EU needs more infrastructure investment to boost grid links and energy trade, says report

Out-Law News | 16 Oct 2014 | 5:10 pm | 2 min. read

More investment in Europe’s energy infrastructure is needed, particularly to end “gas market isolation” in the Baltic States and connect electricity grids across the continent, according to a new report.

The European Commission’s Internal Energy Market progress report (16-page / 160 KB PDF) also called for greater regional cooperation and said there is an “urgent need for adoption of a set of simple, harmonised rules to facilitate cross-border flows and trade of energy in the EU”.

According to the report, energy market integration in the EU has already delivered “many positive results”, with “missing infrastructure links” between EU countries built or under construction and gas pipelines “being used more efficiently thanks to common rules on the use of gas networks”.

EU legislation is also ensuring that energy companies “cannot exclude competitors from access to pipelines or withhold the construction of important infrastructure”, the report said.

However, the report said there should be greater investment in smart grids and, for electricity, “investments should focus on linking the grids of the Iberian Peninsula, the Baltic region, and Ireland and the UK”. By 2020, “three quarters of the EU's infrastructure projects of common interest (PCIs) should be completed”, the report said.

The report said a total of 248 PCIs, which “urgently need to be realised” to strengthen the integrated market, were adopted by the Commission in October 2013. PCIs benefit from “more efficient permit granting procedures” and can obtain financial support from the EU under the so-called ‘connecting Europe facility’, under which €5.85 billion has been earmarked for energy infrastructure.

The Commission’s vice-president responsible for energy Guenther Oettinger said: “If energy markets are well connected and common rules are in place there's not much room left to use energy supplies as a political instrument. With proper price signals and sufficient infrastructure, energy is produced where it's cheapest and sent to where it is needed. All this translates into secure energy supplies all over Europe and lower bills for consumers.”

According to the report, “the lion’s share” of grid investments will not come from public money and so “the investment climate needs to be further improved”.

The report said: “Access to finance remains a continuing problem for infrastructure development in the EU. Investments in energy infrastructure are capital intensive projects that require stable and predictable regulatory conditions. While investors are still risk averse, the lack of a stable regulatory framework can shake investors' confidence.”

Ongoing work on common EU-wide rules for setting transmission tariffs in gas, as well as the practice developed by national regulatory authorities and the Commission in setting “tailor-made regulatory regimes for important new individual projects”, are “steps in the right direction which need to be built upon further”, the report said.

A report published earlier this year by manufacturing lobby group the European Round Table of Industrialists (ERTI) said the EU needed a single energy policy and a single energy regulator if it is to protect its economy.

ERTI also called for the development of a smart grid to be prioritised, using new technology to create a more cost effective system for delivering energy to consumers.