Annexes to COM(2023)757 - Grids, the missing link - An EU Action Plan for Grids - Main contents
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This page contains a limited version of this dossier in the EU Monitor.
dossier | COM(2023)757 - Grids, the missing link - An EU Action Plan for Grids. |
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document | COM(2023)757 |
date | November 28, 2023 |
Offshore renewables in particular will bring enormous benefits to society, likely to extend beyond the borders of the hosting Member States. This brings about complexities in agreeing on the appropriate sharing of costs, including for hybrid interconnectors.
Providing appropriate regulatory incentives starts by establishing a supportive regulatory framework that brings investment certainty. This calls for a rapid agreement on the Electricity Market Design reform with its provisions recognising the importance of anticipatory investments, a transmission access guarantee for offshore renewables and accounting for both CAPEX and OPEX in network tariffs.
However, such a major overhaul of tariff methodologies requires the right balance between, on the one hand, anticipating future infrastructure needs, accepting a higher degree of uncertainty that an infrastructure asset might not be fully utilised from its commissioning and allowing for the early recovery of the related costs on the one side, and, on the other, affordability for consumers who bear the costs through network tariffs. The socio-economic welfare losses of delaying the network upgrades necessary to connect renewables and flexible demand will frequently outweigh the additional initial cost of anticipatory investments. Moreover, given the long lifespan of network assets, significant cost reductions can occur in the future when today’s investments are done already considering upcoming needs.
Action 4: Commission to propose guiding principles identifying conditions under which anticipatory investments in grid projects should be granted
The electricity market design reform proposal made by the Commission clearly indicates that anticipatory investments should be used for the relevant network projects. At the same time, its usage should remain proportional to the needs.
Anticipatory investments can be relevant for example for investing in future-proof offshore networks that allow for future expansions of meshed offshore grids; for areas with high untapped onshore PV potential such as renewable acceleration areas set in accordance with RED; for grid connections to ports for the provision on shore-side electricity supply, or for building smart grids that support EV infrastructure charging national plans or municipal plans for heat pump rollout.
Complementing the work on anticipatory investments being conducted by the Copenhagen Forum28, the Commission, with support from ACER, ENTSO-E and EU DSO Entity and in consultation with relevant stakeholders on both electricity supply and demand side, will by Q1-2025 propose guidance identifying conditions under which the approval of anticipatory investments should normally be expected, taking into consideration different levels of development certainty of projects and ways to address the different levels, such as via the conditional provision of the anticipatory investments.
Action 5: Commission to issue guidance on cross-border cost sharing for offshore projects
Offshore networks will be composed of radial and hybrid transmission projects evolving towards a future meshed grid. The connection of energy islands and other large offshore projects will bring large benefits to society, likely to extend beyond the borders of the hosting countries. This poses challenges in agreeing on the appropriate sharing of costs, taking into account consumer and producer benefits but also the inherent uncertainty of future investments and their timing. Hybrid projects that interconnect countries while connecting offshore renewables will face additional particularities. This will also require increasing transport infrastructure from coastal regions towards landlocked regions in Europe to unblock a larger number of onshore and offshore wind projects.
Taking into consideration the offshore network development needs, Member States and regulatory authorities should engage in discussions on principles for collaboration – including on costs – already at the stage of identifying the network needs to accelerate the emergence of new cross-border projects. ENTSO-E should further develop effective modelling tools to better account for Member States’ needs for information relevant to kickstart such exchanges. Moreover, current approaches on cost allocation should consider new complexities, such as offshore hybrid projects. The Commission will address these challenges in a guidance aiming to support Member States and NRAs in such activities by June 2024. Dedicated meetings with Member States at political and technical levels will steer the work on cost sharing . In addition, the Commission will organise a series of meetings with Member States to exchange ideas and support them in finding agreements on particular projects.
II. INCENTIVISING A BETTER USAGE OF THE GRIDS
Queues on grid connections cause long delays in bringing renewables on stream. These are often the result of insufficient information for project promoters but also of the modalities of the permitting process. Thus, bringing visibility on available grid capacities helps directing connection requests to where they can be dealt with most readily. Many system operators have made grid hosting capacity maps available, but with divergent clarity and quality29. On the other hand, some administrations have pioneered practical ways to prioritise applications or disincentivise abusive demands, thus helping to reduce the backlog and cut waiting times.
To improve the usage of existing grids, project promoters’ lack of awareness of the rapid evolution of technologies for smart and efficient grids needs to be addressed, including technologies promoted by Horizon Europe, their degree of utilisation across Europe and the benefits already provided to other projects.
Finally, there are insufficient incentives for the uptake of smart grid, network efficiency and innovative technologies due to prevailing tariff structures with a focus on CAPEX. Insufficient compensation of OPEX as so far largely linked to human resource costs does not adequately reflect the rising costs of digitalisation, data processing or flexibility procurement.
