Projects of common interest (PCIs) are key cross-border infrastructure projects that significantly enhance the links among the energy systems of EU countries.
They 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.
PCI monitoring
What is the role of ACER?
ACER monitors and reports on the progress achieved in the implementation of the projects on the most recent PCI list adopted by the European Commission. If necessary, ACER makes recommendations to facilitate their implementation.
ACER’s monitoring is carried out on the basis of the individual reports submitted by their project promoters and using additional inputs received from the national regulatory authorities (NRAs). These inputs are collected via ACER’s data exchange platform AEGIS.
Before the adoption of the draft PCI lists proposed by the European Commission, ACER provides an Opinion assessing the consistency of the selection criteria applied and the cost-benefit analysis across regions.
The ENTSOs' Cost-Benefit Analysis (CBA) methodologies should allow a neutral comparison between the costs of infrastructure projects with their expected benefits, in order to inform decision-makers. The CBA methodologies are useful tools for assessing the projects' merits, and therefore guiding the PCIs selection process first; and later the NRAs to take decisions on investment requests and cross-border cost allocation.
The ENTSOs have also presented an interlinked electricity and gas market and network model which should be incorporated as a future part of the CBA methodologies. A truly interlinked model will allow to study the electricity and gas energy system and network development options in a holistic way and capture the interdependencies between both sectors, leading to a more efficient network planning. The implementation of an ambitious interlinked model has gained momentum given that energy sector integration ranks high in the European agenda.
Cost-Benefit Analysis and Interlinked Model
What's the role of ACER?
ACER provides Opinions on each draft cost-benefit analysis methodologies developed by the ENTSOs, as well as the interlinked model, and may request the process for CBA updates.
ACER provides a cooperation framework for NRAs to establish and publish a set of indicators and corresponding reference values for the comparison of unit investment costs for projects of gas and electricity infrastructure, which could be used in CBA analysis.
The projects of common Interest naturally contribute to enhance the security of the European gas supply. The degree of this contribution is assessed with the help of the cost-benefit analysis methodology.
Under the European regulation on security of gas supply, ACER is mandated to decide on CBCA reverse flow projects, to issue Opinions on exemption requests and on the elements of coordinated decisions taken by national authorities, as well as to participate in the Gas Coordination Group.
The study provides findings and suggestions for establishing a baseline of negative impact against which the merits of a project or “soft measure" can be assessed.
The study is accompanied by a “calculator" assessing the potential negative consequences of interrupted gas supply.
ACER is mandated to monitor the short-term gas supply outlooks published by ENTSOG for both winter and summer periods.
The summer outlook examines the potential evolution of the gas supply as well as the ability of the gas infrastructures to meet the demand, exports, and the storage injection needs during the summer.
The winter outlook assesses the storage levels before the winter season begins and uses simulations to assess the flexibility of gas infrastructure to dispatch gas supply to meet demand during the winter.
Gas storages play an important role in the European gas system as they supply up to 25-30% of the total gas consumed in the Union during winter. The energy crisis which followed Russia’s invasion of Ukraine in February 2022 underscored the importance of having adequately filled gas storages across Europe to enhance the preparedness for potential gas supply disruptions.
ACER, based on information provided by NRAs, periodically reviews and reports on national gas storage regulations.
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.
What is it about?
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ACER participates in the identification of projects of common interest (PCIs) and monitors their implementation annually.
In addition, the Agency contributes to:
Developing cost-benefit analysis methodologies to identify the best projects from a socio-economic perspective
Providing guidelines to facilitate the allocation of projects' costs across borders (CBCA)
Creating a cooperation framework for NRAs to establish and publish a set of unit investment cost indicators and corresponding reference values for gas infrastructure
Sharing best practices on regulatory incentives.
ACER has also proposed legislative changes to improve the planning and implementation of electricity and gas infrastructure and their governance, based on its experience with the implementation of the TEN-E regulation.
The ACER-CEER position paper (March 2021) sets out and makes recommendations on 6 main issues. It calls for neutral and independent technical assessment of infrastructure projects and improved regulatory oversight so that the projects bringing most benefits for the European Green Deal are supported and to avoid any risks of unjustified costs to European consumers.
