Cost-Benefit Analysis and the Integrated Model
Cost-Benefit Analysis and the Integrated Model
What is it about?
Under the Trans-European Energy Infrastructure (TEN-E) Regulation, the ENTSOs’ Cost-Benefit Analysis (CBA) methodologies aim to ensure a transparent and neutral comparison between the costs of infrastructure projects and their expected benefits. They support the selection of Projects of Common Interest (PCIs) and inform national regulatory authorities’ decisions on investment requests and cross-border cost allocation.
ENTSO-E and ENTSOG are also required to establish and progressively implement a consistent and integrated model as part of their system needs assessment and CBA methodologies. This integrated model for electricity, gas and hydrogen network planning should support both cross-sectoral infrastructure needs assessment at system level and project-specific CBAs. By improving consistency of assumptions and methodologies and better capturing interactions between sectors, it helps contribute to more coherent and cost-effective EU network planning.
Cost-Benefit Analysis and the Integrated Model
What's the role of ACER?
ACER provides Opinions on each draft cost-benefit analysis methodologies developed by the ENTSOs, as well as the interlinked model, and may request the process for CBA updates.
Documents
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October 2017
April 2017
February 2014
Cost-Benefit Analysis and the Integrated Model
Unit Investment Cost
ACER provides a cooperation framework for NRAs to establish and publish a set of indicators and corresponding reference values for the comparison of unit investment costs for projects of gas and electricity infrastructure, which could be used in CBA analysis.
Security of Supply
Security of Supply
Security of Supply
The projects of common Interest naturally contribute to enhance the security of the European gas supply. The degree of this contribution is assessed with the help of the cost-benefit analysis methodology.
Under the European regulation on security of gas supply, ACER is mandated to decide on CBCA reverse flow projects, to issue Opinions on exemption requests and on the elements of coordinated decisions taken by national authorities, as well as to participate in the Gas Coordination Group.
In its opinions on the cost-benefit methodology for gas, ACER advises on how to improve specific issues connected with security of supply.
To better identify the benefits of a stable gas supply, ACER has carried out a dedicated study on the cost of disrupted gas supply (CoDG).
The study provides findings and suggestions for establishing a baseline of negative impact against which the merits of a project or “soft measure" can be assessed.
Security of Supply
Summer & winter outlooks
ACER is mandated to monitor the short-term gas supply outlooks published by ENTSOG for both winter and summer periods.
The summer outlook examines the potential evolution of the gas supply as well as the ability of the gas infrastructures to meet the demand, exports, and the storage injection needs during the summer.
The winter outlook assesses the storage levels before the winter season begins and uses simulations to assess the flexibility of gas infrastructure to dispatch gas supply to meet demand during the winter.
Security of Supply
Gas storages
Gas storages play an important role in the European gas system as they supply up to 25-30% of the total gas consumed in the Union during winter. The energy crisis which followed Russia’s invasion of Ukraine in February 2022 underscored the importance of having adequately filled gas storages across Europe to enhance the preparedness for potential gas supply disruptions.
ACER, based on information provided by NRAs, periodically reviews and reports on national gas storage regulations.
TEN-E
The TEN-E Regulation introduced the so called “Projects of Common Interest" (PCIs). PCIs are infrastructure projects which have a significant impact on the EU electricity and gas systems, and help the EU achieving its energy policy and climate objectives: ensuring affordable, secure, and sustainable energy for all citizens.
PCIs also play a key role in the long-term decarbonisation of the economy in accordance with the Paris Agreement.
The PCI label helps accelerating the planning, streamlining permit granting and thus facilitating faster commissioning of projects, which bring the highest value to the European consumer.
Every two years, the European Commission draws up a list of PCIs, starting with the first list in 2013.
In April 2022 the fifth PCI list entered into force, with 98 projects in total: 72 electricity transmission, storage and smart grid projects, 20 gas and 6 CO2 network projects.
On 3 June 2022, the revised TEN-E Regulation was published in the Official Journal of the European Union.
The new Regulation, among others, aims to:
- conform the infrastructure development to reflect the climate mitigation’s targets,
- promote the integration of renewables and of clean energy technologies into the energy system,
- continue to connect isolated regions,
- strengthen existing cross-border interconnections and
- promote cooperation with partner countries.
ACER participates in the identification of projects of common interest (PCIs) and monitors their implementation annually.