Action 6: ENTSO-E and EU DSO Entity to agree on harmonised definitions for available grid hosting capacity for system operators and to establish a pan-EU overview
System operators should provide transparent, understandable, granular and regularly updated information on grid hosting capacities and connection request volumes, in line with the Commission proposal for a revision of the Electricity Market Design. Regulatory authorities should establish frameworks for non-firm connection agreements, where relevant.
From the publication of this Action Plan, ENTSO-E and the EU DSO Entity, in cooperation with the Commission and regulatory authorities, should work towards harmonised definitions for available grid hosting capacity. This should lead to a pan-EU overview of available grid hosting capacities30 for new network users to connect, together with information on the volumes of connection requests being processed. Such overview should consider the capacity mappings already done by TSOs and DSOs, when applicable. By mid-2025, ENTSO-E and the EU DSO Entity should establish a pan-EU overview that should give visibility to project developers when conceptualising their projects, such as new renewable or EV recharging infrastructure projects and help developers estimate the risk of connection request approval delays and, thus, have a clearer forecast about when projects can start receiving revenues. This will benefit new projects for renewables and flexible demand such as storage or EVs. Some system operators already provide this visibility today locally. Furthermore, ENTSO-E and the EU DSO Entity should support system operators in digitalising and streamlining procedures for grid connection requests, for example by issuing guidance and recommendations, at the latest by mid-2025.
Such an overview can further support NRAs in understanding where in the network flexible (non-firm) connections could be beneficial to the system until the necessary grid buildout takes place. Where network development is the structural solution of the capacity problem, non-firm connection frameworks should be designed so that system operators do not delay grid buildout. In other cases, where grid development may not be an economic solution, non-firm connections could be considered as a long-term solution31.
NRAs should also provide a clear framework to disincentivise the application for connection request where the request is not substantiated by a solid project and not sufficiently committed by a developer, or the requests of over-capacities beyond what needed for the project, to avoid that the reservation of connection capacities is given to projects less likely to materialise or whose main business plan is to sell the right for connection, where this is allowed. For instance, generation projects that are financially bound or pay for the grid connection costs when requesting connection are less likely not to proceed with their projects.
Action 7: ENTSO-E and EU DSO Entity to promote uptake of smart grid, network efficiency and innovative technologies
Commercial technologies that can greatly improve the functioning of the electricity grids are readily available but not sufficiently used32. Yet, such technologies can lead to lower costs to consumers by reducing network losses33. Being aware of the existing pipeline of projects where such technologies have already been demonstrated, and the quantified benefits they have brought, can provide clear arguments to project promoters still considering their use. Therefore, there should be an increase of visibility for technological assets available for rapid deployment as well as innovative solutions for smart grids and better network efficiency, such as dynamic line rating (DLR), high-temperature superconductor (HTS) cables, static synchronous compensators (STATCOM), voltage source converters (VSC) in HVDC systems, HVDC breakers or phase shifting transformers (PST)34.
ENTSO-E and EU DSO Entity should jointly update the Technopedia35, giving clarity on such elements and ensuring that the technologies being utilised in pilots across Europe relevant for smart electricity grid projects and for increasing network efficiency are covered, including those technologies developed under Horizon Europe or Horizon2020 programmes. Technopedia should inform of use cases and benefits and be updated by end-2024 and at least annually, so that promoters can appropriately consider them in their respective projects’ conceptualisation, and regulatory authorities can encourage their usage to promoters. Updates should be disseminated in future Smart Electricity Grid Summits organised with support from the Commission and the EU DSO Entity.
To further promote smart grids, network efficiency and innovative technologies, the Commission will further facilitate with the upcoming network codes regarding the participation of decentralised energy resources to the markets.
Action 8: ACER, in its next tariff report, to recommend best practices in relation to the promotion of smart grids and network efficiency technologies through tariff design, focusing on the consideration of OPEX in addition to CAPEX and benefit sharing
Grids are typically financed via network tariffs, complemented with congestion income for cross-border transmission projects. Transmission and distribution network tariffs should be regularly updated, with an efficient consideration of both OPEX and CAPEX, to account for the changing energy system towards decarbonisation and an increasingly active role of DSOs. There is a need to acknowledge an increase of operational costs in the deployment and operation of our networks, including for physical and cybersecurity. Efficiency requirements stimulate the network operators to reduce costs and to work more efficiently36. NRAs should regularly review their network tariff setting or methodologies, including how they set long-term incentives, support peak demand shifting and incentivise the deployment of technologies that increase the efficiency and operability of the grids (see previous action), such as through output- or performance-based remuneration schemes. Network tariffs therefore need to evolve with the energy system. Innovative approaches such as benefit sharing37 can contribute to energy system resilience at affordable prices. Some Member States are introducing new practices, for example the Italian NRA38 is moving from input-based regulation to premiums to increase transfer capacity and CAPEX-efficiency incentives and considering both OPEX and CAPEX in 2024. ACER should further support NRAs through recommending best practices in the next tariff report39 due January 2025, based on thorough consultations with all relevant stakeholders, and subsequently support NRAs in their implementation.