Already in July 2020, ACER and CEER set out their recommendation to the European Commission (as it began developing its proposals on revising the Trans-European Energy Networks Regulation) in a Position Paper on the Revision of the Trans-European Energy Networks Regulation (TEN-E) and Infrastructure Governance. The proposals highlight how the legislative changes could improve the planning and implementation of electricity and gas infrastructure. The paper also advises on improving the infrastructure development governance, the principles for PCI scope, and the TEN-E processes.
Previously, ACER issued two other Position Papers (2016) and (2017) about possible improvements of the European framework for energy infrastructure development related to the TEN-E Regulation.
ACER contributes to efficient and consistent gas network development plans by monitoring the development and implementation of the European-wide TYNDP. ACER also reviews the consistency and complementarity of national, regional and European network development plans.
Additionally, the Agency monitors the implementation of the projects of common interest, which are a subset of the projects listed in the TYNDPs, as well as the gas regional investment plans (GRIPs).
What is the TYNDP and why is it important?
Every two years, ENTSOG publishes a non-binding Ten Year Network Development Plan (TYNDP), which looks forward over a ten-year horizon and includes a European supply adequacy outlook. These periodically updated plans are essential for identifying the need of new infrastructure projects to ensure an adequate level of security of gas supply. The TYNDP must be consistent with the National Development Plans (NDPs).
The Projects of Common Interest (PCIs) are selected from the most recent TYNDP via a separate process led by the European Commission. The TYNDP should provide essential and comprehensive information for the selection of PCIs, particularly a complete, monetised, and trustable cost-benefit analysis results.
What is the role of ACER?
ACER is mandated to monitor the development and execution of ENTSOG's Plan. As a result, ACER issues an opinion on the draft TYNDP taking into account the objectives of non-discrimination, effective competition, and the efficient and secure functioning of the internal gas market.
What are ACER's recommendations for improving future gas TYNDPs?
ACER acknowledges the release of the TYNDP is the result of a complex, time-consuming and resource intensive process. ACER Opinions take note of the TYNDP improvements and of the areas where further improvements in the European infrastructure planning are feasible. A summary of ACER’s assessment on the draft TYNDP 2020 and the related main recommendations is available.
ACER monitors the progresses made in the implementation of investments to create new interconnector capacity of the gas Ten Year Network Development Plan. The Agency also periodically reviews the national network development plans to assess their consistency with the EU TYNDP. As a result, ACER issues Opinions including recommendations for improving the consistency between future network developments plans.
Transmission system operators (TSOs) establish regional cooperation within ENTSOG and publish a Gas Regional Investment Plan (GRIP) every two years. Based on this plan, TSOs can take investment decisions. ACER monitors the level of regional cooperation of TSOs within the GRIPs, and takes account of the outcome when formulating its views.
In an integrated energy system, network planning and operation are carried out via a holistic approach for both large-scale and local infrastructures. This includes all the energy carriers (electricity, gas, blended, hydrogen, CO2, heating, district energy, liquid fuels) and would cover a longer timeframe than the ten years required by the current networkplanning.
Such integrated approach is generally missing in the current energy market design and regulatory framework, with only few exceptions:
The “Recast Renewable Energy Directive" (2018) establishes that Member States require electricity distribution system operators to assess at least every four years, in cooperation with the local heating or cooling operators, the potential for district heating or cooling systems to provide balancing and other system services and whether this would be more resource and cost efficient than alternative solutions.
The “Recast Electricity Directive" (2019) has established the obligation for TSOs to consider alternatives to network expansion such as energy storage installations, including power-to-gas facilities. It has also established specific and exceptional conditions for Member States to grant their electricity TSOs the possibility to develop, manage, or operate energy storage facilities while the current gas regulatory framework does not allow it.
Network planning and operation: a holistic approach
ACER and CEER highlighted the importance of precluding network operators from investing in potentially competitive activities and open to the possibility of granting limited exemptions to invest in market assets to get the market started, following a careful analysis of cost and benefits of the proposed investment and its impact on competition, with some requirements and restrictions to avoid any market abusive behaviours.