In addition, the Agency contributes to:
- Developing cost-benefit analysis methodologies to identify the best projects from a socio-economic perspective
- Providing guidelines to facilitate the allocation of projects' costs across borders (CBCA)
- Creating a cooperation framework for NRAs to establish and publish a set of unit investment cost indicators and corresponding reference values for gas infrastructure
- Sharing best practices on regulatory incentives.
ACER has also proposed legislative changes to improve the planning and implementation of electricity and gas infrastructure and their governance, based on its experience with the implementation of the TEN-E regulation.
The European Commission is developing legislative proposals (as part of the Grids Package) to improve and simplify the current legal framework. This includes the revision and simplification of the 2022 Trans-European Energy Networks Regulation (TEN-E Regulation), a key framework for the European energy infrastructure development.
On 19 September 2025, ACER published a position paper on improving and simplifying the legal framework on European grids.
In March 2021, ACER and CEER published a position paper to set out recommendations on 6 main issues. The paper calls for neutral and independent technical assessment of infrastructure projects and improved regulatory oversight so that the projects bringing most benefits for the European Green Deal are supported and to avoid any risks of unjustified costs to European consumers.
When the European Commission's revised TEN-E Regulation proposals were published in December 2020, ACER and CEER flagged up the need for further improvement for energy network development (see the ACER-CEER Press Release).
Already in July 2020, ACER and CEER set out their recommendation to the European Commission (as it began developing its proposals on revising the Trans-European Energy Networks Regulation) in a Position Paper on the Revision of the Trans-European Energy Networks Regulation (TEN-E) and Infrastructure Governance. The proposals highlight how the legislative changes could improve the planning and implementation of electricity and gas infrastructure. The paper also advises on improving the infrastructure development governance, the principles for PCI scope, and the TEN-E processes.
Previously, ACER issued two other Position Papers (2016) and (2017) about possible improvements of the European framework for energy infrastructure development related to the TEN-E Regulation.
Network Development Plans
ACER contributes to efficient and consistent gas network development plans by monitoring the development and implementation of the European-wide TYNDP. ACER also reviews the consistency and complementarity of national, regional and European network development plans.
Additionally, the Agency monitors the implementation of the projects of common interest, which are a subset of the projects listed in the TYNDPs, as well as the gas regional investment plans (GRIPs).
What is the TYNDP and why is it important?
Every two years, ENTSOG publishes a non-binding Ten Year Network Development Plan (TYNDP), which looks forward over a ten-year horizon and includes a European supply adequacy outlook. These periodically updated plans are essential for identifying the need of new infrastructure projects to ensure an adequate level of security of gas supply. The TYNDP must be consistent with the National Development Plans (NDPs).
The Projects of Common Interest (PCIs) are selected from the most recent TYNDP via a separate process led by the European Commission. The TYNDP should provide essential and comprehensive information for the selection of PCIs, particularly a complete, monetised, and trustable cost-benefit analysis results.
What is the role of ACER?
ACER is mandated to monitor the development and execution of ENTSOG's Plan. As a result, ACER issues an opinion on the draft TYNDP taking into account the objectives of non-discrimination, effective competition, and the efficient and secure functioning of the internal gas market.
What are ACER's recommendations for improving future gas TYNDPs?
In July 2024, ACER published its feedback on ENTSOG’s “Implementation Guidelines and other complementary guidance documents” for the 2024 TYNDP, recommending further improvements (see our communication).
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ACER periodically reviews the national network development plans to assess their consistency with the EU TYNDP. As a result, ACER issues Opinions including recommendations for improving the consistency between future network developments plans.
Transmission system operators (TSOs) establish regional cooperation within ENTSOG and publish a Gas Regional Investment Plan (GRIP) every two years. Based on this plan, TSOs can take investment decisions. ACER monitors the level of regional cooperation of TSOs within the GRIPs, and takes account of the outcome when formulating its views.
Consistency of gas and hydrogen network developmentsGas Regional Investment Plans (GRIPs)See AlsoRelated documentsRelated documentsChanging Role of Gas
Changing Role of Gas
Future Regulatory Decisions on Natural Gas NetworksImage
What type of regulatory decision on natural gas lie ahead?
Europe’s ambitious energy transition and decarbonisation goals by 2050 point to a changing role for natural gas. Demand for natural gas is expected to decline over time as the decarbonisation goals lead to a substitution of natural gas with other energy vectors. Therefore national regulatory authorities (NRAs) will need to take regulatory decisions on a wide range of issues such as:
- the repurposing of natural gas assets for their use as part of hydrogen networks;
- the potential decommissioning of natural gas assets that become stranded; and
- the reinvestment of assets that reach the end of their regulatory or technical lives.