As established by the Electricity Regulation, tariff methodologies shall provide appropriate incentives, including in the long run, ensuring cost reflectiveness, which is enhanced by a careful consideration on the distribution of costs between producers and consumers. This is especially relevant considering that network development is increasingly driven by the need to connect areas where renewables can be generated, a trend that should be reflected in the appropriate level of injection and connection charges to cover related costs.
III. IMPROVING ACCESS TO FINANCE
Funding the necessary grid reinforcements and adaptations will require mobilisation of vast resources, close to half a trillion, in a context where public resources are constrained and inflation and rising interest rates are hitting projects. There are also emerging issues with the credit rating and access to capital for project promoters. Grid operators, both at the transmission and distribution levels, are faced with an unprecedented increase in the volume of capital expenditure. For example, the size and rapid extension of a company’s investment programme may affect its credit rating, with negative consequences in access to finance. All of these require a new effort to identify tailor-made financing products and instruments to support grid investments.
Action 9: Commission to identify tailored financing models and strengthen dialogue to address obstacles to private financing
Building on the Investors Dialogue on Energy, the Commission will launch by the end of 2023 a reinforced process with investors (including pension funds), credit agencies, financial institutions, regulatory authorities and system operators to identify and address obstacles to financing including through bank loans, market-based instruments (debt and equity), guarantees and blended finance. Considering the specificities of the business models of system operators, the Commission, with the support of relevant stakeholders, should explore financing instruments to provide the most appropriate solutions to match the investment needs, including guarantees or similar funding mechanisms that catalyse private financing.
The Commission and the EIB will explore further the need for financing tools and instruments to support grid investments at large, in the context of InvestEU.
The Commission will ensure the coordination and synergies between this work and relevant work on access to finance as set out in the Wind Power Action Plan (action 8) and other renewable technologies to ensure a coherent integration of the future electricity system.
Action 10: Commission to increase visibility on opportunities from EU funding programmes for smart grids and modernisation of distribution grids
Distribution grids are eligible for financing under different EU funding instruments. Major funding sources are the regional (ERDF), cohesion funds (CF) and the Recovery and Resilience Facility (RRF) including its REPowerEU component. ERDF and CF may co-finance the development of smart energy systems, grids and storage projects. In their operational programmes for the period 2021-27, Member States have so far in total only allocated EUR 4.7 billion leading to investments of EUR 6 billion. Allocated amounts vary strongly among Member States also since some Member States have used RRF to support such investments. The Modernisation Fund, financed via part of the revenues from the EU ETS40, and the RRF can contribute to part of the investment needs.
If modifying their operational programmes for the regional and cohesion funds, Member States with a high need for distribution grid modernisation and local smart grid deployment should consider available options to increase allocations for this sector. The Commission will kick-start from Q1 2024 a process to work with Member States on funding opportunities for distribution grids, including via a dedicated high-level meeting. The Commission will also put forward dedicated technical assistance within the Technical Support Instrument to help enterprises preparing their funding applications and will collaborate with the EU DSO Entity to raise awareness on this action among its DSO members.
IV. ACCELERATING DEPLOYMENT THROUGH FASTER PERMITTING AND PUBLIC ENGAGEMENT
Infrastructure projects encounter complex and lengthy permitting procedures as they cover long distances crossing very often several jurisdictions. This entails the navigation through different permitting procedures in several languages with various set-ups and deadlines. Some of these problems are linked to constraints in staffing and digitalisation of the competent authorities. The process of obtaining the necessary environmental permitting for cross-border projects is sometimes difficult, especially for projects crossing protected natural areas or certain species’ habitats, in particular where knowledge about the protected habitats and species present is not complete. Moreover, the implementation of infrastructure projects frequently faces significant public concerns that, in the worst cases, may lead to lengthy court procedures. Minimum legislative requirements are often not sufficient in addressing the concerns of local communities impacted by the construction of a projects in their vicinity, and ambition for public engagement should go beyond what is strictly required.
The TEN-E Regulation and most lately the emergency Council Regulation (EU) 2022/2577 offer solutions to these issues, however they are not yet sufficiently taken up.
Action 11: Commission to support permitting acceleration providing guidance and technical support on how to implement existing legislative tools and Member States to implement acceleration measures
Member States may make use of the voluntary provisions under the emergency Council Regulation41 (Article 6) and are encouraged to rapidly transpose the revised Renewable Energy Directive (RED) in view of accelerating the development of transmission and distribution grid networks necessary to integrate renewables into the system. Network development is increasingly driven by the need to integrate large amounts of renewables into the system, and thus there might be important potential for Member States to designate dedicated infrastructure areas in compliance with the Regulation and the Directive respectively.
