This document is an excerpt from the EUR-Lex website
Document 52013DC0791
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL On the implementation of The European Energy Programme for Recovery
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL On the implementation of The European Energy Programme for Recovery
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL On the implementation of The European Energy Programme for Recovery
/* COM/2013/0791 final */
REPORT FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT AND THE COUNCIL On the implementation of The European Energy Programme for Recovery /* COM/2013/0791 final */
REPORT FROM THE COMMISSION TO THE
EUROPEAN PARLIAMENT AND THE COUNCIL On the implementation of The European
Energy Programme for Recovery I PROGRESS IN PROGRAMME IMPLEMENTATION The European Energy Programme for Recovery
(EEPR)[1]
provides financial support to selected, highly strategic, projects in three
areas of the energy sector: gas and electricity connections, offshore wind
energy and carbon capture and storage. By co-financing these projects, the
programme helps the European Union to progress towards its energy and climate
policy objectives: security and diversification of energy supply; completion
and smooth operation of the internal energy market; and reduction of greenhouse
gas emissions. Most of the budget available was allocated
to 59 promoters and 61 projects in the following sub-programmes: gas
infrastructure (€1363 million); electricity infrastructure (€904 million);
offshore wind energy (€565 million); and carbon capture and storage (€1000
million). Overall, by the end of 2010, grant decisions and grant agreements had
been made for a total amount of €3833 million i.e. 96.3% of the total EEPR
budget. An amount of €146.3 million that could not be committed to projects in
these sectors by the deadline of 31 December 2010 was reallocated to a new financial
facility, the European Energy Efficiency Fund [2](EEE-Fund),
focusing on energy efficiency and renewable energy investments. Since last year's report (COM (2012) 445
Final), the implementation of the EEPR has continued progressing. A substantial
number of projects are now completed; others are well on track and will be
operational soon. The present Report provides information on the state of play
since the last report (August 2012) in qualitative terms as well as data
related to the payments and the de-commitments as from the start of the
programme up to June 2013, It also provides an overview of the current state of
play and of the mid-term evaluation of the EEE-Fund (see CSWD). (1)
Success Stories Gas and electricity infrastructures From an energy policy perspective the
programme succeeded in improving the way the gas and the electricity internal
markets work: It contributes to increasing interconnections capacities and to
ensuring a better integration between the western and the eastern parts of the Union. The programme is helping some Member States, notably the Baltic and Iberian Peninsula, towards the 10% target of electricity interconnection. It has created
additional storage capacities in peripheral Member States and in Central and Eastern Europe. It has contributed to the completion of a bi-directional gas pipeline
network in Europe and to the fulfilment of N-1 of the infrastructure standard
as required in the Security of Supply Regulation[3]. The reverse flow gas projects, located in
Central and Eastern Europe, are up and running and avoided a gas supply crisis
during February 2012's cold spell. The reinforcement of the interconnections
both for gas and for electricity have contributed to the integration of the
internal market. The most prominent examples are the following: gas
interconnections on the Africa–Spain–France corridor; electricity
interconnections between Portugal and Spain which contribute to the development
of the Iberian electricity market; electricity interconnection between the
United Kingdom (Deeside) and the Republic of Ireland (Meath) for the
establishment of a regional market between the UK and Ireland; and the
electricity interconnections in the Baltic region and their integration into
the Nordpool Market. Offshore wind energy (owe) Through EEPR support for the supply and
installation of innovative foundation structures and wind turbine generators,
the realisation of the first large size (400 MW) offshore wind farms, located
far from shore (more than 100 km) and in deep waters (more than 40 m), has been
secured. Indeed, EEPR money has been instrumental for the selected projects in
the German and Belgian North Sea to obtain the necessary loans from banking
consortia in order to achieve financial close. The EEPR action on the Thornton
Bank in Belgium was finalised in September 2011 and the first offshore wind
electricity generated through infrastructure co-financed by the EEPR had
already been fed into the German grid in autumn 2010. In the area of the grid integration of
offshore wind electricity, EEPR co-financing has been crucial for the final
investment decision regarding the 'Kriegers Flak-Combined Grid Solution'
project in the Baltic. This flagship project is the first offshore link that is
utilised both as a connection of offshore wind farms and as a cross-border
interconnector. It will use innovative HVDC VSC (High Voltage Direct
Current-voltage source converters) equipment and constitutes a first important
building block in the modular development of an offshore grid. More generally an in-depth analysis of the
impacts of the EEPR was provided by an independent mid-term evaluation[4] carried out in 2011. It appears
that the programme, by setting in motion construction work and the procurement
of equipment and intermediate manufactured goods, is already generating a
meaningful impact on the real economy. Several projects are now finalised and many
others are on track, while in some cases project implementation remains
challenging and is advancing slower than initially planned, as illustrated in
the following chapters. The economic context proved to be particularly
challenging for the Carbon Capture and Storage sub-programme. (2)
lessons
learned The EEPR is the first example of
large-scale support from the EU Budget to the energy sector managed through
direct grants to companies. However, despite the progress made, some
structural obstacles in the implementation were encountered by the sector. The integration into the grid of offshore
wind energy was partially successful despite some technical difficulties which
have not yet been solved by energy companies. In general terms, Member States
were not proactive enough in the successful implementation of the EEPR. The
insufficient cooperation between the National Regulatory Authorities (NRAs) can
create in some cases a big uncertainty on the business case for the promoters.