ACER commissioned consultants DNV to carry out a study on the “Future Regulatory Decisions on Natural Gas Networks”. The DNV study, published in November 2022, addressing issues such repurposing, decommissioning and reinvestments of natural gas networks.
The information and the views set out in this DNV study are those of the author only, DNV, and may not in any circumstances be regarded as stating ACER’s official position, opinion, or recommendation. ACER does not guarantee the accuracy of the data and the statements contained therein.
What is repurposing, decommissioning and reinvestments?
Repurposing
The repurposing of natural gas pipelines for the use of hydrogen transportation will require transferring natural gas assets to dedicated hydrogen networks. This will require
- identifying assets
- defining the value of the asset to be transferred
- deciding on any incentives for the TSO to transfer assets to hydrogen networks.
Decommissioning
The decline of natural gas could potentially lead to some natural gas assets becoming stranded. This raises regulatory challenges such as
- identifying different types of decommissioning costs
- allocating the decommissioning costs and the different measures to prevent asset stranding.
Reinvestments
As assets age and reach the end of their depreciation periods, NRAs will have to take decisions on whether or not to replace these assets or to extend their regulatory lives (where possible or appropriate). The regulatory depreciation times applied for natural transmission assets is often below the technical lives of the assets.
Changing Role of Gas
A bridge beyond 2025Image
The Bridge beyond 2025 paper jointly released by ACER and CEER in 2019, provides recommendations on the overall framework that could help in reducing the emissions of greenhouse gases and in increasing the availability of decarbonised gases.
See AlsoA bridge beyond 2025
DocumentsMethane emissions
Methane is widely regarded as one of the main greenhouse gases and its emissions are considered to be the second most important contributor to climate change. In the context of the Green Deal and as a part of the clean energy transition, the European Union has launched a dedicated effort for reducing methane emissions in the energy sector.
The effort takes into consideration the global nature of the industry and that about 80% of natural gas consumed in the European Union is imported. Approaches dealing with methane emissions in the natural gas industry have to account for the entire gas supply chain link, as well as for technology-specific features.
What are methane emissions?DocumentsACER is looking at the issue of methane emissions primarily from the viewpoint of sustainability, as a sine qua non for any undertaking in gas infrastructure. Sustainability is one of the criteria that must be met by all projects included in the TYNDPs and in the PCI lists. To achieve the 2050 climate goals of the European Union, a balance must be found between:
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The scale of the problem and the tools to address it,
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The costs and benefits of any possible regulatory measures,
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Best industry practices, technical norms and regulation.
What's the role of ACER?See AlsoRelated DocumentsConsultancy Studies
Consultancy Background Studies
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Infrastructure
Cross-border energy infrastructure is the backbone connecting the European markets and allowing their integration. Gas pipelines, together with liquefied natural gas (LNG) terminals and underground gas storage (UGS) facilities, are the hardware supporting market integration, competition, and enhancing the security of supply in an efficient and sustainable way. If coupled with electricity, gas infrastructure can also support the energy transition towards a less carbon-intensive, and eventually carbon-neutral future.
Gas infrastructure offers flexibility, energy storage and back-up services which are already in place and of significant scale. Gas infrastructure is thus not just an object, but a tool that could contribute positively to the most profound decade of change in the European energy system.
What is it about?DocumentsACER's main tasks regarding trans-European gas infrastructure are performed in close cooperation with the national regulatory authorities and the ENTSOs for Electricity and Gas. ACER monitors the implementation of projects creating new interconnector capacity and the Union-wide network-development plans. If ACER identifies inconsistencies between those plans and their implementation, the Agency investigates and makes recommendations to the transmission system operators, regulatory authorities or other competent bodies concerned.
Each year, promoters of projects of common interest report to ACER their progress. Based on these inputs, ACER produces a consolidated annual report which highlights the development, construction and commissioning of the projects, as well as possible delays and difficulties in their implementation across Europe.
ACER fosters a proper assessment of the projects of common interest in terms of contribution to market integration, competition, security of supply and sustainability.
What's the role of ACER?Find out more:Network Codes
Network Codes and Guidelines are important instruments to organise access to the European Union's gas market. They aim at lowering barriers to entry for market participants, promoting market integration and improving market efficiency to the benefit of all EU citizens.
Why are the Network Codes important ?
