Europe is working rigorously towards achieving its 2050 net zero greenhouse gas emissions (GHG) ambitions agreed to in the European Green Deal along with an intermediate GHG reduction target of at least 55 per cent by 2030 compared to 1990 levels. It is recognised that developing a modern transmission infrastructure with adequate interconnections and reliable networks is essential for the creation of a European integrated energy market to achieve these climate and energy goals. To this end, the European Commission (EC) is extending policy support through the identification of a list of projects of common interest (every two years) and extension of funds via the Connecting Europe Facility (CEF) since 2013.

In November 2021, the EC adopted the fifth list of PCIs, which are critical infrastructure projects for achieving the European Union’s (EU) long-term climate-neutrality goals. The key advantages for the projects approved under the list include streamlined permit granting procedures, faster and better streamlined environmental assessment, a single national competent authority (one-stop-shop) coordinating all permit granting procedures, and eligibility for financial assistance under the CEF in the form of grants and innovative financial instruments. Notably, while PCI status is a precondition for CEF funding, it does not guarantee the award of a CEF grant. In addition to CEF funding, PCIs can apply for support under other EU programmes, such as the European Fund for Strategic Investment (EFSI), and the European Structural & Investment Funds (ESIF), in particular the European Regional Development Fund (ERDF). Further, the biennial exercise allows the integration of new projects and the removal of those that have been completed or deemed unfeasible.

Global Transmission Report takes a closer look at the key facts relating to PCIs and CEF funding.   

PCI selection methodology

The EC follows a structured process in establishing the PCI list. To begin with, the promoters submit their projects for selection as PCIs, post which the regional groups [chaired by the EC and representatives from the member countries, transmission system operators and their European networks, project promoters, national regulatory authorities, as well as the Agency for the Cooperation of Energy Regulators (ACER)] evaluate the projects’ compliance with the pre-determined criteria under the trans-European energy networks (TEN-E) framework. Following this, the regional groups propose regional lists of PCI candidates and then EC adopts the list of PCIs, in the form of a delegated regulation. The EC then submits the PCI list to the European Parliament and Council, which has two months to decide on the list.

The TEN-E framework, which was put in place to ensure that Europe’s energy infrastructure continues to develop in a timely manner to support this energy transition, was revised by the EC in December 2020. The new rules ended the eligibility of oil and gas infrastructure projects for future PCI lists and created an obligation for all projects to meet mandatory sustainability criteria as well as to follow the ‘do no significant harm’ principle as set out in the Green Deal. The revised rules created space for smart grids, which includes gas networks that make use of digital solutions to integrate low-carbon and renewable gases. The EC also put a stronger focus on electricity transmission through provisions that would allow for an ambitious scale-up of offshore grids across sea-basins in Europe.

The fifth PCI list

Published as a delegated act, the fifth PCI list includes 98 projects, of which 67 relate to electricity transmission and storage projects, 20 are gas projects (listed previously in the fourth PCI list), six are CO2 network projects and five are smart grid projects. The PCI list also includes two priority offshore grid interconnections – Celtic Interconnector (between France and Ireland) and North Sea Wind Power Hub (between Denmark, Germany and Netherlands); and a green hydrogen hub compressed air storage project in Denmark. The selected transmission and storage projects will contribute to increased renewable energy ambition under the European Green Deal, while the smart grid projects will improve network efficiency and cross-border data coordination as well as provide for safer grid management. Many of the projects included under the fifth PCI list were also part of the previous list.

The fifth PCI list also continued the declining trend in the number of projects included in the PCI list. The first PCI list, released in October 2013, included 248 projects, the second list (2015) included 195 PCIs, the third (2017) included 173 PCIs, and the one adopted in 2019 included 152 projects. The decrease can be mainly attributed to the reduction in the number of gas and oil projects.

In terms of electricity projects, the fifth PCI list recorded 34 per cent less projects when compared to the 67 electricity projects approved in the previous list. This decrease is explained by the completion or near completion of 14 interconnection projects and by the change in status of the UK from a member state to a third country, which led to the ineligibility of 12 projects that were part of the fourth list.

