New Policy Frameworks for Electricity Infrastructure Cooperation in South East Europe

Policy briefing

Luca Bergamaschi and Jonathan Gaventa

July 2014

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Summary

> The integration of European electricity markets has become a priority issue for EU

energy policy. Market integration offers the prospect of a more cost-effective and

competitive power system, enhanced security and cross-border solidarity, and the

potential for integrating greater proportions of variable renewable power.

> Accessing these benefits requires both development of the necessary infrastructure and

alignment of market rules and policies – a process that remains far from complete.

> While steps towards market integration are progressing at European level, regional

approaches allow many of the benefits of market integration to be attained more swiftly

while recognising national specificities. A number of differing regional approaches have

been developed in different parts of Europe.

> The South East Europe region has much to gain from European power market

integration. More interconnected power systems allow costs savings from both reduced

capital investment requirements for generation, and lower operational costs from better

optimised system.

> The region’s power system is strategically important for Europe as a whole to deliver

Europe’s mid- and long-term energy and climate objectives. Until now, however, this

potential has not been fully captured.

> A dedicated regional dialogue is needed to bring political momentum towards accessing

these benefits.

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Acknowledgements The authors are grateful for helpful comments from Julian Popov (ECF), Yana Popkostova

(ECF), Andreas Tuerk (Joanneum Research), Natalia Caldes Gomez (Ciemat), Oliver Rapf

(BPIE), Antonella Battaglini (RGI), Prof Oktay F. Tanrisever (University of Ankara) and Ana

Aguado Cornago (Friends of the SuperGrid).

The views expressed are of the authors alone.

Figure 1: South East Europe

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Introduction

The integration of European power markets and development of the associated

infrastructure is expected to have significant benefits, not only at national but also at

regional level. The South East Europe region stands to gain significantly from market

integration and sharing of abundant renewable resources. However, despite significant

European focus on gas infrastructure development in the region, the potential for South East

Europe regional collaboration on electricity infrastructure and market integration has not

been fully recognised. This paper outlines the importance of market integration and regional

collaboration on electricity infrastructure and adequate generation capacity for the South

East Europe region, and identifies relevant models from elsewhere in Europe.

Strategic context

Infrastructure and market integration

The potential benefits of European power market integration are substantial:

> An assessment for the European Commission found that energy market integration

across Europe could save up to €40 billion per year by 2030, with further savings of up to

€30 billion per year possible through moving to a unified market for renewables1.

> A study commissioned by the European Climate Foundation identified that a total cost

saving of €426 billion by 2030 is achievable as a result of increased system efficiencies

through more interconnected markets2. Around a third of the savings potential come

from savings in capital investments costs, whilst the remaining two thirds are the result

of reductions in operational and fuel costs. That means that the bulk of the savings come

from physical interconnection and optimising system operation – i.e. making best use of

the most efficient power plants on the system – with a smaller share attributable to

optimal siting of renewable generation assets.

> A new paper by Accenture for Eurelectric suggests that a combination of optimised

renewable energy systems, market integration, active system management and demand

response and energy saving could deliver benefits of €27 to €81 billion per year by 2030.

These economic benefits are supplemented by the role that market integration and regional

collaboration can play in protecting security of supply by enabling cross-border solidarity in

case of supply disruptions, by diversifying energy sources, and by developing storage

systems. In addition, as noted by the European Commission’s European Energy Security

> 1 Booz & co (2013) Benefits of an Integrated European Energy Market. Prepared for Directorate General Energy, European Commission, 20 July 2013. 2 ECF (2011) Power Perspectives 2030: On the road to a decarbonised power sector.

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Strategy, “competitive and liquid markets provide an effective hedge against abuses of

market or political power by individual suppliers”3.

Delivering the network infrastructure at sufficient scale and speed to fully enable these

benefits will, however, be a significant challenge. European Commission Roadmaps suggest

that rates of overall grid investment would need to double by 2025, and triple by 20404.