The gas industry is based on a vast interconnected physical network consisting of pipelines, LNG terminals, and gas storage facilities. Access to the EU gas market depends on access to the cross-border gas networks. To facilitate networks' access across EU Member States, the Union law foresaw to harmonise the relevant market rules in a number of Network Codes and Guidelines.
There are currently four gas Network Codes covering capacity allocation, tariffs, balancing rules, interoperability and data exchange rules, along with a Guideline on congestion management.
- Capacity Allocation: ensures auctioning of standard capacity products across the EU. The allocation rules foresee bundling of pipeline capacities at both sides of a border and selling them as a single product, thus simplifying trades between neighbouring systems.
- Harmonised Transmission Tariffs: provides transparent and harmonised measures for the charging methodologies, revenue recovery, reserve and payable price across the EU. These rules facilitate competition and promote the efficient use and development of the gas transmission network.
- Balancing Rules: market-based balancing rules financially incentivise network users to balance their positions with short-term products. In doing so, balancing rules contribute to the creation and development of short-term gas wholesale markets in the EU.
- Interoperability and Data Exchange Rules: create operational, technical, communication and business rules for the proper operation and interoperability of gas transmission systems.
- Congestion Guidelines: facilitate the efficient use and maximisation of capacities in the gas transmission networks.
Why are the Network Codes important?ACER and ENTSOG are responsible for jointly drafting the Network Codes, which are adopted by the European Commission through comitology procedure as binding regulations. The European Commission is also in charge of developing specific Guidelines, after consultation with ACER and ENTSOG. The Network Codes' and Guidelines' implementation takes place nationally, while the Agency offers guidance and monitors the effectiveness of the implemented rules at European level. ACER occasionally takes individual decisions in case of disagreement between NRAs on a cross-border issue, to ensure a consistent application of the legislation.
What is the role of ACER?Find out more:Related DocumentsDecarbonisation of Gas
Currently, gaseous fuels used in the European Union are dominated by natural gas, a fuel of fossil origin. Natural gas is composed mostly of methane and is consequently associated with greenhouse gas emissions of carbon dioxide when the natural gas is used as fuel or as methane when the natural gas is produced, processed, transported and used.
Decarbonisation of gas can be achieved by different ways and means. In other words, decarbonisation entails different ways by which the greenhouse gas emissions associated with the life cycle of natural gas from its source to the end user can be avoided, eradicated, or mitigated.
On 15 December 2021, the European Commission published its hydrogen and decarbonised gas market legislative proposals. See the ACER-CEER Position Paper on Key Regulatory Requirements to Achieve Gas Decarbonisation (20 December 2021).
The current situationDocumentsOne way to decarbonise natural gas is to find ways to produce methane from renewable resources, such as biomass or natural waste. The resulting fuel is typically biogas (a mixture of methane and other gases) or biomethane (resulting from the separation of methane from the other biogas components).
Another way to decarbonise is to replace the natural gas with a sustainably produced non-methane one. Hydrogen produced via water electrolysis with the help of electricity from renewable resources is an example.
A third way is capturing the carbon contained in the natural gas, either before its use (pre-combustion, for example by converting it in a mixture of hydrogen and carbon dioxide destined for storage) or post-combustion, for instance by capturing the carbon dioxide and placing it in long-term geological storage.
There are other possible ways and means to decarbonise gas apart from the examples above. Methane emissions can be eradicated or minimised by applying a host of common sense practices, such as preventing venting during the exploration and production of natural gas, prohibiting flaring (especially when natural gas is produced as “associated gas” along with liquid hydrocarbons), avoiding fugitive emissions from valves and compressor stations, and making sure that burning is not incomplete.
Many of these “common sense” approaches apply not only to natural gas, but also to methane-containing decarbonised gases. It is therefore important to develop and deploy the relevant regulatory tools and methods for all methane-containing gases, decarbonised or not.
Decarbonised gases are only produced and used in the European Union on a minor scale, with the bulk being biogas and biomethane. Besides, most of the natural gas is imported (ca. 80%).
The ramping up of gas decarbonisation poses thus numerous challenges, ranging from assuring that the field is level for all available technology options and pathways, to supporting innovation by the right regulation, to monitoring, reporting and verifying greenhouse gas emissions across the entire international gas supply chain, to properly defining “green gases”, to making sure that competition is fair and market integration works.
Across this broad range of issues, ACER is committed to fostering the decarbonisation of the gas sector, by tackling different aspects in its regulatory tasks.
How to decarbonise?The decarbonisation journeyFind out more: