Financing for Energy Projects 

This legislative proposal would implement a component of the European Economic Recovery Plan (EEPR) by drawing up a stimulus package for key parts of the energy sector. It provides for a programme of investment for energy projects during 2009 and 2010.

Background

This proposal follows on from the Second Strategic Energy Review, which set out guidelines for new energy security projects. It also follows on from the European Economic Recovery Plan, a Communication adopted in 2008. A key element of the Recovery Plan was the proposal to draw up a financial stimulus package for key parts of the energy sector.

Main Objectives and Elements of the Proposal

The proposal is for a Regulation establishing a financing instrument for the European Energy Programme for Recovery. It aims to support energy projects in the EU that contribute to:

• economic recovery;
• security of energy supply;
• reduction of greenhouse gas emissions.

It also establishes sub-programmes to advance the main objectives involving the financing of gas and electricity interconnection points, offshore wind projects and carbon capture and storage.

The stimulus package has a total budget of €3,500m for 2009 and 2010. This budget would be made available in 2010 and 2011 to complete ongoing energy projects. The budget is divided between the sub-programmes as follows:

• €1,750m for electricity and gas interconnections;
• €500m for offshore wind projects;
• €1,250m for carbon capture and storage.

Member States can also propose other projects to be financed but as long as they can be covered by the amount of allocated resources in the budget. Member States will also be responsible for the technical monitoring and financial control of all projects in close co-operation with the Commission.

The Commission is responsible for evaluating the Recovery Plan and ensuring the effective use of resources. Projects will be awarded funding by the Commission if they meet specific criteria. To be eligible for assistance a project must also provide evidence that it meets the objectives set out in each sub-programme.

The gas and electricity sub-programme requires all projects to meet the following objectives:

• security and diversification of sources of energy and supplies;
• optimisation of the capacity of the energy network and the integration of the internal energy market;
• development of the network to strengthen economic and social cohesion by reducing the isolation of the less-favoured and island regions of the EU;
• connection of renewable energy resources; and safety, reliability and interoperability of interconnected energy networks.

The offshore wind power sub-programme will be assessed according to the following objectives:
• the construction of full-size and industrial-scale installations and infrastructures that address the variability of wind electricity through integrative systems:
• large-scale storage systems;
• management of wind farms as virtual power plants (more than 1 GW);
• turbines placed further from the shore or in deeper waters (20 to 50m);
• novel substructure designs;
• impact of the project and its contribution to the EU's offshore wind grid system,
• project replication potential.

The sub-programme for carbon capture and storage lays down the following objectives:

• projects that have the ability to capture at least 85% of CO² in power generating installations and that will have at least 300MW electrical output or equivalent with the ability to transport and geologically store CO² produced safely underground;
• communication of funding required per ton of CO² to be abated in the first 5 years of the operation
• readiness of the proposed concept to achieve operation of the project by 31 December 2015.

All projects in all sub-programmes require the sharing of technical knowledge to allow for further construction elsewhere within the EU. Contractors and Member States therefore have an obligation to exchange information.

Annexes

The Annex provides a listing of all projects that are eligible for funding and the amount of funding the project will receive for both electricity and gas interconnectors, small island projects, offshore wind projects and carbon capture and storage projects. The Annex also provides a legislative financial statement that details all resources and expenditure and the monitoring and anti-fraud measures that will apply.

What’s Next?

There have been a number of disagreements between Member States as to which projects really merit financing. In particular there was sharp disagreement over the NABUCCO and CCS projects. In March 2009 the Council issued a compromise proposal which included agreements that had been reached between Member States. This proposal is therefore now under scrutiny in the European Parliament. Opinions have differed between MEPs and there is particular concern about the sustainability of some projects.