kom (2018) 0438 - Ingen titel

Europaudvalget 2018
KOM (2018) 0438
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EUROPEAN

COMMISSION

Brussels, 6.6.2018

SWD(2018) 312 final

COMMISSION STAFF WORKING DOCUMENT

IMPACT ASSESSMENT

Accompanying the document

Proposal for a Regulation of the European Parliament and the Council

establishing the Connecting Europe Facility and repealing Regulations (EU)

No 1316/2013 and (EU) No 283/2014

{COM(2018) 438 final} - {SEC(2018) 292 final} - {SWD(2018) 313 final}

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Table of contents

INTRODUCTION: POLITICAL AND LEGAL CONTEXT ............................................................... 3

1.1

1.2

1.3

Scope and context .............................................................................................. 3

Lessons learned from previous programmes ..................................................... 7

Results from the consultation activities ........................................................... 10

Challenges for the programmes of the next MFF ............................................ 11

Objectives of the programmes for the next MFF ............................................ 25

The core priorities remain focused on the trans-European networks .............. 28

The scope of intervention in the digital sector is redefined in

complementarity with the new Digital Europe Programme and with

the centralisation of all financial instruments under InvestEU ....................... 30

The scope of intervention in the energy sector is extended to targeted

cross-border cooperation in the field of renewable energy under

specific circumstances ..................................................................................... 31

Changes in the programme delivery according to the Commission's

global simplification measures ........................................................................ 33

Direct management of CEF and its benefits .................................................... 34

Proposed changes in the programme management by the parent DGs

and the Agency ................................................................................................ 35

THE OBJECTIVES ............................................................................................................................ 11

2.1

2.2

PROGRAMME STRUCTURE AND PRIORITIES ........................................................................... 27

3.1

3.2

3.3

DELIVERY MECHANISMS OF THE INTENDED FUNDING ...................................................... 33

4.1

4.2

4.3

HOW WILL PERFORMANCE BE MONITORED AND EVALUATED?....................................... 42

ANNEX 1: PROCEDURAL INFORMATION ............................................................................................ 45

ANNEX 2: STAKEHOLDER CONSULTATION....................................................................................... 47

ANNEX 3: COMPREHENSIVE ASSESSMENT OF THE EXTENSION OF SCOPE OF THE

ENERGY WINDOW TOWARDS TARGETED CROSS-BORDER COOPERATION IN

RENEWABLES .................................................................................................................................. 64

ANNEX 4: FURTHER BACKGROUND REGARDING THE SCOPE OF CEF DIGITAL ...................... 83

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Glossary

Term or acronym

CEF

EEPR

EFSI

EIB

ERDF

ERTMS

ESIF

eTEN

INEA

MFF

PCIs

RES

SESAR

TEN

TEN-E

TEN-T

Meaning or definition

Connecting Europe Facility

European Energy Programme for Recovery (EEPR)

European Fund for Strategic Investments

European Investment Bank

European Bank for Reconstruction and Development

European Rail Traffic Management System

European Structural and Investment Funds

Trans-European Telecommunications Networks

Innovation and Networks Executive Agency

Multiannual Financial Framework

Projects of Common Interest

Renewables

Single European Sky ATM Research

Trans-European Networks

Trans-European Energy Networks

Trans-European Transport Network

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1 I

NTRODUCTION

: P

OLITICAL AND LEGAL CONTEXT

"State-of-the-art

connectivity of digital, energy and transport infrastructure is key to

Europe’s territorial, social, and economic

cohesion."

1.1

Scope and context

The Connecting Europe Facility

(CEF) is a common, centrally-managed funding

programme for transport, energy and telecommunications infrastructures, with an

available budget of EUR 30.4 billion for the years 2014 to 2020. It was established as

part of the Europe 2020 strategy for smart,

sustainable and inclusive growth and the EU’s

‘20-20-20’ objectives in the area of energy and climate policy.

On 2 May 2018, the European Commission adopted its proposals for a new Multiannual

Financial Framework (MFF) for 2021-2027. Under these proposals, the Connecting

Europe Facility programme will have a budget of EUR 42,265,000,000 over this period.

This impact assessment report reflects the decisions of the MFF proposals and focuses on

the changes and policy choices which are specific to this instrument.

Based on the respective sectoral guidelines

, CEF supports the development of trans-

European networks (TEN)

, with the objective of improving cohesion in the internal

market and the EU’s competitiveness in the global market. The general objective of

CEF

is to foster implementation of projects contributing to the completion of the TEN. This is

reflected in the priorities laid down in the guidelines for the sectors of transport and

energy. CEF addresses market failures, focuses on projects of high European added value

and helps leverage further investment from the private sector.

As the scope of intervention in the digital component of CEF has changed significantly,

it is necessary to repeal the sectoral guidelines for telecommunications and incorporate

the provisions defining and prioritising projects of common interest in the area of digital

connectivity - which would have been the substance of the revised digital guidelines -

into the CEF Regulation. This was done in order ensure

a coherent and comprehensive

view of its scope, of the funding instruments and priorities proposed for the next multi-

annual financial framework, and, conversely, to avoid overlaps and contradictory

legislation.

As outlined in the Communication on the budget for Europe 2020

, the Commission

considered that "while

the market can and should deliver the bulk of the necessary

investments, there is a need to address market failure

–

to fill persistent gaps, remove

bottlenecks and ensure adequate cross-border connections. However, experience shows

that national budgets will never give sufficiently high priority to multi-country, cross-

Communication from the Commission "A new, modern Multiannual Financial Framework for a European Union that

delivers efficiently on its priorities post-2020" COM(2018)98

–

14.2.2018

Regulation (EU) No 1316/2013 of the European Parliament and of the Council of 11 December 2013.

Regulation (EU) No 1315/2013 of the European Parliament and of the Council of 11 December 2013 on Union

guidelines for the development of the trans-European transport network, Regulation (EU) No 347/2013 of the

European Parliament and of the Council of 17 April 2013 on guidelines for trans-European energy infrastructure, and

Regulation(EU) No 283/2014.of the European Parliament and of the Council on guidelines for trans-European

networks in the area of telecommunications, to be repealed by the new CEF Regulation.

Articles 170-174 of the Treaty on the Functioning of the European Union (TFEU).

Communication from the Commission to the European Parliament, the Council, the European economic and social

Committee and the Committee of the regions: A Budget for Europe 2020, European Commission, 29 June 2011.

kom (2018) 0438 - Ingen titel

border investments to equip the Single Market with the infrastructure it needs. This is

one more example of the added value of the EU budget. It can secure funding for the

pan-European projects that connect the centre and the periphery to the benefit of all.

Therefore, the Commission has decided to propose the creation of a Connecting Europe

Facility to accelerate the infrastructure development that the

EU needs.”

Figure 1: Needs, priorities and CEF support

Investments

needs in

transport,

energy, ICT

Priorities

defined in

the 3

sectorial

guidelines

investment

priorities

Market

and

national

financing

EFSI

EU co-

financed

projects

Market

failures

CEF ESIF

A mid-term evaluation

of the current programme was carried out in 2017. It indicated

that CEF is overall on track in its contribution to meeting the policy objectives of the

TENs and is effective in supporting projects with high EU added value. CEF triggered

the development of projects that Member States had failed to enable with their own

financial means. In some areas however, the effectiveness could still be improved. This

would require a number of improvements in the financing of the TENs and, where

appropriate the European Structural and Investment Funds

(ESIF), with a view to

preparing a successor investment instrument post-2020. The financing framework of the

TENs must take into account the impact of new initiatives such as the European Fund for

Strategic Investments (EFSI)

as well as the creation of the single guarantee fund “Invest

EU”. The framework must also fully align with the current policy priorities of the

Juncker Commission as well as long-term objectives such as the Paris Agreement

commitments with more emphasis on digitalization, decarbonisation, (cyber)security and

green industrial leadership. In this context, an extension of scope to integrate renewables

into cross-border cooperation involving at least two Member States is considered as an

additional element in the CEF-energy window. This extension is designed to make use of

the cost-effective renewable energy potential across the EU by stimulating

regional/cross-border cooperation, sector integration and enabling the EU to meet its

COM(2018)66

Including European Regional and Development Fund (ERDF) and the Cohesion Fund (CF)

In 2015, the adoption of the Paris Agreement by the 21st session of the Conference of the Parties (COP21) to the UN

Framework Convention on Climate Change committed the EU and its Member States to a reduction in domestic

greenhouse gas (GHG) emissions of at least 40 % by 2030 and by 80 to 95 % by 2050 compared with 1990 levels.

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collective 2030 target. The scope of intervention of CEF Digital is changed in the same

context, in order to ensure a closer alignment with the Union's strategic connectivity

objectives, and a stronger focus on the core overall objective of the programme, allowing

it to deliver on the infrastructure necessary for the digital transformation of the

economy

Moreover, in alignment with the cross cutting objectives of the new MFF, there is a need

to explore ways to incorporate in the future programme simplification, flexibility,

synergies and coherence with other EU programmes. Of paramount importance is the

need to reflect upon the considerations put forward in the Commission's reflection paper

on the EU's finances

which highlights CEF as a directly-managed EU programme

supporting major EU infrastructures with high EU added value, contributing in making

the EU visible and recognisable in the daily lives of its citizens. The paper also invites

reflection on improvements to strengthen the performance and impact of the programme,

in particular by avoiding overlaps, combining instruments and ensuring complementarity

and simplification.

In this spirit, the design of the successor CEF programme has to well

address any potential overlaps and

maximise synergies with the different EU instruments

and programmes such as EFSI/InvestEU, the European Structural and Investment Funds

(ESIF), Horizon Europe and the envisaged Digital Europe Programme.

The European Commission jointly with the Estonian Presidency contributed to this

reflection process

holding in the margins of the Informal Council in Tallinn in

November 2017 a joint session of transport and energy ministers, looking into the

achievements and the future of CEF as well as its priorities post-2020. The session

highlighted the need to build in the next MFF on the success of CEF as the key tool for

promoting infrastructure development and a deeper integration of the EU. The outcome

of discussions were reflected in formal Council Conclusions on TEN-T and CEF

adopted by unanimity in December 2017, which emphasised the efficient management of

the CEF budget and called for the reinforcement of CEF as the strategic EU investment

instrument for the realisation of the TENs.

While completion of electricity network infrastructure remains the priority to achieve the

development of renewables, integrating cross-border cooperation on renewables reflects

the more Europeanized approach adopted as part of the Clean Energy for all Europeans

Package with a collective responsibility to reach at least 27 % renewables in 2030, the

changed policy context and the amendments from both legislators calling on the

Commission to enable and support regional cooperation in the currently negotiated

review of the Renewables Directive (for more details cf. chapter 3.3. Annex 3). It will

also contribute to making better use of synergies, align with the development of the

meshed grid under current energy priority corridors and facilitate sector coupling e.g.

between power and mobility.

A first class digital infrastructure is also a clear political priority, not only for the

Commission but also for many Member States. In the wake of the Tallinn Digital

Summit of 29 September 2017, the European Council has, in its conclusions of the

October 2017 meeting, formally

declared that “to successfully build a Digital Europe, the

These changes, as well as the ones resulting from the realignment of the instruments in the context of the coherence

of the overall MFF package, are discussed in detail below as well as in Annex 4.

COM(2017) 358 of 28 June 2017

http://data.consilium.europa.eu/doc/document/ST-15053-2017-INIT/en/pdf

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EU needs in particular […] a first rate infrastructure and communications network: this

requires cooperation at the EU level, inter alia with the aim of achieving world-class very

high-speed

fixed and mobile networks (5G) all across the EU […]” (EUCO 14/17).

In its report on the next MFF: "Preparing the Parliament’s position on the MFF post-

2020"

, the European Parliament:

"supports reinforcing the Connecting Europe Facility […];

[…]

Stresses that an updated and more effective CEF programme should cover

all modes of transport, including road and rail infrastructure, as well as inland

waterways; considers that is should prioritise greater links between

comprehensive networks and modes of transport that contribute to reducing CO2

emissions, and focus on interconnections and the completion of the network in

peripheral areas; reiterates the importance of enhancing interoperability through

the European Railway Traffic Management System and enabling the full use of

the Single European Sky initiative; calls for the completion of the European

digital air traffic management system;

[…] stresses that CEF Telecom should continue to support Digital Service

Infrastructures and high-speed broadband networks by enabling their

accessibility, including in remote regions and rural areas, and by improving

digital literacy, interconnectivity and interoperability;

[…] calls […] for continuous support for investments ensuring the diversification

of energy sources and routes, increasing energy security and energy

independence, and enhancing energy efficiency and the use of renewable energy,

including by CEF Energy;"

With regards to complementarity with related programmes to CEF, the Parliament called

for the Commission to implement and further facilitate greater synergies and

complementarities between the different EU funds, including cohesion policy, FP9 and

EFSI. The Parliament also asked for a thorough climate mainstreaming and underlined

that the EU should not finance projects and investments that are contrary to the

achievement of EU climate goals.

On the basis of the CEF mid-term evaluation and stakeholder consultation including the

Open Public Consultation on EU funds in the area of strategic infrastructure, the

envisaged scope of this impact assessment relates to identifying the main challenges to be

addressed by the future CEF programme 2021-2027 with a focus on the key issue-areas

requiring improvement compared to the current CEF programme. Stemming from this

impact assessment will be the overall general and specific objectives of the future

programme and a programme structure and associated delivery mechanisms that

reinforce CEF for the purpose of the achievement of the EU policy objectives in the

sectors concerned.

This impact assessment satisfies the requirements of the Financial Regulation in respect

of preparing an ex-ante evaluation.

European Parliament resolution of 14 March 2018 on the next MFF: Preparing the Parliament’s position

on the MFF

post-2020 (2017/2052(INI))

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1.2

Lessons learned from previous programmes

Mid-Term Evaluation of CEF

In accordance with the CEF Regulation

, the Commission, in cooperation with the

Member States and the beneficiaries concerned, was required to present a report on the

mid-term evaluation of the CEF to the European Parliament and the Council. This

report

and its accompanying Commission staff working document (SWD) was adopted

by the Commission on 13 February 2018. The evaluation assessed the programme’s

overall performance in light of its general and sectoral objectives, as well as compared to

what has been achieved as a result of national or EU action. In line with the

Commission’s Better Regulation Guidelines, the evaluation was carried out according to

five criteria: effectiveness, efficiency, relevance, coherence and EU added value.

Table 1: Summary financial information as of March 2018 (EUR million)

CEF Budget

CEF Funding (Grants)

Sector

Total CEF

Budget

(Financial

programming

Draft Budget

2019)

out of

which total

CEF

Budget

allocated to

grants

Total reserved by

an annual work

programme or an

amended multi-

annual work

programme

(% of CEF

budget allocated

to grant)

out of which

total Actual

CEF Funding

for the awarded

grants

(% of CEF

budget allocated

to grant)

Total effective

budgetary

commitment for

grants

(% Actual CEF

funding)

Total effective

payment for

grants

(% Actual

CEF funding)

Transport

Energy

Telecom

Synergy

Total

24.138

4.752

1.043

23.549

4.574

579

23,540 (100%)

3,406 (74%)

325 (56%)

22,293 (95%)

2,461 (58%)

176 (30%)

22 (55%)

24,952 (87%)

8,877 (40%)

1,201 (49%)

155 (88%)

22 (100%)

10,255 (41%)

3,608 (16%)

259 (11%)

71 (40%)

8 (40%)

3,946 (16%)

29.933

28.724

27,311 (95%)

The grants selected under the Multi-annual Work Programmes for CEF Transport and

CEF Energy are managed through annual instalments over the period 2014-2020. The

legal commitment is broken down into one or several budgetary commitments depending

on the progress of the action. The total budgetary commitment is therefore lower than the

Article 27 of Regulation (EU) No 1316/2013 of the European Parliament and of the Council of 11 December 2013.

COM(2018)65

The synergy call funding came from both the Transport and Energy budgets.

Not taking into account the credits allocated to PSAs, Financial Instruments and procurements (including IT costs for

TENtec). In addition, the total CEF Budget for grant has been supplemented with internal assigned revenues for EUR

255 million (mostly allocated to the CEF Transport).

Taking into account funding reductions due to amendments, closures and terminations

The indicative amount for the multi-sectorial call for proposal (energy and transport) was EUR 40 million but the

effective demand was limited and only EUR 22 million was awarded in grants

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total amount allocated via grant agreements (i.e. the total of the budgetary commitment

represents 41% of the total amount of the grants allocated). So far, 16% of the total

amount allocated to the selected grants has been paid through pre-financings and interim

payment accounts. This information is broken down per sector in the above table.

Overall, the conclusions of the Mid-Term Evaluation of CEF were as follows:

"The evaluation illustrated that after the first three and a half years of CEF

implementation, the programme is on track, although it is much too early to measure

results given that the programme implementation is still at an early stage. Moreover, the

performance framework provided in the Regulation has proven lacking well defined or

robust indicators. With this reservation in mind, the evaluation showed that:



CEF is an effective and targeted instrument for investment in trans-European

infrastructure (TEN) in transport, energy and the digital sector. Since 2014, it has

invested EUR 25 billion, which has resulted in approximately EUR 50 billion of

overall infrastructure investment in the EU. CEF contributes to the Commission’s

priorities on jobs, growth and investment, the internal market, Energy Union and

climate, and the Digital Single Market. In so doing, it is strengthening the

competitiveness of the EU economy.



CEF brings high European added value for all Member States by supporting

connectivity projects with a cross-border dimension. Most funding is awarded to

projects bridging missing links and removing bottlenecks, with the aim of ensuring

the proper functioning of the EU internal market and territorial cohesion among

Member States in the transport, energy and digital sectors. Projects in energy also

provide security of supply and are key for the cost-effective decarbonisation of the

economy. CEF is also instrumental in the deployment of EU-wide new systems in

traffic management and safety (e.g. SESAR for aviation, ERTMS for railways), high-

performance electricity lines and smart grids essential for the rapid intake of

renewable non-carbon energy sources, and in the roll-out of broadband and

interconnected Digital Services (such as Open Data, e-Health, e-Procurement,

eIdentification and eSignature).



The direct management of CEF grants has proved very efficient, with a strong project

pipeline and a competitive selection process, a focus on EU policy objectives,

coordinated implementation and the full involvement of Member States. The INEA

executive agency has a very good track record on the financial management of CEF

and on optimising the budget, particularly thanks to its flexibility in quickly re-

directing money unspent by certain actions to financing new ones.



For the first time, a share of the cohesion budget (EUR 11.3 billion for transport)

was executed under direct management within the CEF framework. 100 % of the

envelope was allocated during the first half of the programme period, almost

exclusively on sustainable transport modes. Targeted technical assistance, lower

administrative costs for Member States, clear funding priorities and a solid project

pipeline stemming from the continuity of projects and studies formerly supported by

the TEN-T Programme or by the Cohesion Policy instruments contributed to the fast

allocation of funds.

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

CEF has continued to use and develop innovative financial instruments. However,

their deployment has been limited due to the new possibilities offered by EFSI

. The

use of the CEF financial instruments is expected to take up during the second half of

the programme when complementarity between the CEF specific financial

instruments and EFSI will have been ensured. The Connecting Europe Broadband

Fund, building on contributions from CEF and EFSI, is expected to become

operational in 2018 and fund the rollout of very high capacity networks in

underserved areas, with an important leverage effect.



Moreover, a very positive first experience of blending

grants with financial

instruments was carried out in 2017 in transport, with EUR 2.2 billion funding

requested for a call with an indicative budget of EUR 1 billion, enabling the use of

grants to maximise the leverage of private or public funds.



CEF spending in transport and energy is a major contributor to the EU’s target of at

least 20 % of the total EU budget to be dedicated to climate action-related spending.

In the area of energy more than 50% of the CEF energy budget

was allocated to

electricity transmission and smart grids therefore contributing to the energy

transition.



In the Telecom sector, the dual focus of CEF on digital cross border services of

public interest and communication and computing infrastructure has shown that the

programme has an important impact on achieving the EU digital single market goals,

enabling citizens and businesses to access high quality digital services across

Europe. It has helped develop and implement common policies to address societal

challenges including the digital transformation of healthcare, cybersecurity and

digitisation of governments. However, due to the limited resources CEF Telecom

could only support the very first steps towards a full cross border digital

infrastructure in areas of public interest. Given the limited envelope allocated for

broadband under CEF vis-à-vis the size of the investment gap, it was necessary to

implement it in an innovative way and to aim at maximising leverage in order to

ensure effectiveness. However, due to the complex set up of the dedicated financial

instruments, the investments on the ground will only materialise at a late stage in the

implementation of the programme.



CEF has also tested cross-sectoral synergies, but has been limited by constraints in

the current legal/budgetary framework. The sectoral policy guidelines and the CEF

instrument would need to be made more flexible to facilitate synergies and be more

responsive to new technological developments and priorities such as digitalisation,

while accelerating decarbonisation and addressing common societal challenges such

as cybersecurity.



The completion of the TENs defined in the EU policy priorities will still require

massive investments, part of which will depend on continued EU support. The size of

CEF currently makes it possible to address only some of the identified market

In particular projects initially in the pipeline for CEF Debt Instrument got ultimately financed under EFSI guarantee

Commission Implementing Decision C(2017) 164 ‘EU grants from the Connecting Europe Facility –

Transport

Sector (General envelope) combined with financing from the European Fund for Strategic Investments, or the

European Investment Bank, or National Promotional Banks, or private sector investors’

EUR 1.25bn out of the EUR 2.46bn awarded in grants in the CEF energy calls between 2014 and 2017

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failures in all three sectors. Therefore, potential exists for unlocking further public

and private investment if additional EU budget was made available to address

market failures."

In addition, concerning the delivery, some additional points of improvement were

identified regarding the reduction of administrative requirements for small grants, and a

certain lack of flexibility over time as regards the priorities and scope of intervention, for

instance to accommodate new policy priorities or to reflect technological evolutions.

Furthermore, various lessons learnt, which - due to the timing of the operational launch

of the instruments - could not be incorporated in the Mid-Term Evaluation. They have

nevertheless been reflected in the proposals for the new CEF Digital, in particular in the

change of scope and in the implementation mechanisms. The lack of adequate funding, as

well as the limitation to financial instruments at the onset of the implementation of the

current CEF, where clear impediments to CEF having a strong impact in the area of

broadband. Most importantly, the experience of setting up the financial instrument in the

field of broadband, as well as the monitoring of the broadband investments supported by

other EU programmes, clearly underlined that there are gaps and missing links in the

types of projects supported, which constitute barriers to the completion of the Digital

Single Market. These gaps and missing links, as well as the proposed refocus, are further

described in section 2.1 below. Finally, new strategic objectives in the digital area have

been defined in the Gigabit Society Strategy Communication, which have to be reflected

in the new scope of CEF Digital, now focusing only on infrastructure.

1.3

Results from the consultation activities

OPC for the CEF Mid Term Evaluation and OPC on strategic infrastructure in the next MFF

Overall, stakeholders reiterated their support for the CEF programme and highlighted the

key role it plays in contributing to the EU’s objectives in areas such as the completion of

the TENs, promoting economic growth and jobs across the EU. The transition to a low

carbon system was named as the most important challenge for the future CEF in both the

energy and transport areas by respectively 94 and 98 % of respondents. Stakeholders

encouraged additional flexibilities in the new programme to encourage further synergies

across the three sectors.