The Platform of the National Competent Authorities in charge of permitting set up in 2022 has proven to be a useful forum to exchange best practices and provide clarifications and guiding support. The work of the Platform will be intensified. In particular, a dedicated ministerial meeting will be organised to ensure political steer to address identified permitting issues. For further support, the Commission will conduct a study in 2024 assessing the implementation of the permitting provisions of TEN-E Regulation. This will especially enable the identification and dissemination of best practices. On the basis of the findings of the study, Member States should identify specific measures to be taken to accelerate their permitting regimes. The Commission will support this assessment and its implementation through the Platform of National Competent Authorities in charge of permitting.
The Commission will work with relevant ministries and permitting authorities, including in the context of the Covenant of Mayors, to disseminate and support application of the provisions of the RED III and emergency Council Regulation and the revised RED as regards distribution grids. Moreover, the Platform of National Competent Authorities will further exchange on the permitting particularities of smart electricity grids with the aim to streamline the respective procedures.
At the latest by mid-2025, in view of the permitting obstacles encountered by energy infrastructure projects, the Commission will provide guidance on the designation of dedicated infrastructure areas for grid projects necessary to integrate renewables as provided by the revised RED. The Commission will update by Q4 2024, if necessary, the existing guidance on streamlining environmental impact assessments for PCIs42 and PMIs and the guidance on energy transmission infrastructure and EU nature legislation43 as necessary to adapt them to the revised legislative frameworks of TEN-E and RED and their streamlining permitting provisions.
Lastly, from 2024 the Commission will support the digitalisation of permitting procedures for grid projects through the Technical Support Instrument (TSI). The TSI Regulation44 foresees that Member States can receive, through either stand-alone or multi-country projects, technical expertise for accelerating permitting. Member States are encouraged to make use of the TSI provided by the Commission to upgrade their systems for dealing with permitting and connection procedure applications, for example through digitalisation. In addition, as announced in the European Wind Power Action Plan45, by the end of the year the Commission will launch a dedicated online tool to support Member States, among others, by providing for answers to frequently asked practical questions from Member States related to the implementation of the revised permitting provisions.
Action 12: Commission to launch a Pact for Engagement for early, regular and meaningful stakeholder engagement and regulatory support
Quantifying and monetising the successful avoidance of conflicts and delays can be challenging in a complex regulatory framework for building infrastructure that crosses several jurisdictions and competences. Whilst best practices are promoted and shared amongst project promoters, there is a need to reinforce the engagement framework towards stakeholders into a regular and collective effort to mitigate the impact on communities and nature, while redistributing benefits to communities and enhancing nature protection.
To address potential public opposition and ensure the highest standard in stakeholder engagement, the Commission will launch, with the occasion of the 2023 edition of the PCI Energy Days, a Pact for Engagement with Member States, NRAs, system operators and civil society for early, regular and meaningful stakeholder engagement and the need for adequate regulatory support (see Annex II).
V. STRENTGHENING GRID SUPPLY CHAINS
The EU industry is global leader in the manufacturing of components for power systems, such as on HVDC cables and substations, fundamental elements to deliver on the EU’s offshore ambitions.
Nonetheless, grid project promoters flag long and growing lead times for procuring specific grid components, sometimes of several years even for the most urgent Projects of Common Interest, including because of tight supply of some components or increasing raw material prices. At the same time, EU manufacturers are faced with barriers to benefit from economies of scale due to divergencies in product specificities.The strong growth in global demand for electricity grid technologies could stretch lead times even longer. Therefore, the EU manufacturing capacity is set to increase significantly, while EU’s partnership will further strengthen the value chains.
Increasing global competition in the market for HVDC and HVAC cables and systems, which are still supplied mainly domestically in Europe, is very positive provided a level playing field is in place. To foster energy system resilience, careful attention is needed to ensure such a level playing field remains in place with no room for unfair trade practices.
Moreover, it must be ensured that security risks do not emerge. Relying on third country suppliers, in particular from countries not aligned with EU values and positions, to meet EU critical energy infrastructure needs can however present security risks46 – both directly in terms of cybersecurity47 as well as relating to the potential weaponisation of such supply chain dependencies.
Reliance on high-risk third country suppliers for critical components can create cyber-vulnerabilities to the grid, including interconnectors to third countries. The Network and Information Systems (NIS 2) Directive48 requires entities in the energy sector to take security measures in relation to their supply chains as part of the cybersecurity risk-management measures. The upcoming Cyber Resilience Act, currently under negotiation by the co-legislators, will considerably enhance supply chain security by requiring cybersecurity-by-design for hardware and software products with digital features accessing the EU market, as well as obligations for manufacturers to ensure compliance with cybersecurity requirements throughout the lifecycle of the product.
Furthermore, EU grid operators face challenges in getting sufficient access to raw materials, such as copper or steel. Given the ambitious deployment objectives, boosting domestic production capacities and diversification of supplies of raw materials and key components will have to be pursued domestically and via EU agreements or partnerships with reliable third countries, respectively. The Critical Raw Materials Act will help to ensure that Europe meets such objectives, including through domestic production and strategic partnerships. The Commission is working on securing access to critical and strategic raw materials. Free trade and other bilateral agreements, covering energy, raw materials and clean technology supply chains, and the Global Gateway strategy, will also contribute to this end.