Electricity TSOs are currently planning to increase their rate of investment by 70% out to

20205. Capital investment requirements for power transmission in Europe are expected to

be in the range of €114-184 billion by 2030 and €273-420 billion out to 20506. Yet ENTSO-E

notes that a third of projects from its 2010 Ten Year Network Development Plan have

already been delayed, partially as a result of lengthy permitting procedures7.

South East Europe power market and infrastructure challenges

In its broadest sense, the South East Europe region can be understood to include EU

Member States (Hungary, Romania, Bulgaria, Greece, Cyprus, Croatia, Austria, Slovenia, Italy

and Malta), the Western Balkans (Bosnia and Herzegovina, the Former Yugoslav Republic of

Macedonia, Montenegro, Serbia, Kosovo* and Albania) and other non-EU States (such as

Turkey and Moldova). However a number of studies and initiatives for South East Europe

include only a subset of these countries, as a number of different configurations are

possible. In this study South East Europe refers to the wider region and includes all countries

mentioned above.

The South East Europe (SEE) region is in a strong position to benefit from power market

integration and regional collaboration on infrastructure:

> The region is moderately interconnected as a legacy of historical investments, but

nevertheless requires significant investment to respond to the changing power profile in

the region and overcome key bottlenecks (see figure below). ENTSO-E estimates at least

€10.8 billion needs to be invested in power transmission projects in the region by 20208.

> 3 European Commission (2014) Communication: European Energy Security Strategy. SWD (2014) 330. http://ec.europa.eu/energy/doc/20140528_energy_security_communication.pdf 4 DG Clima (2012) Roadmap for moving to a low-carbon economy in 2050. 5 Roland Berger (2011) ‘The structuring and financing of energy infrastructure projects, financing gaps and recommendations regarding the new TEN-E financial instrument’ 6 ECF (2012) Power Perspectives 2030; DG ENER (2012) Energy Roadmap 2050. 7 ENTSO-E (2012) Ten Year Network Development Plan. Successful development of infrastructure will require an active approach to mitigate environmental impacts (e.g. to habitats and landscapes) and involving the public at an early stage, in order to pre-empt problems and concerns. Such processes take time to be conducted successfully, but may help to prevent future delays. 8 ENTSO-E (2012) Regional Investment Plan: Continental South East https://www.entsoe.eu/fileadmin/user_upload/_library/SDC/TYNDP/2012/120705_CSE-RegIP_2012_report_FINAL.pdf

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Figure 1: Key power grid bottlenecks. Source: European Commission

> An ageing power plant fleet in many countries in the region means there is high value in

making most use of the newest and most efficient plant. Over 35% of the power

capacity of Romania, Hungary, Bulgaria and Slovenia is expected to close between 2010

and 20209. Integrated power markets also help to ensure energy security during asset

replacement cycles.

> Swiftly developing variable renewable resources in the region can be incorporated more

cost effectively into an integrated system, through enabling system balancing to take

place over large areas. With 30-50% better solar irradiation than Germany and

substantial amount of wind available (especially in Greece, Romania and Turkey), both

solar and wind potentials are considerable.10 Major new increments of variable

generation from wind and solar plants would have to be balanced by output from large

hydro plants, gas plants, hydro pumped storage facilities or more advanced energy

storage technologies. Meanwhile, the considerable deployment of decentralised solar

PV already underway in the region will mean there is a pressing need for ‘smarter’

distribution grids to optimise use of these resources. In this context, a regional planning

process and energy strategy to jointly optimize electricity generation, transmission

infrastructure, and the demand side could help advance cost-effective renewable power

investment options and achieve economies of scale.

> South East Europe has considerable hydroelectric power generation capacity in place

and significant potential to develop this further. Deutsche Bank estimates that only 40%

of the cost-effective hydro potential in the region has been developed and the

remaining 60% of economically viable potential is waiting for investors.