This aspect is particularly critical for some new offshore wind projects. A common problem to the three
sub-programmes lies in the complex and lengthy permit granting procedures.
These difficulties and lessons learned from the EEPR implementation were taken
into account by the Commission when drafting the new Regulation of the European
Parliament and the Council on guidelines for trans-European energy
infrastructure (EU) n° 347 of 17 April 2013[5].
The Regulation contains provisions to accelerate permit granting procedures,
establishing a three and a half year time limit for the permit granting
decision and increasing transparency and public participation. It also foresees
measures to develop regulatory incentive measures and to allow financial
assistance if necessary. In addition, infrastructure projects faced
difficulties in accessing long term financing on competitive terms. This
remains an important issue. The Commission proposal on the Connecting Europe
Facility (CEF)[6],
a cross-sector infrastructure Fund, is designed to help projects put together
the necessary financing package and trigger their fruition. The commercial
viability gap of projects of European importance will be complemented with CEF
grants. Furthermore, the financial instruments under CEF should help project
promoters in accessing the necessary long-term financing for their projects by
bringing in new classes of investors (pension and insurance funds) and mitigating
certain risks. The Project Bonds Initiative which is one of the financial
instruments proposed under CEF, has already been made available to project
promoters under a "pilot phase" with the use of the budgetary
resources available under 2007-2013 budget. The first project bond was launched
in July 2013 with the support of the European Investment Bank the Commission's
partner for this initiative, and further operations are expected later in 2013. The EEPR funding, as intended, enabled a
fast start to the CCS projects. However, as was already known at the beginning
of the programme, the EEPR funding was never intended to cover all the very
high investment and operational costs of the CCS projects. The low carbon price
under the Emissions Trading System (ETS) has rendered the short and medium-term
business cases for CCS unattractive. In addition, the current economic context
makes it more difficult for projects to access the additional financing needed.
Hence, the CCS sub-programme is facing major uncertainties that risk
undermining its successful implementation. Knowledge sharing on CCS is crucial to the
success of the technology. Under the EEPR CCS programme the CCS Project Network
was established to exchange experiences and best practices. It is the first such
knowledge-sharing network worldwide and its members (EEPR CCS projects and
Sleipner project in Norway) are working together and produce common 'good
practice' guides. The Network furthermore published reports of the lessons
learned by projects on CO2 storage, public engagement and permitting. Regarding the future of Carbon Capture and
Storage (CCS), the Commission adopted on 27 March 2013 (COM (2013) 180 final)
its communication and reaffirmed that " An urgent policy response to
the prime challenge of stimulating investment in CCS demonstration is required
to test whether the subsequent deployment and construction of CO2
infrastructure is feasible. The first step on this path is therefore to ensure
a successful commercial-scale demonstration of CCS in Europe that would confirm
CCS's technical and economic viability as a cost effective measure to mitigate
GHG in the power and industrial sector". Together with the adoption of the CCS
communication a public consultation was open until 2 July, and received more
than 150 responses.[7].
