Towards 2020 and beyond

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1 Towards 2020 and beyond Gas Infrastructures in the EU Milosz Momot DG Energy: Unit B1 Internal Energy Market - Networks & Regional Initiatives Krakow, 24 May 2012 Energy

2 Agenda.2050: What Role for Gas?.2020: immediate target.energy Infrastructure Package 2

3 The Energy Roadmap 2050 is a basis for developing a long-term policy framework European Council.EU objective for 2050 GHG emissions down to 80-95% below 1990 levels.looks forward to elaboration of a low-carbon 2050 strategy a framework for longer-term action in energy and related sectors Aim of the roadmap.give more certainty to governments and investors.explore routes towards a low-carbon energy system by 2050 which improve competitiveness and security of supply.basis for developing the 2030 policy framework and concrete milestones with MS, EP and stakeholders 3

4 No doubt that gas is good Abundant resources with a good geographical distribution (and new discoveries continue) World Primary Energy Demand by Fuel in the Gas Scenario, Mtoe Fight against climate change: Natural gas is the less CO 2 intensive fossil fuel Gas-to-power is a suitable backup solution for renewables: Intermittent renewables need to backed-up with fast start-up and rampup/down Unique flexibility in storage and generation Energy Policy in some countries favours the increasing use of gas: Nuclear phase-out in Germany, Shale gas development in the US, etc. Source: IEA 4

5 Role of gas in the future energy mix Electricity production; transport; heating(?) 5

6 How much gas? It will depend Decarbonisation scenarios - fuel ranges (primary energy consumption in %) No regret options: energy efficiency, renewable energy, more and smarter infrastructure Need for fully integrated, welldesigned markets for gas and electricity Innovation for lowcarbon solutions Energy

7 How much gas? It will depend Scenarios explore routes to decarbonisation of energy system Current trends scenarios. Reference scenario (as of March 2010) Current Policy Initiatives (as of April 2011) 40% GHG reduction by 2050 Decarbonisation scenarios High Energy Efficiency Diversified Supply Technologies High RES. Delayed CCS Low Nuclear 80% GHG reduction 7

8 How much gas? It will depend Integration, flexibility, liquidity, security of supply Key role for infrastructure operators!! ` January 2009 gas crisis 8

9 How much new infrastructure? Gas infrastructures. massively developed over last 30 years More than 2 million kilometers of pipeline (T&D) EU Pipeline Network EU Gas Storages EU LNG Terminals Pipeline import capacity. Supplying. 124 Many.. 18 LNG. More Pipelines gas to more than 115 million customers storage facilities with a combined working volume of 86bcm countries planning to construct new or expand existing ones LNG terminals in the EU with a combined regasification capacity of 175bcm/a represents 24% of EU imports (2010) than 300bcm/a of pipeline import capacity represent 76% of EU imports (2010) Source: European Commission, Eurogas (Status: January 2011 otherwise stated) Development less impressive in terms of interconnections 9

10 Pipeline network development Source: Fluxys New infrastructure? Certainty? / ? 2050??? Beyond??? 10

11 Perspective Energy policy development Regulation on security of gas supply (ad) EED REMIT (ad) Strategic Energy review Third Internal Energy Market Package (ad) RES Communication SET Plan Second Strategic Energy Review Energy Infrastructure Communication Connecting Europe Facility & Energy infrastructure guidelines Internal Market Communication

12 Infrastructure is at the heart of our energy and climate policy goals -20% Energy Infrastructure Security of supply Achieved: Effective unbundling European planning (TYNDP by ENTSOs) ACER TEN-E / EEPR But challenges remain: Permit granting Regulatory framework Increased investment needs Economic crisis 12

13 The legislative proposals of the package Energy Infrastructure Package (EIP) Three sectorial infrastructure policy proposals Connecting Europe Facility: Budget EUR Energy 9.12bn Transport 30bn ICT 9.1bn 13

14 Energy Infrastructure Package Regulation on guidelines for trans-european energy infrastructure + CEF.Implementation of 12 priority corridors/areas, necessary to meet EU s energy and climate policy goals by 2020 and beyond. by providing policy and regulatory certainty through a stable and appropriate regulatory framework to promote the necessary investments. 14

15 The EU energy system will need substantial investment to get fit for 2020 and beyond Total investment needs in the electricity and gas sector between : over 1 trillion Power generation: ~ 500 bn Transmission and distribution: ~ 600 bn RES: ~ bn Distribution: ~ 400 bn Transmission: ~ 200 bn TSO Investment Average p.a. Natural Gas 9.8 TSO Investment Forecast p.a. Electricity Electricity: ~ 140 bn Gas: ~ 70 bn 15 NB: approximative figures, mainly from DG ENER calculations based on data from PRIMES, ENTSOs, KEMA etc.

