Priority Interconnection Plan (PIP)

An efficient energy infrastructure is essential for the internal energy market to work properly and to achieve the European Union's targets for sustainable development, competitiveness and secure energy supplies. This requires considerable investment in the existing gas and electricity networks along with rapid development of their interconnections.

ACT

Communication of 10 January 2007 from the Commission to the Council and the European Parliament entitled "Priority Interconnection Plan" [COM(2006) 846 final - Not published in the Official Journal].

SUMMARY

Interconnection of networks allows the transmission of electricity and gas between markets usually organised on a national basis, and is a key element in setting up trans-European gas and electricity networks.

Interconnected networks are vital to the development of healthy competition and constitute a prerequisite to successfully creating an internal energy market. They also prevent the risk of short supply by diversifying sources, for example for electricity, by facilitating the introduction of a "green network" based on renewable energies.

Development of energy structures in Europe

The trans-European networks are currently underdeveloped as a result of insufficient funding. Certain malfunctions demonstrate the lack of coordination between the national energy networks and of a genuine separation of production, transport and distribution functions. System operators belonging to vertically-integrated companies have no incentive to develop their interconnections with other networks and expose themselves to competition from new producers and suppliers in the sector.

The infrastructures are increasingly operated at the limit of their physical capacities which hampers the integration of additional energy resources necessary for market growth. Thus the large-scale production of electricity from renewable sources could be compromised in certain regions. The saturation of the networks also threatens to generate temporary breakdowns in supply and an increase in energy prices. Numerous regions remain "energy islands" with poor interconnections, or none at all, with the rest of the internal market.

The Priority Interconnection Plan (PIP) details the progress of the 42 projects of European interest listed in the Guidelines for trans-European energy networks (TEN-E) adopted in 2006.

Sixty percent of electricity network projects are behind schedule, largely due to the complexity and lack of harmonisation in planning and authorisation procedures. Funding problems and environmental or health objections also constitute obstacles.

Although the gas projects of European interest are progressing more satisfactorily, the completion of terminals and storage facilities for liquefied natural gas (LNG) sometimes encounter major problems in some Member States where a number of projects have been abandoned or frozen. External interconnections require particular attention since they are responsible for more than 50% of our supplies and are becoming increasingly political.

Key activities for a stable environment favourable to investments

The PIP proposes five priority actions to ensure a stable environment favourable to investments:

• identify and closely monitor projects which are vital to the creation of an internal market, ensuring at the very least that the projects of European interest (PEI) likely to encounter serious difficulties are completed satisfactorily and to a reasonable deadline;
• appoint coordinators for these PEI, starting with the following four: the power link between Germany, Poland and Lithuania, interconnection of the North Sea wind farms, power link between France and Spain, and the southern gas corridor linking the Caspian and Black Sea basins to the European Union, including the Nabucco gas pipeline from Turkey to Austria via Bulgaria, Romania and Hungary;
• plan networks according to consumer requirements using a regional approach with increased cooperation from the transmission system operators, responsible for monitoring and analysing development scheduling and investments at this level;
• accelerate planning and authorisation procedures by encouraging their simplification and harmonisation, and obliging the Member States to establish national procedures to ensure that planning and approval for projects of European interest are completed within a maximum five-year period;
• consider the value of increasing Community funding and encourage the European banks (EIB and EBRD) to give funding priority to energy interconnections.

Gains

Implementing the PIP will create a genuine single market for energy where prices will be acceptable to all categories of consumers, and external supplies and internal exchanges will be secure, with limited risk of saturation and outage. It will ensure the additional capacities necessary to meet the inexorable increase in demand for electricity and gas, and will satisfy CO2 reduction targets whilst integrating on a large scale new sources of renewable energy. Cohesion objectives will also be fulfilled, with the required capacities guaranteed even in isolated or sparsely populated regions.

RELATED ACTS

Decision No 1364/2006/EC of the European Parliament and of the Council of 6 September 2006 laying down guidelines for trans-European energy networks and repealing Decision 96/391/EC and Decision No 1229/2003/EC [Official Journal L 262 of 22.9.2006].

Communication of 10 January 2007 from the Commission to the Council and the European Parliament entitled Prospects for the internal gas and electricity market [COM(2006) 841 final - Not published in the Official Journal].

Directive 2005/89/EC of the European Parliament and of the Council of 18 January 2006 concerning measures to safeguard security of supply of electricity and infrastructure investment [Official Journal L 33 of 4.2.2006].

Council Directive 2004/67/EC of 26 April 2004 concerning measures to safeguard security of supply of natural gas [Official Journal L 127 of 29.4.2004].

Last updated: 14.03.2008