EU delivers damp squib for smart grids

Only two of the long-awaited 248 projects of common interest (PCI) to link Europe’s energy network will be smart grids, the European Commission has said, in an oft-predicted setback for plans to rationally manage energy demand and integrate renewable sources.

Few of the PCIs listed will be chosen to receive funding from the €5.85 billion pot which the EU has available for cross-border network projects that advance Europe’s single energy market, security of supply, and the bloc’s low carbon objectives.

Appearing on the list allows a project to reduce its administrative costs, and opens the door to a fast-tracked three-year permit-granting process under a single competent national authority.

Selected projects will also benefit from increased access to revenues from the European Investment Bank in the form of loans and capital guarantees, offered at preferential interest rates, such as project bonds, risk capital or enhanced loans.

Europeanisation of energy supply

Announcing the new list, the energy commissioner Günther Oettinger told a press conference in Brussels yesterday (14 October) that the package would allow a further ‘Europeanisation’ of EU energy supplies. 

“We believe that with our new network architecture, we can jump into a new generation of smart and super grids and gas transmission networks with reverse flow possibilities,” he said. 

“It is not just a question of more networks but of making them more intelligent, not just a question of making them quantitatively greater, but qualitatively better, a new generation of interconnectors and networks. The time has come for it.”

But because smart grids do not tick the Commission’s boxes on crossing borders, and pan-European requirements, only two out of four proposals presented to the Commission were chosen.

A ‘smart grid’ digitally processes information about energy supply, demand and patterns of consumption so as to super-efficiently route power from the point of production to its end-use in homes and businesses.

Industry representatives were skeptical about the effect that yesterday’s announcement would have on encouraging grid roll-outs, beyond the two projects linking France with Italy and Ireland with Northern Ireland.

Selection criteria

CEDEC, an association of 1500 small and medium-sized energy companies, said they "deplored" the almost exclusive attention for transmission infrastructure.

“The selection criteria such as the number of users and especially the cross-border aspect and the mandatory involvement of TSOs (Transmission System Operators), de facto excluded most distribution system operators, the large majority being small-to-medium-sized,” said Gert De Block, CEDEC’s secretary-general.

Indeed, 108 out of the 248 projects chosen were exclusively gas and oil infrastructure builds. The rest will often include fossil fuels in more general electricity-based projects, although it is impossible to calculate percentages.

A final list of projects for this tranche of funding will be announced in June 2014 and every two years thereafter, the PCI list will be updated.

Funding limits

Asked by EURACTIV where funding for smart grid roll-outs would now come from, Oettinger parsed a key limit to cross-border cooperation.

“Our lists are not covering everything going on in Europe,” he said. “There are member states, or even regions of member states with national projects, all sorts of things going on there that are not necessarily steered or driven or co-financed by us.”

Brussels had originally proposed a €9.1 billion package, but the sum was cut by a third in the negotiating process over the EU’s 2014-2020 budget.

One EU official accepted that the €5.85 billion figure was “not a huge sum” but insisted that it would still leverage much more private investment. The €9.1 billion number had just been intended as “a rough estimation based on the economic recovery programme we had” in 2011, the official said.

But even four months after the initial announcement, Oettinger was warning against any cut to the proposed headline figure. “We can’t fail to negotiate the €9 billion that’s necessary, because €4 billion is not going to work,” he told a ministerial roundtable in February 2012. “You would be better doing the interconnections yourselves.”

As things stand, the European Investment Bank will make up some of the funding shortfall, but officials were unable to say how much.

Smart grids will also have access to EU regional funds which are earmarked energy efficiency and renewables.

“What is getting funded is technology, what is not getting funded is programmes and market development,” said Jessica Stromback of the Smart Energy Demand Coalition (SEDC). “If you ignore that at the policy level you really will not harvest the benefits of smart grids for consumers.”

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