It should also be highlighted that electricity interconnection projects with third countries, such as PMIs, that aim at exporting significant amounts of renewable electricity to the EU should not create new dependencies in terms of security of energy supply.
Finally, the lack of skilled workers affects the increasing staffing needs of transmission and distribution system operators, HVDC cable manufacturers and other power system suppliers. This includes the need to acquire further advanced digital and technological skills, such as automation, controlling, big data and advanced analytics, to detect and control network challenges as well as develop the necessary technologies49.
The above important needs for resilient and effective grid manufacturing supply chains have been addressed in the proposal for a Net-Zero Industry Act (grid technologies are proposed among the strategic net-zero technologies and Net-Zero Academies address skill challenges) and the European Wind Power Action Plan (increasing grid demand certainty by establishing an EU digital platform for wind power auction planning and national pledges). A swift adoption and implementation of the Net-Zero Industry Act will allow supporting a resilient grid supply chain notably through faster permitting for new manufacturing capacity, increased skilled workforce and through appropriately designed public tenders and auctions.
Other Commission enforcement tools are available to EU industry, to promote a level playing field, counter unfair trade practices50, or to remedy asymmetries between EU and third countries in market openness in the public procurement sectors (International Procurement Instrument). Furthermore, with regard to risks relating to security and public order, the EU’s Foreign Direct Investment (FDI) Screening Regulation51 allows for the assessment of security risks of FDIs. Moreover, EU trade agreements are geared to promote renewable investments, including through access to energy grids, with a view to diversify sourcing and enable market access in third countries while preserving security of supply.
Additional and complementary targeted action in this present Action Plan will support further improvements in the grids supply chains. Efforts in aligning product designs across the EU would enable suppliers to focus on delivering quantity, instead of utilising time and human resources in tailored design and manufacturing. Such alignments would serve not only to increase access of suppliers to the internal market, but also increase competition, lower costs and increase manufacturing output with the same manufacturing capacities.
Action 13: ENTSO-E and EU DSO Entity to collaborate with technology providers to develop common technology specifications and improve visibility of grid project pipelines, to facilitate investments in manufacturing capacity and secure supply chains
Standards, addressing the whole value chain of electricity grids and equipment, are critical to ensuring safety and security of the electrical installations, facilitating supply chain security, interoperability, enabling investments in the electricity network, saving costs and hence speeding up deployment and modernisation.
As first and imminent need, current tender specifications by TSOs towards grid manufacturers are frequently very tailor-made, meaning that efforts and resources of the supply chain need to be used on special design requests for virtually each TSO in Europe. The collaboration among TSOs towards agreeing on common specification requests would lower costs, accelerate project delivery, increase the amount of output with the already existing manufacturing facilities that suppliers can produce and enable a better access of suppliers across the EU to other markets within Europe. First attempts to agree on common requirements have been conducted, initiated by the EU’s Horizon Europe52 and in some instances by some TSOs53, while still implemented in divergent ways by different TSOs. The need to further collaborate in this regard and streamline specifications was stressed by ENTSO-E in the discussions under the high-level event on the Future of our Grids54.
The Commission will request the European Standardisation Organisations (ESOs) to provide a Workshop Agreement deliverable, involving all relevant stakeholders (ENTSO-E, TSOs and manufacturers) on common product specifications that should be agreed by end-2024. These product specifications should be deployed by TSOs across the EU in their own procurements and regulatory authorities should encourage them in tariff designs. The work should be closely coordinated with the High-Level Forum on European Standardisation’s working group on green electricity system. Going forward, if deemed necessary, this could be a first step towards developing technical specifications and ultimately EU standards for the entire electricity grid value chain.
In cooperation with the above workstrand by the ESOs, the High-Level Forum will identify standardisation gaps and propose a roadmap by Q1 2024. The focus will be on strategic issues based on current market and business trends, including geopolitical constraints, impact on European business and facilitating global trade.
ENTSO-E and the EU DSO Entity should, together with grid operators, establish by Q4 2024 mechanisms for providing increased visibility to manufacturers into their upcoming procurement plans for equipment and systems on all voltage levels. This action could help the manufacturers of grid technologies to better prepare their production capacities and skilled workforce and/or plan production slots for catering in time for the grid expansion needs. As a result, potential bottlenecks in the technology supply chains could be avoided. This action should take inspiration from the interactive EU digital platform on which the auction planning of the Member States will be published, as announced in the EU Wind Power Action Plan.
Action 14: Commission to promote common technical requirements for generation and demand connection
Specifications set for the connection of new demand and new generation projects have important implications on the product design and requirements. Today, such technical requirements are deeply divergent across Europe, requiring manufacturers to adapt to such requests locally and hampering their access to the single EU market. The Commission will assess and propose measures to promote common technical requirements in revisions of the network codes on requirements for generators and demand connection code, by 2025, to ensure that manufacturers can fully benefit from the single market access.
