
capacity, from 1400 MW to 2800 MW. Currently,
electricity interconnection capacity between
France and Spain covers just 3% of potential
peak energy demands in the Iberian peninsula.
EURELECTRIC believes that greater
attention should be paid to streamlining the
authorisation procedures and removing other
barriers to network investment as a way to
speed up development. Its spokesman said
that to optimise the use of regional capacity,
national capacity markets need to evolve into
regional ones, making it easier for consumers
to purchase electricity across borders, as if they
were buying domestically-produced power.

Renewables
The European Wind Energy Association
welcomed the Commission's commitment to
promoting renewables within the package:
'Ultimately, an Energy Union will be achievable
through the strict enforcement of the 2030
climate and energy package on member
states to ensure that both the 40% target for
greenhouse gas reduction and the 27% target
for renewables are met. This will require a
robust and transparent governance system
eventually enshrined in legislation' said EWEA
CEO Thomas Becker.
Ultimately, money and politics will determine
the outcome of the Energy Union proposal.
The Commission estimates that up to €40
billion a year can be saved in electricity and
gas bills if the EU's market is truly integrated.
According to a 2014 report by the Task Force
on Investment in the EU, a joint undertaking of
the Commission and the European Investment
Bank, about €200 billion per year is needed to
realise the Energy Union, as envisaged in this
latest plan.