The Commission will publish later this autumn a summary of the responses
alongside the individual contributions, on the public consultation webpage[8]. (3)
next
steps for the projects Aside from the projects already fully
completed, the remaining projects can be classified in two main categories:
projects on track where the financial support should continue; and projects
that are not progressing adequately and for which the Commission is going to
take the decision to terminate the support. For eight important infrastructure
projects, the beneficiaries have not been in position to take a Final
investment decision (FID) or implement the project according to the initial
schedule. For one, HVDC Hub, the promoter has agreed to terminate the project.
For two others (Aberdeen offshore wind and Gravity Foundations) the FID is
expected within the next 6 months. For Cobra Cable, the Commission is currently
seeking assurances that the FID will be taken by mid-2016, which, if not
forthcoming may lead to the Commission terminating the grant agreement. The Commission may therefore take decisions
in view to terminate the financial aid for four gas projects (ITGI Poseidon,
Nabucco, Galsi and reverse flow project in Romania). However, the termination
of the financial aid does not prejudge that these gas projects could be
qualified as projects of common interest (PCI)[9]
for Europe in the context of implementation of the guidelines for TEN-E
infrastructures. As regards the six CCS demonstration
projects, the EEPR action for one of the projects will be completed in October
2013 (Compostilla), 3 have been terminated, and the remaining 2 are unlikely to
be completed without additional and substantial financial efforts by Member States and/or industry. The Commission has officially informed by
letter the companies concerned by a termination process. The Staff Working Document (SWD)
accompanying this report provides the state of play of each project. Since July 2011 the European Energy
Efficiency Fund is operational. A specific CSWD reporting on a mid-term
evaluation is presented in addition to the present report.
II OVERALL SITUATION At the end of 2012, 20 projects out of 61
were already fully technically completed, and a total amount of €1,416,970,178,64
has been actually paid to the beneficiaries (June 2013). The rate of payments remains low but this
confirms the difficulties in the planning of such big and complex projects.
Indeed, the complexity of the technologies involved, especially for the OWE
integration in the grid and CCS, the difficulties for the public authorities
both at government and regulatory level to offer a proper regulatory framework,
the lack of public acceptance, as well as difficulties linked to environmental
issues and public procurement have all constituted additional challenges for
the projects promoters. Furthermore, the permit granting procedure forms the
basis for many of the delays. At the moment €42 million funds unspent
were recovered from the German CCS project. For the terminated electricity and
gas infrastructures projects, €12.millions were de-committed. This is partially
explained by the fact that the final costs are below the initial estimated
costs. 1. Gas and Electricity
Infrastructure - The EEPR infrastructure sub-programme supports
44 projects in three major areas of activities. The projects are implemented by the
transmission system operators (TSO) in each Member State or by project
promoters. An amount of €2268 million has been committed, of which about €777
million, i.e. 34.25% has been disbursed to the beneficiaries by the June 2013.
Payments are subject to the firm commitment of the promoters to implement the
project through a FID. Projects cover three areas: - Gas infrastructure and storage projects:
the infrastructure for transporting and trading gas across the EU needs to be
further integrated by constructing the missing links between Member States.
Further diversification of the EU's energy sources and routes should continue,
including Liquid Natural Gas (LNG). - Gas reverse flow projects: During the
2009 gas supply crisis between Russia and Ukraine, most of the Central and
Eastern European Member States were left without gas, not because of lack of
gas in Europe, but because the existing infrastructure lacked the technical
equipment and capabilities to reverse the gas flows from an East-West to a
West-East direction. EEPR financing provided support to address this difficulty
and reverse flows infrastructure is now in place in Central and Eastern Europe. - Electricity infrastructure projects: The
integration of an increasing amount of electricity from variable Renewable
Energy Sources, require huge investments in new infrastructure. Furthermore, a
number of Members States are still "energy islands" because they are
poorly connected to their neighbours and the internal energy market. 1.1 Progress to date To date 19 projects out of the 44 are
completed, as compared to 13 at the beginning of 2012. In the electricity
sector, 4 projects are completed. The remaining 8 projects are progressing
well, with some projects expected to be completed by 2014. In the gas sector,
15 projects are completed; 13 are progressing according to schedule. Most (10
out of 15 projects) of the reverse flow and interconnections projects in
Central and Eastern Europe have been completed. The EEPR funds helped the
projects to secure their financing and therefore to become operable without
