Cleared from scrutiny; drawn to the attention of the Business, Energy and Industrial Strategy and the Exiting the European Union Committees
(a) Commission delegated Regulation (EU) .../... of 23.11.2017 amending Regulation (EU) No 347/2013 as regards the Union list of projects of common interest; (b) Commission Communication on strengthening Europe’s energy networks
(a) Regulation (EU) No 347/2013; (b)—
Business, Energy and Industrial Strategy
(a) (39320), 15089/17+ ADDs 1–2, C(17)7834; (b) (39284), 15079/17, COM(17) 718
4.1The development of cross-border energy networks throughout the EU is seen as a critical part of the further development of the EU’s internal energy market and the movement towards an Energy Union.
4.2In 2013, the EU adopted a Regulation on guidelines for trans-European energy networks (the TEN-E Regulation) requiring the Commission to establish a list of EU Projects of Common Interest (PCIs) every two years. PCIs are specific energy infrastructure projects that are deemed critical for completing the internal energy market. Document (a) establishes the third list of PCIs, including 173 projects of which 23 involve the UK. PCI designation facilitates the planning and authorisation processes and opens up the possibility of receiving financing under the Connecting Europe Facility (CEF). The CEF was created in 2013 to financially support the development of trans-European energy, transport and telecommunication networks.
4.3Document (b) takes stock of progress made in integrating and modernising European energy networks at transmission level since the adoption of the TEN-E and CEF Regulations in 2013. It concludes that further progress on electricity interconnection in particular is required.
4.4The Minister for Energy and Industry (Richard Harrington) welcomes the inclusion of 23 PCIs involving the UK. These, he says, comprise 21 electricity and gas interconnection and storage projects and two carbon dioxide cross-border network projects. Previously, electricity and gas PCIs based in the UK have benefited significantly, he says, from CEF grant funding.
4.5On Brexit, the Minister observes that the UK and EU have agreed that the UK will continue to participate in EU programmes financed by the current budget (2014–20), until their closure. The eligibility of UK organisations to apply to participate in EU programmes and receive EU funding will be unaffected by the UK’s withdrawal from the EU for the entire lifetime of such projects. This would apply to projects granted PCI status and those allocated CEF grants.
4.6The Minister welcomes the Communication on strengthening energy networks, document (b), as a comprehensive summary of progress since 2013 and a forward look to the level of gas and electricity interconnection by 2020 and beyond and actions needed to achieve that.
4.7While the Minister is silent in these Explanatory Memoranda on the UK’s future energy relationship with the European Union, the Government has been clear that it wishes the UK to retain access to the EU’s internal energy market. Energy will form part of the wider negotiations on the future UK-EU relationship.
4.8We note the Government’s support for the strengthening of energy networks across the EU and we welcome the inclusion of a number of UK projects within the list of Projects of Common Interest.
4.9We note too that the Commission revises the list of PCIs every two years through a Delegated Regulation. The next such Regulation will therefore be adopted in November 2019, after the UK’s exit from the EU but well before the end of the current financial framework. As the Minister notes, UK projects will be eligible for PCI status and to receive CEF financing until the end of 2020. The Government explains in its Explanatory Memorandum that the final version of the most recent list “was adopted by the decision-making bodies (Member States and the Commission)” following considerable consultation.
4.10Upon the UK’s withdrawal from the EU in March 2019, the UK will leave the EU’s decision-making processes. In the EU’s draft negotiating directives for phase two of the negotiations, it is suggested that the UK would be invited to attend relevant working group meetings. We make two observations: first, that this Delegated Regulation is an example of the type of legislation relevant to the UK that might be proposed, decided and come into effect during any implementation period; and second, that it may also be an example of an area where the UK would wish to participate in working groups discussions as the Commission has suggested.
4.11We appreciate that the degree of UK involvement in UK-relevant decisions post-Brexit will depend on the outcome of negotiations. We place our observations on the record in case such an example is helpful as negotiations progress.
4.12We consider that the Brexit-related aspects of these documents will be of interest to the House, but we have no further questions and release the documents from scrutiny. We draw the documents to the attention of the Business, Energy and Industrial Strategy Committee and the Exiting the European Union Committee.
(a) Commission delegated Regulation (EU) .../... of 23.11.2017 amending Regulation (EU) No 347/2013 as regards the Union list of projects of common interest: (39320), , C(2017)7834 + ADDs 1–2; (b) Commission Communication on strengthening Europe’s energy networks: (39284), , COM(17) 718.
4.13The TEN-E Regulation established nine strategic geographical infrastructure priority corridors in the domains of electricity, gas and oil and three Union-wide infrastructure priority thematic areas for smart grids, electricity highways and cross-border carbon dioxide networks. It provides for the identification of specific PCIs that are needed to implement these priority corridors and areas.
4.14PCI status confers the following benefits:
4.15The new PCI list (document (a)) marks the culmination of a process that began in September 2016 and has involved collaborative working in regional groups of representatives of the Member States, national regulatory authorities (NRAs), transmission system operators (TSOs), storage operators, the European Networks of Transmission System Operators organisation for Gas and Electricity (ENTSO-G and ENTSO-E), the Agency for the Co-operation of Energy Regulators (ACER), relevant stakeholders acting in the field of energy, such as consumer and environmental protection organisations, and the Commission.
