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Guidance for Project Promoters and Regulators for the Cross-Border Allocation of Projects of Common Interest
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Guidance for Project Promoters and Regulators for the Cross-Border Allocation of Projects of Common Interest

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The Energy Infrastructure Package that has recently been adopted in Europe foresees a new procedure to allocate the costs of Projects of Common Interest between EU Member States. This presentation …

The Energy Infrastructure Package that has recently been adopted in Europe foresees a new procedure to allocate the costs of Projects of Common Interest between EU Member States. This presentation provides guidance to project promoters and regulators for the implementation of this new procedure.

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  • 1. Florence School of Regulation Guidance  to  Project  Promoters  and  Regulators                 for  the  Cross-­‐Border  Cost  Alloca:on                                                 of  Projects  of  Common  Interest   Leonardo  Meeus  &  Xian  He   13/01/2014,  Brussels    CEER  &  ACER  Infrastructure  Task  Force  mee:ng   www.florence-school.eu
  • 2. Introduc:on   •  The  exis)ng  prac)ce  is  that  “each  country  pays  for  the  assets   on  its  territory”,  irrespec)ve  of  the  benefits  of  the  investment   •  Project  promoters  and  NRAs  have  an  interest  to  come  up  with   alterna)ve  CBCA  agreements   •  There  is  now  also  an  economic  tool  to  support  project   promoters  and  NRAs  in  designing  innova)ve  agreements,  i.e.   common  CBA  method   www.#lorence-­‐school.eu   2
  • 3. Introduc:on   •  3  dimensions  for  CBCA  innova)on   –  1)  Basing  the  agreements  on  the  CBA  results   –  2)  Extending  the  scope  of  the  agreements   –  3)  Agreeing  on  a  set  rather  than  individual  projects   •  Guidance  to     –  1)  Project  promoters  and  NRAs  to  take  the  lead  in   designing  innova)ve  CBCA  agreements   –  2)  ACER  to  limit  its  interven)on  to  guaranteeing  a   minimum  standard,  and  to  promote  good  prac)ces   www.#lorence-­‐school.eu   3
  • 4. Improving  the  current  CBCA  prac:ce   1.  Basing  the  agreement  on  CBA  results   •  Exis)ng  prac)ce   –  “Each  country  pays  for  the  assets  on  its  territory”   •  Minimum  standard   –  Remedy  the  strongest  disincen)ve:  compensate  involved  par)es  with   a  strong  likelihood  of  being  a  significant  net  loser   •  Room  for  regulatory  innova)on   –  Improving  commitment  of  the  involved  par)es   •  Complete  improvement   –  Alloca)ng  costs  propor)onal  to  benefits  difficult  to  implement  in  a   context  with  a  lot  of  uncertainty   www.#lorence-­‐school.eu   4
  • 5. Improving  the  current  CBCA  prac:ce   2.  Extending  the  scope  of  the  agreement   •  Exis)ng  prac)ce   –  No  formal  contracts  to  guarantee  execu)on  of  the  agreement,   resul)ng  in  “bridges  to  nowhere”   •  Minimum  standard   –  Safeguard  the  risk  of  stranded  costs:  reward/penalty  scheme  based  on   commissioning  date   •  Room  for  regulatory  innova)on   –  Improving  the  commitment  of  involved  par)es  to  include  also  other   (partly)  controllable  factors   •  Complete  improvement   –  Specifying  the  expected  ac)on  of  involved  par)es  in  every  possible   scenario  with  penal)es  for  non-­‐compliance   www.#lorence-­‐school.eu   5
  • 6. Improving  the  current  CBCA  prac:ce   3.  Agreeing  on  a  set  rather  than  individual  projects   •  Exis)ng  prac)ce   –  Project  defini)on  in  func)on  of  jurisdic)on   •  Minimum  standard   –  Should  be  part  of  CBA  method  to  guarantee  strongly  complementary   projects  are  defined  as  a  single  PCI   •  Room  for  regulatory  innova)on   –  Improving  the  commitment  of  involved  par)es  by  grouped  decision  of   CBCA  at  the  regional  level   •  Complete  improvement   –  A  single  agreement  for  first  PCI  list  would  be  too  complex   www.#lorence-­‐school.eu   6
  • 7. Showcasing  CBCA  innova:on   Compensa:on  from  Norway  to  Sweden   Facts   •  •  •  •  Mid-­‐Norway  )ght  in  dry  years   Easiest  and  quickest  solu)on  is  interconnec)on  with   Sweden,  i.e.  Line  A  ready  in  2009   Most  of  the  assets  on  Swedish  territory,  but  short   term  benefits  mainly  for  Norway   Norway  agreed  to  compensate  Sweden  for  Line  A   un)l  Line  B  was  ready   Interpreta)on  agreement   •  •  •  •  Incen)vized  Sweden  to  speed-­‐up  Line  A,  and  Norway   to  speed-­‐up  Line  B   Based  on  CBA  results,  i.e.  speeding-­‐up  costs  for   Sweden  and  benefits  for  Norway   Con)ngent  to  commissioning  dates  of  Line  A  &  B   Joint  agreement  for  strongly  complementary  projects   www.#lorence-­‐school.eu   7
  • 8. Showcasing  CBCA  innova:on   Compensa:on  from  Italy  to  Greece   Facts   •  500  MW  submarine  HVDC  link  between  Italy   and  Greece  commissioned  in  2002   •  Italy  owns  and  paid  for  75%  of  project,  Greece   the  remaining  25%   •  Project  allows  Italy  to  import  cheaper   electricity  from  Eastern  European  countries   Interpreta)on  agreement   •  Typical  case  with  a  transit  country  (Greece)   that  is  compensated  to  jointly  develop  the   project  with  its  neighbor  (Italy)   The  Italy  –  Greece  Case   Eastern     Europe   Italy   Greece   Source:  own  depic)on   www.#lorence-­‐school.eu   8
  • 9. Guidance   To  project  promoters,  NRAs,  and  ACER   •  A  lot  of  room  for  innova)on  in  cross-­‐border  cost  alloca)on  agreements,   and  innova)on  is  already  happening   •  Future  will  tell  if  new  prac)ces  will  prevail  or  whether  “each  pays  for   assets  on  its  own  territory”  will  con)nue  to  dominate   •  Recommend  project  promoters  and  NRAs  to  be  inspired  by  innova)ve   CBCA  agreements,  like  Norway  &  Sweden  and  Italy  &  Greece   •  It  is  too  early  for  ACER  to  set  a  strong  standard:  more  cases  would  go  to  ACER,   while  ACER  is  not  necessarily  in  the  best  posi)on  to  deal  with  regulatory  innova)on     •  Recommend  ACER  to  guarantee  a  minimum  standard   –  1)  compensate  involved  par)es  that  are  likely  to  be  a  significant  net  loser;     –  2)  establish  reward/penalty  scheme  for  commissioning  date  in  the  agreement   –  3)  CBA  method  should  ensure  grouping  of  strongly  complementary   investments  into  single  PCI   www.#lorence-­‐school.eu   9
  • 10. You  can  also  read  our   policy  brief!   http://fsr.eui.eu/Publications/ POLICYbrief/Energy/2014/ PB201402.aspx http://hdl.handle.net/1814/29679 www.#lorence-­‐school.eu   10

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