> 9 Fichtner (2012) Study on Incentives to Build Power Generation Capacities Outside the EU for Electricity Supply of the EU. Study for DG Clima. [nb. note that Greece is an exception to this, with fewer plant closures this decade]. 10 Fraunhofer ISE (2013) Levelised Cost of Electricity Renewable Energy Technologies, http://www.ise.fraunhofer.de/en/publications/veroeffentlichungen-pdf-dateien-en/studien-und-konzeptpapiere/study-levelized-cost-of-electricity-renewable-energies.pdf

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> The region has the highest potential for energy efficiency improvements in the EU, a key

source of value in creating a more cost-effective and sustainable energy system.

Bulgaria and Romania have the lowest level of energy efficiency in the EU while most

countries in the Western Balkans have very low energy efficiency standards.11 Regional

collaboration on energy efficiency could be beneficial for attracting investments,

exchanging best-practices, and accessing regional funds.

> The region is also strategically positioned to provide a link to North Africa, other Black

Sea countries, such as Moldova and Ukraine, and other European neighbourhood

countries and thus forms an important corridor for power exchange. These areas are

expected to see rapid development of cost-effective renewable power generation as

well as significant demand growth. Synchronisation with Turkey is already underway.

The opportunity to address these shared challenges through regional collaboration is

considerable. A regional policy framework that includes a more rapid deployment of

electricity interconnections, renewable generation, as well as energy efficiency would enable

national energy plans to be better aligned with EU climate and energy policy objectives.

Electricity interconnections foster diversification of energy supply in an affordable and

sustainable manner as well as enable access to, and integration of, energy markets.

European infrastructure objectives

Cross-border energy networks are recognised as a European priority in the Lisbon Treaty:

To enable citizens of the Union, economic operators and regional and local

communities to derive full benefit from the setting-up of an area without internal

frontiers, the Union shall contribute to the establishment and development of trans-

European networks in the areas of transport, telecommunications and energy

infrastructures.

Within the framework of a system of open and competitive markets, action by the

Union shall aim at promoting the interconnection and interoperability of national

networks as well as access to such networks. It shall take account in particular of the

need to link island, landlocked and peripheral regions with the central regions of the

Union.12

Despite this recognition in the treaty, trans-European energy networks have been slow to

develop. In 2002 at the European Council meeting in Barcelona, heads of government

committed to a target for Member States to achieve a level of electricity interconnection

equivalent to at least 10% of their installed production capacity by 2005. However, in the

> 11 Coalition for Energy Savings (2014) Energy Efficiency is the best way to improve energy security 12 Treaty for the Functioning the European Union, article 170.

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absence of sufficient delivery mechanisms or oversight on progress, the Barcelona target

continues to be unmet, with 12 European countries remaining below the 10% threshold in

2011.13

The 10% target was reaffirmed by Heads of Government at the European Council meetings

on energy in May 2013 and March 2014, and has been useful for focusing attention on the

importance of interconnection. The March 2014 European Council also called for the

European Commission to propose new interconnection objectives for 2030, and in its

European Energy Security Strategy the Commission put forward a proposed objective for

2030 for Member States to achieve at least 15% interconnection capacity.

The majority of South East European countries within the EU have achieved the 10%

objective (see figure 2 below)14; however further interconnection will need to be developed

for countries to meet the 15% goal and beyond in order to accommodate future energy

needs cost-effectively.

Figure 2: Interconnection level (Import capacity/net generation capacity). Source: ENTSO-E

At the May 2013 European Council meeting, Heads of Government also reaffirmed a

commitment to eliminate ‘energy islands’ in Europe by 2015, and to complete the internal

energy market by the end of 2014. In practice, this latter goal will primarily imply completion

of the European Network Codes rather than full market integration across Europe.

> 13 European Commission presentation ‘Fostering trans-European energy infrastructure: Identification, Prioritisation, Realisation’, Tuesday, June 25 2013. 14 Data is not currently available for the non-EU countries in South East Europe.

