New actions to accelerate the rollout of EU energy grids
By Aleksandra Kurecka, associate, and Dominik Piechowiak, associate, Linklaters
On 28 November 2023, the European Commission published an EU Action Plan for Grids (“Grid Plan”). Adopting the Grid Plan is one of the 15 key points highlighted in the recently published European Wind Power Action Plan which is aimed to support the wind industry within the EU. The main goal of the adoption of the plan is to accelerate the pace of network development in Europe and is expected to bring far-reaching measures in response to the new challenges that European networks are confronted with due to growing demand for connection of renewable projects.
The Grid Plan identifies seven categories of action plans, the implementation of which may improve the rollout of electricity grids across Europe, and thus boost the green transition. The actions pointed out in the Grid Plan relate, among others, to improving access to finance for grids projects by increasing visibility on opportunities for EU funding programmes, stimulating faster permitting for grids and improving and securing grid supply chains, including by harmonising industry manufacturing requirements for generation and demand connection.
Key points below of the plan are summarised below..
Access to finance
The European Commission plans to enhance collaboration with investors, credit agencies and financial institutions in order to address obstacles to financing energy projects through instruments such as bank loans, market-based tools, guarantees and blended finance. Special attention will be given to the unique business models of system operators, exploring tailored financing solutions with the input from stakeholders. Additionally, cooperation with the European Investment Bank will be intensified to assess financing tools supporting grid investments within the InvestEU framework. The European Commission aims for seamless coordination with initiatives outlined in the Wind Power Action Plan (which also envisaged fit-for-purpose financing tools for new renewable energy sources) and other renewable technologies, ensuring a cohesive integration of the future electricity system.
Distribution grids can be financed through various EU funding instruments, such as the ERDF, CF and RRF, including its REPowerEU component. Member states in their operational programs for the period 2021-2027 have allocated €4.7 billion leading to investments of €6 billion. The Modernisation Fund and RRF can contribute to investments needs. Member states with high distribution grid modernisation needs should consider adjusting operational programs. From the first quarter of 2024, the European Commission will collaborate with Member states on distribution grid founding, organizing a dedicated high-level meeting. Technical Support Instruments will aid enterprises in funding applications and collaborations with the EU DSO Entity.
Stakeholder engagement and faster permitting
The Grid Plan, much like the preceding Wind Power Action Plan, involves the acceleration of permitting procedures by offering guidance and technical assistance to Member States. These efforts include utilizing voluntary provisions in emergency regulations and swiftly transposing the revised Renewable Energy Directive to expedite the development of transmission and distribution grid networks needed for renewable integration. The National Competent Authorities Platform will be intensified, with a ministerial meeting to address permitting issues. A 2024 study on TEN-E Regulations permitting provisions will identify best practices, providing much needed guidance for member states. The European Commission will collaborate with ministries, permitting authorities and The National Competent Authorities Platform to disseminate and support RED III provisions. By mid-2025, guidance on designating dedicated infrastructure areas for grid projects will be provided. Guidance will be updated in environmental impact assessments and will support the digitalization of permitting procedures from 2024 through Technical Support Instrument.
The European Commission identified the need to create a system that could prevent conflicts and delays which are one of the biggest challenges for building infrastructure in several jurisdictions. During the 2023 PCI Energy Days that took place in Brussels on 28th-29th November, the Pact for Engagement was introduced. The Pact involves collaboration with Member States, NRAs, system operators and civil society. It may not only be a great solution for conflicts and delays, but it may also ensure that benefits are redistributed to communities and nature protection is enhanced.
Strengthening grid supply chains
Although European manufacturers of cables and substations are global leaders in the industry, they are currently facing significant challenges caused primarily by component shortages and increasing competition from third country suppliers. The European Commission stressed that reliance on components originating from outside the European Union to meet EU critical infrastructure needs may present a security threat. Limited access to copper and steel as well as lack of skilled workers were identified as another key obstacle to the development of European grid components manufacturing industry.
The European Commission proposed two specific action points to strengthen the European grid supply chains with a view to increasing the competitiveness of the European grid industry, ensuring energy security and facilitating grid development throughout the entire European Union.
To this end, the European Network of Transmission System Operators EU DSO Entity will introduce new mechanisms to inform manufacturers in advance of grid development and procurement plans by early 2024. The idea behind this action point is to allow manufacturers to prepare their production capacities to be able to deliver the required components when needed. Better planning and greater visibility translate directly into improved business results. If implemented properly, this action plan is likely to significantly improve and accelerate the rollout of new and improved networks across Europe.
In addition, the European Commission announced that it would take measures to promote common technical requirements for generation installations and other facilities connected to the grid. Greater uniformity in this regard is likely to make it easier for manufacturers to design their production processes, as fewer components will differ between individual countries comprising the single European market. As a consequence, manufacturers may be able to keep production costs down and reduce lead times, thus increasing the availability of components for power systems.
Modern and smoothly operating grids are one of the necessary components of the green transition in the EU. The Grid Plan identifying seven key challenges sets the direction and provides a framework for modernisation, expansion and smartening of electricity networks in Europe both at transmission and distribution levels. Implementation of the actions indicated in the Grid Plan will require cooperation of entities across multiple economic sectors, in particular in terms of improving access to finance for networks projects, promoting faster permitting procedures for grid projects and strengthening grid supply chains.