The European Commission Communication Powering a climate-neutral economy: An EU Strategy for Energy System Integrationconsiders a new and holistic approach to infrastructure planning and operation as a key driver for decarbonisation via energy system integration. This would be achieved by, among others, reviewing the scope and governance of the Ten Years National Development Plan, as well as of the TEN-E and TEN-T regulations to support a more integrated energy system, the acceleration of investments in renewable-based district heating and cooling networks.
Currently, the links in the energy sector between energy carriers (electricity, gas, heat) and between them and the consuming sectors (industry, buildings, transports) are limited.
The market and regulatory rulesare designed separately.
Beyond the current electricity and gas market designs, the main market-based mechanisms currently in place are:
Emission Trading Scheme - ETS: the ETS currently applies to power generation and heavy industries only. CO2 and greenhouse gas emitting sectors such as shipping are left out.
Guarantees of Origin: as part of the Clean Energy Package, the “Recast Renewable Energy Directive" (2018) has extended the scope of guarantees of origin from 'electricity produced from renewable sources only' to 'gases produced from renewable and decarbonised sources, including hydrogen'. Discussions on whether the scope should be broadened in terms of energy/vectors, but also in terms of functions, are ongoing.
Storage: the “Recast Renewable Energy Directive" (2018) has clarified the definition of energy storage for electricity, which now also includes power-to-gas installations.
Flexibility markets: mainly focused on electricity (intraday, balancing, reserves). Currently a “circular economy approach" is missing (i.e. waste-to-energy).
Bidirectional energy flows: the current electricity and gas demand side response mechanisms mainly involve big energy intensive companies. A more distributed generation/consumption approach is often missing.
Promoting a level-playing field across all energy carriers - by, among others, issuing guidance to Member States aligning non-energy price components across energy carriers, a possible proposal for the extension of the ETS scheme to new sectors, the revision of the Energy Taxation Directive
Reviewing the legislative framework to design a competitive decarbonised gas market which can easily integrate renewable gases
Improving customer information
Studies and impact assessments will be carried out in the next months and will contribute to the EC legislative revisions to be proposed by June 2021.
The main mechanisms currently in place
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The Agency is closely following the discussion at European level on the topic of Energy System Integration, given the vast economic, health and social benefits and positive externalities to be brought by its efficient and effective implementation to the European and global citizens. As such, this section will be regularly updated with the latest and most relevant findings.
Most energy conversion technologies have not yet reached an efficient scale. They are likely to develop with an effective price signal, investments in research and development, and a system integrated network planning and operation.
Decarbonised gases, electrolysers, demand side response mechanisms and increased flexibility are likely to develop with more distributed generation and integrated market signals.
The energy efficiency-first principle, together with the role of energy storage (thermal, gas, electricity, chemical) and the need for an improved access to and operation of the energy flexibility mechanism, are key elements to reach the decarbonisation and other energy system integration targets.
From a regulatory perspective, all technologies must be guaranteed a level playing field, so they can compete on the merits. Any obstacles or barriers to their equal treatment should be identified and removed, following an integrated energy system perspective.
Ensuring a level playing field
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Among the main technologies:
Combined generation of heat and power(CHP)
Gas CHP to produce electricity and heat, electricity CHP to produce electricity and heat, renewable energy CHP to produce electricity and heat
Photovoltaic, thermal solar, solar heating, wind, hydroelectric, bio methane, biomass, biogas, marine and oceans, hydrogen, geothermal electricity, geothermal heat
Boilers
District heating/cooling
Electric heating
Heat boilers
Storage
Thermal storage: sensible (hot water), phase-change material (PCM), chemical reactions, heat storage
Electricity storage (electric vehicles, hybrid electric vehicles, home batteries, industrial batteries)
Chemical storage
Mechanical storage
Waste management
Heat waste
Industrial waste CHP
Buildings municipal waste CHP
Demand side response technologies
Electricity, gas, heating smart meters
Smart grids to allow load shedding/load shifting in buildings, industry and the power system
Smart charging that allows demand side flexibility in electrified transport
Transport
Electric vehicles, hybrid rechargeable vehicles, biofuels, synthetic gas, hydrogen, smart charging, data hubs
Carbon Capture Utilisation and Storage (CCUS)
Networks
Electricity networks, gas (methane) networks, heat networks, thermal storage network, distributed generation and consumption networks (off-grid), hydrogen networks, blended networks, CO2 networks
Energy efficiency technologies and measures on buildings, industries, heating and cooling sectors
Lightings, insulation
The Agency is closely following the discussion at European level on the topic of Energy System Integration, given the vast economic, health and social benefits and positive externalities to be brought by its efficient and effective implementation to the European and global citizens. As such, this section will be regularly updated with the latest and most relevant findings.
