Transmission System Operators have to provide non-discriminatory access to their infrastructure and offer the same service and contractual conditions to other market players (third party access). 

Regulatory authorities may grant exe​​​mptions for new interconnections in strict circumstances:

• the investment must enhance competition in the electricity supply

• the level of risk attached to the investment is such, that the investment would not take place without the exemption

• the interconnection must be owned by a legally separate firm from the TSO in whose system it will be built;

• the users of the interconnector must pay for it

• the costs of the interconnection cannot be financed through charges for using the linked transmission or distribution systems

• the exemption does not harm the competition or the efficient functioning of the market or the regulated system.​

Regulatory authorities receiving a request for exemption should decide within six months. When NRAs fail to agree, or upon their joint request, ACER becomes responsible for adopting such decision.​

​A copy of every exemption request needs to be transmitted to the European Commission and to ACER on receipt.

Within two months, ACER can provide an opinion to the regulatory authorities involved.

If a decision is taken, this must be notified  by the NRAs to the European Commission, together with all relevant information.

The decision shall be notified, without delay by the concerned regulatory authorities (or by ACER where the decision is taken by ACER), to the Commission, together with all the relevant information with respect to the decision.

The Commission may request to amend or withdraw the decision to grant an exemption. The exemption expires if the construction of the interconnector has not started within two years yet or the interconnector has not become operational within five years. The exemption may be extended if the delay is due to major obstacles beyond the control of the project promoter.​

​​​​Research, development and innovation could not be effective without the involvement of distribution and transmission system operators. To ensure an effective and inclusive energy transition, every stakeholder must play a role.

Cross border cooperation and knowledge sharing facilitate the efficient functioning of both the interconnected system and the internal energy market, making the cooperation of sector associations at European level a welcome approach. ​

Research, development and innovation activities, if conducted by regulated entities, require a clear assessment of their foreseen costs and bene​​​​fits. ACER acknowledges that a CBA is difficult to conduct for such activities, but this fact should not defer regulated entities to establish project benefits in order to prove its benefit to the consumer. In this respect, the same level of transparency is required of such projects as of any other infrastructure project. ​

Congestion management procedures associated with a pre-specified timeframe may generate revenue in case network congestion happens in that specific period.

However, all income generated as a result of the cross-zonal capacity allocation must be used as a priority for either guaranteeing the actual availability of the allocated capacity, or for maintaining or increasing cross-zonal capacities. Only where these objectives are fulfilled, the revenues can be used as income when determining network tariffs. Potential residual revenues shall be place on an internal account line until they can be spent for the abovementioned purposes.

The relevant methodology for congestion revenues use must be proposed by the TSOs and it has to set out:

• the conditions under which congestion revenues can be used for fulfilling the priority objectives,

• the conditions for placing the residual revenues on a separate internal account line for future use along with the amount of time those revenues can be placed on such an account line.

Transmission System Operators must report to national regulatory authorities (NRAs) how they are expecting to use the congestion income and how they actually used it. On yearly basis, NRAs must inform ACER and publish a report detailing the amount of the collected revenue, as well as how it was used in view of fulfilling the priority objectives. The report must also highlight the amount placed on a separate account line and the quantity used when calculating network tariffs.​

​ACER decides on the proposed methodology and can request TSOs to amend or update it. ACER also receives yearly reports on the congestion revenue use from NRAs.​

The Inter-TSO compensation (ITC) mechanism allows transmission system operators (TSOs) to receive a compensation for the costs of hosting cross-border flows on their networks. This compensation shall be paid by the operators of national transmission systems from which cross-border flows originate and the systems where those flows end.

Pursuant to Commission Regulation (EU) 838/2010, two types of costs shall be compensated:

• the costs of losses due to hosting cross-border flows of electricity and

• the costs of making infrastructure available to host these cross-border flows.​

ACER monitors the implementation of the ITC mechanism as well as the management of the ITC fund and reports to the European Commission. ACER is also responsible for assessing the annual cross-border infrastructure compensation fund along with a recommendation and for providing an opinion on suitability of the methodology of using long run average incremental costs. 

​ACER recom​men​ds to limit the infrastructure compensation to existing infrastructures and to phase-out the infrastructure fund. In ACER's view, NRAs should also engage in cross-border cost allocation agreements for new investments and on implementing an ex-post compensation mechanism for the loop flow induced costs and losses due to cross-border flows. In 2022, during its annual monitoring on the ITC mechanism, ACER identified potential shortcomings and soon issued new recommendations to ENTSO-E, TSOs and NRAs on how to improve the treatment of electricity losses for the purpose of the ITC mechanism. In addition, ACER concluded in its Opi​​​nion that in the context of the current ITC mechanism, LRAIC methodology is of only limited suitability.​

​​​​​National Regulatory Authorities (NRA) have the duty of fixing or approving transmission or distribution tariffs or their methodologies in Europe. 

Tariff methodologies should reflect the fixed costs of transmission and distribution system operators and provide appropriate incentives to them to increase efficiencies, fostering market integration and security of supply, supporting efficient investments and related research activities; as well as facilitating innovation in the interest of consumers in areas such as digitalisation, flexibility services and interconnection.