Respondents in the transport sector stressed the importance of CEF in facilitating cross-

border projects as well as removing bottlenecks and missing links. Stakeholders called

for an increased budget in order to accelerate the decarbonisation and digitalisation of the

transport sector while increasing connectivity across the EU.

The energy-related responses to a very large extent reaffirmed the important contribution

of CEF towards the completion of the trans-European energy infrastructure network and

by extension towards the fulfilment of the Energy Union targets.

The digital respondents highlight the central role of broadband connectivity as a catalyst

for the economic and social development across society and sectors. In order to increase

competitiveness of the EU, they call for increased investments into connectivity and 5G,

which would help improve economic performance, generate jobs in the EU and promote

a qualitative leap in the transition to a Digital Society.

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Stakeholders at the same time provided useful feedback on the areas that require further

improvement or development and this is detailed in the consultation report in Annex 2.

Specific consultations concerning renewable energy

The extension of scope towards cross-border projects in the field of renewable energy is

supported and justified by relevant findings of the REFIT-evaluation of the RES

Directive of 2016

. and the outcome of the specific expert stakeholder workshop on the

extension to cross-border renewables cooperation which took place on 5

March 2018 in

Brussels where stakeholders present (including 12 Member State governments)

overwhelmingly felt that EU action (including financial support) was necessary in order

to overcome the Member State's hesitance to engage in cross-border cooperation and/or

overcoming associated barriers

(for more details see annex 3)

Specific consultations concerning synergies between sectors

To reinforce synergies between the three sectors specific expert workshops were

organised. A workshop on the Internet of Energy was held on 26 February 2018 and on

30 January 2018 a workshop on Green-ICT.

2 T

BJECTIVES

2.1

Challenges for the programmes of the next MFF

Key features of the ongoing programme and the Baseline

CEF is the main funding tool contributing to the objectives set by the Treaty

as regards

the establishment of the TENs and which have been identified in the respective sectorial

guidelines. ESIF, the EIB, including through EFSI, and the Member States alone, or in

combination, make considerable contributions to the achievement of the objectives of the

TENs; however, they tend to focus on national and regional areas as opposed to the

European dimension. One additional challenge is that TENs are complex structures

developed in a cross-border context with associated regulatory hurdles to be addressed.

There are many EU actions that support the achievement of the TENs objectives. The

unique features of CEF however, such as direct management (including of the CEF

Cohesion envelope for transport); the "use it or lose it" principle; clear prioritisation and

deadlines; focus on cross-border and low-carbon infrastructures; flexibility to re-orientate

unused funds; capacity to develop synergies; capacity to blend with private finance;

targeted technical assistance and the full involvement of the Member States through the

respective Committees allow CEF to address these particularly complex challenges. CEF

is the only instrument of this scale at the EU level designed to specifically tackle the

market failures due to the cross-border nature.

As highlighted in the Reflection Paper on the Future of EU Finances,

CEF is steering

investments where the EU added-value is highest: on projects with a cross-border impact

and European-wide interoperable systems and services. Given the persistence of market

SWD(2016) 416 final

Article 170 TFEU

COM(2017) 358 of 28 June 2017

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failures for these types of projects as well as the significant investment needs that remain,

the continuity of the instrument is very relevant and indispensable after 2020 for the

achievement of the TENs. In addition, thanks to its efficient modus operandi and its

capacity to attract private finance, CEF is also a major contributor to the Investment Plan

for Europe and

EU policy objectives of the Juncker Commission.

An unchanged policy (the Baseline

), would see the continuation of the current CEF

approach in the next financial perspective, carrying on in the post-2020 period with the

same scope, delivery methods and budget (EUR 30.4 billion

Investments in the TEN-

T core transport network, the integration of the internal energy market, security of energy

supply, the transition to low-carbon and climate resilient economy and the digital single

market as currently possible would continue. However, without further refinement of

CEF, the main challenges identified in this impact assessment could not be addressed.

For example, the possibility to address the increased investment challenge of the

existing

and new emerging priorities, innovative projects and exploiting synergies and

sector coupling would be very limited, while overlaps with other EU funds/programmes

would persist.

The baseline scenario for CEF Digital would amount to quantitative and qualitative

shortcomings, both risking to jeopardise the completion of the Digital Single Market. In

terms of budget vis-à-vis the estimated investment gap, assuming that the same level of

public funding is dedicated to broadband investment through all the EU programs,

including CEF, ESIF, and InvestEU, and taking into account private investment

predictions, it is estimated that between 50 and 70 million households across the EU

would remain unconnected to high-capacity networks. More importantly, in the absence

of a change of scope of CEF Digital, digital projects of strategic importance for EU's

competitiveness would risk remaining unrealised, translating into significant untapped

potential in the Digital Single Market. Finally, in terms of the overall structure of the

CEF programme, failure to bring CEF digital budget to a more comparable level than that

of the two other sectors would mean failure to reflect the importance of digitalising the

European economy and, in particular, the other two sectors of CEF.

With respect to the qualitative shortcomings of CEF Telecom, and to the proposed

change of scope of CEF Digital, a review of the support for broadband by instruments in

the current programming period revealed that several types of digital projects of strategic

importance are underfunded or overlooked. Seamless connectivity networks, including

cross-border links and international connectivity networks have clearly been absent under

the existing EU schemes, including ESIF investments, since it was decided that

INTERREG 2014-2020 would not invest in digital networks and most other Operational

Programmes are based on (Member States') national core-to-periphery models. The

deployment of 5G corridors, by definition cross-border, would be clearly hampered if

This Impact Assessment uses as basis Baseline EU28 including the UK, because due to the nature of the CEF Calls

procedure there is no possibility to single out particular MS or attribute the average annual envelope between the

individual MS.

CEF support is attributed through competitive calls. It is therefore not possible to single out an envelope for the UK

and to define an EU 27 baseline. To date, grants awarded to beneficiaries established in the UK amount to EUR

430.8 million. Moreover, specifically for CEF-energy, the track record shows that UK related projects tend to be

commercially viable and therefore do not require subsidies for construction. They benefit from grants for preparatory

studies which are normally much less budget intensive than construction subsidies

E.g. there will be a step-change in the need for the reinforcement of the electricity transmission grid to be able to

support the decarbonisation processes

kom (2018) 0438 - Ingen titel

broadband support would continue under the same conditions as the current ones.

Moreover, various areas throughout the EU would remain uncovered, unless grant

support is extended. The experience of setting up the financial instrument dedicated to

broadband confirmed the importance of financial instruments in generating leverage for

broadband investments and dealing with problems of access to finance; however, it also

underlines the difficulty of steering private investments into market failure areas, due to a

mismatch between risks and expected returns. While in such cases, a low intensity grant,

possibly blended with a financial instrument, is sufficient to render a deployment

commercially viable, it is necessary to be able to provide such grant in order to ensure

that the project is implemented and that it generates a comprehensive coverage of the

area in question. In other words, a grant component is needed to ensure a stronger policy

steer of the intervention.

The main challenges and problems to be addressed by the future programme

The findings of the open public consultation on the future CEF programme and the CEF

mid-term evaluation show that there is scope to build on the momentum created with the

positive implementation of CEF in the period 2014-20. Further aligning CEF with the

current political priorities of the Commission, in particular digitalisation and

decarbonisation, can actually contribute to a strengthening of CEF delivery as more areas

for synergy may emerge. The incorporation of support for cross-border renewables

planning and deployment can be complementary to the development of the meshed grid

(=integrated development of electricity transmission and offshore sources infrastructure

(in the North Seas and the Baltic Sea) which is a complex endeavour. As with all

programmes of the MFF, the challenge to increase flexibility, coherence and synergies,

simplification and focus on performance needs to be addressed. In considering how CEF

could be improved, the following main challenges have been identified:

First challenge: completion of Trans-European Networks in transport, energy and digital

area

Europe's sustainable growth and competitiveness depend on efficient connectivity both

within and to the rest of the world. CEF is a key EU funding tool contributing to the

achievement of the objectives set by the Treaty as regards the establishment and

development of the Trans-European Networks. Other EU instruments complement this,

as the investment needs go far beyond interconnectors with the transition to a

decarbonised system having in particular a very strong decentralised dimension (see also

second challenge

. Achieving well-interconnected, interoperable and efficiently

managed transport, energy and digital infrastructures in Europe requires the ability to

plan and invest in a coordinated long-term approach at EU level.

In the post-2020 financial period, the continued development of high-performance

infrastructure connecting and integrating the Union and all its regions, in the transport,

energy and digital sectors will be crucial for strengthening the social, economic and

territorial cohesion of the Union and contributing to the creation of a single European

transport area, an EU Energy Union, and the Digital Single Market (DSM).

For example, only the investment needs for renewables over 2021-2030 to meet the at least 27 % target for 2030 in

Europe were estimated to be 240,000-400,000 million Euros and hence already higher than the TEN-E investment

needs indicated above. Estimates go even up to 600,000 million Euros in a study of 2017 for the ITRE Committee

that provided estimates for investments that ensure alignment with 2050 decarbonisation.

kom (2018) 0438 - Ingen titel

As illustrated in the table below, recent studies have estimated significant investment

needs required in order to fulfil the objectives of the TENs.

Table 2: Estimated investment needs related to the Trans-European Networks -

2021-2030 (EUR million)

TEN - Transport

TEN - Energy

TEN - Digital

Investment needs

550,000

- 1,500,000

178,670

500,000

For transport, the figures cover cross-border sections, bottlenecks and missing links on

the TEN-T core network, the large scale deployment of traffic management systems such

as SESAR and ERTMS and major new priorities such as alternative fuels, digitalisation,

and overall safety and security. Taking into account the TEN-T Comprehensive Network

and urban transport investment needs, this figure would amount to EUR 1.5 trillion. Over

the period 2021-2027, it is estimated that the total investments in the area covered by the

new programme (core network, parts of the comprehensive networks and additional

investments in decarbonisation and digitalisation of transport) would be close to EUR 1

trillion, while the new instrument would only target approx. 10% of the total, in order to

focus the intervention on where it brings clear EU added-value. In addition, important

support would also be needed through ESIF in order to match the investment needs,

notably as regards urban and territorial mobility

For energy, the figures cover infrastructure projects with cross-border relevance in

electricity, gas

and smart grids at transmission level. The detailed assessment of the

investment needs in each of the TEN-E priority corridors and areas (factoring in the

historical data on the average co-funding rate required within corridor) indicates that out

of EUR 11 billion EU support needed for TEN-E (2021-2027), more than 85% would be

required for electricity PCIs. It is expected that smart grid PCI projects alone will require

EUR 2bn in EU support in the next decade. This indeed confirms that a step change in

investments will be required in reinforcing the electricity grid (for higher absorption of

renewable generation), in electricity storages and grid smartening and therefore it is

expected that projects' technological innovation will become even more important driver

Based on a consultation of Member States carried out in June-July 2017 and relating to the Core Network and

Horizontal Priorities only. EU support to the Comprehensive Network (notably in Cohesion Member States) and

urban mobility is not included in the EUR 95 billion amount indicated in the table.

Based on the study "Investment needs in trans-European energy infrastructure up to 2030 and beyond", Ecofys, July

2017.

Connectivity for a Competitive Digital Single Market - Towards a European Gigabit Society - COM(2016)587 and

other studies. The figure includes both private and public investment needs to reach the targets set.

Specific attention will be given to the outermost regions connectivity needs and participation to the Trans-European

Transport Network as indicated in the Commission Communication of 24 October 2017 "The outermost regions of

the European Union: towards a new approach" (COM (2017) 623 final)

The recent Communication on strengthening Europe's energy networks (COM(2017) 718 of 23 November 2017)

recognises that the gas grid has become more resilient and nearly all Member States comply with the N-1 criterion

and already have access to two sources of gas. If the necessary commitment is ensured from Member States,

promoters, regulators and stakeholders, the remaining bottlenecks can be largely addressed by 2022/25 and Europe

should achieve a well interconnected and shock resilient gas grid.

kom (2018) 0438 - Ingen titel

behind the grant decisions

. It should be noted that the investment needs in the overall

energy sector associated with the transition to a low carbon system are much higher than

those reflected under the scope of TEN-energy which focuses on transmission

infrastructure with cross-border relevance. Significant investments will be required at

decentralised and local level (including for smart grids), in energy efficiency, renewables

etc.

For the digital sector, the figure illustrates investment needs to reach EU's connectivity

targets, i.e. gigabit connectivity for all main socio-economic drivers, high performance

5G connectivity

–in

particular uninterrupted 5G coverage of all major terrestrial paths

–

and access to at least 100Mbps for all European households. The combined investment

needed to meet the Gigabit Society connectivity objectives by 2025 has been estimated at

EUR 500 billion, for which an additional EUR 155 billion is required over and above a

simple continuation of the trend of current network investment and modernisation efforts.

An improved regulatory environment, as well as an increased exploitation of synergies,

are expected to reduce this investment gap. It should be noted indeed that important

synergies can be achieved between the deployment of 5G and of other (mostly fixed)

connectivity networks. A dense 5G network reaching all urban areas and major transport

paths

–

based on backhaul fibre to the 5G cells - will also benefit the deployment of

wider networks for connectivity of both households and socio-economic drivers located

in less densely populated area, e.g. by bringing the fibre network closer to homes as

domestic and enterprises’ needs and demand evolve. Nevertheless, a significant

infrastructure investment gap to reach the EU's objectives is expected to persist after

2020, spread throughout the entire territory of the EU. Given the size of the challenge,

EU support must be complementary, targeted and efficient, making the most of limited

public resources.

It is important to note that with regard to digital infrastructure, all projects supported

have cross-border characteristics and cross-border effects. Notably, the current legal base

for CEF Telecom does not distinguish between cross-border projects and projects

implemented entirely within one Member State. Due to the architecture and way of

functioning of Internet connectivity, any local deployment is part of a trans-European

digital network and has cross-border impact. Moreover, by addressing local connectivity

problems at the EU level, in a coordinated and timely manner, the scale and network

effects are maximised. Nevertheless, in view of the limited resources available and in

order to maintain the key features of the CEF programme, it is important to prioritise

digital investments on the projects that are considered to have most impact on the Digital

Single Market and the highest EU benefit. “Local is global": the current experience of the

Wifi4EU, of an otherwise purely local character as regards physical location, should

demonstrate, thanks to its foreseen roaming functionality, the mechanism to build a

network effect at EU level, underpinning the digital economy

Similar initiatives can be

replicated for socio-economic drivers, which are local but underpin e-health, e-

government, and enhanced digital skills. By their location and function, they should be at

the forefront of digital connectivity, driving the digitalisation of public services and

producing important socio-economic spillovers. Acting at EU level, due to scale and

timing produces an effect which could not be achieved at national or regional level and,

Only PCIs providing significant externalities such us innovation, security of supply or solidarity are eligible for

grants for works under CEF-energy. To date the innovativeness was the key driver behind grants amounting to at

least 25% of the overall granted amount.

kom (2018) 0438 - Ingen titel

moreover, avoids increasing territorial, social and economic discrepancies associated

with digital divides.

The revised scope CEF Digital programme is then aimed at ensuring a more effective

intervention in the sense of a stronger alignment with EU's strategic connectivity

objectives, including by selecting priority areas of intervention that are currently not

covered by public funding programs or that are best suited to be covered under CEF.

CEF has indeed a proven track record concerning the timely delivery of cross-border

deployments or of projects with strong cross-border effects, as well as the support to

projects that can be delivered with only small grant components, which also maximise

private participation to projects. This prioritisation, along with further eligibility criteria

making sure that the risk of market distortion is minimised, further described in Annex 4,

are reflected in the new CEF Regulation. Finally, it is of utmost importance that the

reinforced intervention in the area of digital connectivity is reflected also in the allocated

budget, in order to enable its effectiveness.

Compared to the overall investment needs, CEF will focus on a limited part relating to

public goods of European dimension that would not be realised at national, regional or

local level without EU support. More specifically, the programme will steer public and

private finance towards EU policy objectives, enabling action where the costs are borne

at national/local level and the benefits are tangible at European scale, and will accelerate

the shift to a low-carbon and digital economy, while contributing to economic, social and

territorial cohesion.

Without this targeted support, the possibility to achieve the EU policy objectives to

complete Trans-European Networks in transport

, energy and digital area would be

limited. Significant delays would occur and the completion of strategic projects would be

at risk. Projects already started would slow down or stall, leading to a partial loss of

benefits from previous investment and EU support.

This would notably be the case for the deployment of smart systems such as SESAR and

ERTMS and for major transport projects as illustrated in the recent Communication "

new, modern Multiannual Financial Framework for a European Union that delivers

efficiently on its priorities post-2020"

"Other

examples of the negative effects of delays in agreeing a new financial framework

include

Rail Baltica.

The project will build a

crucial railway link into the Baltic States

and should be completed by 2025/2027. The project must be able to launch the major

procurements it needs for construction in 2021. This is crucial for the completion of a

project that will help connect five million people in the Baltic States to the rest of

Europe. The high-speed rail link will cater at the same time for freight flows all the way

from Finland to Germany, the Benelux and the Adriatic.

The

Brenner base tunnel

is planned to be completed by 2027, with the rail engineering

works due to start under the next MFF. It is a crucial project to shift half of the 2.2

million trucks of the Brenner motorway to rail. This will cut down on pollution in the

precious valleys between Munich-Innsbruck and Verona.

The achievement of the TEN-T core network and its corridors is expected to generate additional EUR 4,500bn or

1.8% of GDP and 13 million additional job-years by 20302 (Delivering TEN-T, Facts & Figures,

https://ec.europa.eu/transport/sites/transport/files/delivering_ten_t.pdf, September 2017)

COM(2018)98, 14.2.2018

kom (2018) 0438 - Ingen titel

The

Fehmarn Belt between Denmark and Germany,

the

Evora-Merida railway link

that will finally connect Lisbon and Madrid,

the Lyon-Torino base tunnel

that will

connect the high-speed railway networks of France and Italy are also all due to be

completed by the end of the next Multiannual Financial Framework. "

A lack of EU support would also put at risk major energy cross-border interconnections,

including those necessary to reach the electricity interconnection targets, deployment of

electricity interconnectors which are crucial for integrating markets, enabling more

renewables in the system and benefiting from their different demand and renewable

supply portfolio, off-shore wind networks and smart grids, de-synchronisation of the

Baltic electricity grid, integrating all countries into a liquid and competitive energy

markets.

The connectivity targets as set in the Gigabit society, which are a pre-condition for a

functional Digital Single Market, would also not be reached without further targeted

support. In particular those projects with the strongest cross-border characteristics and

with the highest expected impact on the Digital Single Market, such as the deployment of

5G corridors and the digitalisation of energy and transport networks, would be impacted.

The viability of the anticipated next generation digital services, such as Internet of

Things services and applications that are expected to bring significant benefits across

various sectors and for society as a whole, will require uninterrupted cross-border

coverage with 5G networks, in particular in view of allowing users and objects to remain

connected while on the move. However, the cost sharing scenarios for 5G deployment

across these sectors remain unclear, and the perceived risks of commercial deployment in

some key areas are very high. Road corridors and train connections are expected to be

key areas for the first phase of new applications in the field of connected mobility and

therefore constitute vital cross-border projects for funding under this Programme. The

aim in to deliver "5G corridors", meaning full coverage with 5G systems of transport

path, road or railway, particular 5G systems, enabling the uninterrupted provision of

synergy digital services such as connected and automated mobility or similar smart

mobility services for railways. At a more general level, the absence of a realignment of

interventions for all programmes supporting broadband deployment, including ESIF and

InvestEU, would lead to a situation where many areas throughout the EU would remain

unconnected, with untapped potential for the digital economy but also for smart public

services.

Overall, a reduced CEF budget would require policy choices between the completion of

the TEN networks, the possibility to better address their evolution in relation with the

energy and digital transition, and to build

–up

significant synergies on emerging topics as

illustrated in the following second and third challenges.

Second challenge: the energy transition and technological developments in the transport,

energy and digital sectors

While CEF makes a strong contribution to climate change actions and decarbonisation of

infrastructures

, this is insufficient in view of a growing need to invest directly into

90% of CEF funding dedicated to transport supported green modes of transport, while approximately 48% of the

CEF electricity budget allocated so far has contributed to projects contributing directly to reduction of CO2

emissions (electricity projects; gas projects not taken into account)

kom (2018) 0438 - Ingen titel

rolling out of innovative technologies, notably in mobile equipment, for the

decarbonisation of the land and maritime transport in line with Europe’s

transition to

low-emission

and climate resilient mobility and EU commitments entered in the scope

of the Paris Agreement.

This requires the roll-out of infrastructure for alternative fuels,

as well as enhancing climate resilience during planning, design, construction and

operation of infrastructures. The challenge of transitioning to a low carbon and climate

resilient economy was the highest ranked issue in the public consultation for both the

transport and the energy part (with 98% and 94 % of respondents respectively).

The Alternative Fuels Infrastructure Directive

addresses the provision of common

standards on the internal market, the appropriate availability of infrastructure and

consumer information on the compatibility of fuels and vehicles. Based on this Directive,

Member States were requested to design policy frameworks for rolling-out publicly

available electric recharging points and natural gas filling stations, and optionally

hydrogen filling stations. In order to achieve mass acceptance and deployment of electric

vehicles, charging and maintenance infrastructure needs to become widely available

throughout Europe. While in the current CEF framework, a target of 5% of the CEF

Transport budget is dedicated to innovation in low carbon transport, and proved

successful in starting to deploy such infrastructures this will have to be scaled up

substantially in order to meet future needs. For instance, the Commission's proposal for

post-2020 CO2 targets for cars and vans

implies that a substantial share of the vehicle

fleet in 2030 will be electric (plugin hybrid or full electric). Similarly, in light of

technological advancements, digitalisation and innovation requires intensifying support.

In the energy sector, the recent Communication

on strengthening Europe's energy

network recognises that electricity,

where renewables will constitute half of the

electricity generation by 2030, will increasingly be driving the decarbonisation of sectors

so far dominated by fossil fuels, such as transport, industry and heating and cooling.

Therefore the focus will need to be on the reinforcement of the electricity transmission

and distribution grids, digitalisation and smartening of the grids and deployment of new

infrastructure solutions, particularly in the electricity storage area, and the impact of

self-consumption."

It is important to recognise that innovation is already one of the three

main drivers (externalities) which can justify CEF energy grants for works (within the

framework of the TEN-E guidelines). To date the energy envelope of CEF enabled

several important highly innovative projects such as SincroGrid, Biscay Bay HVDC

connection, gas deodorisation technology (these three totalling to EUR 0.629 billion, i.e.

more than 25% of the overall budget allocated to date). It is, however, clear that in view

of the investment challenge and the transformational (hence increasingly innovative,

first-of-the-kind

) character of the planned projects there is insufficient funding in the

market alone. Public budget support will be indispensable to facilitate and de-risk the

Communication from the Commission "A European Strategy for Low-Emission Mobility" COM(2016)501

In the case of transport for example, this is reflected in the 2011 White Paper. In addition, commitments of the

United Nations Climate Change Conference (COP 21) calls upon the achievement of 60% greenhouse emission

reduction target in the area of transport

Directive 2014/94/EU.

https://ec.europa.eu/clima/policies/transport/vehicles/proposal_en

Communication from the Commission COM(2017) 718 of 23 November 2017

http://eur-lex.europa.eu/legal-content/EN/TXT/?qid=1511977964680&uri=CELEX:52017DC0718

E.g. transformer station solutions required off-shore, which have unprecedented design

kom (2018) 0438 - Ingen titel

take-up of such innovation in the networks sector

and to enable system operators to

invest substantially higher volumes than they (both through their balance sheets and their

regulated asset bases) are used to, including on sector integration beyond energy. As

innovation will be necessary along the full value chain, the complementing enabling

instrument for cross-border projects in the field of renewable energy will promote

innovation aspects beyond the transmission network.