delays. Hence both the safety and reliability of the gas network have been
improved, security of supply and diversification has been increased and
critical bottlenecks were removed. The following examples can be pointed out:
the EEPR funds have secured the development of the project of development of
the Larrau gas branch by upgrading the Spanish (Vilar de Arnedo compression
station, pipeline between Yela and Vilar de Arnedo) and the French networks
(Bear Artery). The security of supply in the region and market competition will
be thus increased and the Iberian gas market will be better integrated into the
remaining European one. The completion of the two electricity
interconnections in 2011 between Portugal and Spain, in the Douro and the Algarve regions, helped to connect to the renewable energy sources. The EEPR funds
significantly contributed to upgrade and extend the Portuguese network and as a
result to increase exchanges capacities with Spain. The EEPR funds also supported establishing
the first electricity interconnection between Ireland and Great Britain. By contributing to increase electricity interconnection capacities and
allowing possible integration of offshore wind energy, this interconnection has
enhanced the security of supply and diversification of sources of energy for Ireland. Three EEPR projects in the Baltic region
aim at improving the functioning of the internal energy market and ensuring a
level playing field. When completed, those projects will significantly
contribute to enhancing the security of supply, enabling electricity trading
and reducing the region imports' needs. However, despite the good progress made,
four projects in the gas sector are facing serious delays that might result in
their termination: - The competition for Shah Deniz resources
regarding the final route has been concluded between the Nabucco and
TAP projects (not covered by EEPR) in favour of TAP. The decision of the
Shah Deniz Consortium will have an impact on the EEPR grant.
- By a decision of 18 May 2013, the Algerian gas company has decided to
postpone, for the third time, the decision on the construction of the pipeline between
Algeria and Italia (Galsi project). Hence, this EEPR-supported project is
significantly delayed. The authorisations to build the project have not yet
been granted after 5 years of procedures and the commercial agreements for the
gas supply have not yet been concluded. - The ITGI Poseidon project is facing
difficulties to secure the gas sources required to underpin its construction. - Finally, the reverse flow project in Romania, which also includes the linking of the "transit" gas system to
the national gas system, is seriously delayed. However, the project is crucial
for the further development of the gas market in Romania and in the wider
South-East European region. For all these projects facing major delays
and where progress remains insufficient, the Commission has sent
pre-termination letters to the project promoters. 1.2 Conclusions Substantial progress has been demonstrated
for electricity and gas infrastructure projects. A large majority of the
projects (40 out of 44) are either completed or progressing For some projects,
the final date of implementation has been extended (see CSWD) The EEPR is concretely improving the way
the internal market works, by providing interconnections between Western and
Eastern parts of the EU, and increasing the security of supply of the country
and regions concerned. Some remarkable steps forward are being taken: the
reverse flow gas projects are up and running and avoided a gas supply crisis
during the recent February 2012 cold spell. The electricity projects supported
are lending strong impetus to the completion of the internal market. The
electricity network projects will contribute to absorbing the electricity
produced from renewable sources. The completion of an EU-wide energy
infrastructure system is progressing thanks to the clearing of bottlenecks and
the progressive integration of "energy islands" such as the three
Baltic States, the Iberian Peninsula, Ireland, Sicily and Malta. To date, it is foreseen that the majority
of the 25 on-going projects should be completed during the years 2013/2014
whilst only a few projects will run until 2017. The remaining projects, those
undergoing serious difficulties, may be terminated by the end of 2013. Many of the delays and difficulties encountered
by some projects could have been avoided should an early involvement of the
NRAs and ACER been foreseen. This is a lesson learnt that the Commission has
taken into account in the process of assessment and identification of the PCIs
under the CEF. 2. Off shore wind energy (owe)
projects The EEPR OWE sub-programme consists of 9
projects in two main areas of activities: - Support to the large scale testing,
manufacturing and deployment of innovative turbines and offshore foundation
structures; - Support to the development of
module-based solutions for the grid integration of large amounts of wind
electricity generation. The beneficiaries of the grants include
project development companies, engineering companies, renewable energy
producers and TSOs. The full available EEPR envelope of €565 million has been
committed and payments to all 9 projects totalled €204 million at the end of
June 2013. 2.1 Progress to date Out of the 9 projects, 1 has been