Network tariffs shall, inter alia, be:

• Cost-reflective

• Transparent

• Non-discriminatory

• Taking into account the need for network security and flexibility​​

The Tariff setting process consists of three steps:

• The allowed revenues (including the remuneration method for TSO/DSO costs) and other relevant costs are determined.

• The tariff structure is defined.

• The costs are allocated to each of the tariff structure's items (i.e. charges paid by network users). 

​Pursuant to the Electricity Regulation, at least every two years, ACER shall provide and update a report on electricity transmission and distribution tariff methodologies' best practices. ACER takes into account national specificities in this evaluation. National regulatory authorities should as well consider these best practices before fixing or approving the tariffs.​

ACER's report on electricity transmission​ and distribution tariff methodologies in Europe (2023) provide an analysis of national​ practices as well as corresponding recommendations​ and represent​ a starting point to increase the transparency and comparability in tariff-setting. 

Risk may lead project promoters or investors to refrain from investing or to delay their investment decisions in energy infrastructure projects. Regulation (EU) 2022/869 foresees additional incentives for Projects of Common Interest (‘PCI’) in the categories of electricity transmission, electricity storage, smart electricity grids, smart gas grids and hydrogen infrastructure, if the project promoter faces higher risks.

National Regulatory Authorities (NRAs) and Member States play an important role in providing the appropriate incentives to facilitate these investments.

ACER facilitates the sharing of good practices among NRAs.

ACER's (2014) Recommendation on incentives for projects of common interest and on a common methodology for risk evaluation:

• establishes an incentives framework for PCIs promoters who are incurring high risks;
• recommends to NRAs to follow a 7-step common risk evaluation methodology.

ACER highlights the importance of considering project-specific risk-based incentive schemes in conjunction with the risk and reward balance that is offered to project promoters through national regulatory frameworks.       

The ACER’s Report on investment evaluation, risk assessment and regulatory incentives for energy network projects takes into account the methodologies and the criteria used by NRAs to evaluate investments in energy infrastructure projects and the higher risks associated with them. ACER also reviewed the national regulatory frameworks in terms of risk mitigation methods and regulatory incentives for the network operators. The ACER’s Report focuses on regulated electricity transmission projects.

ACER’s findings regarding electricity infrastructure show that:

• The national regulatory frameworks rarely differentiate in their regulatory treatment of specific project features such as high capital expenditure, interconnection or offshore investments;
• TSOs’ risks are generally covered/mitigated by the default risk mitigation measures within the national regulatory framework, while the measures differ across Member States;
• Project promoters have rarely requested additional incentives due to higher risk during the past decade.

ACER concludes that:

• The current national regulatory frameworks are generally effective in mitigating risk, and the need for additional project-specific incentive has so far been limited while this may change in the future.
• The current risk mitigation approach does not guarantee that the most beneficial and cost-efficient investments are put forward by project promoters, because the regulatory frameworks treat all projects alike. Therefore, the focus on how to improve the incentives framework should be on prioritising the identification of more cost-efficient, but currently 'missing' solutions/projects.

In order to assist NRAs, ACER provides several recommendations regarding:

• The evaluation of investment needs and the assessment of individual investments;
• The evaluation of project promoters’ risks and the provision of risk-based incentives;
• Fair risk/revenue balance, benefit-based incentives and related indicators to foster development of efficient networks.

In 2023, ACER has commissioned a consultancy work on benefit-based incentive regulation to promote efficiency in addressing system needs and to overcome the CAPEX bias.

A first report published by ACER presents the main principles of benefit sharing, provides an overview of the experience of different European countries in this area and outlines a proposal for an incentive-based regulatory scheme.

The Regulation on guidelines for trans-European energy infrastructure (‘TEN-E Regulation’) was first introduced in 2013 to facilitate the development of the European energy networks. The Regulation was revised in 2022 to provide a legislative framework fit to address the goals set by the European Green Deal.

The Regulation introduces the concept of projects of common interest (PCIs) and projects of mutual interest (PMI). These are key infrastructure projects with cross-border impact that significantly enhance the links among the energy systems of EU countries (and third-party countries in the case of PMIs) and benefit from accelerated permitting procedures and funding as they are identified as key contributors to achieving the EU’s energy and climate objectives.

In order for a project to be selected as a PCI, it must:

• be necessary for one of the priority corridors (trans-European energy infrastructure at specific geographical areas) set in the TEN-E Regulation;

• be a cross-border interconnector or have a significant impact on EU countries; and

• bring important benefits to sustainability, market integration, and EU’s energy security of supply which outweigh its costs.

In order for a project to be selected as a PMI, it must:

• be located on the territory of at least one EU country and on the territory of at least one third country;

• contribute to increase Europe’s sustainability, market integration, and energy security of supply; and

• impact a third country in deploying its energy transition.

The selection criteria are set out by in TEN-E Regulation and their assessment is based on the data and the analyses outlined in the Ten-Year Network Development Plans (TYNDP), which are provided by ENTSO-E and ENTSOG.