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European institutional frameworks for market

integration

In recent years, progress has been made toward developing a more European approach to

energy network development and towards European power market integration. The EU

Third Energy Package, the legislative package adopted in 2009 for increasing competition

and integration of EU’s electricity and gas markets, established the European Network of

Transmission System Operators for Electricity (ENTSO-E) and the Agency for the Cooperation

of Energy Regulators (ACER). Their mission is to complement and coordinate the work of

European TSOs and regulators towards the completion of the single EU market.

The Third Energy Package also introduced a requirement for ENTSO-E to publish a non-

binding Ten Year Network Development Plans (TYNPD) every two years. Progressive

iterations of the TYNDP have moved from ‘bottom-up’ aggregation of national plans towards

the inclusion of ‘top-down’ European scenarios.

The Third Energy Package also introduced a requirement for ENTSO-E (with guidance from

ACER) to develop Network Codes governing network and market operation in the EU. The

codes cover areas such as operational security and electricity balancing, and should – in

theory - be completed in 2015.

In recognition of the need to accelerate development of key infrastructures, in 2013 the new

Trans-European Network Guidelines for energy created a system of Projects of Common

Interest (PCIs) that may benefit from faster permitting regulations and access to limited

financing mechanisms through the Connecting Europe Facility (CEF) fund, which allocates a

total of €5.85 billion to trans-European energy infrastructure for the period of 2014-2020.

Regional collaboration

These European level approaches to market development are supplemented by both ‘top-

down’ and ‘bottom-up’ modes of regional collaboration.15 These regional approaches, it has

been noted, “aim to hone the effectiveness of EU energy policy objectives through enhanced

policy coordination at the regional scale”.16

In some cases, regional approaches have been developed in relative isolation to address

specific market or policy barriers; in others, strong regional dimensions have been designed

into European processes and objectives.

> 15 De Jong, J., and Egenhofer, C. (2014) Exploring a Regional Approach to EU Energy Policies. CEPS Special Report 84/2014. http://www.clingendaelenergy.com/files.cfm?event=files.download&ui=897D7879-5254-00CF-FD038B9B66A671A1 16 ibid

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Top down approaches

TEN-E Regional Groups

A key example of a ‘top-down’ regional approach is seen in the EU’s Trans-European

Network for Energy guidelines, adopted in early 201317. This sets out a list of 12 ‘priority

corridors’, 4 of which for electricity, including for example the North Seas offshore grid and

the Baltic Energy Market Interconnection Plan. A ‘regional group’ made up of member

states, regulators and TSOs will be formed for each of the priority corridors in order to

evaluate and rank project proposals.

The SEE is included in the North-South Interconnections East Electricity corridor, a large

grouping that runs all the way from the Baltic Sea to the Aegean Sea. This strategic corridor

alone includes half of all electricity transmission projects identified. However – as indicated

in figure 3 – non-EU countries (e.g. the Western Balkans) are not included in the regional

group. This contrasts with the system of regional groups for gas, where third country

projects are included.

Figure 3: Priority Electricity Corridors. Source: EC

The regulation also identifies the PCIs and specifies that if projects are unduly delayed by

more than two years, they may be turned over to third party developers to ensure they are

completed. The governance structures set up by the Energy Infrastructure Regulation

represents a significant milestone. Projects will be evaluated and ranked according to their

impact on a regional level, rather than a solely national basis. The time limits on permitting

will, in some cases, lead to faster decisions, while CEF financing should help to accelerate

some key strategic projects.

> 17 Regulation (EU) No 347/2013 on guidelines for trans-European energy infrastructure http://eur-lex.europa.eu/LexUriServ/LexUriServ.do?uri=OJ:L:2013:115:0039:0075:EN:PDF

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Figure 4: Electricity PCIs in South East Europe. Source: EC

However the system of priority corridors and PCIs has a number of limitations. Unlike the

interconnection target, there is no quantification of the capacities to be delivered along the

priority corridors – and thus no way of determining whether objectives have been met.