The extension to cover cross-border projects in the field of renewable energy happens

against a new political context of more Europeanisation of efforts in this area and the

increasing focus on renewables within existing intergovernmental groupings on energy

matters. In addition to benefits stemming from a more coordinated approach

, there are

potential cost savings to be reaped from coordinated grid and RES deployment, reduced

overall investment and back up needs as documented in various studies

. The EU is

entering a new scale in terms of RES electricity deployment (almost 50 % of EU

electricity in 2030 will be from RES) and complementing regional transmission network

planning with a more regional approach to planning of renewables can further help

optimising the energy systems. While renewable electricity costs (particular for wind and

photovoltaics) have significantly decreased in the last years and these technologies start

becoming competitive, there is a need of tapping the potential of cross-border projects to

further decrease production costs (= total generation and grid development costs) and

incentivise sector coupling (where the electricity producing sector is developed in an

integrated manner with the energy end use sectors such as transport).

In the digital sector, the demand for network data will increase exponentially with the

advance of the Internet of Things, bringing at the same time major benefits across sectors

and across borders. For example, the benefits of the deployment of 5G networks have

been estimated at EUR 113 billion per year across for industrial sectors (automotive,

health, transport and energy), while the cost sharing scenarios across these sectors remain

unclear and the perceived risks of commercial deployments, very high. Other examples

of exponential need for data concern the smart home market, which is expected to grow

at a compound annual rate of 57% in the next five years, or the healthcare sector, where

major savings can be realised - but only to the extent that high capacity connectivity

covers not only major hospitals, but also smaller medical centres and homes of patients

living with chronical conditions. Beyond this, measures need to be employed to control

both the amount and the type of energy required to fuel that demand. In particular, it will

be necessary to support appropriate solutions for the growing number of data centres

migrating from single enterprise/institution to co-location and cloud data centres, which

will operate through a steadily increasing number of sites across different countries. In

addition, future trends, including the advance of the Internet of Things (IoT) may support

the development of small and distributed data centres with many of the features of Cloud

data centres.

Considering the cross-border/EU relevance of PCIs in these sectors, EU level instrument, i.e. CEF, is best placed to

provide such support

SWD (2016)0418 final.

See Annex 3 for more details

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Third challenge: Better coordination with other EU programmes and better exploitation

of synergies within CEF

Transport, energy and telecommunications infrastructure is supported to various degrees

by a number of EU financial programmes and instruments, including CEF, ESIF,

Horizon 2020 and EFSI. CEF is for the most part complementary with these other EU

financial interventions; however, this complementarity bears the risk of overlap with

implications to TENs policy and overall EU budget. Consequently, for the new CEF

programme, the distinction from other EU financing programmes is a key requirement in

order to maintain and promote clear objectives of the programme, avoid overlaps and

optimise budgetary resources.

Complementarity with ESIF

The European structural and investment funds comprise the European regional

development fund (ERDF), the European social fund (ESF), the Cohesion fund, the

European agricultural fund for rural development (EAFRD) and the European maritime

and fisheries fund (EMFF). The current ESIF mainly focus on five areas: research and

innovation, digital technologies, supporting the low-carbon economy, sustainable

management of natural resources and small businesses. Both the Cohesion fund and the

ERDF fund actions in the transport, energy and digital sectors with the ERDF aiming to

promote balanced development in the different regions of the EU and the Cohesion Fund

funding transport and environment projects in countries where the gross national income

(GNI) per inhabitant is less than 90% of the EU average. All of these funds are managed

by the EU countries themselves, by means of partnership agreements.

Building on the first experience of directly managing a EUR 11.3 billion CEF envelope

from the Cohesion fund for transport, the challenge is to better delineate the scope of

both instruments in order to render them more complementary. Investments on the TEN-

T Network are currently supported by CEF, the Cohesion Fund and ERDF.

The overlap between these instruments in the field of transport is limited by the narrower

eligibility perimeter of CEF, in particular by its focus on railways and inland waterways

while ESIF also covers important investments in the road sector. In addition, CEF

resources are concentrated on the core network, while ESIF covers both the core and the

comprehensive networks amongst other transport infrastructure.

Complementarity is pursued through:



the national programming of regional instrument at the beginning of the period;



the transfer to CEF of a EUR 11 billion share of the Cohesion Fund (entirely

allocated, positive feedback from stakeholders and concerned Member States);



the participation of DG REGIO in the CEF selection panels and in project specific

task forces.

However, as evidenced in the CEF mid-term evaluation, there is significant overlap

between CEF and ESIF for railway projects on the core network. In the period 2014-

2020, CEF financing for railway projects on the core network is expected to reach

approx. 16 billion, while Cohesion Fund and ERDF financing to railway projects on the

core network are respectively expected to reach EUR 5.3 billion and EUR 2.5 billion. In

certain cases, different sections of the same railway line are financed by different

instruments as a result of optimising strategies of Member States and promoters.

kom (2018) 0438 - Ingen titel

In addition to the lack of clarity concerning the scope and results of each programme, this

situation means that project promoters have to adapt to different administrative

frameworks, rules and reporting schemes with all additional costs associated.

For example, CEF and ESIF large infrastructure projects have different rules as regards

the maturity of projects and application requirements. As regards maturity, major projects

under ESIF need as a minimum to have a binding environmental permit to be eligible for

support, whereas this is not a requirement for the CEF projects, as maturity is assessed by

the Commission during the evaluation process. Furthermore, the application requirements

slightly differ, for example, ESIF major projects have to take additionally into account

climate change adaptation and mitigation needs. The results of the public consultation

show that the stakeholders expect fewer rules and more aligned rules. Hence, the above

differences should be reduced where possible and only be maintained where justified by

the different management mode.

In the case of energy transmission, the areas of intervention for CEF and ESIF have been

designed with a view to avoiding overlaps. CEF which stems from the Trans-European

Network article of the Treaty concentrates on cross-border relevant transmission assets

and energy storages, CO2 transportation as well as transmission grid smartening and

pioneering smart grids in interface between transmission and distribution networks

ESIF, in turn, covers gas and electricity transmission which is not identified as PCI (i.e.

of national and regional relevance only

), investments in distribution networks and in

particular in increasing theses networks’

intelligence. The objective is to continue with

this clear delineation of responsibilities between CEF and ESIF also recognising that the

latter would increasingly focus on accompanying the CEF enabled investments in

transmission assets, the backbone and integrating element for the transformation of

energy systems, with the decarbonisation-enabling investments in regions and

municipalities (such as local RES storages, reinforcement of distribution and distributed

renewable generation). For the extension of scope towards cross-border cooperation in

renewable energy, the demarcation line will be similar: ESIF will continue to fund RES

at urban and regional level, including through bordering regions assistance via

INTERREG, whilst the new programme specifically supports two Member States getting

together in planning and roll-out.

There are currently very limited overlaps in the digital field due to a different scope of

intervention and current limitations for broadband under the current CEF, i.e. the low

budget and the exclusive use of financial instruments. For the upcoming period, it is

foreseen that CEF and ESIF will provide complementary and coherent support to

reaching EU's strategic connectivity objectives, while having different focuses, reflected

in the eligibility criteria set out in the CEF Regulation. CEF will focus on projects with

cross-border and cross-sector dimensions, which would benefit from a coordinated

approach at EU level (such as CAD/5G corridors, submarine cables, the Internet of

Energy, green-ICT, connectivity for health etc.); on covering socio-economic drivers

across the EU with Gigabit connectivity as well as local communities with very high

quality wireless connectivity for citizens and visitors; and on supporting broadband

The identification of Projects of Common Interest that are subsequently eligible for CEF is done under the strict

criteria set out in TEN-E guidelines regulation (347/2013) which guarantees that the programme focused on projects

with the highest EU added value.

Even though during the negotiations of the legal bases for ERDF for 2014-2020 the explicit ban on financing of

TEN-E assets was abandoned, in practice only two countries programmed investments in TEN-E gas and electricity

and only for very few specific projects

kom (2018) 0438 - Ingen titel

rollout in areas where a market failure is observed, but where a limited public

intervention can ensure commercial viability. On the other hand, it is expected that ESIF

will focus on connecting areas with more severe market failure, where high intensity

grants and public promoters remain necessary.

In terms of EU's connectivity targets as set out in the Gigabit Society Strategy, CEF will

mostly support objectives regarding the main 5G corridors and the connectivity of socio-

economic drivers and local communities, while both CEF and ESIF will contribute in a

complementary manner - depending on the characteristics of each individual project to be

funded in different areas - to reach the objective regarding ubiquitous coverage of

households with high capacity broadband networks. CEF is indeed specifically

appropriate for pan European/cross-border projects, but also for targeted and efficient

interventions, pushing the footprint of private investments to cover as much geography as

possible. CEF has indeed a proven record of use of financial instruments and blending,

and this experience is useful in ensuring coverage of areas where only a low intensity

grant can render a project viable. Ensuring that such resource-efficient interventions are

done via CEF also allows ESIF to reach further territories with deeper market failures,

such as peripheral or sparsely populated areas. At the same time, the eligibility criteria

for CEF interventions will ensure that the supported projects do not lead to market

distortion or crowding out private investments, inter alia by taking into account

investments by private operators. Such delineation remains therefore, ensuring

consistency with state aid principles. Further mechanisms to ensure complementarity will

be put in place, at the level of national programming of ESIF and at the selection level.

Complementarity with Horizon2020

Horizon 2020 is the EU Research and Innovation programme for 2014 to 2020,

implementing the Innovation Union, a Europe 2020 flagship initiative aimed at securing

Europe's global competitiveness. The goal is to ensure Europe produces world-class

science, removes barriers to innovation and makes it easier for the public and private

sectors to work together in delivering innovation. The successor programme (Framework

Programme 9) will be known as Horizon Europe.

Systemic yet underexploited synergies exist in the area of research and innovation. For

example, while the scope of Framework Programmes is focused on supporting research

and innovation, including technology development and prototype demonstration, the

CEF scales it up to the level of development of new business cases and results in a

broader and faster market

deployment of innovative technologies, covering market

risks, in the three sectors of transport, energy and telecommunications.

Options in harnessing complementarity at the level of projects or financing solutions

should take into account the market maturity, alignment of timeline and scope of the

researched product and the readiness to deploy that product, in order to cover the full life

It is important to note that CEF support allows promoters of energy transmission projects opt for innovative solutions

(to system problems) which might not be otherwise approved by the (conservative and cost conscious) national

regulators. This makes CEF supported grids more suitable test-beds for the outcome of EU research than average

transmission assets.

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cycle. It is furthermore important to ensure a cross-dissemination of the know-how

accumulated on the supported projects

and of the results of the overall programmes.

Complementarity with Digital Europe Programme

The new CEF programme will provide the physical infrastructure for digital services

supported by the Digital Europe Programme that is, the infrastructure necessary to

support the digital transformation of industry, economy, public administration and

society at large. On the other hand, Digital Europe, in general, will provide the service

ecosystem that will make the infrastructure rentable and used. For example, Digital

Europe will ensure and build the Cybersecurity capacity required for the deployment and

functioning of trusted and secure infrastructure, and it will deploy the Services of Public

Interests that need a connected society to be used at their full potential. Clear synergies

exist and will need to be exploited, by taking into account specific area’s needs and

timeline alignment.

Therefore, it is clear that, contrary to what has been done in the current MFF, the new

CEF will not provide support to the deployment of digital services in areas of public

interest, as this will be done within the scope of the new Digital Europe Programme. The

envisaged extension of scope is to widen connectivity coverage to reach new

stakeholders thus making (cross-border)

digital services accessible to an enlarged users’

community.

Complementarity with EFSI/"InvestEU"

The European Fund for Strategic Investments (EFSI) is an initiative launched jointly by

the European Commission and the EIB Group

–

the European Investment Bank and

European Investment Fund

–to

help overcome the current investment gap in the EU. In

order to enhance complementarity with EFSI, the Commission took action to reorient

the CEF Debt Instrument to innovative EU pilot programmes, which has yielded some

significant

room for complementarity, and further work is planned to re-orient the CEF

Debt Instrument to support the deployment of alternative fuels and PCIs in third

countries.

It is expected that financial instruments will play an important role in delivering

investments in the transport, energy and digital sectors and that for the next programming

period they will be available under the InvestEU programme. Financial instruments are

considered particularly relevant to support broadband deployment, complementary with

the interventions via grants and blending. Concretely, it is proposed that InvestEU would

provide: (i) guarantees for more mainstream broadband investments, with the aim to

steer, de-risk, and accelerate investments in the newest technologies; while (ii) special

purpose vehicles/thematic instruments, with the aim to overcome persistent issues of

access to finance. Contrary to CEF, whose intervention is clearly steered towards market

failure areas, InvestEU support is not expected to reach on its own commercially

There were several research projects under H2020 which resulted in improved processes and technologies actively

used by electricity and gas transmission system operators (e.g.iTESLA)

Following an agreement by the Commission and the EIB in the scope of the CEF Steering Committee in September

2015

The Green Shipping Guarantee Programme benefits from dual support of both the EFSI and the CEF Debt

Instrument, with potential to mobilise up to EUR 3 billion of investment.

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unattractive areas, being rather focused on maximising the commercially viable

deployments.

As these types of intervention are, however, likely to be

covered by the “InvestEU”, this

would then eliminate the issue of complementarity between different financial

instruments in different programmes.

Consequently, the complementarity between the CEF grants and the InvestEU will relate

to:



the intervention logic (CEF grants only where support through financial instruments

is not sufficient/possible);



the possibility to use CEF grants blended with InvestEU (or other private financing).

Synergies within CEF

The mid-term evaluation of CEF illustrated that the potential of CEF as a joint instrument

for three sectors has not been fully exploited. Infrastructures such as EV charging

stations, energy storage and smart grids often combine and operate at the intersection of

transport, energy storage and digital infrastructures, but so far, CEF has not been able to

sufficiently address this in an integrated way. The EU's commitments on decarbonisation

will imply a growing role for sector coupling, i.e. infrastructure where power generation

and storage and end-use sectors are interlinked.

One CEF Synergy Call has been launched covering the sectors of transport and energy,

yielding limited results.

The CEF Transport Call 2018 will focus on horizontal

priorities under an overall "digitalisation" umbrella coordinated in close proximity with

CEF Digital calls. For 2018, CEF-telecom plans to explore cross-sector activities with

CEF-energy and CEF-transport under Cybersecurity applied to the area of cooperative,

connected and automated mobility and well as to the Internet of Energy. However, at the

time of publication of this Impact Assessment, results were still unknown. Meanwhile, a

substantial number of indirect synergies have been identified indicating that they are

happening by default, but go uncaptured:



Energy Union and its priorities identified in the recent Communication "Accelerating

Clean Energy Innovation

: such as alternative fuels, low-carbon solutions and

innovative systems (energy-transport-digital-climate-maritime);



Alternative fuels charging infrastructure can involve transport infrastructure, power

network, and digital investments aspects. Currently, restrictive selection criteria

constitute barriers to invest in such technologies;



Digital Single Market, such as data, infrastructures/processing capabilities, automated

driving vehicles, e-mobility, ERTMS (transport-digital-energy);



Regional, such as enhanced interconnectivity at urban nodes (transport-regional)

7 out of 9 innovative studies were recommended for funding for about EUR 24 million, falling short of the available

EUR 40 million. As the first step it is encouraging since this call involved rather complex synergy between transport

and energy, providing lessons for the future

36 CEF transport actions with a total value of EUR 220 million in funding awarded as enabling synergies with

energy. Additional data show that 10 actions in CEF Energy for a total value of EUR 45 million are contributing to

the enablement of synergies with transport.

COM(2016)763 final

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

Research and Innovation, as well as Energy Union, such as urban energy efficiency

(transport-digital-energy-research);

The challenge for this programme is how best to support projects including through the

proposed scope extensions delivering benefits which are in line with policy objectives of

more than one CEF sector.

2.2

Objectives of the programmes for the next MFF

General objective of the programme

The overarching objective of the future CEF is to support the achievement of the EU policy

objectives in the transport, energy and digital sector, as regards the trans-European

networks, by enabling or accelerating investments into projects of common interest, and to

support transnational cooperation on renewables planning and deployment in line with EU

long-term climate and sustainable development goals. It will aim at maximising synergies

among the sectors covered by the CEF and with the other EU programmes.

The future CEF should thus contribute to the EU policy objectives detailed in the table

below.

Supporting the EU policy objectives beyond 2020

►

Completion of the TEN-T Core Network by 2030

, including the deployment of

SESAR and ERTMS, and transition towards clean, competitive and connected

mobility

, the low-carbon transition through innovative infrastructure including an

EU backbone of charging infrastructure by 2025; progress towards the completion of

the TEN-T comprehensive network by 2050.

►

Completion of the TEN-E priority corridors and thematic areas

, in alignment with

“Clean Energy for all

Europeans

objectives, to ensure the functioning of the Union

internal energy market, provide security of supply (inter alia through smartening and

digitalisation of the infrastructure) and contribute to sustainable development and

climate objectives by integrating renewable energy sources and enabling a cost-

effective collective target achievement by 2030

►

Achieving the digital connectivity infrastructure of a Gigabit society

, as a

underlying condition for a functional digital single market

, as well as providing the

necessary infrastructure to properly support the EU-wide digital transformation of

economy and society.

Regulation No 1315/2013 on Union guidelines for the development of the trans-European transport network, Art 38

COM(2017)283 Communication from the Commission "Europe on the move - An agenda for a socially fair

transition towards clean, competitive and connected mobility for all"

Regulation (EU) 347/2013 on guidelines for trans-European energy infrastructure

COM(2016) 860 final

i.e. Gigabit connectivity for all main socio-economic drivers , High performance 5G connectivity, access to Internet

connectivity offering download speed of at least 100 Mbps, upgradable to Gigabit speeds for all European

households, including rural ones, cf Connectivity for a Competitive Digital Single Market - Towards a European

Gigabit Society - COM(2016)587

A Connected Digital Single Market for All: COM(2017) 228 final

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Specific objectives of the programme

CEF aims to ensure the development of high-performance infrastructure connecting and

integrating the Union and all its regions, in the transport, energy and digital sectors while

contributing to the energy transition and technological advancement in these sectors. In

light of this and on the basis of the challenges previously defined, the general objective

of CEF can be translated into specific objectives for each of the three sectors. These

specific objectives will be addressed at the level of programme structure and priorities

and/or delivery mechanism.

Cross-cutting specific objectives



The programme should also address the cross-cutting objectives of the MFF for

all funding programmes in terms of

simplification, flexibility, coherence and

focus on performance.

These objectives will be taken into account in section 4

(delivery mechanism) and 5 (performance measurement).



For

synergies

between the three sectors, the programme should be sufficiently

flexible to support actions at the crossroad of several sectorial objectives and

adapt the form and scope of synergies to technological development and market

needs. The synergies should in particular result in a more efficient and cost

effective implementation of specific projects. Initial synergy areas could include

Cooperative, Connected and Automated Mobility (CCAM) along major European

Transport paths, smart grids, the use of alternative fuels and a better support for

sector coupling in sectors that are end users of energy (such as electrification of

transport), as well as an optimised grid for renewables, Internet of Energy and

Green-ICT. Actions in one sector which also contribute to policy goals of another

sector should also be encouraged and supported



As regards climate mainstreaming, CEF should, in line with the overall approach

taken in the next MFF, ensure that it fulfils its potential to accelerate the low

carbon and climate resilient transition, and that it does not invest in activities that

are incompatible with the related EU policy.

Sectorial specific objectives of the programme



Trans European Networks - Transport

In the transport sector, the specific objectives of the programme are twofold.

First, the programme will aim at the development of projects of common interest

relating to efficient and interconnected transport networks. This includes the

completion of major cross-border projects and the removal of bottlenecks and

missing links. Priority will be given to the core network corridors, with the

possibility to also support sections of the comprehensive network where justified

(cross-border projects). Second, the programme will aim at modernising or

upgrading the transport infrastructure in order to allow for smart, sustainable and

safe mobility. This includes the deployment of alternative fuel supply facilities, a

For example, a lock co-funded under CEF transport that contains a small turbine that improves its socio economic

case, could also receive co-funding for the turbine element. This element of the action would be ineligible under the

current CEF (see section on synergies page 31).

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next phase in the deployment of the digital systems like ERTMS and SESAR,

further initiatives relating to cooperative, connected and automated mobility, and

actions aiming at improving safety (notably road safety) and security of the

transport infrastructure, as well as its resilience to climate change.



Trans European Networks - Energy

Completion of the internal energy market through interconnections

Sustainable development through network infrastructure enabling integrating

renewable energy sources

including through facilitating cross-border planning

and deployment of renewables.

Security of supply inter alia through smartening and digitalisation of the grids



Trans European Networks - Digital

To contribute in an efficient and targeted way to reach the broadband connectivity

targets set in the Gigabit Society Strategy[i.e.

Gigabit connectivity for all main

socio-economic drivers , High performance 5G connectivity, access to Internet

connectivity offering download speed of at least 100 Mbps, upgradable to Gigabit

speeds for all European households, including rural ones.].

To contribute to the digitalisation of energy and mobility networks to enable

cross-border services in these two areas.

To contribute to the resilience and capacity of EU digital networks by addressing

international connectivity.

3 P

ROGRAMME STRUCTURE AND PRIORITIES

The table below summarises the main changes in scope for the new CEF programme.

Main changes concerning the scope of the programme

All sectors

Transport

(TEN-T)

Energy

Scope unchanged

–

but more

weight given to decarbonisation

and digitalisation

Scope unchanged for TEN-E

Support to cross-border projects

in the field of renewable energy

Out

Financial instruments

transferred to InvestEU

Digital

Digital Service Infrastructure

(transferred to the Digital

Europe programme)

Grant support to strategic

connectivity

infrastructure/redefined projects

of common interest

It is estimated that these changes of scope will not affect more than 10-15% of the

programme budgetary allocations.

And therefore contributing to decarbonisation of the energy systems and overall energy transition

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3.1

The core priorities remain focused on the trans-European networks

Necessity for EU action

On the basis of Article 171 of the TFEU, the Union is empowered to define projects of

common interest in TENs infrastructure while leaving the Member States to choose the

methods of implementation. The same Article empowers the Union to support such

projects of common interest.

A legal basis for the extension to renewables is provided by Article 194 TFEU that

explicitly lists the promotion of renewables as one of the objectives of EU energy

policies. In addition, Article 3(4) of the recast Renewables Directive stipulates "the

Commission shall support the high ambition of Member States through an enabling

framework comprising the enhanced use of Union funds, in particular financial

instruments".

EU action is necessary for the following reasons:



The scale of the problems being tackled specifically require EU action since they are

by nature EU-dimensional, and can be more efficiently resolved at Union level,

leading to overall greater benefits, accelerated implementation and reduction of costs

if Member States act together.



CEF was developed taking into consideration the impact of the decline in investment

during the financial crisis and thereafter, when long-term bank lending was scarce.

Although market conditions have evolved, the investment needs in TENs beyond

2020 exceed the resources at the disposal of several Member States.