16 Gas: Scale of investment challenge EU TYNDP 90 billion investment in grids TYNDP Gas Number of projects Transmission projects 62 13,711 FID Storage projects FID 26 4,260 Aggregate Cost Estimate for infrastructure investment (in million Euro) LNG projects FID 11 3,570 Transmission projects 97 58,556 Non-FID On average it follows investment patterns from the past and is less of a challenge than in case of electricity Storage projects Non- FID LNG projects Non- FID 22 2, ,614 Subtotal FID projects 99 21,514 Subtotal Non-FID ,763 projects TOTAL ,304 Source: ENTSOG, TYNDP

17 Priority corridor: North-South interconnections in Central Eastern and South Eastern Europe: gas Objective of the corridor: Regional gas connections to enhance diversification and security of gas supply Potential PCIs: Slovakia Hungary: interconnection Poland Czech Republic: interconnection upgrade Poland Slovakia: interconnection Germany Poland: interconnection capacity increase Bulgaria Greece (IGB) and Bulgaria Turkey (ITB): interconnections Slovenia, Italy and Austria: interconnections Croatia: LNG regasification terminal Bulgaria Romania, Romania Hungary: Reverse flow Estimated investment need: 26 bn Type of projects likely to need financing: security of supply, single source and route dependency, solidarity, monopolistic, fragmented markets, energy poverty Est. investment gap: 5 bn

18 Priority corridor: North-South interconnections in WesternEurope: gas Objective of the corridor: Gas interconnections for North-South flows to further diversify routes and to increase short-term deliverability Estimated investment need: 20 bn Type of projects likely to need financing: monopolistic, fragmented markets Est. investment gap: 1 bn Potential PCIs: Interconnections between - France Spain: across Pyrenees (MIDCAT) - France-Luxembourg: - Portugal Spain: 3 rd gas interconnection - Belgium-France (Veurne) - Germany-Denmark (Ellund) - Southern Germany: DE-AT-IT, FR-DE and FR-CH-IT - Malta-Italy - Italy-Algeria: Galsi - Ireland-United Kingdom - Netherlands: Gas roundabout

19 Priority corridor: Southern Gas Corridor Objective of the corridor: Transmission of gas from the Caspian Basin, Central Asia, the Middle East and Eastern Mediterranean Basin to the Union to enhance diversification of gas supply Potential PCIs: Interconnections: Nabucco-West/Nabucco SEEP TAP ITGI TANAP SCP TCP etc. Estimated investment need: 22 bn Type of projects likely to need financing: single source and route dependency, security of supply, energy poverty, first mover disadvantage, anticipatory investments Est. investment gap: 8 bn

20 Priority corridor: Baltic energy market interconnection plan: gas Objective of the corridor: Gas: to end the isolation of the three Baltic States and Finland and their single supplier dependency and to increase diversification Estimated investment need: 3 bn Type of projects likely to need financing: lifting of isolation, single source and route dependency, security of supply, monopolistic markets, energy poverty Est. investment gap: 2 bn Potential PCIs: Polish Lithuania: interconnection Denmark Poland: interconnection (BalticPipe) Eastern Baltic Region: Regional LNG terminal and internal network reinforcements Norway Denmark: interconnection Germany Denmark: interconnection upgrade and reverse flow Finland Estonia: interconnection (BalticConnector)

21 GAS EU relevance N-S corridor West N-S corridor C&SEE BEMIP Southern Corridor Bottlenecks or missing links NB: the corridors are only schematically represented by the lines

22 Energy Infrastructure Package Regulation on guidelines for trans-european energy infrastructure + CEF.Implementation of 12 priority corridors/areas, necessary to meet EU s energy and climate policy goals by 2020 and beyond. by providing policy and regulatory certainty through a stable and appropriate regulatory framework to promote the necessary investments. 22

23 EIP Toolbox TYNDP projects (+others in 2012/13) Projects of common interest (PCI) Accelerated permit granting Cross-border cost allocation Regulatory incentives Financial instruments and grants for studies (9.12 bn EUR in CEF) Grants for works, if: & Positive externalities No commercial viability 23

24 Conclusions.Gas has a future. Infrastructure operators can help in ensuring this the future is bright.good name of gas to be further promoted. Image of "flexibility" for gas needed more than expensive PR.Energy Infrastructure Package ready to help Thank you for your attention! 24

25 PR alone will not help

26 Backup EIP toolbox element 26

27 Permit granting Regime of common interest. Priority status for PCIs» Establish public interest and necessity in Member States, most preferential treatment» Streamlining of EIA procedures Competent Authority to manage permit granting process. 3 years time limit for the permit granting decision Increased transparency and enhanced public participation 27

28 Regulatory framework - measures. Energy system-wide cost-benefit analysis.» Proposal by ENTSOs, ACER opinion, Commission approval Enabling investments with cross-border impact:» Cost allocation as function of net positive impact on MSs» NRA joint decision on investments and cost allocation.» ACER decision if no agreement Long-term incentives for investment:» Obligation on NRAs to grant appropriate risk-related incentives through tariffs (anticipatory investments, early recognition of costs incurred, additional return, etc.)» ACER guidance on best practices of NRAs and methodology 28

29 Financing Connecting Europe Facility bn for transport, energy ( 9.12 bn) and ICT Financial Instruments (equity/debt incl. project bonds in cooperation with IFIs) and grants for studies and works Eligibility criteria (in guidelines):» Grants for studies and financial instruments:» In exceptional cases, grants for works (50/8: Project CBA shows positive externalities Project commercially not viable 29 29

30 Other measures.monitoring of PCI implementation by regional groups and ACER.PCI transparency platform.measures in case of significant delay of a PCI.Possibility to withdraw a PCI from the Unionwide list.european coordinators to facilitate coordination and implementation.implementation report from the Commission 30 30