successfully completed (Thornton Bank). 3 other projects are progressing
well and their completion can be expected in 2013-2014. Some others could last
until 2016/2017 (gravity foundations), 2017/2018 (Aberdeen, Krieger Flak), 2019
(Cobra Cable) and will require the Commission's close monitoring. The Cobra Cable (link between DK and NL)
has experienced serious delays and the partners, the Danish and Dutch
transmission system operators, have yet to have approval from their regulators
for the investments needed or the permits for the cable's route. Following
receipt of a pre-termination letter from the Commission, the partners renewed
their efforts and obtained agreement from their regulators for a process that
should lead to regulatory approval in April 2014. The Commission is currently
seeking assurances from the partners on the milestones that would have to be
met before allowing the FID to be taken beyond the end of 2013. One project, the HVDC hub, will terminate
in agreement with the beneficiary because of the accumulated and continuing
delay and the significantly modified and reduced scope. 2.2 Progress to date by sector 2.2.1 Offshore turbines and
structures (six projects) Through the EEPR grants, the installation
of the first large size (400 MW) offshore wind farms far from shore (more than
100 km) and located in deep waters (more than 40 m) has been secured. Indeed,
EEPR funds have been instrumental for the selected projects to obtain the
necessary loans from banking consortia in order to achieve financial close. The EEPR action on the Thornton Bank in Belgium was completed in September 2011. Three of the German wind farm projects are already
in the offshore installation phase. It is anticipated that two of them will be
completed by the end of 2013 and the third one by end of 2014. The first
offshore wind electricity, generated through infrastructure co-financed by the
EEPR, has already been fed into the German grid in Autumn 2010. While these
projects are advancing very well, they do show some delays as compared to the
original planning, mainly because of delays of the guaranteed grid connection.
The fourth German offshore wind farm project, aiming to manufacture and install
gravity based foundations, has been rescheduled after serious delays in the
permitting process. It is expected to be fully realised by 2017. The project aimed at installing an offshore
wind energy technology test centre off Aberdeen (UK) has obtained full consent.
However, this consent is currently legally challenged. The final investment
decision for this project is due to be taken early 2014. 2.2.2. Offshore wind-grid (three
projects) In 2012 the FID has been taken for the
project 'Kriegers Flak - Combined grid solution' in the Baltic. This flagship
project is the first offshore link that is utilised both as a connection of
offshore wind farms and as a cross-border interconnector. As such, it
constitutes a first important building block in the modular development of an
offshore grid. The technical solution for the Kriegers Flak area, involving
important HVDC VSC technological components, has been defined and a market and
business model for the combination of renewable electricity allocation and
cross-border electricity trade has been developed. Important impact for the
future design of combined inter-connections and offshore wind integration can
be expected. However, the overall situation for offshore
wind-grid projects remains very challenging. In particular the offshore
deployment of innovative HVDC technology in multi-terminal solutions faces a
complex combination of technological, regulatory and commercial barriers. Delays in decisions on the co-financing by
national regulatory authorities (NRAs) hinder a timely implementation of
offshore grid projects. The role of NRAs is key in these projects as
demonstrated in the case of gas and electricity infrastructure where the
economic models and the experience in cooperation between NRAs are far more advanced.
The Commission takes the view that NRAs should act in a more coordinated manner
as requested by the third internal energy package[10]. 2.3 Conclusions The EEPR support to "turbines and
structures" projects results directly in an additional 1500 MW of
carbon-free electricity production capacity. The EEPR projects are also
generating important learning effects, for instance shortening the production time
of offshore foundations and decreases in the installation time of foundations. For the wind-grid integration projects, the
maturity and cost of the HVDC technology, the licensing of the wind farms to be
connected as well as the co-financing to be obtained through the regulatory
authorities are the crucial hurdles to be addressed before the FID can be
taken. 3. Carbon capture and storage
(ccs) 3.1 Introduction Achieving the decarbonisation of the energy
system by 2050 with fossil fuels as part of the energy mix requires the
deployment of carbon capture and storage (CCS). The EEPR targets the
demonstration of integrated CCS projects with a view to making this technology
commercially viable by the end of the decade. The programme awarded financial
support of €1 billion to projects in the power generation sector, out of which
€ 399,5 million have already been paid to the beneficiaries by June 2013.
Integrated CCS projects are a novel technology challenge and their demonstration
needs to address the range of technical, economical and regulatory challenges.