Transport: public budgets are still under considerable fiscal consolidation, while the

implementation of the CEF for TEN-T in 2014-2016 shows that financing support

from Member States and private sector continues to be crucial but insufficient for

projects with European dimension.



Energy: while the majority of projects of common interest can be financed in

principle by the market within the regulatory framework, EU support is indispensable

for a number of projects because of their externalities (including innovation) and the

investment volume exceeding capacity of the system to socialise the cost.



Renewables projects are also expected to be increasingly financed by the market in

the future. Potential support in this area would only compensate the cost for

overcoming barriers associated with cooperation beyond borders amongst Member

States and/or the barriers preventing sector integration.



Digital: a future-proofed EU economy and society depends heavily on the

deployment of data infrastructure capable of supporting the development of new

technologies, services and applications. Insufficient funding as well as missing links

in current programmes lead to persistent gaps in broadband connectivity

infrastructure, which are a barrier to the achievement of the full potential of the EU´s

digital economy. Digital innovations and services

–

including all Internet of Things

services, all the applications and implications for the other economic sectors and

public services - can only emerge and flourish if Europe becomes a truly connected

continent. Public support, and in particular EU action is required to ensure seamless

connectivity across the EU, which will in turn lead to massive benefits across various

economic sectors, as well as to increased cohesion across the continent.

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Added value of EU action

CEF provides EU added value

through the development of connectivity in transport,

energy and telecommunications, not only because of the type of public goods with a

European dimension that it covers, but also because of its focus on projects that would

not be realised without EU support.

More specifically, the EU added value of CEF resides in its capacity to:



steer public and private finance towards EU policy objectives;



enable key investments where the costs are borne at national/local level whereas the

benefits are tangible on a European scale;



accelerate the shift to a low-emission and digital society.

In comparison with the total investment needs, EU CEF support focuses on actions that

carry the highest EU added value. It should drive the alignment of major new

infrastructure investment in the EU to our long-term climate objectives, thereby reducing

the risk of stranded assets.

For transport, it covers cross-border sections and bottlenecks on the core networks, the

large scale deployment of traffic management systems and major new priorities such as

alternative fuels, digitalisation, and overall safety and security.

For energy, it covers infrastructure projects with cross-border relevance in electricity

transmission and storage, gas, CO2 transportation and smart grids at the interface

between transmission and distribution networks (enabling integration of data flow

between the various grid layers and reaching the energy consumers/prosumers) as well as

increasing the intelligence of the transmission networks. It also covers targeted cross-

border projects in the field of renewable energy deployment and planning involving

(funding) of at least two Member States

, possibly with accompanying storage facilities

and connections to the transmission grid.

For the digital sector, it covers the deployment of digital connectivity projects expected

to have a high impact on the Digital Single Market, inter alia through their alignment

with the objectives of the Gigabit Society Strategy Communication, through strong cross-

border effects, and through synergies across sectors and with the digital services enabled.

Projects are furthermore prioritised taking into account the advantages of realising them

at EU scale, noting that on the one hand, some projects would not be realised at all if left

to Member States, while for other projects a series of granular, un-coordinated

interventions would not achieve the same impact on the Digital Single Market.

Critical mass of funding/projects

In the case of transport, TEN-T core network corridors and horizontal priorities are listed

in Annex I of the CEF Regulation. Each of the corridors is underpinned by a well-known

project pipeline, with identifiable financial maturity and readiness for implementation,

Criteria for assessing the value-added of European Finance were set out in the Reflection Paper on the Future of EU

Finances (COM(2017) 358 of 28 June 2017).

RES technology such as wind, CSP, sustainable biomass or even more innovative ones such as ocean technology

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drawn together with the Member States and all relevant stakeholders in the scope of the

Corridor Work Plans (cf. 2.1 above).

New emerging priorities needed to improve the future programme in the area of transport

decarbonisation, digitalisation and cross-sectorial synergies constitute another cluster of

projects that require EU's intervention. A significant scale-up of support to the

deployment of alternative fuels infrastructure, major initiatives in the field of

cooperative, connected and automated mobility or cybersecurity is expected to

necessitate very considerable resource.

In the case of energy, the programme addresses very specific needs and objectives across

various energy transmission sub-sectors in order to ensure that an increasingly integrated

energy system of the EU functions well. It is clear, as evidenced with the investment

needs analysis, that CEF must provide a comprehensive answer to specific problems

across the entire system since an inability to address deficiencies in one area would

immediately undermine the achievements/interventions in other parts of the

interconnected grid

In addition, a limited number of targeted cross border projects in the field of renewables

can bring economies of scale, avoid duplication of infrastructures, increase deployment

across Europe to better reflect the available potential, policy convergence, knowledge

transfer, uptake and replication of innovative technologies in the European home market.

It was precisely such EU added value that provided also the justification for granting

support for selected offshore projects under the European Economic Recovery

Programme.

In the case of the digital sector, considering the size of the investment gap (cf. 2.1

above), increasing the support to connectivity is indispensable for the success of all

digital policies and for a competitive European economy. In case such additional funding

will not be granted via CEF, significant potential for efficient support of network rollout

and for socio-economic impacts would be lost. This relates to the focus of CEF on

strategic connectivity projects, on cross-border and cross-sector projects, currently not

supported adequately by any other EU programme. CEF also has a proven record of

resource efficient support for deployments.

3.2

The scope of intervention in the digital sector is redefined in complementarity

with the new Digital Europe Programme and with the centralisation of all

financial instruments under InvestEU

The scope of the CEF programme for the digital sector has been changed with respect to

the current financial framework and will not address the part called Digital Services

Infrastructure, which will be included in the new Digital Europe Programme. A further

change relates to the centralisation of all financial instruments under InvestEU, with the

consequence that CEF support will be provided via grants and blending.

This changed scope of intervention amounts to a re-focus of CEF Digital on CEF core

business of supporting connectivity infrastructure, taking advantage of the benefits of

E.g. even most sophisticated off-shore grid may still require some reinforcements on-shore to deliver its benefits in

full

Regulation (EC) No 663/2009

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aligning with the new EU's strategic connectivity objectives defined in 2016 and thereby

also leading to a re-definition of projects of common interest. The funding projects

envisaged in the CEF programme for the digital sector will focus on covering the needs

of the physical layer infrastructure of very high capacity broadband networks, from

backbone to access networks, in view of ensuring coverage to specific communities/areas

and socio-economic drivers, as well as coverage along major terrestrial transport paths.

International and cross-border connectivity, as well as connectivity in support of cross-

sector projects (in particular but not exclusively connectivity infrastructure requirements

and operational digital platforms supporting the digitalisation of transport and energy

sectors, such as for Cooperative, Connected and Automated Mobility, the Internet of

Energy and Green ICT) will also be focused. Contrary to what is done in the current

MFF, the new CEF will not provide support to the deployment of digital services in areas

of public interest, as this will be done under the scope of the new Digital Europe

Programme. The rationale behind the new projects of common interest is further

described in Annex 4.

CEF will therefore become a major tool to support the delivery of EU's strategic

connectivity objectives. It will thus provide the first-class infrastructure necessary to

support the digital transformation of industry, economy, public administration and

society at large.

3.3

The scope of intervention in the energy sector is extended to targeted cross-

border cooperation in the field of renewable energy under specific

circumstances

Renewables deployment is currently mostly driven by Member States through national

support schemes and planning with mainly national resources in mind. Support schemes

that include cross-border elements, for instance when competitive bidding processes

allowed the participation of producers from other Member States, had lower auctioning

prices

. Over the past ten years, Member States have not engaged significantly in

transnational co-operation on Renewables deployment - despite the obvious socio-

economic benefits of a more regional approach

. This approach is promoted in several

Articles of the 2009 RES Directive, a guidance document on cross-border cooperation

from 2013, the revision of the renewables Directive and relevant wording in the current

energy and environment state aid guidelines. In the few cases where cooperation took

place in the past, projects either did not materialise, were (partly) too complex even with

a grant from the EU budget (Krieger's Flak reduced from a 3 MS project to a 2 MS one)

or took a substantial time to take off.

The results of the first cross-border tender for renewable electricity in Europe is an illustration of how a Member

State can limit the costs of financing renewables through allowing foreign electricity generators to bid in the auction.

The 50 MW photovoltaic tender organised by Germany and open to Danish generators achieved an awarded price

(5,38 cents/kWh) that were more than 25% lower the last German tender for only-German individual installations

(7,25 cents/kWh). The good response obtained by the tender, with bids totalling almost fivefold the amount procured

and half of it represented by foreign installations shows also the willingness of generators to participate in a broader

market.

Cf. modelling underpinning the Clean Energy Package; "Cooperation mechanisms to achieve renewables target,

Jacobson/Pade/Schroeder/Kitzing, in Renewable Energy 63 (2014; "Promotion of electricity from renewable energy

in Europe post 2020- the economic benefits of cooperation. Fuersch/Lindenberger, EWI working papers. 2013;.

http://www3.imperial.ac.uk/newsandeventspggrp/imperialcollege/newssummary/news_17-7-2017-14-13-34.

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The reasons for Member States' reluctance to engage in cross-border projects include:

regulatory complexities and administrative burden; first mover risk; difficulty in

quantifying the costs and benefits of cooperation; preference for reaping the benefits of

renewables’ deployment nationally (jobs); political acceptance

of using national

taxpayers/consumers' money to fund projects abroad; uncertainty on cooperation design

options and the difficulty in assessing the impacts on grid and integration costs.

Regulatory issues play a role and the Clean Energy for all Europeans Package of

November 2016 already foresees certain alignments and improvements on permit

granting (for all renewable projects, not only cross-border projects), market principles for

support schemes, rules on renewable market integration, rules on grid costs and grid

connection. Further harmonisation in those areas would be disproportionate from a

subsidiarity point of view and will in any event never be able to cover all national

specificities, which also extend in into other areas of strict national competence such as

spatial planning and taxation. Even more importantly, and confirmed both by research

and statements from Member States and other stakeholders the by far biggest obstacle is

indeed the lacking incentive for either Member States or project promoters to engage or

invest in such cooperation

While the integration of renewables to the grid and achievement of EU level target for

renewables will be primarily achieved through the completion of electricity network

infrastructure, reaching this target can become more costly than necessary when areas

with good conditions are not exploited because a Member State lacks the financial means

or energy needs to do so on its own. Also, the additional component on renewables cross-

border cooperation can complement the priority projects on the offshore meshed grid. In

the North Sea and in the Baltic Sea the current transmission projects are point-to-point

interconnectors that do not yet integrate an offshore renewables source. Projects such as

Krieger's Flak supported in 2009 by the EEPR and the world's first infrastructure projects

linking an offshore renewables source to two national grids could thus far not be

replicated.

Similarly, a project might not happen when it requires coordination with other Member

States to take place (e.g., investment in interconnections is needed to reap full benefits,

even though this could bring benefits across several Member States). There are positive

externalities from integrated projects when a production site is planned jointly

(economies of scale) or connected cross-border allowing power to be transmitted to the

country with higher demand and price hence improving the profitability of the site.

Finally, with an EU-level binding target, renewables deployment and target achievement

becomes a collective responsibility with the Commission's role becoming a facilitator.

This calls for an adjustment also of available EU instruments to align them with this new

reality.

Current EU support for renewables does not aim to facilitate their joint deployment.

Lessons can be drawn from the TEN-E Regulation and the CEF also for the future

development of renewables, in particular when it comes to incentives to promote cross-

border cooperation. A similar EU-wide coordination for renewables deployment in the

EU is still at its initial phase, but developing it could facilitate sector integration e.g. with

Cf. finding in: Cooperation between EU Member States under the RES Directive, Ecofys 2014 based on interviews

with representatives from 11 EU Member States and feedback from stakeholders received at the expert workshop on

March 2018 in Brussels (see Annex for more details)

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transport as well as the development of the meshed grids.. Finally, in outermost regions,

solutions only based on interconnectors might not be the most effective ones so that CEF

can become more relevant for those regions if a combination with renewables were

possible.

That is where the new enabling instrument for renewables under the CEF would come in.

It would also underpin the provisions on partial opening of support schemes proposed by

the Commission under the recast of the Renewables Directive.

The present IA considers the following actions:

grants for studies and technical assistance to support Member States in:



assessing the benefits and costs of cross border cooperation



selecting the most adequate cooperation format



implementing cooperation agreements

grants for studies (pre-feasibility and feasibility and development studies) for the

implementation of projects

grants for works for a limited number of projects with high EU added value based

on a preselected Projects of European Interest, when the EU intervention is

justified by the need to overcome:



the additional risks of complex multi country projects



significant positive externalities such as increased grid stability or due to a

particular innovative solution and/or



MS' preference for investing only at home.

The intervention would be geared towards overcoming the identified market/coordination

failures/incentive structure and therefore cover the additional costs arising from cross-

border and multi-purpose infrastructure planning and development, as well as providing

an incentive for Member States to explore such cooperation instead of only planning and

deploying renewable resources nationally. The EU funding, by helping limit the

additional costs linked to cross-border complexities would incentivise Member States to

develop regional planning and deployment.

The total amount of support would be limited to 10% of the total energy window of the

Connecting Europe Facility, whilst it would be ensured that unspent money could be

transferred within the CEF energy window to TEN-E projects, and vice versa.

4 D

ELIVERY MECHANISMS OF THE INTENDED FUNDING

4.1

Changes in the programme delivery according to the Commission's global

simplification measures

In the framework of the Commission's global simplification measures under the post-

2020 Multiannual Financial Framework (MFF), overall simplification efforts will impact

the CEF programme delivery. The preparation of the next MFF was launched by the

Commission with the publication of the White Paper on the Future of Europe in March

2017. The next steps were the publication of the Reflection Paper on the Future of EU

Finances in June 2017 and the circulation of the draft template basic act by DG BUDG in

November/December 2017. The results of this political process provide the top-down

kom (2018) 0438 - Ingen titel

guidance for the next MFF and will affect the form of the post-2020 CEF programming

period.

The template for the basic act has provided for an overall simplification basis for the new

CEF regulation. This is in line with all other funding programmes and will consequently

affect the new CEF in particular in the simplification of cost options, co-funding rates,

Member States involvement and the development of programme objectives and

indicators. It will also provide for a further simplified legal framework of CEF through a

streamlined basic act and the possibility to delegate provisions and conditions to work

programmes, which will facilitate further synergies between the three sectors and enable

CEF to adapt to future needs.

4.2

Direct management of CEF and its benefits

The targeted delivery of CEF under direct management by the parent DGs and their

executive agency INEA has proved efficient for the implementation of the current CEF

programme. For the delivery and implementation of CEF funding, direct management

has shown several practical advantages.



Direct management allows for a stronger policy steering as regards the priorities, the

selection of projects and their implementation;

Direct management allows for exerting an independent coordination at EU level.

Such coordination is exerted by the Commission (CEF parent DGs and INEA

interacting directly with the project promoters);

For the three CEF sectors, direct management allows for a fast delivery of EU

support. As an example, in transport, the EUR 11 billion Cohesion envelope under

direct management through CEF was entirely allocated by mid-2017 and all

corresponding grant agreements were signed before end 2017.

Direct management has allowed for project management expertise at INEA to be

built up allowing for the monitoring of projects and the handling of these matters in

an efficient and consistent manner while ensuring close control as regards compliance

with EU standards. Direct management also allows for coordinated and consistent

technical validation procedures.

The "use it or lose it" principle, a key feature of direct management, helps Member

States to prioritise as well as to adhere to commitments. Nevertheless, the possibility

to recycle the commitments in cases where projects are not performing as foreseen

increases the efficiency of CEF.



There are many benefits to using an Executive Agency for the implementation of CEF.

Gains in efficiency have been introduced through the externalised management of the

grant cycle via a unified system. In addition, annual Action Status Reports from

beneficiaries allow for closer monitoring of grants. Furthermore, there is increased cost

effectiveness given the ratio between human resources employed and the amounts

granted.

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The direct management of CEF will be supported especially by the "ex-ante assessment

mechanism for large infrastructure projects"

. The mechanism is aimed at providing

targeted support to ensure that the public procurement processes of CEF financed

projects are implemented efficiently and effectively by the beneficiaries. It will thereby

further facilitate the deployment of critical infrastructure.

Based on this positive experience, which has also been supported by the CEF mid-term

evaluation results, the aim for the period beyond 2020 is thus to continue the current

direct management for the new CEF with identified simplification and efficiency

adaptions.

4.3

Proposed changes in the programme management by the parent DGs and the

Agency

While the general principles applied for the programme management of the current CEF

programme have demonstrated their efficiency and should be maintained, this section

identifies improvements in specific areas, mainly related to simplification, innovative

forms of support, technical assistance to project preparation, sustainability/climate

proofing of certain types of projects and synergies.

Table: Challenges, objectives and delivery

Challenges

Objectives

General objective

First challenge:

to support the achievement of the EU

completion of

Trans-European

policy objectives in the transport,

energy and digital sector, as regards

Networks in

transport, energy

the trans-European networks, by

enabling or accelerating investments

and digital area

into projects of common interest

Specific objectives

Transport: development of efficient

and interconnected transport networks,

including the completion of major

cross-border projects and the removal

of bottlenecks and missing links.

Energy: completion of the internal

energy market through

interconnections

Digital: deployment of very high

capacity digital networks and 5G

systems in line with the Gigabit

Delivery mechanism

For transport and energy,

the current delivery

mechanism proved

efficient, it will be

continued (grants managed

by INEA).

The same delivery

mechanism will be used for

connectivity projects in the

digital sector.

Communication from the Commission to the European Parliament, the Council, the European Economic and Social

Committee and the Committee of the Regions "Helping investment through a voluntary ex-ante assessment

mechanism of the procurement aspects for large infrastructure projects", COM (2017) 573 of 3.10.2017.

kom (2018) 0438 - Ingen titel

Society Strategy Communication,

increased resilience and capacity of

digital networks.

General objective

Second

challenge:

the

energy transition

and

technological

developments in

the

transport,

energy

and

digital sectors

to support the achievement of the EU

policy objectives in the transport,

energy and digital sector, as regards

the trans-European networks, by

enabling or accelerating investments

into projects of common interest

Specific objectives

Transport: modernising or upgrading

the transport infrastructure in order to

allow for smart, sustainable and safe

mobility

Energy: Sustainable development

through network infrastructure

enabling integrating renewable energy

sources including through facilitating

cross-border planning and deployment

of renewables.

Security of supply inter alia through

smartening and digitalisation of the

grids

Digital: Contribute to the digitalisation

of energy and mobility networks to

enable cross-border services in these

two areas.

A reinforced priority will be

given as regards the

decarbonisation and

digitalisation components

of the programme.

For transport, a

significantly higher share of

the budget will be

earmarked.

While the key features of

the current delivery

mechanism will be

maintained, some

adaptation are necessary to

take into account a greater

diversity of beneficiaries

and type of actions

supported as regards:

- simplified forms of grants

(notably for lower amounts

and/or standardised

actions);

- a more proportionate

degree of oversight exerted

by MS (application process,

monitoring, certification of

reports and cost statement).

General objective

Third challenge:

Better

coordination

with other EU

programmes and

better

exploitation of

synergies within

CEF

maximising synergies among the

sectors covered by the CEF and with

the other EU programmes

Cross-cutting specific objectives

Synergies within CEF

Changed scope of CEF Digital, with a

refocus on core business and a

Coordination with other

programmes:

Synergies:

The delivery will be

improved as regards:

- convergence and

simplification of rules (less

sector-specific) in order to

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realignment with other EU

programmes supporting connectivity

deployments.

facilitate synergies;

- adoption of joint work

programmes;

- more flexible definition of

eligible actions.

Simplification

The aim for the post-2020 MFF period is to continue regular administrative

simplification measures of the programme management based on INEA's experiences

during the 2014-2020 programming period. As an example, INEA has implemented

various administrative simplification measures largely based on the TEN-T Executive

Agency's experiences during the 2007-2013 programming period. These measures

include the introduction of electronic communication tools for beneficiaries as well as the

replacement of grant decisions by grant agreements which require less involvement from

the Commission and the Member States. The following measures are envisaged for the

new CEF at the level of the basic act



Simplification of the

programme structure

Following the general approach defined for all programmes in the next MFF, the basic

act will be simplified compared to the current CEF regulation (see section 4.1). This

includes the removal of all provisions already covered by the Financial Regulation,

references to the TEN guidelines instead of repeating their provisions wherever possible,

and use of standard provisions identical for all programmes. In addition, the number of

specific objectives will be reduced and put in correspondence with the list of eligible

actions.



Simplification of

co-funding rates

in transport

While the current CEF Regulation specifies in detail the co-funding rate applicable per

type of action (different categories at 20, 30, 40 and 50% and the cohesion envelope at

85%), the new Regulation would only refer to a generally applicable maximum co-

funding rate (for instance 30%) with two exceptions:



a maximum co-funding rate at 50% in duly justified cases to be specified in the

Regulation;



an exception concerning actions funded under the cohesion envelope (the maximum

co-funding rates of the future Cohesion Fund would apply).

In addition, the Regulation should clearly specify that, within these limits, the work

programme may provide for more differentiated co-funding rates depending on the type

of action.

It is noted that the most important simplification measures for beneficiaries relate to the implementation phase,

notably as regards the programming and design of the calls, the evaluation process, the grant agreement preparation

and the monitoring arrangements. These elements are not regulated at the level of the basic act.

Co-funding rates in case of CEF-energy and CEF-ICT under the current CEF regulation have already been simple

and will remain such in the next generation of CEF.

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Finally, the Regulation should allow for the derogation to these limits in the case of joint

work programmes covering several sectors in order to avoid that different co-funding

rates per sector constitute an obstacle to synergies.



Streamlining the

Member States

involvement through the

CEF Committee

While the implementation of the programme lies within the responsibility of the

Commission, the involvement of Member States is considered important, especially

when it comes to large infrastructure projects on their territories or to regulated public

goods. In addition, the simplification of the programme implies that important

implementation modalities would be set in the work programmes and no longer in the

basic act.

For these reasons, it is considered proportionate and justified to maintain the CEF

Committee and to focus its role on the work programmes. While the Committee would

continue to be informed in detail on the selection of projects and on the monitoring of the

programme, it should be assessed if a formal opinion of the Committee on the award

decisions taken by the Commission is necessary. Such simplification would allow to

further reduce the time to grant by almost a month.

As regards individual projects, currently Member States are requested to approve

applications and to certify incurred expenses and final reports. The approval of

applications by Member States was questioned in a certain number of cases, notably

when promoters are private entities and/or the project does not concern common goods or

interest. It would be preferable to remove this general obligation but to keep the

possibility to impose it in the work programmes when duly justified (large infrastructure

projects, use of the national envelope under the transport cohesion envelope, projects

including certain aspects related to security or public authority, etc.).

On the contrary, the certification of expenditure and final report by Member States could

be removed entirely and replaced by a more systematic obligation to provide an audit

certificate.

Complementarity/Coherence with other funds

The challenges identified in section 2.1 concerning the complementarity/coherence with

other EU programmes are presented in the table below:

ESIF



Better delineation of scope between ESIF and CEF concerning

transport

: CEF focusing on the TEN-T infrastructure of cross-

border relevance (including through the implementation of a

Transport Cohesion Fund envelope) while ESIF focuses on the

urban, local and regional mobility needs through ERDF.

Better coordination and streamlining of policy objectives and

interventions through the ex-ante conditions applicable to

transport investment under shared-management (to ensure full

consistency with the TEN-T).

In case of energy, clear delineation ensured with CEF focusing



Subject to final decisions concerning the scope and budget of each programme.

