Brussels, 28/04/2016 (Agence Europe) - The High-Level group on Energy Infrastructure in Europe, which was set up in spring 2015 on the initiative of former French economy minister and current head of the Centre for European policy Studies (CEPS) Edmond Alphandéry, submitted eight recommendations to the European Commission on Thursday 28 April for improving the investment climate in the cross-border energy infrastructure sector - electricity network interconnections and gas pipelines - where close to €200 billion will be needed between now and 2020.
In its report, which was also made available to the press on Thursday, the high-level group recommends, firstly, putting in place alongside the implementation of the carbon market stability reserve in 2019 an independent entity, the remit of which will be to adjust the supply of emission permit certificates to demand so that the expected path of the price floor for carbon, determined long in advance, is always respected over time.
Secondly, the expert group suggests that strategic cross-border projects of common interest could be selected on the basis of independent socio-economic assessment prior to their launch to make sure that they are fully in line with European energy policy. To enhance the public sector delivery capacity, these projects could enter into an “energy union delivery process” that could be implemented by the Innovation and Networks Executive Agency (INEA), which, in 2014, took over from the Trans-European Transport Network Executive Agency (TEN-T EA) in the management of infrastructure and research projects in the areas of transport, energy and telecommunications.
In order to develop a common approach to cross-border projects at regional level, the high-level group recommends assigning the Agency for the Cooperation of Energy Regulators (ACER) the role of helping convergence and harmonisation among the relevant national regulators and giving it a role of coordinator. It suggests, too, that an ad hoc “transnational procuring agency” formed by member states of the relevant region could be in charge of project execution.
The expert group recommends, too, that an ombudsman or project coordinator be put in place to accelerate and create liability for the delivery of critical projects locally.
To provide greater assurance to investors in the event of dispute with public authorities, the group suggests a systematic arbitration clause be included in contracts
The high-level group also recommends encouraging the European Fund for Strategic Investments (EFSI) and the European Investment Bank (EIB) to provide additional guarantee instruments to cover the risks taken by private investors (inflation, exchange rates, etc.) and reduce their weighted average cost of capital (WACC).
For contractual schemes where success of the interconnector leads to power price spread and lower revenues, the expert group recommends improving the economic business model of cross-border infrastructure by defining a new remuneration scheme using cap and floor mechanisms and/or indexation formulae.
Lastly, the group suggests ensuring active fund participation by the European Commission through “mezzanine debt” in order to de-risk projects and enhance the credit rating of “senior debt”, thus facilitating access to the deep pool of institutional liquidity.
The expert group led by Alphandéry brings together 17 eminent representatives of the European energy sector (including Chairman of Engie Gérard Mestrallet, Secretary General of ERDF Michel Derdevet, and Chairman of Iberdrola Ignacio Galan and Chairman of Terna Matteo Del Fante), the banking sector (including Chairman of Société Générale Lorenzo Bini-Smaghi, Vice-President of Deutsche Bank Luc Frieden, and Deputy Chairman of Goldman Sachs Peter Sutherland) and other political institutions (such as Bundestag Deputy Speaker Edelgard Bulmahn). (Original version in French by Emmanuel Hagry)