The coordinators of the projects are utilities or energy companies. Other
beneficiaries include energy transmission companies, equipment suppliers and
research institutes. 3.2 Progress to date Under the EEPR six CCS projects (from Germany, the United Kingdom, Italy, the Netherlands, Poland and Spain) were initially supported. The project Jänschwalde (Germany) was terminated on request of the promoter with effect on 5 February 2012, due to
the lack of a regulatory framework for CO2 storage as well as public
acceptance issues. The promoter concluded at that time that the failure to
transpose the CCS Directive into German Law would not have allowed the
necessary CO2 storage permits to be obtained within the project's
timeframe. The Polish project (Belchatow) was
terminated on 6 May 2013 at the request of the promoter due to the absence of a
realistic plan to close the gap in the financial structure of the project, due
to technical risks and failure of the Member State to timely transpose the CCS
Directive on time with the resulting lack of a suitable legal framework for CO2
storage and public acceptance issues as regards CO2 storage. The Italian project (Porto Tolle) was terminated
on 11 August 2013 at the request of the promoter due to insurmountable delays
in project execution caused by the decision of the Italian State Council to
annul the environmental permit for the Porto Tolle power plant. Additionally,
the promoter saw no prospects for achieving the closure of the financial
structure of the project. However, the project promoter is not going to stop
all activities regarding CCS, it will continue to work on different aspects of
CCS in the pilot plant in Brindisi. None of the three remaining projects has
yet adopted the Final Investment Decision (FID).The
Commission is strongly committed to supporting the successful implementation of
all the remaining projects. Their state of play is the following: Regarding the UK project (Don Valley), the promoters are committed to going ahead and aim at securing operational support
via the UK's Contract for Difference (CfD) scheme which is currently under
preparation. The implementation of the project would create opportunities for
synergies with one of the projects short-listed by the UK government for support under the UK CCS Commercialisation Competition. The Dutch project (ROAD) is the most
advanced and ready to adopt FID if the increase in project costs, notably due
to the low carbon price, can be matched by additional funding. Discussions with
additional investors are on-going with the aim to achieving closure of the
financial structure of the project within 2013. As regards the Spanish project
(Compostilla) the EEPR Action will be completed as planned in October 2013. By
then three pilot plants on CO2 capture, transport and storage will
be operational and will provide very useful testing facilities for the full CCS
value chain. The potential next step of the project, outside the EEPR Action,
should be an integrated industrial scale CCS demonstration plant which,
however, would require additional funding to be found. 3.3 Conclusions Despite the good progress achieved so far
as regards preparatory work for implementing CO2 capture, transport
and storage solutions, the actual implementation of most CCS projects remains
uncertain. Public acceptance for CO2 onshore storage remains a
significant hindrance. The costs of investments and operation are very high
and, as known from the beginning of the programme, the EEPR funding alone
provides a kick start for projects but is not
sufficient to cover all additional costs for applying CCS in power plants. The
combination with the NER 300 and the Regional Fund has yet to be fully
exploited. In addition the technical challenges were not all mastered by the
companies and permits have in many cases not been secured in time.. At current
carbon prices, which are very low, and without any other legal constraints or
incentives, there is no rationale for economic operators to invest in CCS. The 27 March 2013 Communication on the
Future of Carbon Capture and Storage in Europe[11] aims
to re-start the CCS agenda and to initiate a debate on how best to encourage
demonstration and deployment and to stimulate investment. Based on the
contributions received in the context of the on-going consultation, the full
analysis of the CCS Directive transposition and implementation in the Member
States, and in the context of its work on the 2030 Climate and Energy framework,
the Commission will consider the need to prepare proposals, if appropriate, for
the short, medium and long-term. The CCS Directive provides a legal
framework for capturing, transporting and storing CO2. By the transposition
deadline in June 2011 only a few Member States reported full or partial
transposition. The situation has substantially improved in the meanwhile and
currently only one Member State has not notified any transposition measures of
the Directive to the Commission. While the majority of Member States with
proposed CCS demonstration projects have completed the transposition of the
Directive, several Member States are banning or restricting storage of CO2 on
their territories. The full analysis of the CCS Directive transposition and
implementation in the Member States will also look at this in detail. For the immediate future, the second call
of proposals, launched on 3 April, in the framework of the NER300 programme, is