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

InvestEU



Digital

Europe



Programme



FP9



on TEN-E (including smart grids on transmission and

transmission/distribution

interface)

while

ESIF

national/regional transmission, distribution and distribution

level smart grids and storages. Increasing importance of

investments at local and regional level in a decentralised energy

system points to a continued or even increased relevance of

EFSI funding for energy therefore

Both ESIF and CEF are aligned in providing coherent and

complementary support to EU's strategic connectivity

objectives. As regards one target to which both ESIF and CEF

are expected to contribute to, CEF is expected to cover market

failures areas where projects can be deployed with low intensity

grants, allowing ESIF to address further and more severe

market failure areas which require higher grant amounts and

intensity.

Better alignment of rules concerning applications,

implementation and monitoring.

No competing financial instruments in CEF.

Focus grant support on projects that cannot be supported

through financial instrument, or

Use grants for blending with InvestEU (or other private

financing) if needed for bankability.

According to its current definition, Digital Europe will include

future activities concerning the Digital Services Infrastructures

part of the current CEF.

Services developed in Digital Europe will run over the

connectivity infrastructure provided by CEF2.

Cybersecurity developed in Digital Europe will be used also to

protect critical infrastructures supported by CEF2

As in the current period, while the development of innovative

solutions will be supported by the EU research programme FP9,

the deployment of innovative solutions will be supported by the

new CEF when in relation with its scope (for instance as

regards alternative fuels or digital traffic management systems).

No risk of overlaps as inherently different stages of market

maturity of FP9 and CEF actions

Innovative forms of support

For infrastructure projects that have positive expected environmental and socio-economic

values in support of EU policy objectives, there exists a full spectrum of financing needs

(in terms of the financial viability of the investment). From financially viable projects

based on the income stream generated by users and concession fees in regulated sectors,

to projects of high policy, environmental and economic value, but not generating

sufficient revenues to cover investment and therefore being highly dependent on public

sector/government support.

Therefore a full range of support mechanisms continue to be appropriate for

infrastructure including a continuation of EU-backed budgetary guarantees and financial

instruments under “Invest EU”, to complement the

bulk of EU support to the sector

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which will continue to be delivered through grants by EU programmes such as CEF

(whether conventionally or through blending) and by the EIB and other financing public

and private institutions and investors.



Expanding the use of

blending.

The provision of grants in combination of EIB, whenever appropriate through EU-backed

financial instruments, National Promotional Banks or private finance to projects aligned

with EU high value objectives is an appropriate support mechanism because many

infrastructure projects are on the margins of financial viability, and support solely

through EU-backed financial instruments, including "InvestEU" backed financial

products, would not be sufficient to deliver financial viability.

The blending approach allows the bulk of the finance to be provided privately,

minimising the overall public sector contribution in line with the goals of the Investment

Plan for Europe, improves the quality of the projects and their efficient delivery.

Furthermore, an emphasis on private finance and blending can catalyse changes in

investment strategies by Member States.

There is a strong case for the administration and allocation of grants (whether

conventionally or through blending) to be towards projects with high EU added value.

The proven way to deliver this is through centralised sector specific instruments such as

the CEF, through either blending calls or blending facilities, where the use of the CEF

budget ensures the fulfilment of the TEN priorities.

The update of the EU Financial Regulation includes legal text regarding blending and

blending facilities

. In addition, as part of the so called ‘Omnibus’, an amendment to the

current CEF Regulation to establish the possibility of a blending facility for one or more

of the CEF sectors, has been agreed. This approach can be tested in the current financial

period and then scaled up in the next period.

Blending seems also well suited for the integration of renewables into cross-border

action. Blending also seems particularly suitable for supporting broadband rollouts,

where only a small grant component could ensure full coverage of territories where

private investors alone would otherwise not go, or would favour locations within that

specific area.



Making use of

simplified forms of grants

The new Financial Regulation no longer requires grants to be expressed as a percentage

of eligible costs and grants may also be expressed as an absolute value, i.e. in a so called

notional approach.

The possibility to use simplified forms of grants will be ensured in

the new Regulation according to the provisions set out in the template basic act circulated

by DG BUDG. This includes notably provisions under Article 11 of the new Regulation

A cooperation framework established between the Commission and development or other public finance institutions

with a view to combining non-repayable forms of support and/or financial instruments from the Union budget and

financial support from development or other public finance institutions as well as from commercial finance

institutions and investors and be managed either by the Commission or by persons or entities implementing Union

funds pursuant to point (c) of the first subparagraph of Article 62(1)".

As further specified in Article 11 of the template basic act circulated by DG BUDG and in Article 180(1) of the new

Financial Regulation.

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specifying that co-financing rates will only apply where the work programmes foresee

grants calculated as a percentage of eligible cost.

Simplified forms of grants, for example in the form of voucher schemes, will continue to

be used to fund very high quality wireless local connectivity to local communities and

could be used for socio-economic divers in the future: connectivity vouchers are

envisaged to be used to provide Gigabit connectivity to specific entities with a public

mission, e.g. eHealth centres and practitioners, schools, local administrations. This will

directly and indirectly support important digitisation efforts, i.e. driving demand by

illustrating the benefits of advanced digital services, and potentially improving the

business case for wider network deployments in the respective areas.

Synergies

The design of the programme will allow synergies between sectors in a flexible manner

notably through the following changes.



The alignment of key provisions for the three sectors and the possibility to adopt

thematic work programmes

covering specific priorities of several sectors. The

possibility to adopt thematic work programmes between the three sectors will also

further facilitate coordinated synergy calls for proposals between the sectors, which

will enable CEF to specifically direct Union funding to shared areas of interests and

inter-sectoral horizontal priorities. The first thematic work programme could focus on

Connected and Automated Mobility for instance.

The

removal of the obstacles

that have hampered synergies in the current

programme. Under the current programme specific obstacles were identified, which

have hindered the exploitation of synergies in practice:

- Actions with synergies can be financed only if the components and costs of

such an action can be clearly separated per sector;

- Each component must be eligible under the specific sectoral guidelines which

each, independently, sets strict criteria;

- No dedicated budget line for synergies exists which would support actions

whose components cannot be separated per sector;

- Difference in programming timing (e.g. multiannual vs annual work

programmes).

Under the new programme, the Commission's global simplification measures will

notably facilitate the removal of the identified obstacles for synergies of the current

programme period. In particular, the above-mentioned possibility for dedicated

synergy work programmes as well as simplified provisions in the basic act will

enable synergies among the three sectors. As the new Regulation would only refer to

generally applicable maximum co-funding rates in all three sectors and gives the

possibility to specify additional eligibility criteria in the calls for proposals, the new

Regulation offers more flexibility through the delegation of provisions to the work

programme level.



more flexible definition of eligible actions

in the new Regulation allowing to take

into account some elements in synergy with other elements eligible under CEF or

contributing to the policy goals on in the transport, energy or digital sectors.



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Sustainability/climate proofing of projects

The climate proofing (both mitigation and adaptation aspects) of ESIF major projects has

been successfully implemented within the 2014-2020 period. Furthermore, individual

MS/regions devised their national/regional approaches to strengthen the sustainable

dimension of EU co-funded infrastructure projects

. In view of this experience and the

sustainable development requirements of the TFEU (Art. 11), the CEF funding should

better integrate the sustainability/climate proofing into its operation, irrespectively of the

sustainable nature of its project portfolio.

Any system to be designed should be relatively simple and should not entail excessive

costs and be made-to-measure for specific types of projects.

Climate proofing of investments made under the CEF will aim at ensuring continuity of

services in case of extreme weather events (minimisation of disruption of transport

services, security of energy supply and security of network stability). The increase in

weather related risks caused by climate change should also be taken into account, using

sector specific and the best available information. For investments made under the CEF,

negative externalities related to climate and other environmental risks can be taken into

account in the overall project risk assessments and mitigation strategies during planning

and development phases. For larger infrastructural systems such as energy network

systems, transport systems or broadband infrastructure, a climate proofing exercise

would include both damages to the infrastructure itself and losses due to projected

operational down-time.

5 H

OW WILL PERFORMANCE BE MONITORED AND EVALUATED

Compared to CEF 2014-2020, a simpler but more robust performance framework will be

put in place to monitor the achievement of the Programme's objectives and its

contribution to the EU policy objectives. Performance monitoring will continue to be

carried out both at actions level and at programme level.

At actions level, the necessary data will be collected by INEA during the implementation

and evaluation of supported actions. The collected data will relate to the technical and

financial progress of the actions. To this end, the conditions for applying for a grant and

the model grant agreement will contain proportionate requirements on applicants and

beneficiaries to provide the necessary data.

At programme level, in line with guidance from DG BUDG under the EU Budget

Focused on Results initiative and building on the work INEA has already undertaken on

improving output indicators during the current CEF programme (in accordance with the

findings of the mid-term evaluation), the new CEF Regulation will contain several high

level indicators based on each of the specific objectives with the measurement

mechanisms for these indicators being developed in advance of the implementation of the

new regulation.

As far as possible, the relevant criteria and approaches will be harmonised across all

MFF programmes. As far as possible, the mainstreaming methods of ESIF and CEF

Some examples can be found in the Report of the European Network of Environmental Authorities

–

Managing

Authorities (ENEA-MA) working group on

Mainstreaming the environment in cohesion policy in 2014-2020,

2016

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should be harmonised

. The table below sets out the high level indicators and provides

illustrative examples of possible measurement mechanisms.

Sectors

Transport

Specific Objectives

Efficient and interconnected

networks and infrastructure for

smart, sustainable and safe mobility

Indicators

Number of cross-border and missing links

addressed with the support of CEF (including

actions relating to urban nodes, maritime ports,

inland ports and rail-road terminals of the TEN-T

core network)

Number of CEF supported actions contributing to

the digitilisation of transport

Number of alternative fuel supply points built or

upgraded with the support of CEF

Number of blackspots addressed with the support

of CEF

Number of transport infrastructure components

adapted to meet military mobility requirements

Number of CEF actions contributing to projects

interconnecting MS networks and removing

internal constraints

Number of CEF actions contributing to projects

ensuring resilient gas network

Number of CEF actions contributing to the

smartening and digitalisation of grids and

increasing energy storage capacity

Number of CEF actions contributing to projects

enabling increased penetration of renewable energy

in the energy systems

Number of CEF actions contributing to

transnational cooperation in the area of renewables

New connections to very high capacity networks

for socio-economic drivers and very high quality

wireless connections for local communities

Number of CEF actions enabling 5G connectivity

along transport paths

Number of CEF actions enabling new connections

to very high capacity networks for households

Number of CEF actions contributing to the

digitalisation of energy and transport sectors

Energy

Contribution to military mobility

requirements

Contribution to interconnectivity

and integration of markets

Security of energy supply

Sustainable development through

enabling decarbonisation

Digital

Contribution to the deployment of

digital connectivity infrastructure

throughout the European Union

Regarding the climate and air quality related indicators, common headline indicators

would improve coherence and communicability of the CEF and should be developed in

the context of a Commission-wide coordinated approach in order to harmonise the

provisions with other programmes, including with regard to the climate mainstreaming

methods (on project/programme screening criteria/CBA, on tracking, on KPIs, on

reporting). As regards indicators for air quality and emission reduction

, they should

include emissions of PM 2.5 in kg/year and emissions of NO2 (or NO2 equivalent in the

case of NOx) in kg/year, before and after the project.

For example on delivery mechanisms, project/programme screening criteria/CBA, on tracking, on KPIs, and on

reporting.

There is the European Court of Auditors' recommendation for quantification of environmental benefits (notably in

transport projects co-funded by the EU, even if these are only secondary objectives of projects).

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These indicators will allow monitoring and evaluating implementation and progress of

the Programme towards the achievement of its objectives. A mid-term and an ex-post

evaluation of the programme will be carried out in conformity with Article 34 paragraph

3 of the Financial Regulation and, based on the implementation and output indicators,

assess the efficiency, effectiveness, relevance, coherence and value added of the

programme. Where available, results and impacts indicators will be taken into account

The Commission will communicate the conclusions of the evaluations accompanied by

its observations, to the European Parliament, the Council, the European Economic and

Social Committee and the Committee of the Regions.

For investment in large infrastructures, results and impacts can only be measured after several years of operation.

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NNEX

1: P

ROCEDURAL INFORMATION

Lead DG(s)

Directorate-General for Mobility and Transport (DG MOVE), Directorate-General for

Energy (DG ENER) and Directorate-General for Communications networks, Content and

Technology (DG CNECT).

Organisation and timing

The preparations for the CEF programme in the 2021-2027 period were undertaken in

accordance with the guidance received from central services as part of the overall

preparations for the Multiannual Financial Framework for 2021

–

2027. A drafting

working group was established by the three parent DGs to prepare the CEF proposal,

comprising the legislative proposal and the accompanying impact assessment. The

Secretariat General set up an Inter-Service Steering Group (ISSG) for the CEF proposal

for the 2021-2027 period, gathering representatives of different Directorates-General of

the Commission. Two meetings (26 February and 16 March) were held prior to

submission of the Staff Working Document containing the impact assessment to the

Regulatory Scrutiny Board in March 2018.

Consultation of the RSB

An informal upstream meeting was held on 9 January 2018 with RSB representatives

During this discussion Board members provided early feedback and advice on the basis.

Board members' feedback did not prejudge in any way the subsequent formal

deliberations of the RSB. The initial draft of the impact assessment was submitted to the

Regulatory Scrutiny Board on 21 March 2018. Scrutiny took place at the Board meeting

of 18 April 2018 and a positive opinion with reservations was issued on 21 April 2018.

The table below demonstrates how each of the Board’s recommendations were taken into

account.

Main considerations of RSB

The report is too vague regarding

the changes and extensions to the

programme’s

scope

intervention, in particular in the

digital pillar. It does not

demonstrate

that

extensions

clearly

target

cross-border

solutions.

Revisions

A table summarising the changes of scope has been

added at the beginning of section 3. In addition, a

table illustrating the linkage between the challenges,

objectives and delivery of the programme has been

added to section 4.3. The drafting throughout the text

on the extension of scope to renewables and digital

has been further elaborated and a standalone annex on

the digital sector is now included.

Additional drafting has been provided in section 2.1

on the third challenge regarding complementarity.

Furthermore, a table has been inserted in section 4.3

summarising

the

key

aspects

concerning

complementarity/coherence with other funds.

It is not always clear how the

fund will ensure that its

interventions are coherent with

those of other programmes, such

as the structural funds or

InvestEU

The report does not sufficiently

Section 5 has been redrafted to better reflect the

develop

arrangements

for

monitoring and evaluation arrangements for the new

monitoring and evaluation.

programme with the proposed new indicators detailed.

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Evidence, sources and quality

In addition to the evaluation of the public consultation, data collection and evidence

stems from:



The mid-term evaluation of the CEF Programme 2014-2020

Progress report on implementation of the TEN-T network in 2014-2015

The impact of non-completion of the TEN-T network in terms of growth and jobs

The independent full-scale evaluation of the pilot phase of the Europe 2020 Project

Bond Initiative

Communication on 'Building the transport core network: core network corridors and

CEF’

Study on the impact on growth and jobs realised through the realisation of the TEN-T

core network

Communication on the mid-term review of the MFF 2014-2020

Study on the long term sustainability of Digital Service Infrastructures

Study on the maturity of the Digital Service Infrastructures supported by the CEF

Assessment of the alternatives for, market sentiment towards, and recommendation of

the most effective financial instrument(s) for the CEF broadband activity

Ex-post evaluation of the TEN-T 2007-2013 programme carried out in 2017

Preliminary results of Study on permitting & facilitating the preparation of TEN-T

core network projects

Investment needs in trans-European energy infrastructure to 2030 and beyond

Cost-Effective financing structures for mature projects of common interest (PCIs) in

Energy

TEN-E evaluation - Annex to the Staff Working Document accompanying the

Commission Delegated Regulation (C(2017) 7834)

Evaluation of the impact of PCI implementation

ENER A4 study for next MFF: Evaluating the structure of EU Financing of Energy

under the current MFF and assessment of options for structuring EU financing of

energy under the next MFF, Final Report prepared for DG ENER, January 2018,

Vivideconomics, Ramboll

Expert stakeholder meeting on cross-border renewables cooperation on 5th March

2018 in Brussels (cf. annex).

ECA special report 31/2016 on climate mainstreaming and the COM replies:

https://www.eca.europa.eu/en/Pages/DocItem.aspx?did=39853

CLIMA consultants' report on climate mainstreaming in the next MFF:

https://publications.europa.eu/en/publication-detail/-/publication/1df19257-aef9-11e7-

837e-01aa75ed71a1



Expert stakeholder Consultation workshop on Green-ICT on 30th January 2018 in

Brussels



Expert stakeholder Consultation workshop on the Internet of Energy held on 26th

February 2018 in Brussels



- Expert stakeholder consultation workshop on integration of cross-border renewables

held on 5th March 2018 in Brussels

kom (2018) 0438 - Ingen titel

NNEX

2: S

TAKEHOLDER CONSULTATION

1. O

PEN

UBLIC

ONSULTATION

This report presents the results of the online public consultation, organised as part of a

series of public consultations covering the entire spectrum of EU future funding. While

the public consultation covered the topic of strategic infrastructure funding (comprising

CEF, Galileo and ITER), this report will analysis the CEF focused results. The

consultation was launched on 10 January 2018 and remained opened for a period of 8

weeks, until 9 March 2018.

1.1 Respondents

The questionnaire’s

initial section collected background and contact information on the

respondents. A total of 441 responses were received, which led to a total of 424 when the

Galileo related responses were removed. There was at least one response from every

Member States as well as 8 responses from outside of the EU (Switzerland, FYROM,

Bosnia and Herzegovina and the USA). Respondents were asked to which topic their

questionnaire referred and Table 1 illustrates the breakdown of responses per CEF sector.

Table 1: Breakdown of responses by CEF sector

Relevant CEF sector

Number of

respondents

107

248

424

Digital

Energy

Transport

Total

16%

25%

58%

100%

Of the total number of responses, 63 respondents identified themselves as individuals

responding in a personal capacity while 361 identified themselves as responding in a

professional capacity or on behalf of an organisation. Table 2 provides a breakdown of

responses by Member State and respondent type. The large number of responses from

Belgium can be explained by the fact that many EU representative associations are based

there. A significant number of responses from logistic companies based in France

accounts for the high number of responses received from France. The geographical

breakdown was quite evenly spread across each sector with 21 Member States

represented in digital responses, 22 Member States in energy responses and 25 Member

States in transport responses.

Table 2: Breakdown of responses by Member States

Country

Austria

EU-Members

States

Belgium

Bulgaria

Individuals

Professional

Capacity/Organisations

Number of

Respondents

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Croatia

Cyprus

Czech Republic

Denmark

Estonia

Finland

France

Germany

Greece

Hungary

Ireland

Italy

Latvia

Lithuania

Luxembourg

Malta

Netherlands

Poland

Portugal

Romania

Slovakia

Slovenia

Spain

Sweden

United Kingdom

Bosnia and Herzegovina

FY Republic of Macedonia

Non EU-MS

Switzerland

USA

Total

361

424

Responses were received for a wide variety of entities as detailed in Table 3. Responses

to “Other” included state owned companies such as railway undertakings and energy

operators as well as region groups and financial organisations.

Table 3: Breakdown of responses by type of organization

Type of organizations represented

International or national public authority

Non-governmental organisation, platform network

Private enterprise

Number of

respondents

117

14%

28%

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Professional consultancy, law firm, self-employed consultant

Regional or local authority (public or mixed)

Research and academia

Trade, business or professional association

Other

Total

424

14%

13%

15%

100%

1.2 O

VERVIEW OF RESULTS

1.2.1 Policy challenges

When asked to rate the importance of the policy objectives, respondents considered the

transition to a low carbon and climate resilient economy and society, the transition

towards clean, competitive and connected mobility, completion of the TENs and

promoting economic growth and jobs across the EU as the most important challenges.

Respondents for the transport sector were more inclined to indicate the specific transport

related challenges as very important or rather important (the transition to a low carbon

and climate resilient economy and society (98%), completion of the TENs (91%) and the

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transition towards clean, competitive and connected mobility (98%). Energy respondents

confirmed the importance of completion of the TENs (84%), the transition of EU energy

and need for ensuring security of supply (92%) and developing new energy sources for

the EU (86%) while also recognising the challenge of transitioning to a low carbon and

climate resilient economy and society (94%). Digital sector respondents identified the

Transition to Digital Single Market (96%) and promoting economic growth and jobs

across the EU (94%) as the two most important challenges, closely followed by

Completion of the trans-European networks in the third place (93%).

When asked to address other policy challenges, just over 64% gave no answer or no

opinion. Of those who did believe other challenges existed, transport respondents

identified urbanisation, territorial accessibility and cohesion (in particular for peripheral

regions), removal of bottlenecks and barriers, and funding (i.e. lack of funding, and

insufficient access to funding for local and regional authorities). A large number of

French logistics companies listed Logistics & Infrastructures as the main policy

challenge. Other issues raised include climate change and clean transport, transition

towards a circular economy, development of interoperable digital traffic management

systems, waterborne transport and digitalisation of maritime transport, integration of

transport modes, and funding of transport projects outside the EU.

When naming additional policy challenges that such programmes/funds could address,

several energy stakeholders stressed the value in promoting energy efficiency and energy

savings including in the context of cohesion programmes. Some suggested the need for a

better integration of power and gas sectors and the possible role for biogases/ hydrogen

and the need for suitable infrastructure. Specifically for gas infrastructure, some

stakeholders considered it as essential for helping the EU in achieving its energy targets

while some stressed that the EU should not invest in fossil fuel infrastructure. Some

stakeholders highlighted the importance of investing in renewable energy sources and in

this context of making full use of existing cooperation possibilities in the area of

investments in renewable and electricity trade between countries. The integration of

decentralised energy sources and the support for the deployment of smart grid solutions

was highlighted by some stakeholders, as was the emphasis on the support of research

and innovation to further optimise the grids. The commitments under Paris Agreement

were raised by some of the respondents, a couple of whom underlined the role of nuclear

power.

Answers from the digital sector respondents highlighted the need to support high speed

connection and development of digital networks, especially in economically weaker areas

where connectivity greatly improves employment opportunities. The responses call for

intervention to speed up the transition to Digital society, to build up digital capabilities

and make them available to users in all areas, including the poorer and less populated

regions.

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When asked to what extent CEF successfully addresses the challenges listed

and when

respondents were most positive towards the following challenges: promoting economic

growth and jobs across the EU (either fully addressed or fairly well addressed - 65%) and

completion of the TENs (62%). Respondents were fairly neutral towards the transition to

a low carbon and climate resilient economy and society (51% either fully addressed or

fairly well addressed); the transition towards clean, competitive and connected mobility

(50%); the transition of EU energy and need for ensuring security of supply (52%).

Respondents were less positive towards the extent to which the following challenges are

being addressed; Implementation of the Digital Single Market (42% to 58%) and

development of new long-term energy sources (34% to 66%).

The majority of transport respondents considered the transport-focused challenges as

being fully addressed or fairly well addressed; completion of the TENs (67%), the

transition to a low carbon and climate resilient economy and society (54%) and the

transition towards clean, competitive and connected mobility (58%).

Energy respondents believed completion of the TENs to be the challenge mostly

addressed by the current programmes/funds (65% of the respondents said that it was fully

or fairly well addressed) with promoting economic growth and jobs across the EU (58%)

No opinions were removed for the analysis of this question.