The decarbonisation of the energy system requires an increasing level of integration between its various components. Today, network operation and planning, market design, and regulatory provisions are developed separately by type of energy carrier.
Energy system integration refers to the planning and operation of the energy system as a whole - across multiple energy carriers (e.g. electricity, gas, heat), infrastructures, and consumption sectors (industry, buildings, transport) - by more strongly linking them with the objectives of decarbonisation, energy efficiency, affordability and reliability of the energy system.
It includes three complementary and mutually reinforcing concepts:
A more circular energy system, with efficiency at its core
A greater direct electrification of end-use sectors
The use of renewable and low-carbon fuels, including hydrogen, for end-use applications where direct heating or electrification are not feasible, not efficient or have higher costs.
The energy system integration is expected to be a dynamic and learning-by-doing process. The results will depend on the development of economic, technological, environmental, and social elements at local, national, European and global level, as there is not a “one-size-fits-all" solution for all Member States.
ACER and CEER issued the Bridge Beyond 2025 Conclusion Paper in November 2019, which includes regulatory proposals for the decarbonisation and energy system integration targets.
Studies and impact assessments will be carried out and contribute to the EC legislative revisions to be proposed by June 2021.
The Agency is following closely the discussion at European level on the topic of Energy System Integration, given the vast economic, health and social benefits and positive externalities to be brought by its efficient and effective implementation to the European and global citizens. As such, this section will be regularly updated with the latest and most relevant findings.
Future Regulatory Decisions on Natural Gas Networks
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What type of regulatory decision on natural gas lie ahead?
Europe’s ambitious energy transition and decarbonisation goals by 2050 point to a changing role for natural gas. Demand for natural gas is expected to decline over time as the decarbonisation goals lead to a substitution of natural gas with other energy vectors. Therefore national regulatory authorities (NRAs) will need to take regulatory decisions on a wide range of issues such as:
the repurposing of natural gas assets for their use as part of hydrogen networks;
the potential decommissioning of natural gas assets that become stranded; and
the reinvestment of assets that reach the end of their regulatory or technical lives.
The information and the views set out in this DNV study are those of the author only, DNV, and may not in any circumstances be regarded as stating ACER’s official position, opinion, or recommendation. ACER does not guarantee the accuracy of the data and the statements contained therein.
What is repurposing, decommissioning and reinvestments?
Repurposing
The repurposing of natural gas pipelines for the use of hydrogen transportation will require transferring natural gas assets to dedicated hydrogen networks. This will require
identifying assets
defining the value of the asset to be transferred
deciding on any incentives for the TSO to transfer assets to hydrogen networks.
Decommissioning
The decline of natural gas could potentially lead to some natural gas assets becoming stranded. This raises regulatory challenges such as
identifying different types of decommissioning costs
allocating the decommissioning costs and the different measures to prevent asset stranding.
Reinvestments
As assets age and reach the end of their depreciation periods, NRAs will have to take decisions on whether or not to replace these assets or to extend their regulatory lives (where possible or appropriate). The regulatory depreciation times applied for natural transmission assets is often below the technical lives of the assets.
Changing Role of Gas
A bridge beyond 2025
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The Bridge beyond 2025 paper jointly released by ACER and CEER in 2019, provides recommendations on the overall framework that could help in reducing the emissions of greenhouse gases and in increasing the availability of decarbonised gases.
