Between 5 March and 15 April 2015, the European Commission (the "EC") seeks consultation on a list of proposed Smart Grids Projects that may be eligible for a Projects of Common Interest ("PCI") label in energy infrastructure. By initiating the consultation procedure, the EC aimed to obtain an understanding of the demand for Smart Grids Projects with a PCI label. The final list of Smart Grids Projects that will acquire a PCI label will be published in the summer of 2015.
On 25 February 2015 the EC presented its Energy Union project with the intention to create an integrated energy market supplying reliable, affordable and climate-friendly energy. The development of Smart Grids Projects is considered key to the EC's Energy Union project taken into consideration that Smart Grids technology provides efficiencies with respect to energy production and distribution as well as consequential cost savings. A PCI label will allow Smart Grids Projects as well as their developers to enjoy benefits given to PCI projects including accelerated approval procedures and potential financing assistance from the Connecting Europe Facility (the “CEF”). Initiatives such as Smart Grids Projects and PCI labels are regarded as key incentives from the EC to develop an efficient energy network and market within Europe.
1. Smart Grids Projects
Smart Grids Projects are able to monitor the energy flows by using analog or digital information and communications technology and utilize the gathered information to automatically adjust the system to fluctuation in the supply and demand of energy. Smart Grids technology increases the efficiency, sustainability and reliability of the production and distribution of electricity. Information gathered during the monitoring process of Smart Grids Projects can be utilized on different levels. For instance, Smart Grids technology in smart meters installed in households allows end-users to control their costs by enabling them to adjust their energy usage based on different energy prices throughout the day. The EU aims at least 80% of the electricity meters to be replaced by smart meters by 2020. At a higher level Smart Grids can be used to improve the integration of renewable energy in existing energy networks.
2. TEN-E Regulation
In 2013, the EC has adopted Regulation (EU) no 347/2013 of the European Parliament and of the Council of 17 April 2013 on guidelines for trans-European energy infrastructure (the “TEN-E Regulation”) to further develop the energy networks in EU. The TEN-E Regulation sets out guidelines for PCI projects that contribute to European energy networks.
PCI projects are entitled to accelerated planning and permit granting procedures, lower administrative costs and the possibility of receiving financial support from the CEF. The first list of PCI projects was published by the EC in October 2013 which included 248 projects, yet only two were Smart Grids Projects. The EC intents to update the list of PCI projects every two years, which makes the list of Smart Grids Projects with a PCI label (the "Smart Grids PCI Project") currently under consultation the first update since 2013.
The TEN-E Regulation recognizes twelve priority corridors, one of which is Smart Grids deployment. By adopting Smart Grids technologies across the EU, the EC aims to integrate the behavior and actions of all users connected to the electricity network, in particular the generation and supply of large amounts of electricity from renewable and distributed energy sources in relation to the demand of end-users
2.1 Smart Grids PCI Project
The TEN-E Regulation stipulates the application procedure for obtaining a PCI label. The procedure is based on a regional approach whereby project promoters must submit their proposal for a Smart Grids PCI project to a regional group. These regional groups will evaluate the projects by assessing the contribution of the involved projects to the TEN-E Regulation’s key objectives of market integration, sustainability, competition and security of supply.
2.2 Financial Assistance from CEF
Once Smart Grids Projects obtained the label of PCI, they will not only benefit from accelerated licensing procedures and enhanced regulatory conditions, but they may also be eligible to receive EU financial assistance via CEF for researches and for works under certain conditions. This financial assistance can be in the form of grants or innovative financial instruments. In 2013, a budget of €5.85 billion was allocated by the EU to the trans-European energy infrastructure for the period from 2014 to 2020.
The EC currently has an open CEF call option which specifically aims at energy projects. This call option is scheduled until 29 April 2015 and a second call option for energy projects is scheduled for later in 2015. For 2015, a total of €650 million has been reserved for grants in the energy sector. The CEF Energy call option particularly supports projects that pursue the following objectives:
- ending energy isolation;
- eliminating energy bottlenecks; and
- completion of the internal energy market.
Although the budget of €5.85 billion sounds impressive, the support that the EC can give to these projects generally is limited. The majority of the projects will not receive sufficient support to cover more than 50% of the costs for the involved research and construction work. The EU support may be increased to a maximum of 75% of the costs for construction works under exceptional circumstances, that is when a Smart Grids Project contributes significantly to the security of supply, enhances energy solidarity between Member States or offers highly innovative solutions.