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.

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
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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
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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
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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
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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
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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
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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
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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
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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
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