a second chance to improve the current prospects for CCS demonstration in Europe. Also in the context of the EEPR, the
Commission will assess the results of the on-going consultation and the NER 300
second call (in which only one CCS project applied for funding) and will draw
the appropriate conclusions as regards the future of the remaining EEPR CCS
demonstration projects. III EUROPEAN ENERGY EFFICIENCY
FUND (EEE F) 1. Introduction As required by the EEPR Amending
Regulation, a mid-term evaluation providing information on the status of the
"financial facility" (the EEE-F, the Technical Assistance and the
awareness-raising activities) is included in the Commission Staff working
document linked to this report. The evaluation shows some fair first
results and a reasonably promising outlook for the Fund. So far, 6 projects have been approved and
signed leading to a total of around €79, 2 million allocated. In addition, the project pipeline contains,
in the most mature category, potential investments worth € 114 million. It is therefore expected, although
challenging, that the full EU contribution will be allocated to investments. Regarding the Technical Assistance (TA), 8
requests were approved for a total amount of € 6.3 million. 2. Main results of Mid-Term
Evaluation Meeting the objectives of the Regulation The first objective of the Amending
Regulation was to establish a specialised investment Fund to reallocate the
EEPR uncommitted appropriations leveraging additional contributions. This has
been achieved with the support of the European Investment Bank to which the
establishment of the Fund and the management of the EU contribution were
delegated. The second objective of the EEE-F was to
facilitate the financing of energy efficiency investments (portfolio target of
70%), renewable energy (20%) and clean urban transport (10%). The Fund thus
mostly concentrates on alleviating specific financial and non-financial
barriers to energy efficiency such as high transaction costs, fragmented and
small investments, limited access to credit, complex deal structuring, and low
confidence of investors and lack of capacity of project promoters. In order to do so, the Fund supports the
development of a credible energy efficiency market through the provision of
non-standard project finance[12]
and dedicated financial products (both debt & equity)[13] supporting in particular the
development of Energy Performance Contracting. To tackle the lack of financing and the
risk aversion of investors, the EEE-F was established as a layered investment
Fund, with three classes of shares. The EU invested in junior C shares,
absorbing the first losses and taking most of the risk to attract additional
investors, including private ones. The EEE- F also serves as a role model for
innovative financial instruments investing in cost-effective and mature
sustainable energy projects (with payback periods of up to 20 years) and
attracting private capital while demonstrating the business case behind these
investments and creating a credible track record.
Cost-effectiveness The 2013 indicative budget foresees € 1.48
million of administrative expenditure and € 160 million of investment
allocation. In concrete terms, if achieved, this will represent € 1 spent on
administrative expenditures leading to approximately € 108 of investment. This
does not take into account income generated in the form of interest rate and
principal reimbursement (€ 21,804 for 2012), which is first allocated to cover
EEE F's administrative expenditures.
Additionality The additionality of the EEE- F has been
demonstrated by its ability to provide long term financing, promoting
market-based and quality investments with replication impacts, while
maintaining a geographical balance in the project pipeline. The Fund's TA can effectively address
project promoters' lack of capacity and administrative barriers hindering the
bundling of larger projects to reach a critical mass. The establishment of the Fund and its first
operations have raised awareness of energy efficiency business opportunities
and innovative project finance, attracting private sector's and financial institution's
interest.
Leverage effect At programme level, the EU contribution (€
125 million) has been more than doubled by additional investor commitments (€
140 million). For every € 100 committed by the EU in project financing, more
than € 110 is being provided by other investors, giving a leverage of more than
2. In the future, it is of course desirable that more investors decide to
invest, however this will not happen until the EEE F has achieved a convincing
track record.
Sound financial management The financial management of the EEE-F is
based on investment guidelines and principles laid down by the European
Commission and the EIB and follows high banking standards monitored and
assessed in the various investment steps. The Investment Manager (Deutsche Bank)
produces monthly investment portfolio reports, quarterly reports and annual
business plans in which yearly targets are set and impacts on the EEE-F’s
balance sheet are forecast. The Commission ensures continuous
monitoring of the EEE-F at working level and through its representation in the
Supervisory and Management Boards of the EEE-F. It is also responsible for
approving Technical Assistance requests prepared by the Investment Manager.
