webinar: regulating the investment in projects of common interest: any role for the eu?

www.florence-school.eu

FlorenceSchoolof Regulation

Regula'ng the investment in Projects of Common Interest: any role for the EU?

Leonardo Meeus Part-‐'me Professor, Florence School of Regula'on Associate Professor, Vlerick Business School

15/10/2014, Webinar

www.#lorence-‐school.eu

Projects of Common Interest

TYNDP PCIs


Progress monitoring


Poll: What is the main reason for the delay?

•  A: Permi*ng related problems •  B: TSO incen:ves


Poll: Response A


Poll: Response B

TSO Rate of Return

TSO

Ris

k


TEN-‐E Regula'on, Ar'cle 13 Incen'ves

•  1. Where a project promoter incurs higher risks for the development, construc4on, opera4on or maintenance of a project of common interest …, Member States and na3onal regulatory authori3es shall ensure that appropriate incen3ves are granted…

•  6. By 31 March 2014, each na4onal regulatory authority shall publish its methodology and the criteria used to evaluate investments in electricity and gas infrastructure projects and the higher risks incurred by them.

•  7. … the Commission may issue guidelines regarding the incen4ves laid down in this Ar4cle.


Italy, 2004

•  Lack of strategically important investment, 2003 blackout Context

•  Eligible projects: interconnection and congestion reducing domestic lines

•  Incentives: 12 years (risk) and +2% WACC premium (return)

Solu'on

•  8 billion invested since 2008 •  28 ongoing strategic projects

Experience


USA, 2006

•  Lack of strategically important investment, 2003 blackout

•  Eligible projects: Interstate investment improving regional reliability and reducing regional congestion

•  Case-by-case assessment by FERC with possibility to reduce risk and increase return, e.g. Duquesne Light (#3)

•  Over 85 cases representing 60 billion in potential investment

Context

Solu'on

Experience


Poll: How should EU guidelines deal with PCIs?

•  A: case-‐by-‐case assessments and investment incen:ves

•  B: no guidelines at all


Poll: Debriefing

Argument for case-by-case: same return for all investments implies overpaying for low risk projects and underpaying for high risk projects

Arguments against case-by-case •  Benefit can be limited for some countries: depends on how

heterogeneous projects are in terms of risk •  Costs can be high for some countries: requires new skills and resources

for regulatory authorities and companies

Response A

Response B


Recommenda'ons (EU Guidelines)

•  Benchmark national investment frameworks •  Spread good coordination practices, e.g. UK-Belgium experience with a

joint incentive package for the NEMO

•  ACER could be given the competence to assist NRAs on a voluntary basis withy case-by-case assessments

•  ENTSO-E could do the same for skills-bounded TSOs

Ensuring an adequate frame for all

For countries that want case-‐by-‐case


FSR research on this topic Jan 2013 CBA electricity Jan 2014 CBA gas Jan 2014 CBCA Sep 2014 TSO incentives

Research agenda •  2014: Update CBA – CBCA power & gas

•  2015: 1st evaluation of 1st infra package

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FlorenceSchoolof Regulation

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