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and the transition of EU energy and need for ensuring security of supply (55%) following

behind. Only 35% of energy respondents considered CEF to be addressing the challenge

of development of new long-term energy sources.

Digital sector respondents identified the Implementation of the Digital Single Market as

the challenge mostly addressed by the current programmes/funds (54% of the

respondents said that it was fully or fairly well addressed). Promoting economic growth

and jobs across the EU was voted in second place (47%), while completion of the TENs

stands as the third mostly addressed challenge by current programmes/funds (43%).

1.2.2 Added value

The figure above illustrates that a majority of respondents (76%) believe that CEF adds

value compared to what could be achieved at national, regional or local level. The figure

rises to 80% when looking at transport respondents only, decreases slightly to 74% for

energy respondents and further to 65% for digital respondents.

When asked to explain how the current programmes/funds add value compared to what

Member States could achieve at national, regional and/or local levels, a large number of

transport respondents listed green and sustainable transport and transnational and cross-

border transport infrastructure, in particular rail, as the two areas where CEF funds added

most value. Territorial cohesion and access to isolated regions were also seen as areas

were EU funds played an important role. One respondent pointed out that the importance

of local and regional authorities in the establishment of the trans-European transport

network had been "legitimised" via the corridor fora. The CEF was also seen as playing

an important role in contributing to the development of inland waterways, the

implementation of common standards and technologies in Europe (e.g. rail

interoperability, intelligent transport, ERTMS), fostering innovation and new

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technologies, and promoting road safety. A few respondents highlighted the importance

of cities, noting that CEF funding for urban nodes was largely insufficient.

The vast majority of the energy sector respondents confirmed the added value of the

program stating that EU funds play a crucial role in enabling the implementation of EU

policies by financing actions that the Member States would not have been otherwise able

to fund on their own. Moreover, most of the respondents highlighted the fact that the

program finances cross-border projects that in many cases are of lower priority for the

Member States as well as of much higher risk, but which at the same time yield

significant welfare benefits for the European citizens.

Digital respondents mentioned the unification of infrastructure, which results in the cross

border interoperability and contributes to the sustainable, inclusive economic growth and

cohesion within the European Union. Some more specific achievements of the CEF

programme, which would not have been at place with only national funding at disposal,

were mentioned.

1.2.3 Objectives

When asked is there a need to modify or add to the objectives of the programmes/funds

in this policy area and if yes, which changes would be necessary or desirable, a large

number of transport respondents called for increased funding for low-emission mobility,

promoting a modal shift from road to sustainable modes of transport, including

waterborne. Respondents suggested that sustainability should be better integrated as a

selection criterion, and that the term "EU added value" should be more clearly defined.

Some respondents also called for EU funds to be made available to fund local public

transport and to promote regional projects, in particular in peripheral regions. They

argued that EU funding for transport infrastructure at the heart of urban nodes is too

limited. A number of respondents also argued that, as ports are transnational in nature;

their co-financing rate should be raised from 20% to 40%.

The majority of energy respondents were of the view that the concept of synergies

between the three sectors should be reinforced with particular emphasis on the

combination of energy and digital infrastructure elements. In the same vain, some of the

participants raised the issue of sector coupling and how the programme could extend in a

way to address this emerging need. Moreover, some of the respondents highlighted the

role that green gas could play in the energy transition and suggested that CEF’s

objectives could extend to the deployment of new carbon-neutral technologies, while

others proposed exploring opportunities for a Trans-European Network for Green

Infrastructure ("TEN-G").

Digital respondents highlighted the necessity to commit more funds to increase

connectivity (including creation of a dedicated fund for Broadband), and reduce the

digital gap between rural and urban areas. Highly specific technical suggestions on

changes in procedures or regulations were also submitted.

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1.2.4 Obstacles

The most prominent obstacle identified by respondents by quite some margin was

complex procedures leading to high administrative burden and delays (65% chose to a

large extent or to a fairly large extent). The second most important challenge was the lack

of flexibility to react to unforeseen circumstances and new user needs (53%) while the

third was insufficient synergies between EU programmes/funds (51%). The lowest

scoring obstacles were limited information on the selection process (39%) inadequate co-

financing rates (41%) and difficulty to ensure the sustainability of projects when the

financing period ends (43%).

When looking at transport respondents only, the figure for each obstacle was higher and

in particular for complex procedures leading to high administrative burden and delays

(70%), lack of flexibility to react to unforeseen circumstances and new user needs (59%

as opposed to 53% overall) and insufficient administrative capacity to manage

programmes (56% compared with 50% overall). On the other hand, for energy

respondents the figure was lower for each obstacle with only complex procedures leading

to high administrative burden rated as an obstacle by over half of energy respondents

(61%). The next most important obstacle for energy respondents was and insufficient

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administrative capacity to manage programmes with 41% of respondents rating it at to a

large extent or to a fairly large extent. The most important obstacles for digital

respondents were complex procedures leading to high administrative burden and delays

(72%), the difficulty of combining EU actions with other public interventions (61%) and

insufficient synergies between EU programmes/funds (54%).

Only 26% of respondents identified other obstacles. For transport respondents, further

flexibility in the eligibility criteria of CEF calls was requested by several stakeholders as

well as more flexibility to the programme generally such as with regards to the

requirement for Member State approval of applications and the facilitation of synergies

with other sectors. Some stakeholders raised the administrative burden at Member State

level in the implementation of the CEF programme as well as requesting further clarity

regarding the timing of calls. The importance of grants was highlighted as well as the

need for an increased budget given the large oversubscription in the current programme.

A few stakeholders requested exemption for the national co-financing element from the

Stability and Growth Pact rules.

A commonly identified obstacle for energy respondents was the timing of the calls. More

specifically, the respondents stated that they should be given more time to prepare their

application and asked for more flexibility with the deadlines. Some of the participants in

the survey mentioned that more clarity regarding the eligibility criteria is required, while

very often it is difficult for them to identify the right person that could provide them with

all necessary information.

When stating other obstacles, digital respondents referred to general issues such as the

complex procedures, the lack of flexibility or the lack of knowledge of the local

authorities as well as the insufficient funding for CEF and Broadband and the low

priority of the disadvantaged areas.

1.2.5 Simplification and reduction of administrative burden

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The majority of respondents believed that simplification and reduction in administrative

burden could be reduced with fewer, clearer, shorter rules (79% to a large or fairly large

extent), the alignment of rules between EU funds (73%), more effective stakeholders’

involvement in the programming, implementation and evaluation (72%), more flexibility

of resource allocations to respond to unexpected needs (69%) and sufficient flexibility

between programming periods (63%). The results were fairly similar across all sectors.

Over 77% respondents gave no opinion or no answer to specifying another possible

method. Of those who did provide suggestions, a number of transport respondents called

for more foreseeable timetables for CEF calls, more even distribution of funds over a

funding period, and more direct involvement of regional authorities in the programming

and implementation of the CEF. They suggested that feedback be given directly to

applicants rather than via the Member States. They asked for pre-financing opportunities

or more financial support dedicated to the development phase of projects. One

respondent suggested that allowing more lead time for applying for funding would be a

way to reduce administrative burden, as it would allow the work to be spread over a

longer time period.

Respondents also pointed out that a two-stage application process (like in H2020 or

Interreg) could significantly reduce the burden on applicants. They suggested that a

simplified proposal could be submitted during the first phase, with more detailed

proposals only required during later phases. Respondents called for simpler procedures,

uniform rules across the various EU funds, and greater flexibility at project level.

Other proposals included broader stakeholder involvement, a one-stop-shop for

infrastructure projects, and translation of documents in all EU languages. A couple of

respondents asked for the publication of a Eurostat Guidance on the statistical treatment

of concession contracts. It was also recalled that the SGP rules represented a heavy

constraint on Member States' co-financing capacity.

Referring specifically to ERTMS, a large French company pointed out that the duration

of the GA is not enough to cover the cycles related to public procurement procedures.

They also called for CEF grants to be paid on the basis of an interoperability

demonstration rather than submission of the file to the National Safety Authority.

Most of the energy respondents suggested that more effective stakeholders' involvement

in the programming, implementation and evaluation process could lead to further

simplification of the current program and reduction of the administrative burdens for

beneficiaries. They also proposed that fewer, clearer and shorter rules as well as more

flexibility of resource allocation to respond to unexpected needs could be a solution to

the various procedural complexities. One of the additional suggestions submitted by the

energy sector respondents is the division of the grant application process into two steps:

the first for the identification of the eligible projects and the maximum amount of fund

likely to be granted and the second for the actual award of the grant. A few respondents

proposed the simplification of the (regulatory Cross Border Cost Allocation

–

CBCA)

process as well as the acceleration of the applications' evaluation phase.

Both segments agree that fewer, clearer and shorter rules would simplify to a large or

fairly large extent current programmes and funds, reducing administrative burdens for

beneficiaries. In second place, both elected more effective stakeholder's involvement in

the programming, implementation and evaluation. In third place, again the segments

agree on the alignment of rules between EU funds as an initiative that would simplify the

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current programmes and funds. Respondents are divided on question whether more

reliance on national rules would simplify the administrative burdens. Not at all or to

some extent only, was the opinion of 49% of both segments, as opposed to 37% of digital

and 32% of overall respondents meaning that more reliance on national rules would lead

to simplification at a large or fairly large extent.

Digital respondents mostly referred to simplification of procedures on the EU side and to

greater involvement of the local actors on the MS level in early phases of drafting, as

well as later in the implementation phase. A call for a dedicated fund for Broadband was

made, as well as the necessity to introduce more flexibility of expenditure eligibility.

1.2.6 Synergies

When asked how could synergies among programmes/funds in this area be further

strengthened to avoid possible overlaps/duplication and whether for example,

grouping/merging some programmes should be considered, to a large extent the

respondents concurred that keeping the transport, telecom and energy sector together

seems appropriate in light of their common goals and challenges but that a separate pillar

per sector seemed appropriate given particular circumstances.

Respondents requested that greater coherence be provided between CEF and

complementarity funds such as Horizon 2020 and ESIF through clarifying the perimeter

of the various funds. Some of the respondents suggested the establishment of a "one-

stop-shop" approach by which a project developer could enter data once on a single

portal and apply for funds from various programs, while others stressed the importance

of just better coordination and alignment between the various EU and national funding

programs. On the other handsome respondents sceptical about the grouping/merging of

programs stating that this might create ambiguity.

Several respondents mentioned the limited success of harnessing synergies in the current

CEF programme and stressed the importance of emerging needs such as decarbonisation

and digitalisation. Thematic cooperation and building on the lessons learned from the

CEF Synergy Call 2016 was encouraged by several respondents in order to make the

most efficient and effective use of the CEF instrument. Joint work programmes on

common themes across sectors was suggested for instance. Several respondents also

suggested that greater flexibility and simplification of rules could help to foster further

synergies.

1.3. P

OSITION

APERS

84 respondents of the OPC offered additional contributions in the form of a position

paper. Position papers were submitted by

'non-governmental organisation' (28), 'trade,

business or professional association'

(18),

'private enterprise'

(15);

'regional or local

authority (public or mixed)'

(12), and

'international or national public authority'

(5),

'research and academia'

(1), and

'professional consultancy, law firm, self-employed

consultant'

(1).

Among all received position papers, 23 focused particularly on the transport pillar of

CEF and commented on this matter. Furthermore, 15 respondents used the opportunity to

provide more targeted input regarding the role of CEF to the energy systems, while five

other position papers were strictly dedicated to issues concerning the digital sector. All

the remaining documents took a more general approach, either targeting multiple sectors

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of CEF activity at once, or highlighting the importance of other topics. Below follows an

overview of the key remarks made by respondents, divided by the sector of activity.

1.3.1

Transport

In addition to highlighting the importance of investment in specific (missing) links, cross

border sections and bottlenecks of particular interest to certain stakeholders, increasing

co-financing rates, and calling for an increase in the overall CEF budget compared to the

current programming period, several other issues were raised by stakeholders issued.

These were as follows:



Increasing the availability of DG MOVE and INEA to provide advice as part of

the development and at different stages of CEF implementation

Allowing access to CEF grants for initiatives such as cross border metro / light

rail and short sea shipping vessels (where waterborne transport is the only

connection within the TEN-T) as well as increasing funding opportunities for

ports, in particular, LNG bunkering facilities;

Making calls for proposals more predictable, simplifying application procedures,

and increasing the transparency regarding the final selection of projects;

Incentivizing 'green and clean' projects (e.g. by increasing co-financing rates,

adopting a climate rating methodology);

Recognizing cycling as a major mode of transport in the new financial

frameworks and support the implementation of those measures included in the

EU’s new Road

Safety Programme 2020-2030 which have the highest lifesaving

potential;

Further improving and facilitating cities’ involvement in TEN-T

governance, and

stimulating cooperation between all relevant public and private sectors.

Energy



1.3.2

In the position papers received for the energy programs, stakeholders recognised the

importance of the CEF for the development of transmission projects with high net

benefits at EU level but also with high investment costs due to the technology required to

minimize environmental and social impact. On the other hand, there was criticism about

the eligibility criteria for not being clear enough in the case of grants for works and in

terms of the CBCA decision for being rather restrictive. Stakeholders from the Baltic

region stressed the role of CEF in strengthening security of supply, highlighting the

significance of the projects contributing to the Baltic synchronisation and the

diversification of the region's natural gas sources.

Other energy stakeholders stressed the potential of biomethane in countries like France

and its contribution to sustainable development objectives as well as the benefits of

offshore wind power. Furthermore, there was a paper suggesting the introduction of a

Full Lifecycle Cost Management (FLCM) method that could master and estimate the cost

of the plant operation and electricity cost, while an energy stakeholder provided insight

into the macro-trends of the changing energy system

–

including decarbonisation,

digitalisation, decentralisation, sector coupling and uncertainty

–

and how the next

generation of EU energy infrastructure policies can successfully adapt concluding that

financing flows should be channelled towards the low carbon infrastructure of the future.

Finally, there have been submitted a number of position papers arguing in favour of

investing in energy renovation of buildings in the post-2020 EU Multiannual Financial

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Framework, highlighting the benefits to the local economies and the environment and

suggesting among other things that the new CEF should enable investments in efficiency

in demand- and supply-side infrastructures, in particular where they have the potential to

avoid unnecessary network investment.

1.3.3

Digital

The position of the stakeholders from the digital sector were aligned on the requirement

for an increased EU investment in the state-of-the-art digital infrastructure, as it is a

catalyst to all other economic sectors' growth. Connectivity was regarded as central to

participation in the economy and society, and they pinpointed that a proper infrastructure

including broadband and 5G will set up Europe as a serious player in the global digital

economy.

1.3.4

General

Most notably, many of the received position papers elaborated on the importance of

environmental protection and the need to incorporate it into CEF's objectives. Other

stakeholders highlighted aspects related to multiple CEF pillars including:



Existing railway infrastructure should be given priority in EU programmes, and

most of all in CEF. There was a call for the establishment of a Shift2Rail 2.

Spending on energy and transport infrastructure should prioritize projects of

cross-border nature that deliver EU added value and which explicitly support the

EU’s climate and energy policies

Investment in vehicle charging infrastructure should be increased, along with

ensuring that electrification projects of public transport systems are eligible for

support.

Green hydrogen economy, sustainable mobility, and autonomous mobility are

emerging markets and need (experiment) space in the existing EU legislation to

make public-private partnerships possible without tendering and state aid issues.

The Digital sector was highlighted as was the need to increase competitiveness of

the EU through connectivity across EU with strong focus on rural

Also, connectivity, 5G and interventions in these fields are seen as the key factor

improving economic performance, promoting qualitative leaps and generating

jobs in the EU

Furthermore, the stakeholders stress the contribution of digitalization, as well as

the importance of the synergies between the TENs. Consequently, digitalization is

considered one of the key elements to be supported by EU investments

4. S

PECIFIC CONSULTATIONS TO REINFORCE SYNERGIES BETWEEN THE THREE SECTORS

In addition to the online public consultation - organised as part of a series of public

consultations covering the entire spectrum of EU future funding - specific expert and

stakeholders consultation workshops where organised to reinforce synergies between

sectors.

4.1 Expert stakeholder Consultation workshop on Green-ICT on 30th January 2018

in Brussels

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The take-up of emerging ICT technologies and paradigms (e.g. IoT, Could Computing,

Big Data, Data Analytics, etc.) has contributed to the modernisation of our economy,

from transport to manufacturing. However, this also meant that the energy consumption

of the ICT sector itself (in particular data centres and networks) is drastically increasing.

To reduce the carbon footprint of the ICT sector is a necessary condition in order to

achieve the EU climate and energy goals. The experts considered action on both

infrastructure and cross-border services. On infrastructure they recommended:

Support the creation of an EU wide cross-border govCloud based on Open technologies

to pool together resources contributed by various MS public sector including both

sharing and hosting infrastructure. Support the deployment of cross border broadband

high capacity low latency connectivity infrastructure as a necessary condition for the

deployment of the EU-wide govCloud.

Create an EU network of data centres (the govCloud) connected cross border to the smart

grids of the neighbouring countries. Provide cross-border connectivity in areas that are

ideal locations for data centres (e.g. regions rich in renewable energy sources and/or

possibilities for heat reuse but no connectivity), while analysing and identifying other

areas in the European network requiring more bandwidth and access points. This would

give data centres the option to locate in optimal areas helping them reduce their

environmental footprint.

On the cross border services, they proposed the deployment of EU wide data platforms.

Examples are a platform to collect energy consumption reports and a cross-border

platform to exchange cybersecurity information and best practices.

4.2 Expert stakeholder Consultation workshop on the Internet of Energy held on

26th February 2018 in Brussels

Expert's recommendations can be classified in two groups. Firstly to support digital e-

platforms providing energy related information services. These would facilitate the

development of the EU energy market in general and more optimal use of renewable

energy production across Europe. Secondly, they stressed there is a need to deploy digital

infrastructures to optimise the energy interconnections amongst the EU member states.

On Digital energy-services e-platforms, there was general agreement that creating a new

renewable energy availability e-platform, forecasting generation across the EU, providing

predictive information on renewable energy availability across the EU to generators,

TSOs, DSOs, aggregators, and other energy market players, would open new

opportunities for interaction and service sharing. It would increase market transparency

and asset optimisation across the energy value chain and facilitate more optimal use of

renewable energy generation capacity throughout the EU. It would enable better

information flows about energy resource availability and would result in more efficient

use of energy resources and interconnection capacity across borders.

Other platforms were also proposed e.g. on cybersecurity and on simulation to monitor

and predict the evolution of all aspects the EU energy market.

On Digital infrastructures, the interconnection of Smart Grids operating in different MS

is already happening at TSO level and they recommended more coordination between the

TSOs and DSOs and also amongst DSOs. The there is a need for more integration of the

distribution grid and the transmission systems and more interconnections at lower

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voltage levels to enable digital and physical interconnections at the distribution level and

across international borders in the future.

Also, there are synergies to be exploited amongst the telecoms, energy and transport

sectors in terms of digitalisation and infrastructures. Close collaboration amongst these

sectors is needed in order to use resources efficiently and effectively to build a

framework that will support the development of new value added services connecting the

three pillars of IoT, 5G networks and the Internet of energy (IoE). This needs to be a

done in a way that is open and compatible at the EU level.

4.3 Consultation to MS on Connected and Automated Mobility (CAM)

April 2016

the Dutch Presidency organised an informal transport council during

which the Amsterdam Declaration was presented and endorsed by all Member States. It

focuses on cooperative driving and automated vehicles.

The Dutch ministry organised two High Level Dialogues to follow-up on the goals set

out in the Amsterdam Declaration. As a result, 27 Member States plus Norway and

Switzerland signed on

23 March 2017

in Rome the Letter of Intent on cross-border

demonstration and testing of CCAM.

Extensive consultations with Member States took place to identify possible cross-border

corridors and during the High Level meeting in Frankfurt and the Round table on CAD

(14-15

September 2017),

six cross-border initiatives were announced by Member States:



–

LU: Metz-Merzig-Luxembourg



–

BE: Rotterdam-Antwerp-Eindhoven;



–

PT: Porto-Vigo and Merida-Evora (corridor Lisbon

–

Madrid);



–

NO: The E8 "Aurora Borealis" corridor between Tromsø (Norway) and Oulu

(Finland);



The "Nordic Way" between Sweden, Finland and Norway.

The Commission is aiming at having more concrete progress on these corridors and

having some additional corridors announced in the frame of the Digital Day 2 high level

event on 10 April 2018 in Brussels.

The policy context



This is in line with other Commission initiatives including GEAR2030 (managed

by DG GROW, having provided stakeholder recommendations to the

Commission in October 2017), the work of DG MOVE on C-ITS (Cooperative

Intelligent Transport Systems, aiming at a Delegated Act scheduled for the end of

2018 providing technical and organisational specifications for deployment) and

the Communication on CCAM scheduled for 2 May 2018 as part of the third

Mobility Package.

CCAM has been identified as a promising (flagship) application enabled by the

future deployment of 5G networks, e.g. in the 5G Action Plan. The Commission

has further proposed that all main EU transport paths be covered by 5G services

by 2025 (Communication on connectivity for the gigabit society). Where 5G

infrastructure is deployed, it will provide uninterrupted coverage for relevant

CCAM services across the full corridor.



kom (2018) 0438 - Ingen titel



CCAM will figure prominently in the 3

mobility package that the Commission

intends to adopt on 16 May this year. This package will come two weeks after the

adoption of the data package and the Communication on Artificial Intelligence,

both extremely relevant for the automotive sector. By the end of the year, we will

also adopt the cyber security package. It will complement the related C-ITS

legislative approaches by giving guidance how to provide overall security,

concerning different strands of possible attacks to the moving vehicle.

4.4. Expert workshop on the extension of scope towards cross border cooperation on

Renewables on 5

March 2018 in Brussels

A stakeholder workshop

"Towards a more Europeanised approach to Renewables' policy

–

a possible instrument to support cross-border cooperation on renewables in the MFF

post-2020"

took place in Brussels, 5 March 2018 in order to support the analysis of this

part of the impact assessment. The expert stakeholder event gathered around 60

participants, including representatives from 12 EU Member States and the Energy

Community, TSOs, utilities, industry umbrella organisations NGOs, think tanks and

consultancies. The purpose was to allow stakeholders to express their views on the merits

and design of an enabling instrument for renewables regional cooperation. Questions for

discussions focussed on persistent barriers, main criteria to assess the EU added value,

delivery mechanisms and innovation.

Main outcome of the discussion:

•

The benefits of having a more coordinated approach to renewables planning and

deployment are uncontested, but at the same time barriers are preventing cooperation to

happen.

•

Member States face a basic conflict between achieving greater cost efficiency

through cross-border cooperation (but potentially having to trade-off with RES

investments and benefits occurring in another country) and public acceptance and

preference for investments at home (but then losing out on potential gains from

cooperation),

•

Setting up cross-border cooperation on renewables is complex, lengthy and might

benefit from facilitating action by EU. Ambition in first cooperation projects was even

too high (Kriegers Flak planned to involve 3 MS, meshed DC grid still as long-term

ambition).

•

Financial support (comprising financial instruments and grants) for renewables

projects of European interest is very important as to provide an incentive to overcome

Member States preference for national planning and national deployment of RES

capacity. It fosters the Europeanisation of RES policies and support.