6. CONCLUSIONS
Electricity grids are a true European success story of integration, cooperation and mutual support. The indispensable role of electricity grids in the energy transition makes it of utmost importance to ensure that the right incentives are put in place, and undue barriers and risks minimised. Grid modernisation, expansion and smartening are highly needed in both transmission and, increasingly, distribution levels to enable the energy transition across all economic sectors. The grids need to be ready for the new system needs, especially integrating renewables and flexible demand. These challenges in network development translate into high investment needs which amount to half a trillion Euro by 2030.
This European Grid Action Plan identifies a number of interlinked measures that can be completed within the next 18 months to provide an adequate investment framework for grids. For example, reliable and high-quality network planning coupled with an enabling framework for anticipatory investments in areas with firm plans for renewable, electromobility or heat pump deployments, together with streamlined permitting procedures for those grid projects, can substantially increase grid hosting capacities for new renewables and flexibility sources for the system.
While the actions identified should be kicked off in the proposed timeline by the respective organisations, they can only produce their full effect through a strong and long-term commitment of all relevant actors, public and private, to collaborate on their implementation. Only by working together will it be possible to keep the momentum make our grids fit for the challenge.
For this reason, the Commission will set up within the Copenhagen Energy Infrastructure Forum a dedicated platform, in collaboration with Member States, ACER, ENTSO-E and the EU DSO Entity, EIB, manufacturers and NGOs, to regularly monitor the progress and report at the annual meeting of the Forum on delivery of this action plan.
ANNEX I – THE EUROPEAN GRID ACTION PLAN IN A NUTSHELL
CATEGORY | ACTIONS | TIMELINE |
Accelerating the implementation of PCIs and developing new projects | 1. Commission, Member States and TSOs to strengthen support to PCI and PMI preparation, faster implementation and funding | From 2024 |
Improving long-term grid planning for a higher share of renewables and increased electrification | 2. ENTSO-E to enhance top-down planning towards 2050 by integrating the identification of offshore and onshore system needs and further considering hydrogen | From Q1 2024 |
3. EU DSO Entity to support DSO grid planning by mapping the existence and characteristics of distribution development plans | Mid-2024 | |
Introducing regulatory incentives for forward-looking grid build-out | 4. Commission to propose guiding principles identifying conditions under which anticipatory investments in grid projects should be granted | Q1 2025 |
5. Commission to issue guidance on cross-border cost sharing for offshore projects | Mid-2024 | |
Incentivising a better usage of the grids | 6. ENTSO-E and EU DSO Entity to agree on harmonised definitions for available grid hosting capacity for system operators and establish a pan-EU overview | From adoption |
7. ENTSO-E and EU DSO Entity to promote uptake of smart grid, network efficiency and innovative technologies | Q4 2024 | |
8. ACER, in its next tariff report, to recommend best practices in relation to the promotion of smart grids and network efficiency technologies through tariff design, focusing on consideration of OPEX in addition to CAPEX and benefit sharing | Q1 2025 | |
Improving access to finance | 9. Commission to identify tailored financing models and strengthen dialogue to address financing obstacles | From adoption |
10. Commission to increase visibility on opportunities for EU funding programmes for smart grids and modernisation of distribution grids | From Q1 2024 | |
Accelerating deployment through faster permitting and public engagement | 11. Commission to support permitting acceleration providing guidance and technical support on how to implement existing legislative tools and Member States to implement acceleration measures | 2024-25 |
12. Commission to launch a Pact for Engagement for early, regular and meaningful stakeholder engagement and regulatory support | From adoption | |
Strengthening grid supply chains | 13. ENTSO-E and EU DSO Entity to collaborate with technology providers to develop common technology specifications and improve visibility of grid project pipelines, to facilitate investments in manufacturing capacity and secure supply chains | Q4 2024 |
14. Commission to promote common technical requirements for generation and demand connection | By 2025 |
ANNEX II – A PACT FOR ENGAGEMENT
Ensuring early, regular and meaningful stakeholder engagement in grid development
The cornerstone of our energy transition and economic recovery will be an electricity system to which renewable energy will contribute to around half of the generation in 2030 and which will be fully decarbonised well before 2050. We will be deploying renewable energy capacity at a pace that is many times faster than today which will require an integrated and interconnected European infrastructure. Accelerating the development of electricity grids in parallel with the massive scale-up of renewable energies is thus key to Europe’s spearheading its energy security and climate ambitions.