CEF Funding

The new European Climate, Infrastructure and Environment Executive Agency (CINEA), which began operations on April 1, 2021 as the successor of the Innovation and Networks Executive Agency (INEA), manages the implementation of CEF in the energy and transport areas on behalf of the EC.

Under the first CEF, which ran from 2014 to 2020, EUR4.7 billion was allocated to energy projects for 107 PCIs through 10 calls for proposals. Of this, electricity transmission and gas transmission assets attracted almost 63 per cent of the funding, with electricity transmission accounting for around EUR1,746 million, followed by gas transmission projects with a funding of EUR1,224.4 million; and the Baltic synchronisation projects accounting for EUR1,053.1 million in funding.

Broadly, for the energy segment, the CEF funded the following four priority electricity corridors through 69 actions between 2014 and 2020:

  • Northern Seas Offshore Grid (NSOG): The NSOG aims to develop an integrated offshore electricity grid and related interconnectors in the North Sea, Irish Sea, English Channel, Baltic Sea and neighbouring waters to transport electricity from renewable offshore energy sources to centres of consumption and storage and to increase cross-border electricity exchange.
  • North-South electricity interconnections in Western Europe (NSI West Electricity): This corridor will integrate electricity from renewable energy sources and reinforce internal grid infrastructure to promote market integration in the region.
  • North-South electricity interconnections in Central Eastern and South-Eastern Europe (NSI East Electricity): This corridor aims to complete the internal EU electricity market and integrate generation from renewable energy sources through construction of interconnectors and internal lines.
  • Baltic Energy Market Interconnection Plan in Electricity (BEMIP Electricity): The PCIs sanctioned for the BEMIP will further integrate the three Baltic States into the European networks by synchronising them with the continental European network and will remove the existing bottlenecks on the borders between them.

CEF for energy also provided grants amounting to EUR236.5 million for smart grid deployment (across five actions) and EUR143.9 million for cross-border CO2 networks (nine actions).

Further, the top three CEF-funded energy PCIs during the 2014-20 period included synchronisation of the Baltic States’ electricity system with the European networks (Phase II) (EUR720 million), interconnection between Nouvelle Aquitaine (France) and the Basque country (Spain) (Biscay Gulf) (EUR578.5 million), and the Celtic Interconnector (EUR530.7 million). The Baltic synchronisation grant is the largest CEF energy grant ever awarded and will be vital for completing the synchronisation of the Baltic States’ electricity grid with the Continental European network by 2025.

Making its first call for proposals for 2021, the EC, in September 2021, launched a new call for proposals for cross-border projects in the fourth PCI list to be co-financed by grants worth EUR785 million under the CEF programme. In response, Polish and Baltic transmission system operators (TSOs) submitted a joint application for EUR238 million in funding for the Baltic power systems’ synchronisation with the continental European system. Further, Finnish and Swedish TSOs also sought 50 per cent co-funding to build the EUR252 million, 400 kV Aurora cross-border line between the countries. The final award decision is expected to be adopted in early 2022 after the evaluation of the applications.

For the period 2021-2027, CEF for energy has a grant budget of EUR5.84 billion and has been set up to support studies and construction works in the areas of electricity, gas, smart grids and CO2 networks. Grants will be awarded through competitive calls for proposals. Additionally, under the new EU’s Multi-Annual Financial Framework for 2021-27, the CEF system introduces a new window for cross-border renewable energy projects, with an allocation of up to 15 per cent of the CEF budget. The maiden call for such projects in the form of pre-feasibility studies was launched in September 2021, to provide EUR1 million to support preparatory studies for cross-border renewable energy projects, also known as hybrid or multipurpose interconnectors. These projects will connect the upcoming offshore wind projects to the onshore gird and act as cross-border interconnectors.

Figure 1: Map of electricity and smart grid PCIs

The way forward

The EC is building well-connected networks across Europe to enhance security of supply through PCIs. The new CEF energy budget will continue to fund key transmission and storage projects along with providing support to new hybrid interconnectors. Net net, the recent developments and measures will help the EU achieve the goals of the European Green Deal.

This article has been sourced from Global Transmission Research and can be accessed here