•

Support in the form of grants for technical assistance and studies is a useful EU

intervention to help lower the high upfront costs related to setting up the coordinated

action. There is also a need for EU first loss instruments, equity and guarantees to lower

the high risk of cross border RES projects.

•

With regard to flagship projects under such an instrument, there is a need of

learning from experiences acquired with the EEPR and TEN-E interventions with regard

to innovation, consistency with the environmental acquis and the need to facilitate also

kom (2018) 0438 - Ingen titel

combinations of technologies, bearing in mind its potential contribution to keep and

expand EU RES industrial leadership.

•

A possible link to the National Energy and Climate Plans and the Financial

Platform (Art 27) under the Governance Regulation should be explored

•

There was large consensus on the need for more alignment between grid and RES

planning to which this potential new instrument could effectively contribute. On the other

hand, the importance to continue electricity grid development as a pre-requisite was also

raised.

•

Integration of cross-border renewables adds value to the relevant provisions of the

legal framework (provisions in the Clean Energy Package on simplified administrative

procedures, cooperation projects, and in particular grid integration as supported through

TEN-E and CEF). Some interventions calls for more regulatory alignment. The

Commission was also invited to update the 2013 guidance on cross border cooperation

including templates.

•

Participants also called upon the Commission to come up with a more supportive

framework for PPAs, for the creation of renewables free trade zones as in the UK, as well

as new measures to address the large differences in cost of capital as to ensure that

renewables can be deployed equally throughout Europe.

kom (2018) 0438 - Ingen titel

NNEX

3: C

OMPREHENSIVE ASSESSMENT OF THE EXTENSION OF SCOPE OF THE ENERGY

WINDOW TOWARDS TARGETED CROSS

BORDER COOPERATION IN RENEWABLES

1. I

NTRODUCTION

1.1. Context

The EU has the

political ambition to "to

become the world leader in renewables"

This is not only contributing to the EU's commitments under the Paris agreement, but

important also for industrial leadership and associated jobs and growth. Renewable

energies should furthermore increasingly penetrate sectors so far predominantly

dependent on fossil fuels, such as mobility which will require appropriate infrastructure

development (e.g. e-mobility).

To achieve these goals, the Commission has tabled the most performant

legislative

framework: Clean Energy for All Europeans package,

which is currently under

negotiations in the ordinary legislative process. Some key new elements of this proposed

new regulatory framework relevant for renewables development are the following:



Firstly,

Member States will no longer be bound by a national target for

renewables post 2020.

With the change to an EU-level binding target,

renewables deployment and target achievement becomes a collective

responsibility with the Commission's role moving to a facilitator. This calls for an

adjustment also of available EU instruments to align them with this new reality.

The recast Renewables Directive includes furthermore measures to Europeanise

renewables support, such as cross-border opening of support schemes.



The

market design

proposals aim at making the market more flexible and thus fit

for the integration of increasing amounts of variable renewable energies.



The

Governance

proposal will further reinforce cooperation among Member

States, including on their national and energy climate action plans (NECPS). In

particular, the Commission's proposal on Governance of the Energy Union and

the recast of the Renewable Directive put forward that

"Member States shall

identify opportunities for regional cooperation".



Art. 3(4) of the

recast Renewables Directive

stipulates that "the

Commission

shall support the high ambition of Member States through an enabling framework

comprising the enhanced use of Union funds, in particular financial instruments".

The co-legislators strengthened the text referring to an enabling framework in the

currently negotiated review of the Renewables Directive to explicitly call for

enabling action to support renewables cooperation across borders.

President Juncker

recently said:

"We need a budget that matches our ambitions. For

instance, we want to be world leaders in renewable energy and get ahead of the curve on

new technologies. If we want our Union to have a role in that, we must give ourselves the

tools we need to make it happen."

Also, Member States and industry repeatedly called for looking into options for EU

funding for joint projects and encourage their uptake, in particular with a focus on

Cf. Clean Energy for all Europeans package[COM(2016) 860 final]

COM/2016/0767 final

Cf Art 3.4 of the General Approach of the Council on the revised Renewables Directive as adopted on 18

December and EP Amendment 113 to the same text.

kom (2018) 0438 - Ingen titel

offshore wind.

The European Parliament in its resolution of 14

March 2018 on the

post 2020 MFF

called for continuous EU support for investments to enable the use of

renewable energy, including by CEF.

It is in this context that the Commission is assessing the inclusion of financial support to

specific aspects of renewables development under the Connecting Europe facility. It is to

be noted that 94 % of respondents in the public consultation on the future strategic

infrastructure funding considered the low carbon transition as important challenge, and

pointed to the increasingly important role of sector integration (e.g. between the power

sector, grid development and the transport sector).

In this context,

regional cooperation

is essential to ensure an effective and affordable

energy transition in the EU taking advantage of trade, evening out variability,

safeguarding security of energy supply, coordinating climate adaptation measures and

optimising the cost-effectiveness of actions.

Voluntary regional cooperation on energy matters such as in the

Central and South-

Eastern European Energy Connectivity (CESEC)

and

Baltic energy market

interconnection plan (BEMIP),

which were initially aimed at improving physical

infrastructure, is expanding its scope and has recently started covering aspects such as

renewables development and energy efficiency.

1.2. Concept

Enabling action to promote

optional cross-border cooperation of EU Member States (EU MS)

was already included in the Renewables Directive (2009/28/EC in 2009 (and strengthened in the

revision of 2016). The rationale was to give Member States

flexibility to jointly exploit

cheaper renewable energy sources. The ones with less resource potential

to cost-effectively

achieve their binding national target could use renewables across the border to fulfil their target.

Those Member States that had a relatively lower national target to fulfil (mostly the countries

with lower GDP) were in return given the possibility to benefit from their renewables (RES)

potential by allowing a Member State to explore it in return for a financial reward. The four

variants of cooperation mechanisms listed are:

Article 6

Statistical transfers between Member States.

Member States agree on a statistical transfer of a specified amount of energy from renewable sources from one

Member State to another Member State.

Article 7

Joint projects between Member States.

Member States may cooperate on all types of joint projects relating to the production of electricity, heating or

cooling from renewable energy sources. That cooperation may involve private operators.

Article 9

Joint projects between Member States and third countries.

One or more Member States cooperate with one or more third countries on all types of joint projects regarding

the production of electricity from renewable energy sources. Such cooperation may involve private operators.

Cf. with a view to the North Seas https://windeurope.org/wp-content/uploads/files/policy/topics/offshore/Offshore-

Wind-Statement-of-Intent-signed.pdf and with a view to the Baltic Sea

http://www.tuuleenergia.ee/wp-

content/uploads/Baltic-Sea-Declaration.pdf .

http://www.europarl.europa.eu/sides/getDoc.do?type=TA&reference=P8-TA-2018-0075&language=EN

The numbering in the revised directive is altered for all Articles listed.

kom (2018) 0438 - Ingen titel

Article 11

Joint support schemes.

Member States partly or fully coordinate their national support schemes so that production in the territory of one

participating Member State may count towards the national overall target of another participating Member State.

The proposal to extend the scope of CEF to support cross-border projects in the field of

renewables as part of the present Impact Assessment focusses on those mechanisms

–

including their fully voluntary nature-, but complements it with action targeting the very

early stages of cooperation between Member States: planning and mapping of sites,

feasibility studies, assessment of the regulatory framework, assessment of benefits and

costs of cross border cooperation and their allocation, comparative assessments of the

total costs of deployment (including generation infrastructure and grid development).

Support will be reserved to projects resulting from a cooperation agreement or any other

kind of arrangement between Member States and or member States and third countries as

set out in above listed Articles of the 2009 Renewables Directive. In addition, the

projects need to provide cost savings in the deployment and/or benefits for system

integration, security of supply or innovation compared to similar projects implemented at

national level and also a cost benefit analysis.

The amount dedicated to such projects will not exceed 10% of the total energy window

under the Connecting Europe Facility of which a vast part and the first phase will be

support provided for grants for studies and technical assistance to Member States and

action aimed at identifying and assessing the expected impact and costs and benefits of

cross-border cooperation in the field of renewables. In a second phase, grants for studies

for the implementation of project and grants for works for a limited number of projects

would be made available

–

only for those projects that can demonstrate significant

positive externalities of regional significance (such as security of supply, solidarity or

innovation) and in the case of evidence that the project would not materialise or not be

commercially viable in the absence of a grant. Examples for innovative technologies that

are at this point in a phase where market upscaling is needed are:

Multiterminal substations (HVDC or AC) allowing a modular build out of the

RES capacity

Floating substations instead of fixed structures

Solution with HVDC cables to enable exploitation of RES further away from

consumption centres

On site storage facilities (batteries, pumped hydro) to enable higher capacity use

of the cables and provide SOS

Energy conversion facilities (e.g. electrolysers) to enable higher capacity use of

the cables and provide SOS

Insofar they are not already covered under the TEN-E Regulation, projects consisting of

such technologies may now become candidates for cross-border project in the field of

renewable energy status and for a possible support under the CEF.

The

cooperation on renewables by at least two Member States

can either result in:

(i)

RES projects physically connected to several Member States and or between a

Member State and a third country;

kom (2018) 0438 - Ingen titel

(ii)

RES projects located in a single Member State, but demonstrating significant

cross-border benefits and financially supported by two or more Member States or

financed by one Member State but located on the territory of a different Member

State (with or without physical connection).

This means that the new instrument would not only be about connecting infrastructure,

but also cooperation with cross-border relevance. The cross-border dimension is assured

by the involvement of two or more Member States. In addition to the

obligatory cross-

border dimension,

the projects should furthermore display a

positive cost-benefit

analysis

taking into account all "integration costs".

Examples of project resulting from enabled cross-border cooperation could include:



Large North Sea/Baltic Sea offshore wind developments where planned RES

generation sites in the waters of several adjacent Member States are developed

and deployed jointly and possibly connected to several Member States instead of

each developing it on its own and linking it only to its national shore.

Other RES technologies such as onshore wind, concentrated solar power,

sustainable biomass

or more innovative ones such as floating windmills, ocean

technology or innovative combinations of different renewables technologies (e.g.

solar PV plus offshore wind) could become eligible under the proposed new

instrument.

RES projects including integrated storage or energy conversion facilities (e.g.

windfarms with combined electrolysers or methanisation facilities for gas grid

injections) that are currently not eligible under TEN-E.



With the emergence of e-mobility, cross-border e-mobility projects will be considered in

synergies with the transport and digital parts of CEF.

1.3. Lessons learnt from the past and past programmes

The European Energy Plan for Recovery has demonstrated how financial support to

specific cross-border renewables projects (Krieger's Flak) could enable the world's first

project linking two national grids with an offshore energy source. What however did not

happen in the case of Krieger s Flak was a joint planning of RES deployment which

would have resulted in economies of scale compared to each MS deploying a smaller

capacity on its own.

Furthermore, the European Fund for Strategic Investments has significantly contributed

to renewables development, with EUR 3.2 billion funding by February 2018, triggering a

total investment value of more than EUR 24 billion

(contributing to the de-risking of

projects).

Accordingly to the 2014 study on the meshed grid90, a more integrated approach to grid

and RES planning/deployment could be beneficial also for the meshed North Sea grid

Biomass combustion should be only eligible if certain sustainability conditions are met and the effects on air

pollution are integrated into the cost-benefit-assessment.

Includes funding for EFSI projects in other energy sub-sectors, beyond renewables.

90https://ec.europa.eu/energy/sites/ener/files/documents/2014_nsog_report.pdf

kom (2018) 0438 - Ingen titel

which is currently part of a priority corridor under TEN-E. This was also the main

outcome of a recent joint event by the Renewables Grid Initiative and WindEurope:

"(…)

renewable energy producers

–

including wind

–

and grid operators need to work

together more closely. Defining the future energy landscape requires joint planning on

the development of new transmission lines. This should take into consideration the

expansion of renewables and the electrification of other sectors, as well

environmental and social impacts (…)".

. Renewables development is currently

mostly driven by Member States through national support schemes and national plans

that remain largely un-coordinated. Support schemes that include cross-border elements,

for instance when competitive bidding processes allowed the participation of producers

from other Member States, auctioning prices tend to be lower, enhancing the

competitiveness of renewable energies

. A similar EU-wide coordination for renewables

deployment in the EU is still at its initial phase

Over the past 10 years, Member States did not engage significantly in transnational co-

operation on RES deployment and the role that the cooperation mechanisms were

expected to have for the growth of renewables in Europe up to 2020 did not materialise -

despite the socio-economic benefits of a more regional approach (see below) and despite

the fact that those have been and are promoted in several Articles of the 2009 RES

Directive (as quoted above), a guidance document on cross-border cooperation from

2013

and relevant wording in the current energy and environment state aid guidelines.

With 2020 approaching and Member States having more clarity on whether they will be

able to meet the target on their own, the last two years saw the emergence of two more

cases of cross-border cooperation - the statistical agreements between Luxemburg and

Lithuania

, as well as Estonia

Table 1: List of implemented cooperation mechanisms

Cooperation type and Year

countries involved

Joint certificate scheme

Norway - Sweden

2012

Status/comments

Since January 2012, Sweden and Norway operate a

joint certificate scheme for supporting renewable

energy. The target is to increase electricity production

based on RES in Sweden and Norway by 28.4 TWh

until 2020.

91https://renewables-grid.eu/publications/press-releases/detail/news/smarter-roll-out-of-electricity-grids-makes-

integrating-35-renewables-easier-and-cheaper.html

The results of the first cross-border tender for renewable electricity in Europe is an illustration of how a

Member State can limit the costs of financing renewables through allowing foreign electricity generators to bid in the

auction. The 50 MW photovoltaic tender organised by Germany and open to Danish generators achieved an awarded

price (5,38 cents/kWh) that were more than 25% lower the last German tender for only-German individual installations

(7,25 cents/kWh). The good response obtained by the tender, with bids totalling almost fivefold the amount procured

and half of it represented by foreign installations shows also the willingness of generators to participate in a broader

market.

SWD(2013) 440 final

https://ec.europa.eu/info/news/agreement-statistical-transfers-renewable-energy-amounts-between-lithuania-and-

luxembourg-2017-oct-26_en

http://www.tuuleenergia.ee/en/2017/11/estonia-luxembourg-sign-eur-10-5-mln-renewable-energy-agreement/

kom (2018) 0438 - Ingen titel

Cross-border PV

auctions

Denmark - Germany

2016

In July 2016, Denmark and Germany signed a

cooperation agreement allowing for a mutual cross-

border participation in auctions for PV installations.

The agreement sets the framework for two pilot

auction rounds in Denmark (20 MW auction, 2.4 MW

opened for installations in DE) and Germany (50 MW,

fully opened for installations in DK). Both auctions

were run in 2016. The cooperation links to the state aid

decisions on the support schemes for renewable energy

in both countries. Both decisions include the partial

opening of auctions for electricity for renewable

energy (to comply with Art. 30/110 TFEU).

In October 2017, the first statistical transfer agreement

was signed between Luxembourg and Lithuania, in

November 2017 the agreement between Luxembourg

and Estonia followed. The transfers will cover the

period from 2018-2020 and will to help Luxembourg

fulfil its 2020 national renewable energy target.

Krieger's Flak CGS (Combined Grid Solution) is a

transmission project with an offshore-wind park-

system in the Baltic Sea in the waters of the exclusive

economic zone of Denmark, Germany and Sweden.

The project was initially set up as a tripartite one

between (Denmark-Sweden-Germany), but reduced to

only linking the Danish and German grids and

technology-wise the transmission system which was

planned to be based on high voltage direct current

(HVDC) is now built with a more common Alternate

Current (AC) system. An additional driver for the

project was the associated reduced integration costs,

although the grant only covered the grid aspects. The

project has been supported by a 150 million euro grant

through the European Energy Programme for

Recovery (EEPR) in 2009, construction work is

ongoing.

Statistical

transfers 2017

Luxembourg - Lithuania

and

Luxembourg

Estonia

Krieger's Flak

2009

for

grant

Table 2: List of so far not implemented cooperations

Project

Status/comments

Intended cooperation on Not implemented The

two

countries

signed

a wind project

memorandum of understanding in

Ireland

United

January 2013. The aim was to establish

kom (2018) 0438 - Ingen titel

Kingdom

DESERTEC

Not implemented

an intergovernmental agreement on

energy trading, to be signed in 2014.

However, a respective agreement was

not signed and discussion on the

cooperation came to a halt.

The DESERTEC project relates to the

concept of producing electricity from

renewable energy in North Africa and

exporting it to EU Member States under

Art. 9 of the Renewable energy Directive

2009/28/EC. Following the creation of

the Desertec industrial initiative (Dii) in

2009, North African countries, in

particular Morocco, and EU Member

States, including France, Germany, Italy

and Spain, discussed the implementation

of a possible first pilot project. In 2012,

the discussion came to a halt.

The HELIOS project relates to concept

of producing solar electricity in Greece

and exporting to other EU Member

States. The project was proposed by the

Greek government in 2011. An

agreement with a possible off-taker

country was not concluded.

HELIOS

Not implemented

As can be seen from the above listing, where intergovernmental cooperation took place

in the past, in several cases projects did not materialise, or at least not as planned, even

with a grant from the EU budget. The underlying complexity and the substantial time and

resources that would have been required explain why such envisaged cooperations did

not move forward.

With regard to offshore projects, the European vision for a North Sea offshore meshed

grid was launched back in 2010, planning for future large volumes of offshore wind

linked with maritime interconnectors for cross-border electricity transmission. However,

progress is thus far rather slow, as was also observed at the specific stakeholder event to

inform the present Impact Assessment that took place on 5

March 2018 in Brussels (see

preceding Annex for more details).

What one can observe at this stage is that currently

several interconnectors are planned in the North Sea, but all are point-to-point

transmission links. Merely the 1400MW "FAB Link" UK-France project may eventually

be connected to an offshore tidal energy project

II. T

HE PROBLEM AND ITS DRIVERS

2. 1. Problem: Foregone gains from uncoordinated RES deployment in the EU

The project was originally conceived as an interconnector via the island Alderney where 3 GW tidal power capacity

was to be developed. At this stage the interconnector goes ahead for 1.4 GW (less than the planned capacity of the

offshore source, with the construction of the tidal plant being delayed).

kom (2018) 0438 - Ingen titel

The national approach to renewables implies that deployment is not necessarily

prioritising the best spots: Where resources are more abundant; where overall system

costs would be minimised (e.g. reduced need for back-up, avoided grid investments);

where overall social benefits would be maximised (e.g. increased security of supply,

avoided local air pollution, employment effects, innovation transfer effects).

From an

EU perspective, renewable energy tends to be exploited not necessarily where it is

most efficient to do so

from a natural resources/geographical conditions/grid/alternative

fuel infrastructure perspective.

The

economic benefits

that could arise from using better Europe's resource potentials

have been confirmed by a number of studies and modelling efforts. Most recently, the

modelling underpinning the Clean Energy package of November 2016 revealed that

cross-border opening of national support schemes would result in reduced energy system

costs ranging from

EUR 1.0 billion (partial opening) to EUR 1.3 billion

(mandatory

regional schemes) annually for the period 2021-2030, while at the same time reducing

renewable energy support costs paid by the consumer by 3% and 5% respectively.

A study carried out for the European Commission on the benefits of a meshed offshore

grid in the Northern Seas of 2014

estimated the

annual savings

including costs of

losses, CO

emissions and generation savings to be

EUR 1.5 to 5.1 billion

higher per

year for the coordinated grid. These monetized benefits make the meshed grid profitable

in all studied scenarios and for a wide range of fuel and CO2 costs. When states also

coordinate their reserve capacity, an additional

EUR3.4 to 7.8 billion

generation

investment cost reduction is obtained. On top of the monetized benefits, there are

less

CO2 emissions and less cables making landfall

in the meshed configuration. The same

study also concluded that in order to realise this benefits of coordinated grid

development, coordination between all stakeholders has to be enabled.

A 2014 study by the Imperial College London on the North Seas Grid infrastructure

concluded that an integrated approach to offshore electricity grid development in the

North Seas can lead to

EUR25-EUR75 billion savings

in operation and network

investment costs as well as

EUR3.4-EUR7.8 billion

in generation investment costs,

lowering average cost of electricity production by 0.8-2.2

€/MWh. However, if each

country were to develop its own renewable power supply and network infrastructure

independently from their neighbours, there will be no possibility for offshore wind

generators to directly dispatch electricity to different markets other than that of the

connected country. Further studies came to similar results for cost savings in cross border

renewables cooperation in general (not only in offshore wind deployment).

100

The reasons preventing (sufficient) cooperation are well known and documented for

years. The Commission's 2013 guidance document on cross-border cooperation already

provides a comprehensive list of barriers. This diagnosis was since confirmed in several

studies with most details possibly contained in a 2014 study carried out for the European

SWD (20160 418 final

https://ec.europa.eu/energy/sites/ener/files/documents/2014_nsog_report.pdf

https://www.e3g.org/news/media-room/how-to-build-a-north-seas-grid-without-regretting-it

100

https://link.springer.com/content/pdf/10.1007%2Fs12398-014-0125-0.pdf ;

http://orbit.dtu.dk/files/59386176/Renewable_energy_63_p_345_352_postprint.pdf;

http://www.nature.com/articles/nclimate3338

kom (2018) 0438 - Ingen titel

Commission that based its findings on interviews with representatives from 11 EU

Member States in different stages of renewables deployment.

101

The identified main barriers to more cross-border cooperation in renewables are:

1. (Perceived)

technical complexity

of designing the most appropriate cooperation

model and reluctance to take associated "first

mover risk". Perceived uncertainty and

complexity of cost and benefit sharing arrangements

between Member States.

Almost all Member States that were interviewed as part of the 2014 Ecofys study,

referred to above, mentioned uncertainty on the design options of cooperation

mechanisms as a barrier. Among other aspects, the compensation of consumers,

monitoring and operation, accounting of RES amounts for target fulfilment and risk

allocation were cited as components that would need either more specific guidance or

knowledge sharing. A proof that complexity is not only a perceived, but actually a real

issue could be that the statistical transfers by Luxemburg

–

the presumingly least

complex form of cooperation - took the governments several years to settle

102

. ENTSO-E

confirmed at the expert workshop that cost-benefit assessment of integrated projects with

a generation component are more demanding and therefore the meshed grid in the North

Sea is still a medium to long-term vision. The technical complexity was emphasised

again by stakeholders present at the expert stakeholder workshop including the Spanish

and Austrian government representatives, complemented by the German representative

who described the EU as still being in a "learning

phase on cooperation".

WindEurope

and MOT

103

thus called on the Commission to provide an update of the 2013 guidance

document among other action.

In a similar vein, Member State sometimes name the reluctance of countries to assume

the first-mover risks, i.e. engaging in cooperation mechanisms without building on the

experience and best-practices of other countries that have done so previously, as a

barrier: "Without

first projects that could be used as a reference for price setting, the

Member State was hesitant to use cooperation mechanisms himself."

104

In the 2016 online public consultation supporting the REFIT evaluation, 90 % of

respondents considered uncertain benefits for individual Member States as a very

important or important obstacle. As demonstrated in a study of the Institute of Energy

Economics, University of Cologne

105

that analysed the national renewables action plans

of Member States until 2014, administrative issues and questions concerning the fair

sharing of costs and benefits between the Member States represent major obstacles that

need to be tackled in order to reach renewable energy targets at the lowest costs possible.