None of this can be achieved in isolation or at the expense of the environmental protection of our most vulnerable habitats. The revised TEN-E Regulation will continue to serve as a guiding framework for identifying and building Projects of Common Interest (PCIs) if and where needed to connect demand and supply across Europe. Decision-making processes, whether at the selection stage for the PCI label or later on, during the ground routing and construction, have been strengthened to be more inclusive, more transparent and accountable towards the views and needs of those communities affected by the construction. Whilst best practices are promoted and shared amongst project promoters, delays in grid development at both transmission and distribution level still occur due to lack of acceptance by communities affected by energy infrastructure projects. Quantifying and monetising the benefits of successful stakeholder engagement and avoidance of delays can be challenging in a complex regulatory framework for building infrastructure that crosses several jurisdictions and competences. There is a need to reinforce the engagement framework towards the public into a regular and meaningful collective effort that harnesses trust and participation in grid development, softens the impact on communities and nature, redistributes benefits and enhances nature protection.
In its Communication ‘Grids, the missing link: An EU Action Plan for Grids’, the Commission announces the launch of a Pact for Engagement to ensure early, regular and meaningful stakeholder engagement in grid development, together with Member States, ACER and national regulatory authorities, ENTSO-E and transmission system operators, EU DSO Entity and distribution system operators, project promoters and civil society, calling for:
1. Designing and carrying out national and European communication efforts on the key role of transmission and distribution grids as enablers of the energy transition;
2. A joint cooperation effort between national and local authorities in ensuring effective implementation of permitting provisions for grid and renewable energy projects and best practices adopted and/or recommended at local, national and EU level;
3. A commitment from Member States to strengthen their involvement in the regional cooperation fora such as the established High-Level Groups in order to accelerate the implementation of PCIs, prioritising the most mature and concrete ones. This work will involve transmission system operators and project promoters, as well as national regulators and stakeholders;
4. An open dialogue between ministries, regulatory authorities and transmission and distribution system operators on adequate regulatory support for early, regular and meaningful stakeholder engagement activities on the basis of dedicated chapters on stakeholder engagement accompanying grid investment plans;
5. Providing for the necessary organisational conditions among all parties involved in permitting or stakeholder engagement processes aligned with the significant needs for grid deployment.
The Commission will work closely with all parties adhering to the Pact for Engagement within appropriate grid-related cooperation fora, such as the PCI Energy Days, the Energy Infrastructure Forum (Copenhagen Forum) and the National Competent Authorities’ Platform (NCA Platform) in order to support the implementation of the four pillars of the Pact. Within these fora, the Commission will also monitor the progress achieved by these initiatives, as well as promote the exchange of practices inspiring further efforts from all parties in developing and sustaining engagement processes that rise up to the EU’s grid challenge.
The Commission invites Member States, national regulatory authorities, transmission and distribution system operators, project promoters and civil society to join the Pact for Engagement and contribute through their collective actions to an enabling framework for early, regular and meaningful stakeholder engagement in grid development.
1 https://ec.europa.eu/commission/presscorner/detail/en/speech_23_4377
2 Governance Regulation (EU) 2018/1999 Article 2(11)
3 In January 2023, Member States agreed regionally on combined ambitions leading to cumulative offshore goals of around 111 GW by 2030 and 317 GW by 2050. This compares to around 971 MW of total onshore and offshore installed capacity in 2023 (Commission’s estimations of 971,452 MW based on ENTSO-E’s Transparency Platform country data)
4 System needs study – Opportunities for a more efficient European power system in 2030 and 2040, TYNDP 2022, ENTSO-E, May 2023
5 Commission Report on Promotion of e-mobility through buildings policy, February 2023
6 See Connecting the dots, conducted by Eurelectric in cooperation with E.DSO. Grids’ share of total energy supply costs has evolved from 27% on average in the previous decade, to 37% this decade – see Commission’s Investment needs assessment SWD(2023) 68 final
7 Implementing the REPower EU Action Plan, SWD(2022) 230 final
8 Electricity Grids and Secure Energy Transitions, IEA, October 2023
9 https://www.consilium.europa.eu/en/press/press-releases/2023/10/09/renewable-energy-council-adopts-new-rules/
10 Regulation (EU) 2019/943 and Directive (EU) 2019/944
11 https://www.ft.com/content/4c843612-1890-49bb-83eb-ddbe4495d6c9
12 Conclusions of the Conference on the Future of Europe, proposal 3 on climate change, energy and transport, measure 4 (p. 45)
13 https://energy.ec.europa.eu/topics/infrastructure/energy-infrastructure-forum_en
14 https://energy.ec.europa.eu/topics/infrastructure/projects-common-interest/pci-energy-days_en
15 2023: https://www.pcisummit.eu/live-stream/; 2022: https://www.sincrogrid.eu/en/News/ArticleID/442/Recordings-of-the-Smart-Grid-PCIs-Summit
16 https://www.entsoe.eu/eugridforum/
17 The European Investment Bank’s role in cross-border infrastructure projects, EIB, May 2023
18 PMIs will link EU Member States with neighbouring countries, contributing to the Union’s 2030 targets for energy and climate, and that may for example support the decarbonisation commitments of the Energy Community Contracting Parties
19 Based on the Recovery Resilience Plans including the RePowerEU chapters of 21 Member States (HR, EE, EL, HU, IT, PL, RO, MT, AT, ES, SI, SK, CZ, PT, LT, LV, CY, DE, BE, BG, FI)
20 The revised RED includes requirements on Member States to ensure that power recharging points can support smart recharging functionalities and, where appropriate, bi-directional recharging, and should put in place measures to ensure that EVs and batteries can participate in non-discriminatory manner in flexibility services. AFIR sets mandatory deployment targets for publicly accessible recharging infrastructure and requires that, from early 2024, all new or renovated publicly accessible recharging points must be capable of smart recharging. Member States should assess by end-2024 the potential contribution of bidirectional charging to reducing user and system costs and increasing the renewable electricity share in the electricity system and, if necessary, take appropriate measures. The upcoming network code for demand-side flexibility, currently under drafting, will set the regulatory framework for participation of bidirectional charging in grid services together with other technologies to provide flexibility with the aim to address any remaining regulatory barriers. The Commission aims at an adoption of the network code in the course of 2025.
