ACER finds serious shortcomings in ENTSO-E’ s electricity network plans – underlining the need for current TEN-E reforms to strengthen independent project assessments

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ACER finds serious shortcomings in ENTSO-E’ s electricity network plans – underlining the need for current TEN-E reforms to strengthen independent project assessments

What’s the ACER Opinion on ENTSO-E’s draft electricity 2020 network plan about?

​​Every 2 years, ACER provides an opinion on the draft grid plans (called Ten-Year Network Development Plans or TYNDPs) proposed by the network operators.

In its Opinions on the draft 2020 plans, ACER finds that the electricity and gas plans (developed by ENTSO-E and ENTSOG respectively) do not sufficiently contribute to the efficient market due to several shortcomings. With respect to electricity, in ACER's view:​

  • The TYNDP core building blocks such as scenarios development, infrastructure needs identification and cost-benefit analysis (CBA) implementation need to be improved. There are also shortcomings in public consultations on key elements of the methodologies used for the assessment of the energy projects being proposed by network operators.

  • A number of shortcomings could be remedied by legislators in the current TEN-E reforms by strengthening the independent assessment of projects and the regulatory oversight of network operators. ACER has previously pointed to risks of lack of neutrality of the European Network of Transmission System Operators (ENTSOs) and the need for step changes in TEN-E governance to avoid conflict of interests while ensuring transparency.

See also the ACER Opinion on the ENTSOG gas network plan​.​

Shortcomings could be remedied by improving the TEN-E Regulation

The EU framework for energy infrastructure needs to be robust for cost-efficient cross-border projects which are best for the energy transition.

ACER believes that the shortcomings of the TYNDP process as can be remedied by improving the TEN-E investment framework in line with the European Green Deal. To this end, regulators (through ACER and CEER) issued two position papers, one in March 20​21 and one in June 202​​0 on how to improve the revision of TEN-E Regulation including on infrastructure development governance.

ACER has called on the European co-legislators to consider the regulators' proposals as a solution to promote a neutral technical assessment of infrastructure projects in line with the European Green Deal, avoiding risks of unjustified costs to European consumers.

For example, currently the transmission system operators (TSOs), through the European Network of Transmission System Operators (ENTSOs), develop the scenarios to assess projects in different futures. TSOs can be perceived as biased towards favouring more infrastructure as it is in their interest. The neutrality of scenarios and the credibility of the TYNDP process can thus be compromised. To safeguard neutrality, regulators have proposed the introduction of ACER framework guidelines for TYNDP scenarios for the ENTSOs to follow. This has been taken up in the European Commission's legislative proposals but should be further strengthened and streamlined, as suggested by regulators.

Europe's energy regulators have pointed to the need for strengthened regulatory scrutiny over the ENTSO's to safeguard the public interest, for ACER to be given the powers to approve the methodologies for the Cost-Benefit Analysis (CBAs) and to issue binding guidelines to the ENTSOs for the TYNDP development.

What are ACER's key findings of the 2020 draft electricity TYNDP?

ACER has issued two Opinions on the European Network of Transmission System Operators for Electricity (ENTSO-E) TYNDP 2020, one on methodological aspects of the electricity TYNDP 2020 and one on the TYNDP projects.

The ACER Opinions are addressed to ENTSO-E, the European Commission, the European Parliament and the Council.

What are the key improvements in the 2020 draft electricity TYNDP?

The ACER Opinions acknowledge that the TYNDP process is complex and resource intensive, and needs to be carried out within a two-year timeframe. For the elec​tricity TYNDP, ACER welcomes a number of improvements for instance in the so-called Inclusion Guidelines, the data collection process, the needs identification, and the transparency of the CBA assessment.

What are the key shortcomings of the 2020 draft electricity TYNDP?

ACER's opinion notes limited improvements and evolution of the draft plan in comparison to previous TYNDP and identifies 4 main shortcomings:

  1. Delays of scenario development process and lack of data release which compromised the integrity of the TYNDP.

  2. Unbalanced CBA due to the missing, non-traceable Current Trends scenario.

  3. Lack of CBA analysis after the study year 2030.

  4. Poor and insufficient consultations of the scenarios methodology and of the needs methodology.

​​In ACER's opinion the draft electricity TYNDP 2020 does not sufficiently contribute to the objective of efficient functioning of the market.

What does ACER recommend for improving future electricity TYNDPs?

ACER encourages the ENTSOs to address the remaining shortcomings and stands ready to provide guidance or clarifications where needed. ACER proposes several recommendations to ENTSO-E in pursuit of an efficient, further integrated and transparent network planning to serve European consumers and Europe's decarbonisation and sector integration ambitions:

For the Final Electricity TYNDP 2020

  1. Provide the storyline and full data for the missing Current Trends scenario.

  2. Publish the baseline capacities per border as used in the starting grid for the needs exercise and in the reference grids for the CBA calculations.

  3. Include a Benefit / Cost ratio and Net Present Value calculation for all projects for each of the four scenarios.

For the Electricity TYNDP 2022 and beyond

  1. Restructure the scenario development process in order to be completed by December of the year before the TYNDP.

  2. Involve relevant stakeholders and experts in the development of scenario assumptions.

  3. Ensure transparency of scenario development and availability of scenario data. All scenarios should be used in the needs exercise and the CBA analysis in a balanced way, using the premise of economic growth.

  4. Early and substantial consultation of the needs methodology (including important parameters like the horizons to be studied, the zones modelling, the climatic years to be used).

  5. Define an appropriate starting network for the needs identification.

  6. Duly implement the provisions of the TYNDP Inclusion Guidelines - non-compliant projects should be excluded.

  7. Consider the impact of the 70% minimum interconnection capacity target in the modelling of the power system, where relevant.

  8. Transfer capacities should be calculated for all projects and with more granularity and transparency.

  9. Consult the main elements of the TYNDP CBA (e.g. study horizons, criteria for the construction of the reference grid, scope of the CBA) before the inclusion of projects in the future TYNDP.

  10. Build the reference grid considered for the CBA analysis, according to the Agency's recommendations.

  11. ENTSO-E should extend the study horizons for which a CBA analysis is conducted for the TYNDP 2022 at least to one study year after 2030 (e.g. 2035 or 2040).

What is the TYNDP?

The main objectives of the TYNDP are to:​

  • identify investment gaps (including cross border capacities

  • contribute to a sufficient and non-discriminatory level of cross-border interconnections, the effective competition and the efficient functioning of the market, and

  • ensure a greater transparency of the European electricity transmission network.

​The TYNDP builds on national investment plans prepared by the transmission system operators (TSOs) and takes into account the regional investment plans, published every two years.

Projects of Common Interest (PCIs) are selected from the TYNDP via a separate process led by the European Commission. The TYNDP should provide essential and comprehensive information for the selection of PCIs, in particular through complete, monetised, and reliable cost-benefit analysis (CBA) and assessment of projects.

What is the role of ACER and its overall assessment?

ACER issues an opinion on the draft network plan developed by network operators taking into account the objectives of non-discrimination, effective competition, and the efficient and secure functioning of the internal electricity market.