Accordingly, the corridors can seem rather vague, and collectively they cover the whole of

Europe. Regional Groups also currently play a rather passive role: they can rank project

proposals but not solicit new proposals or set regional objectives. This constrains the scope

of the Regional Groups to proactively develop shared strategies for infrastructure or even to

define a set of outcomes that the regional groups seek to achieve – and points to the need

for parallel initiatives for political collaboration on strategic direction.

ENTSO-E Regional Groups

A second example of regional operation is ENTSO-E’s six Regional Groups, established to

ensure compatibility between system operation on the one side and market solutions and

system development issues on the other. The regional groups publish a ‘Regional Investment

Plan’ every two years, which identifies transmission links of regional and European

importance as a contributing document to the Ten Year Network Development Plan.

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Figure 5: ENTSO-E Regional Groups. Source: ENTSO-E

2030 governance

The EU’s emerging climate and energy framework for 2030 is also likely to have a strong

regional dimension. In the European Commission’s Communication in January 2014, a new

governance system was proposed in which member states develop national energy plans

setting out how they will deliver objectives including renewables development, energy

efficiency and development of smart grids and interconnections. The national plans will be

iterated on a regional basis, before being validated at European level as part of a 3-step

process to implement the new governance framework.18 However final details of how

regions will be constituted – and how the process will be governed – have yet to be

confirmed.

Project co-ordinators

The terms of the Trans-European Network for Energy (TEN-E) regulation enable the

European Commission to appoint “European Co-ordinators” to facilitate the development of

priority infrastructure projects that are at risk of delay. European Coordinators are high-

level individuals who engage in cross-border dialogues and provide support and strategic

direction for critical projects. Following the agreement of the EU’s ‘Priority Interconnection

Plan’ in 2007, five coordinators were appointed to accelerate key projects. The work of the

European Coordinator for Baltic and North Sea offshore wind connections laid the

groundwork for more intensive regional cooperation through the Baltic Energy Market

Interconnection Plan and the North Seas Countries Offshore Grid Initiative (see case

studies). Two out of the five projects with appointed European Coordinators relate to South

East Europe: the "Salzburgleitung" power line within Austria, and “the axis linking Caspian

> 18 European Commission (2014), Communication: A policy framework for climate and energy in the period from 2020 to 2030, page 13 http://ec.europa.eu/energy/doc/2030/com_2014_15_en.pdf “Consultation with neighbouring countries should be a key element in the preparation of the plans. Regional approaches (based around regional electricity groups for example) should be promoted as they will contribute to further market integration from joint decisions on renewables deployment, balancing markets, generation adequacy and construction of interconnectors. Cooperation between Member States will also improve the cost-effectiveness of investments and enhance grid stability.”

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Sea countries and the Middle East to the European Union, including the Nabucco pipeline”.

No Coordinator has yet been appointed for cross-border electricity collaboration in SEE.

Bottom up approaches In parallel to these ‘top down’ approaches towards instituting regional collaboration, a

number of initiatives have developed more organically as a response to specific market or

policy challenges. These can be grouped into several different categories:

Infrastructure development:

> The Baltic Energy Market Interconnection Plan was created to accelerate regional

interconnection investment as a way of strengthening energy security and market

operation in the region, and includes both political and technical collaboration.

Political cooperation:

> The Nordic Council of Ministers has long had a focus on energy, and has collaborated in

a number of different areas from climate policy to research to power trading.

> The Danish Government initiated in 2012 the Northern European Energy Dialogue

where energy ministers, ENSTO-E and industry representatives meet once a year to

discuss the conditions required for investment in modern energy infrastructure in the

North Seas region

Electricity trading:

> The Pentalateral Forum in North West Europe (including France, Germany, Belgium,

Netherlands, Luxembourg and Austria) was set up to promote market integration in the

region, including accelerating market coupling.

> The Nordic countries (Finland, Sweden, Denmark and Norway) established NordPool, a

common trading platform for the region, in 2002. A similar structure – Mibel – as also

been established in Iberia.

> The Central East Europe Flow-Based Market Coupling Initiative seeks to accelerate

market coupling across five markets in the CEE region, and involves both regulatory and

TSO collaboration.

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Case study 1: Baltic Energy Market Interconnection Plan

8 Baltic countries signed a memorandum in 2009 for a Baltic Energy Market

Interconnection Plan. The aim is to connect Baltic countries to wider EU energy markets

for both security and market integration. An interconnection plan was produced with

annual monitoring reports and the initiative is coordinated by a High Level Group, with

working groups on internal electricity market, electricity interconnections and power

generation, and gas internal market and infrastructure.

The project has been closely supported by the European Commission, and the Baltic

market was identified in the 2013 Energy Infrastructure Regulation as a ‘priority corridor’

for both electricity and gas.

Figure 6: Map of Baltic Energy Market Initiative. Source: European Commission

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Case study 2: North Seas Countries Offshore Grid Initiative

The North Seas region is a key test case for regional market integration and cost competitive

decarbonisation. The region will see major deployment of renewables capacity, with potential

for up to 250 GW of onshore and offshore wind capacity to be developed by 2030 –

representing a key element of European decarbonisation pathways and future security of

supply.

Figure 7: The North Seas Offshore Grid. Source: E3G

There is an unprecedented level of investment interest in offshore grid interconnection and

offshore wind transmission projects in the North Seas region. 15 GW of transmission capacity

in bilateral interconnection projects is under development together with 19 GW of capacity in

combined interconnection /offshore wind transmission projects. If completed in full, the

projects would enable a major increase in power trading in the region as well as facilitating

development of a significant quantity of offshore and onshore wind.1

In order to address the regulatory uncertainty and political risk that projects face, the North

Seas Countries Offshore Grid Initiative (NSCOGI) was launched as a way to help tackle these

issues at the regional level. NSCOGI is a 10-country inter-governmental initiative established in

2009 that seeks to facilitate strategic and coordinated development of offshore grids, through

assessing potential grid architectures, market structures and permitting procedures.

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Regional collaboration initiatives in South East Europe

There are already several examples of regional collaboration underway in South East Europe

– but also considerable scope to further strengthen these approaches.

Energy Community

In cooperation with the European Union, countries of the former Yugoslavia, Albania,

Moldova and Ukraine have signed the Energy Community Treaty of 2005. The Energy

Community is an international organisation dealing with energy policy issues established

between the European Union and a number of third countries to extend the EU internal

energy market to South East Europe region and beyond19.

The Energy Community is an organisation which can play a key role in fostering closer energy

policy cooperation in the EU neighbouring states based on binding commitments of its

members to implement the EU energy acquis and liberalisation of the energy markets to

attract investments.

In October 2012 the Energy Community members committed to binding renewable energy

targets for 2020 pursuant to the EU’s Renewable Energy Directive. In 2013, the countries

introduced National Renewable Energy Action Plans (NREAPs) which will commit them to

attain higher shares of energy from renewable sources in gross final energy consumption by

2020, in a similar way as neighbouring EU Member States prepared as part of the delivery

mechanism of EU’s 20:20:20 energy and climate framework. Collectively, current and former

Energy Community members are planning to increase their renewable electricity generation

by 42.6 billion kilowatt-hours between 2009 and 2020.20

At the core of SEE’s power system plans for 2020 are the Projects of Energy Community

Interest (PECIs). These include priority projects for both generation and transmission. By

definition, PECIs must have an impact on at least two Energy Community countries, enhance

socioeconomic welfare, enhance market integration, increase competition, enhance security

of supply, and contribute to energy and climate goals. The list of PECIs is to be updated

every two or three years. The current list of electricity PECIs includes 14 renewable energy

plants, or groups of plants, and 9 electricity transmission infrastructures. The PECIs will

require more than €2.3 billion investment for renewable generation projects and €683

million for transmission projects.21

> 19 The organisation was established by an international law treaty in October 2005 in Athens. The Treaty entered into force in July 2006. The Parties to Treaty establishing Energy Community are the European Union, on one hand, and 8 Contracting Parties from the South East Europe and Black Sea region. The Energy Community Secretariat has its seat in Vienna http://www.energy-community.org/portal/page/portal/ENC_HOME/ENERGY_COMMUNITY/Who_are_we 20 IRENA Executive Strategy Workshop on Renewable Energy in South East Europe, http://www.irena.org/menu/index.aspx?mnu=Subcat&PriMenuID=30&CatID=79&SubcatID=365 21 Energy Community Secretariat

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The investment framework for the PECI projects is still under development although several

mechanisms have been proposed as potential sources of financing (Western Balkan

Investment Framework, Project Bonds, Risk sharing facilities, Long term guarantees).

Figure 8: Map of Projects of Energy Community Interest. Source: IRENA workshop based on Energy Community,

Abu Dhabi December 2013

ENTSO-E Regional Group

The ENTSO-E Continental South East (CSE) regional group includes TSOs of Bosnia and

Herzegovina, Bulgaria, Croatia, Hungary, Italy, Greece, FYR of Macedonia, Montenegro,

Romania, Serbia and Slovenia. It publishes a bi-annual Regional Investment Plan as part of

the Ten Year Network Development Plan process, and identifies transmission links of

regional and European interest. In 2012, its Regional Investment Plan identified the need for

€10.8 bn investment in the region by 2020.

However, while the European Commission, Energy Community and ENTSO-E provide a good

lead for coordinating some aspects of the energy policies in the region, overall the region

lacks sufficient coordination in developing national energy strategies. Further, the region

doesn’t have a common voice in the EU institutions since the countries have different status

regarding their European integration.

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Conclusions: deepening collaboration

This review suggests that there are several areas in which deepened regional collaboration

could be beneficial for both Europe and the South East Europe region. Across Europe

regional collaboration is emerging as a key element for effective policy implementation and

for timely delivery of the economic, security and climate benefits from the integration of

energy markets and infrastructure.

> The European Commission should appoint a high level ‘European Coordinator’ to kick-

start regional energy market collaboration in the South East Europe region. The

Coordinator should convene a high-level political dialogue to help set an overall

strategic direction for increasing integration, trade and security in the region. In line with

the evolving EU 2030 framework, such a dialogue could identify areas for collaboration

on smart grid and interconnection development, renewables trading, accelerating

energy efficiency, and managing energy demand.

> Ongoing regional collaboration could focus on future infrastructure development needs

to respond to a changing power system, in the model of the Baltic Energy Market

Interconnection Plan and the North Seas Countries Offshore Grid Initiative. Regional

initiatives can capture the value of resource sharing while continuing to reflect differing

national circumstances. They need a clear institutional mandate in order to succeed.

This would give the region a stronger voice in the Projects of Common Interest process

as well as helping to address shared challenges.

> Including non-EU countries in political dialogues and future regional activities for power

trading and infrastructure development is a way to further increase power markets’

interconnectivity and deepen regional collaboration and security. The growing need for

electricity of non-EU neighbouring countries, such as Turkey and the North African

Countries, represents a significant opportunity for the SEE region to export electricity

and stimulate new investment.

> Technical collaboration on market integration could strengthen the regional market,

help boost competitiveness and increase regional security. Sharing best-practice is an

important way of initiating a regional dialogue among stakeholders. There is large yet

untapped potential for innovation, especially in managing demand side responses and

distributed generation. This will require both new products and new business models.

> Successful delivery of new infrastructure networks will require overcoming the financing

challenges of building infrastructure at scale, including financial capacity and

organisational capacity limitations. This means attracting new sources of investment to

the sector, and recognition of the risks associated with cross-border working. There is a

strong role for regional collaboration in jointly addressing the financing challenge.