4.16The final list, as published, was adopted by the decision-making bodies (Member States and the Commission) on 17 October 2017. The new PCI list comprises 173 energy projects and reflects a greater focus on electricity interconnection, electricity storage and smart grids projects than before. The list comprises 106 transmission and storage projects, four smart grid deployment projects, 53 gas projects, six oil projects and, for the first time, four cross-border carbon dioxide network projects. Some PCIs form part of a cluster of projects because they are either interdependent or (potentially) competing.
4.17In the Northern Seas region, the electricity PCI projects will further integrate the markets around the North Sea, with expected future development of significant offshore wind capacity. UK-relevant PCIs include links with Belgium, France, Ireland, Norway, Iceland, Denmark and the Netherlands. A number of electricity storage facilities within the UK are also included.
4.18In Western Europe, the electricity PCIs will help integrate the Iberian Peninsula with the European market, in particular the Biscay Bay interconnector. The only UK-relevant PCIs are designed to increase electricity exchange capacity between Ireland and Northern Ireland.
4.19For gas, infrastructure is generally in good shape and resilient to a number of disruption scenarios. There are, however, pockets where significant action is still needed. These are primarily in the Eastern Baltic Sea area, the Central and South-Eastern part of Europe and in the Iberian Peninsula (links with France). UK-specific PCIs include Ireland-UK, Scotland-Northern Ireland and development of the underground gas storage facility at Larne.
4.20For the first time, the PCI list provides for four PCIs that aim at developing carbon dioxide transport infrastructure. The projects are all around the North Sea and all involve the UK, but only two are UK-led.
4.21The Communication covers progress with PCIs to date, noting that 30 have now been completed or will be in operation by 2018, with a further 47 scheduled to be completed around 2020 out of the total of 173 PCIs on the most recent list.
4.22The Communication also refers to the important contribution of the Connecting Europe Facility. So far, 74 PCIs have received grants for awards and studies worth €1.6 billion, out of a total CEF energy budget of €5.35 billion (£4.70 billion) for the period 2014–20.
4.23Regulatory measures under TEN-E have contributed to accelerated implementation of PCIs. So far, eight gas and six electricity PCIs have benefited from cross-border cost-allocation decisions agreed by a process involving regulatory authorities and the Agency for the Cooperation of Energy Regulators.
4.24Four regional high-level groups have been established by the Commission to accelerate infrastructure development in specific regions that face particular challenges, including the North Sea. The Northern Seas Memorandum of Understanding was signed in 2016, promoting the integration of offshore wind and enhanced interconnection. Public and private stakeholders will work together to establish a legal and regulatory framework to help facilitate the development of such projects. The adoption of a North Sea infrastructure/offshore grid Action Plan is foreseen for 2018.
4.25The European Commission makes various recommendations as to how electricity interconnection in particular can be improved, looking forward to 2020 and then to 2030.
4.26In the context of the deal reached on the first phase of the withdrawal negotiations, the Minister says:
“UK organisations should continue to bid for EU funding with the assurance that payments will continue after our departure from the EU. In respect of projects that have PCI status these would continue to be eligible to apply for, and receive, grants from the CEF energy programme and provided they meet the relevant criteria under the Connecting European Facility regulation and TEN-E regulation.”
4.27On the Delegated Act and the PCI process more generally, the Minister says:
“The Government welcomes the publication of the PCI list with a significant number of UK projects (23) being included. These comprise 21 electricity and gas interconnection and storage projects and 2 carbon dioxide cross-border network projects. Electricity and gas PCIs located in the UK have benefited significantly from CEF grant funding to date in respect of awards for both works and studies.
“The Government supports the important work the Commission has done over the last year to improve the PCI process through identification of the most pressing infrastructure needs and bottlenecks in the electricity and gas priority corridors that could not effectively be addressed by more efficient use of existing infrastructure. The Commission has also closely monitored the progress of existing PCIs.”
4.28The Minister sets out the Government’s position on the Communication in the following terms:
“The Government welcomes this Communication on strengthening Europe’s energy networks as a comprehensive summary of progress since 2013 and a forward look to the level of gas and electricity interconnection by 2020 and beyond (including for the first time carbon dioxide network PCIs) and actions needed to achieve that. The recent improvements in interconnection within the EU recorded in the report are welcome as an important building block towards a fully functioning energy market and an important contribution to energy security.”
4.29The Minister notes the number of UK projects listed in the third PCI list and adds that the UK has “benefited significantly” from CEF grant funding for both works and studies of electricity and gas awards to date. The UK, he says, is also a signatory to the political declaration on energy co-operation between the North Seas Countries adopted in 2016, which is referred to in the report.
52 Regulation (EU) No 347/2013.
53 Regulation (EU) No 1316/2013.
54 €1 = £1.13655 as at 30 November.
19 December 2018