21 Such as the Sustainable Transport Forum and the Smart Energy Expert Group
22 C/2023/1729 Commission Recommendation of 14 March 2023 on Energy Storage
23 Small DSOs serving less than 100,000 customers or small isolated systems may be exempted
24 Commission estimation of 2,558 DSOs based on Eurelectric’s data: Distribution grids in Europe, Facts and Figures 2020, December 2020
25 For example, measurement data from transformers, inverters and consumers at low voltage level can be used as input in load-flow calculations by which it is possible to calculate the influence of new PV connections on voltage and loads based on the individual reserves of the corresponding grid section, limiting grid development planning to what is actually needed (Distribution grids: The energy transition’s backbone, Geode, May 2023)
26 See for example those investigated by the JRC’s Distribution System Operator Observatory 2022 (chapter 4.7), JRC, April 2023
27 CEER Views on Electricity Distribution Network Development Plans, CEER, November 2021
28 https://energy.ec.europa.eu/system/files/2023-06/Conclusions%209th%20EIF_13%20June%20FINAL.pdf
29 Power System of the Future: Keys to delivering capacity on the distribution grid, Eurelectric, September 2023
30 See examples at distribution level in Spain and in Czech Republic
31 CEER Paper on Alternative Connection Agreements, CEER, May 2023
32 The benefits of innovative grid technologies, CurrENT, December 2021
33 For example, given the higher voltage levels (and lower current), network losses are lower in relative terms in transmission grids than in distribution: around 0.5%-3% in transmission vs 2-14% in distribution. Report on Power Losses, CEER, March 2020
34 Clean Energy Technology Observatory: Smart grids in the European Union, Joint Research Centre, October 2023
35 https://entsoe.eu/Technopedia/
36 Report on regulatory frameworks for European energy networks 2022, CEER, January 2023
37 Benefit-based incentive regulation to promote efficiency and innovation in addressing system needs, Florence School of Regulation, June 2023
38 https://energy.ec.europa.eu/events/9th-energy-infrastructure-forum-2023-06-12_en
39 https://www.acer.europa.eu/Publications/ACER_electricity_network_tariff_report.pdf
40 The Modernisation Fund uses a part of the EU ETS revenues to support investments in the modernisation of energy networks in the 13 lower-income EU Member States. Over the period 2021-20230, EUR 57 billion will be available under the MF, assuming an EU ETS price of EUR 75/tCO₂.
41 Council Regulation (EU) 2022/2577 of 22 December 2022 laying down a framework to accelerate the deployment of renewable energy, OJ L 335, 29.12.2022, p. 36–44
42 Streamlining environmental assessment procedures for energy infrastructure Projects of Common Interest (PCIs), European Commission, 2013
43 Guidance on energy transmission infrastructure and EU nature legislation, European Commission, 2018
44 Regulation (EU) 2021/240 establishing a Technical Support Instrument, OJ L 57, 18.2.2021, p. 1–16
45 COM(2023) 669 final European Wind Power Action Plan
46 Directive (EU) 2022/2557 on the resilience of critical entities
47 Commission Recommendation (EU) 2019/553 of 3 April 2019 on cybersecurity in the energy sector
48 Directive (EU) 2022/2555 on measures for a high common level of cybersecurity across the Union
49 Skills needs developments, vocational education and training systems in the changing electricity sector, by industriAll European Trade Union, the European Public Service Union (EPSU) and Eurelectric, with support from the EU
50 See the recent opening of a trade investigation on optical fiber cables, in OJ C2023/891 Optical fibre cables notice of initiation
51 Regulation (EU) 2019/452 establishing a framework for the screening of foreign direct investments into the Union
52 https://interopera.eu/
53 E.g. TenneT’s 2 GW programme for offshore grids (https://www.tennet.eu/about-tennet/innovations/2gw-program)
54 Conclusions ENTSO-E event ‘Future of our Grids’ session 3 on ‘People and procurement’
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