3. Main Conclusions Experience with the EEE-F has helped to
understand the dynamics of the energy efficiency market, suggesting that: ·
Financing instruments for sustainable energy
need to be flexible, reflecting local market needs; ·
The gap in capacity to develop and finance
energy efficiency investments can be effectively tackled by the provision of
project development assistance, which would enable the creation of a verified
track record of the impacts of energy efficiency investments, building the
sector's credibility and investor confidence; ·
EU-level instruments should address common
barriers, market failures and impacts of the financial crisis, while
complementing national or regional schemes in place, avoiding duplication and
avoiding crowding out private investments; ·
To overcome market fragmentation, demand
aggregation through bundling single projects into larger ones is needed as well
as working through financial intermediaries and provision of guarantees; Overall, the evaluation shows some fair
first results and a reasonably promising outlook for the Fund. At present, an increase of the EU financial
contribution does not seem justified inter alia due to the amount still to be
allocated. However, once this amount is spent and the Fund will have reached
its maturity level and proved its attractiveness to the market, additional
contributions could be considered provided there is a large increase in
leverage.
IV PUBLIC PROCUREMENT Following the Court of Auditors remarks
about errors in the procurement procedures of an EEPR project, the Commission
decided to launch systematic actions and sent a detailed questionnaire to 59
promoters (61 projects) at the end of 2012 aimed at collecting information on
procedures they applied to award contracts in the framework of the
implementation of the action. The analysis performed clearly demonstrated
that the EEPR project beneficiaries overall demonstrated a mature knowledge of
their situation under public procurement and award rules. It is expected that
the systematic aware-raising actions undertaken by the Commission with respect
of the EEPR beneficiaries will help avoid future shortcomings in the
procurement procedures (the shortcoming identified so far did not affect the
implementation of the EEPR program). [1] Regulation (EC) No 663/2009 of the European Parliament
and of the Council of 13 July 2009 establishing a programme to aid economic
recovery by granting Community financial assistance to projects in the field of
energy. OJ L 200 ,31.7.2009,p.39 [2] Regulation (EC) No 1233/2010 of the European
Parliament and of the Council of 15 December 2010 amending Regulation (EC) No
663/2009.OJ L346,30.12.2010,p.5 [3] Regulation (EC)N°994/2010 of 20/10/2010 OJUE N° 295
of 12/11/2010 [4] http://ec.europa.eu/energy/evaluations/doc/2011_eepr_mid_term_evaluation.pdf [5] OJ L 115,25.04.2013,p.39 [6] Proposal for a Regulation of the
European Parliament and of the Council establishing the "Connecting
Europe Facility", COM(2011)665 [7] http://ec.europa.eu/energy/coal/ccs_en.htm [8] http://ec.europa.eu/energy/coal/ccs_en.htm [9] The Commission adopted by a Delegated Regulation a first
list of PCI projects on 14 October 2013 [10] Directives 2009/72/EC and 2009/73/EC establishing
common rules for the internal market in Electricity and Gas [11] COM(2013)180 final [12] Project
finance is based on the project's cash-flow rather than on the balance sheet of
its sponsors, creating value and risk assessment benchmarks for energy
efficiency projects themselves. [13] Such as
senior and junior debt, mezzanine instruments, guarantees, equity, leasing
structures and forfeiting loans. The EEE F does not provide grants or
subsidised interest rates ("soft" loans), as these financial
incentives are not considered appropriate for projects generating sufficient
revenue. Total amount of payments done for EEPR projects (Eur) 30 June 2013 BL || year || Total Interconnectors || 2010 || 360,855,255.05 || 2011 || 224,169,430.99 || 2012 || 129,624,008.68 || 2013 || 67,763,843.57 General total || || 782,412,537.72 CCS || 2010 || 193,746,614.74 || 2011 || 192,027,188.76 || 2012 || 37,119,607.39 || 2013 || 19,405,061.13 -42,735,826 General total || || 399,562,646.02 OFF WIND ENERGY || 2010 || 146,307,027.84 || 2011 || 41,300,324.67 || 2012 || 15,648,927.94 || 2013 || 804.463,30 General Total || || 204.060.743,75 || 2011 || 30,000,000.00 || 2012 || 934,251.15 Energy efficiency Fund || || 30,934,251.15 Grand Total || || 1,416,970,178.64