Under the TEN-E Regulation, ACER:

• provides inputs to the regional groups during the assessment of candidate projects, in coordination with National Regulatory Authorities (NRAs) and

• assesses the draft regional lists and provides an Opinion on whether the selection criteria and the cost-benefit analysis (CBA) have been applied consistently across regions.

ACER has released its Opinions on each of the Commission’s biennial Regional PCI lists since their establishment in 2013: one on the proposed gas PCIs and one on the proposed electricity PCIs. Since the introduction of the revised TEN-E Regulation (2022), ACER’s Opinions address proposed hydrogen and electricity PCIs and PMIs.

ACER also actively participates in the selection process by providing views, remarks, and analyses either to the regional groups or within the framework of the Cooperation Platform (an informal working group comprising representatives of ACER, the Commission, and the ENTSOs, established to discuss and resolve issues connected with the PCIs selection).

In September 2023, ACER provided its Opinion on the European Commission’s draft regional list of proposed PCIs and PMIs, addressing hydrogen and electricity infrastructure projects respectively.

For the first time, hydrogen infrastructure projects are included as an eligible PCIs/PMIs category.

What are ACER’s recommendations?

In both its Opinions, ACER identifies three areas for improvement:

• reconsidering how infrastructure needs are identified;

• improving the effectiveness of the selection methodology; and

• ensuring greater transparency in the selection process and in applying the methodology.

In the case of hydrogen PCIs/PMIs, ACER acknowledges the complexity and recommends these enhancements for the next selection process (expected in 2025).

In both cases, ACER concludes that it is unable to assess the consistent application of the TEN-E Regulation selection criteria and the cost-benefit analysis across the candidate projects.

The TEN-E Regulation introduced the so called “Projects of Common Interest" (PCIs). PCIs are infrastructure projects which have a significant impact on the EU electricity and gas systems, and help the EU achieving its energy policy and climate objectives: ensuring affordable, secure, and sustainable energy for all citizens.

PCIs also play a key role in the long-term decarbonisation of the economy in accordance with the Paris Agreement.

The PCI label helps accelerating the planning, streamlining permit granting and thus facilitating faster commissioning of projects, which bring the highest value to the European consumer.

Every two years, the European Commission draws up a list of PCIs, starting with the first list in 2013.

In April 2022 the fifth PCI list entered into force, with 98 projects in total: 72 electricity transmission, storage and smart grid projects, 20 gas and 6 CO2 network projects.

On 3 June 2022, the revised TEN-E Regulation was published in the Official Journal of the European Union.

The new Regulation, among others, aims to:

• conform the infrastructure development to reflect the climate mitigation’s targets,

• promote the integration of renewables and of clean energy technologies into the energy system,

• continue to connect isolated regions,

• strengthen existing cross-border interconnections and

• promote cooperation with partner countries.

​ACER contributes to various activities concerning the selection, implementation and monitoring of the electricity and gas transmission, storage and smart-grid PCIs (for example via opinions on draft Regional lists of PCIs, decisions on cross-border cost allocation, monitoring reports on PCI progress). ACER also provides support through the scrutiny of respective TYNDPs, which are used as a gateway to the PCI label.​

The Green Deal Strategy (and its Acton Plan) is transformative. It recognises that to meet the challenge of net zero requires action by everyone in every aspect of society and the economy. We must go further and faster. More renewable electricity on its own is not enough. Instead, we must re-think of all the ways we contribute to climate change (manufacturing, transportation, heating) to have a holistic approach.

Hence, the European Commission is developing a wide range of Green Deal strategies including on biodiversity, agriculture, buildings, taxation (including a carbon border tax) and decarbonising the energy sector to transition to clean energy.

In 2021, major reforms to EU laws are expected including on renewables, emissions trading and clean hydrogen.

As an EU Agency, ACER is playing its part by applying a Green Deal lens to its core work and providing expertise on key energy legislative files (such hydrogen or ensuring the TEN-E energy infrastructure funding framework is fit for purpose for decarbonisation).​

The challenge of climate neutrality is huge. The European Commission's proposed European Climate Law (in the final stages of negotiations by Europe's co-legislators) seeks to make carbon neutrality a legal obligation. A key part of the Green Deal is setting targets for GHG emissions every decade until “net-zero" GHG emissions is reached by 2025.

For the year 2030, the European Council endorsed a cut of “at least 55% in GHG emissions (the earlier 2030 target was a 40% cut) in December 2020 whereas the European Parliament calls for an even more ambitious 60% emissions cut.

​A pillar of the Commission's Green Deal proposal is to increase funding for the transition by mobilising €1 trillion for sustainable investment over the next decade, and to put sustainable finance at the heart of the financial system.

The EU's €750 billion Next Generation EU (NGEU) recovery package (agreed by the Council in July 2020) targets climate change with 37% of it dedicated to the European Green Deal. A Just Transition Mechanism addresses equity concerns by focusing on the regions, industries and workers who will face the greatest challenges in the transition to a cleaner Europe.