EU MS declared that there is no clear common understanding of how cooperation

mechanisms could work in practice or a lack of information concerning the potential for

joint projects in other MS or third countries. The Ecofys 2014 study concludes on this

101

102

https://www.ecofys.com/files/files/ec-ecofys-tuvienna-2014-cooperation-member-states-res-directive.pdf

MEP Claude TURMES from Luxemburg at the 5

March 2018 expert workshop in Brussels and REFIT evaluation

supporting the review of the RES Directive SWD (2016) 0416 final.

103

La Mission Opérationnelle Transfrontalière (MOT), French government.

104

https://www.ecofys.com/files/files/ec-ecofys-tuvienna-2014-cooperation-member-states-res-directive.pdf,

page 12.

105

https://link.springer.com/content/pdf/10.1007%2Fs12398-014-0125-0.pdf

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issue that "further

insights to governments on quantifiable costs and benefits of specific

projects would help to inform the discussion".

106

Domestic policy considerations

–

in particular communicating to the national

electorate the benefits of cooperation over reliance on domestic resources (with their

various perceived economic benefits)

The political willingness of Member States to engage in cooperation is a prerequisite, but

Member States highlight public acceptance as a barrier preventing them from pursuing

cooperation mechanisms more actively. Governments face difficulties to communicate

the costs and benefits of cooperation mechanisms to their national electorate.

107

Interestingly this problem does not only occur with the buying country that needs to

explain to its tax payers that it is partly sponsoring investment abroad, but also for the

receiving country that could find itself in a situation to explain to its citizens why it is

beneficial to exploit domestic resources beyond the own energy needs. The public

consultation underpinning the REFIT evaluation on the RES Directive in 2016 revealed

again a reluctance to see taxpayers or consumers' money used for investments abroad

108

as main reasons for the limited use of cooperation mechanisms. Indeed, the majority of

respondents support such view, arguing that benefits in the form of employment,

economic and industry growth, tax income and security of supply are thus not created

within the own country. This observation was confirmed again by a representative from

the renewables industry at the expert workshop in 2018 stating that the main barrier is

"the

not unreasonable view by Member States that RES should first and foremost be

deployed at home".

The lack of incentive with every Member State to start including

cross-border elements results in a first mover disadvantage where the one that moves first

and without prior agreement by the other actors stands to lose. Besides public acceptance

issues, concerns about giving up national sovereignty through the engagement in

cooperation mechanisms were mentioned. Cooperation mechanisms could interfere with

domestic support schemes or domestic policy preferences such as the security of

supply.

109

3. Investments in cross-border RES projects can be hindered by conflicting national

interests and/or insufficient coordination between grid operators and RES generation

project promoters.

RES potential e.g. in South East Europe may not be exploited because a Member State

lacks the financial means or energy needs to do so on its own or because the project

requires coordination with other Member States to take place (e.g. investment in

interconnections is needed to reap full benefits, even though this could bring benefits

across several Member States). In 2017, IRENA estimated Southern and Eastern Europe

to hold a potential of renewable resources of 740GW

110

. This represents twice the

economically attractive potential by 2030 in the North Seas

111

. Also the Baltic Sea has

106

107

https://www.ecofys.com/files/files/ec-ecofys-tuvienna-2014-cooperation-member-states-res-directive.pdf

108

94% of public consultation respondents cite this factor as important or very important

109

https://www.ecofys.com/files/files/ec-ecofys-tuvienna-2014-cooperation-member-states-res-directive.pdf

110

http://www.irena.org/-/media/Files/IRENA/Agency/Publication/2017/IRENA_Cost-

competitive_power_potential_SEE_2017.pdf?la=en&hash=DE44F51BDDFB43D4CB8D880B5AB71713447BA04

111

https://windeurope.org/wp-content/uploads/files/about-wind/reports/Unleashing-Europes-offshore-wind-

potential.pdf

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significant unexploited potential and could according to the wind industry be as big as 9

GW by 2030.

National decisions on RES infrastructure (in particular of large projects) can carry cross-

border impacts in terms of intangible benefits, but also on the use of networks and

flexibility needs.

The importance of coordination between grid developers and RES generation promoters

was already highlighted as one contributing factor to the delays with the meshed North

Sea Grid. Participation of all relevant stakeholders, particularly market participants, to

ensure pragmatic and practical solutions was also given as one of the most important

success factors for renewables cooperation in a 2015 study.

112

It could be seen in the past

(with cases of RES capacity additions that were not fully matched with timely grid

developments resulting in curtailment and re-dispatching needs due to congested grids),

that having more comprehensive information on what is planned on renewables

development at the moment when transmission operators plan the grid extensions can be

useful. Secondly, coordination can lead to lower needs for transmission, generation and

back up infrastructure.

2.2. The scope of the problem

The consequence of the above is that achievement of the EU renewables target and the

energy transition can become more costly than necessary for EU's Member States,

project promoters, taxpayers and consumers, especially when looking at the "full costs"

of RES (including in particular grid development and integration costs), when

underexploited areas with good conditions are not used, because a Member State lacks

the financial means or energy needs to do so on its own, when Member States interests

are not aligned, or when the complexities in setting out such cooperation regimes are

(perceived) higher than the benefits.

The relevance of gains from cooperation is expected to increase in the future with

renewables estimated to have around 50 % share in EU electricity production in 2030.

Renewables will continue to play a major role in the decarbonisation of the European

economy and in meeting Europe's commitments under the Paris process. Higher share of

variable renewables also means that grid and integration costs will become an

increasingly acute issue that requires optimisation of renewables planning and

deployment, including across Member States.

IV. N

ECESSITY AND

ADDED VALUE

Necessity

A legal basis for the extension of the new CEF to renewables is provided by Article 194

TFEU that explicitly lists the promotion of renewables as one of the objectives of EU

energy policies. In addition Art. 3(4) of the recast Renewables Directive

113

stipulates that

"the

Commission shall support the high ambition of Member States through an enabling

112

113

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COM/2016/0767 final.

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framework comprising the enhanced use of Union funds, in particular financial

instruments".

The necessity of the EU to intervene is evident from the above description of the

underlying problem drivers, which also are due to diverging interests of EU Member

States (distribution of benefits and costs from cooperation fall uneven among Member

States and/or few incentives for a country with high RES potential to allow another

country to explore it) that prevent cooperation from happening and leave European

public goods delivered at sub-optimal levels (e.g.: an optimised deployment of RES). At

the same time national energy policies increasingly affect each other, impacting the

energy mix of neighbouring countries through cross-border trade and electricity flows,

especially in the context of improved cross-border electricity trade.

The crucial role of the national targets until 2020 for successful cooperation in the past is

evidenced in research, with Ecofys 2014 stating that "without

strong incentives to

cooperate beyond 2020 such long-term joint endeavours and investments are unlikely".

The new collective and binding target for renewables for 2030 could also be described as

a European public good: The European Commission and the Member States are jointly

bound by this target, but there is the possibility of single Member States to not contribute

to it and free-ride. Vice versa, the currently more advanced Member States might feel

that they have already delivered their share and that others will need to step up.

EU added value

Such coordination between Member States can be done only at macro regional level.

Experience shows that the Commission's facilitating role has bene decisive in such

contexts. Reinforced cooperation can bring economies of scale, avoid duplication of

infrastructures, increase deployment across Europe to better reflect the available

potential, contribute to policy convergence and thus to further market integration (with an

example often referred to being the different requirements for signalling red stripes on

windmill blades in different national legislation), knowledge transfer and uptake and

replication of innovative technologies in the European home market. It was precisely

such EU added value that provided also the justification for granting support for selected

offshore projects under the European Energy Economic Recovery Programme

(Regulation (EC) No 663/2009).

III. C

OMPLEMENTARITY WITH OTHER PROGRAMMES

The TEN-E Regulation and the existing strand of CEF-Energy and its priority corridors

on electricity transmission grids, and efforts for EU grid integration in a wider sense have

and will need to continue playing a key role in supporting the transformation of the

energy sector as this brings flexibility that is the key to managing intermittent renewable

sources.

The new supporting framework for renewables cross-border cooperation

shall thus not crowd out electricity transmission investment,

but rather complement

and facilitate them further.

Strengthened regional cooperation including the articulation from all stakeholders in the

energy sector can provide a solid base for more efficient integration of renewables. Better

knowledge on the costs and benefits for renewables projects could help informing also

the assessment of grid projects in the future, as put forward by a Member State's

representative and E3G.

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As could be demonstrated above and also accordingly to what was stated in the 2014

study on the meshed grid for the Commission

114

, a more integrated approach to grid and

RES planning/deployment could be beneficial also for the meshed North Sea grid which

is currently part of a priority corridor under TEN-E. This was also the main outcome of a

recent joint event by the Renewables Grid Initiative and WindEurope: "(…)

renewable

energy producers

–

including wind

–

and grid operators need to work together more

closely. Defining the future energy landscape requires joint planning on the development

of new transmission lines. This should take into consideration the expansion of

renewables and the electrification of other sectors, as well as environmental and social

impacts (…)".

115

The

North Seas energy cooperation

116

indeed has this more integrated approach also as

one of its objectives. However, it does not have any budget with which to overcome the

cross-border related barriers. Also the new cooperation instrument would aim to replicate

cooperation in other parts of Europe and on other technologies besides offshore wind.

For example, it might be an important venue for the EU industry in the view of global

competitiveness to develop hybrid wind and solar photovoltaic projects or advance in

floating or ocean technologies - all of which can for legal base reasons not be done under

TEN-E and is at least for the moment also not discussed in the North Sea Offshore

cooperation.

The European Structural and Investment Fund

has resulted in ca 4.8 billion Euros

allocated by Member States for renewables under the low carbon earmarking obligation

in 2014-2020. It did not obligate Member States to invest in renewables (and in fact not

all of them allocated ESIF to renewables), but those that wished to do so, could support

local and regional renewables deployment, implement renewables investments e.g. as

part of refurbishment of buildings and/or integrate a renewables dimension into the so-

called smart specialisation strategies. The EU support via ESIF does not have as an aim

to facilitate Member States' joint planning or deployment, but rather supports regional

and urban action and knowledge sharing. Transnational cooperation under ESIF

(INTERREG B and C) is supporting bordering regions from several countries facing

similar challenges and can occasionally include the territory of a full Member State, but

is not meant to facilitate whole Member States cooperating. The scope of INTERREG B

and C is wider than renewables, but did in the past support coordination and exchange of

best practice of bordering regions also for renewables.

Financing through

EFSI

has become a major source of funding for renewables,

successfully contributing to de-risking of RES investment in particular for large

infrastructure projects. EFSI has already provided EUR 3.2 billion of EFSI financing to

renewables resulting in more than 24 billion total investment. The relevance is expected

to continue in the future with the 40 % earmarking foreseen for energy and climate in the

new EFSI. EFSI is, as well as the new InvestEU programme will be, a bottom-up

programme that relies on project proposals to be driven by the market. It will greatly

contribute to renewables development in a national context, it can however not overcome

coordination failures and complexities of cross-border projects as set out

114

115

https://ec.europa.eu/energy/sites/ener/files/documents/2014_nsog_report.pdf

https://renewables-grid.eu/publications/press-releases/detail/news/smarter-roll-out-of-electricity-grids-makes-

integrating-35-renewables-easier-and-cheaper.html

116

https://ec.europa.eu/energy/en/topics/infrastructure/north-seas-energy-cooperation

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above.Furthermore, the new to be set up Invest EU Fund will cover, as is the case for

CEF energy in general, also the RES related financial instruments part.

The

Innovation Fund

(successor of NER 300) will provide support for innovative low

carbon technologies including for renewables projects. Innovfin

–

Energy Demo

–

Complementing Horizon 2020 and NER 300, provides financial instruments that target

the demonstration of innovative RES technologies.

The intended opening for cross-border cooperation in renewables under CEF would

complement the aforementioned instruments as it would also provide support for non-

technological innovations such as action combining already established RES

technologies and/or targeting market uptake. Finally, the new instrument would become

an effective and complementary tool to help Member States in the reporting and planning

of the national energy and climate plans established in the proposed Governance

Regulation, in particular with respect to its regional dimension. A possible future link to

the financial platform to be set up by the Commission under Art 27 of the proposed

Governance Regulation could be explored. The new instrument would also underpin the

provisions on mandatory partial opening of support schemes proposed by the

Commission under the recast of the Renewables Directive.

V. P

OLICY

BJECTIVES

In line with the problem statement above and also reflecting the changed policy context

with a Europeanisation of renewables target achievement after 2020 and innovation and

leadership ambitions, the objectives of the new enabling action for cross border

cooperation would be the following:

General objective:

enabling a cost-effective EU target achievement by 2030 and cost

effective energy transition, reflecting also the Juncker Commission ambition of the EU as

the world leader in renewables

Specific objectives:



Facilitate cooperation in cross-border planning and deployment of renewables by

overcoming the persisting barriers and disincentives



Facilitate that the collective EU-level renewables target for 2030 and renewable

energy integration is met cost-effectively and that CEF further contributes to the

energy transition and 2030 and 2050 decarbonisation commitments.



Contribute to improving the EU's competitive position in renewables and the EU

leadership ambition for all renewables technologies

VI. P

OLICY

PTIONS AND BRIEF OUTLINE OF IMPACTS

The following options have been identified:



Option 1: Business as usual (baseline)



Option 2: Reinforced voluntary cooperation and/or revised non-legal guidance



Option 3: Establishing an enabling framework for cross-border cooperation on

renewables

kom (2018) 0438 - Ingen titel

Variant 1: additional legal provisions to be included in the CEF Regulation, but

with no financial support

Variant 2: same as above but with access to additional finance in CEF

1. Business as usual (baseline)

Under the baseline scenario we assume that the

Clean Energy Package

will be adopted

in its integrity and that CEF is implemented as described above- but not including the

extension of scope towards renewables. Also other currently existing financial

programmes are assumed to continue with their current scope.

The Clean Energy package will already include the following provisions that are

expected to contribute to a more regional approach towards renewables deployment and

planning: An obligation for Member States "to

cooperate at regional level to effectively

meet the targets, objectives and contributions set out in the integrated national energy

and climate plans."

(Article 11 of the Governance Regulation). The same article then

continues to request from Member States to identify opportunities for cooperation, to

consult with neighbouring countries and to consider any comments from those countries.

Again in the same article the Commission is called upon to "facilitate

cooperation and

consultation among the Member States on the draft plans".

As mentioned above, with regard to the binding EU target for renewables, the approach

followed in the Clean Energy Package is to give Member States the final say in their

national contribution towards the target, but also to incentivise high pledges through the

iterative process established in the Governance regulation, where the Commission may

issue recommendations to draft integrated energy and climate plans (Art 9.2 Governance

Regulation) taking into account the level of ambition of objectives, targets and

contributions in view of collectively achieving the Union’s 2030 target. Additionally, the

finally adopted version of the revised Renewables Directive will in all likelihood contain

an Article on partial opening of renewables support schemes (Article 5). The voluntary

cooperation fora for energy matters (North Seas Offshore Cooperation, BEMIP, CESEC,

Pentalateral Forum) would continue to operate and the development of the meshed North

Sea Grid would continue at its current pace delivering in the medium or long term as

explained above.

Under this option, it can be expected that over the next few years some more progress

will be made with regard to regional cooperation for renewables with Member States -

who are under the new 2030 Governance obligated to reflect on the cooperation

opportunities. The existing fora for intergovernmental cooperation will continue their

work - and in the case of CESEC and BEMIP start - on renewables cooperation.

However, there would still not be targeted action or a budget for the costs associated with

overcoming the barriers identified above that currently prevent cross-border action from

happening and Member States from investing into the additional cost of coordination.

The Commission would under this option also not respond to the call from the co-

legislators to enable cross-border action in the area of renewables, including through

finance. This might then again make it more difficult for the Commission to request

additional action by Member States and in particular on renewables as part of the

recommendations under the Governance Regulation. The finally agreed text on the

revised Renewables Directive will most probably contain some provisions for Member

kom (2018) 0438 - Ingen titel

States to partially open the RES support schemes, although it is at this point in time not

clear whether this would become a mandatory or voluntary clause. Whilst a partial

opening of national support schemes is one element in order to reap the benefits of a

more coordinated approach, this provision does not apply to the other forms of

cooperation and more importantly does not overcome the national perspective in

planning and deployment in the first place.

It is however to be expected that not all the benefits described in Section II.2.1 of this

Annex 3 will be realized. It should be noted that in the expert workshop held to gather

stakeholders view on the extension of scope of CEF, none of the around 60 stakeholder

present intervened or submitted input describing the baseline as sufficient.

2. Reinforced voluntary cooperation and/or revised non-legal guidance

Under this option, the context would evolve as described for the baseline, but in addition,

the Commission would

issue an update of the guidance document on cross-border

cooperation from 2013 and/or reinforce its input to the voluntary cooperation fora

that exist.

This would take up on a proposal that was also put forward by several

stakeholders at the expert meeting, in particular if it were to include detailed lessons

learnt from cooperation that have occurred between 2013 and today. However it should

be noted that most of those who intervened with suggestions for improved or updated

guidance did not feel that this was the only additional element that would be needed, but

rather suggested it as part of a package complemented e.g. by additional legislative

provisions to improve coordination. With a revised non-legal guidance document, details

could be made available on how concretely a bilateral agreement (until now there was no

trilateral cooperation) needs to be drafted and topics to be taken into account.

Alternatively or additionally, the Commission could re-enforce the support it currently

provides to the intergovernmental fora on energy matters, however this will be within the

limitations of not having additional resources for that. This option would most certainly

accelerate renewables cooperation in those geographical areas and/or sectors that are

currently covered by such a forum, even though it was noted in a report from 2015

117

that the progress occurred on existing renewables capacity rather than on future RES

deployment thus far. This progress might not go as far as to address the important issues

that will condition renewables deployment over the next decade e.g. the most efficient

use of RES potential across Europe.

3. Establishing an enabling framework for cross-border cooperation on renewables

Variant 1: additional legal provisions to be included in the CEF Regulation, but

with no financial support

Variant 2: same as above but with access to additional finance in CEF

Both variants can be combined with the content of

option 2.

Replicating the logic established with the TEN-E framework, two variants will be

considered for the extension of scope: One in which only a regulatory enabling

framework for cross border cooperation will be set up

(variant 1)

vs. one in which such a

117

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kom (2018) 0438 - Ingen titel

framework will also be complemented by financial support through the EU budget (CEF)

(variant 2).

The cross-border component on renewables will not be underpinned by

separate sectoral guidelines as is the case for the current energy part under CEF.

However, the Clean Energy Package already contains a number of provisions that

actually address regulatory issues for cross border cooperation:

- The proposed revised Directive for Renewables foresees an Article on limits for

duration for authorisation procedures (for all RES projects, not only cross-border ones),

basic principles for support schemes including partial opening,

The proposed Electricity Regulation contains rules on RES market integration, including

principles on rules on grid costs and grid connection rules.

The subsidiarity assessment underpinning the Clean Energy Package of 2016 has not

changed and further regulatory alignment seems to be disproportionate and will in any

event never be able to cover all national specificities, which also extend in into other

areas of strict national competence such as spatial planning and taxation. Even more

importantly, and confirmed both by research and statements from Member States and

other stakeholders the by far biggest obstacle is indeed the lacking incentive to engage or

invest in such cooperation.

However the CEF Regulation will contain for both variants a definition of cross-border

cooperation on renewables, the definition of the criteria that need to be met in order for a

cooperation to be selected for the status of a cross-border project in the field of renewable

energy , the process with which this selection is being made and the information and

methodology that is being used in order to select projects. Under variant two, it would

also contain provisions on how to provide financial support for cross-border project in

the field of renewable energy. The cross-border project in the field of renewable energy

status would not result in any fast track procedure or priority treatment.

To address the issue of uncertainty around the allocation of benefits and costs among

various Member States, it could be envisaged to include provisions similar to those in the

TEN-E (Article 12) guidelines specifying rules on the allocation of costs (variant

under

variant 2

financial support for studies could be offered to Member States that

could be used for exactly such purpose. Variant 2 seems more appropriate to underline in

the light of the responses received from Member States and other stakeholders.

With regard to maximum permit granting period, Art 16 of the proposal for a revised

Renewables Directive already introduces new rule for permitting procedures (for all RES

projects, not only cross-border ones). There is no need for amending those rules as the

prosed 3 years maximum permitting period seems to be already sufficiently fat for the

generally more complex cross border projects.

Both variants would contribute to a more integrated approach between renewables and

grid development, with variant 1 expected to provide input for anticipatory grid planning

by making visible the planned cross-border cooperation in the area of renewables.

The new enabling framework would also be complementary and in line with what was

announced recently with regard to outermost regions

118

and deliver on the EU's territorial

118

SWD (2017) 349 final.

kom (2018) 0438 - Ingen titel

cohesion objectives and "take

account in particular of the need to link island, landlocked

and peripheral regions with the central regions of the Union".

A pure energy

transmission connection to the mainland is for some of those regions not the most

attractive and effective solution, hence integrating renewables into cross border action

can make the new CEF more relevant for those regions that tend to have a significant

RES potential.

However, it will be only under variant 2 that the biggest impediments (such as the

Member States reluctance to be the first mover, to invest abroad or to invest in such

cooperation without knowing to what extent benefits and costs will fall between Member

States) will be addressed

The enabling framework could put the Commission into a better position in order to

facilitate target achievement under the 2030 Governance and contribute to all innovation

efforts under the new MFF with an emphasis on innovative combinations of existing

technologies and technologies in the stage of market uptake needing upscaling. Variant 1

without financial support will however be significantly less powerful in overcoming the

domestic policy concerns that prevent Member States in cooperating more. Only setting

up new rules and not offering also a component of financial support (as requested by the

co-legislators) would add to the costs of cooperation that are already present today and

the EU would also not directly contributing to the collective target.

Thanks to these enabling measures by the EU, it is expected that cross-border

cooperation will be put into action leading to a more cost-effective deployment of

renewables in across the EU. Under variant 1, certain hurdles e.g. the cross border cost

allocation would be addressed with provisions, its effectiveness can be expected to be

limited (as the estimation of potential gains and attribution to specific Member States

may be costly or impossible and the benefits may go wider than what can be allocated

among the directly involved Member States). The financial component under Variant 2

could therefore finance programme support actions, technical assistance facilitating the

coordination among Member States, studies notably to facilitate the cost-benefit analysis

of rational projects and grants to compensate for the positive externalities, such as wider

economic benefits to the society which however represent additional costs to the

promoters.

An EU financial contribution could finally be justified based on the delivery of EU wide

benefits such as collective target achievement, an optimised grid or the innovative

dividend that can help towards the global leader ambition.

Based on the above it seems that regulatory issues are addressed sufficiently in the

proposed Clean Energy Package so that additional provisions are only need in order to

define cross border cooperation on renewables, renewables projects of European Interest

and their eligibility criteria and selection processes. Given that the biggest persisting

barriers cannot be solved without addressing the costs of the increased coordination,

variant 2 is chosen.

Delivery mechanisms:

Cross-border project in the field of renewable energy will be eligible for

kom (2018) 0438 - Ingen titel

grants for studies and technical assistance aimed at identifying and assessing the

expected impact and costs and benefits of cross-border cooperation in the field of

renewables

grants for studies for the implementation of projects

grants for works for a limited number of projects

–

only for those projects that can

demonstrate significant positive externalities of regional significance (such as security of

supply, solidarity or innovation) and that the project would not materialise or not be

commercially viable in the absence of a grant.

The intervention would be geared towards overcoming the identified market/coordination

failures/incentive structure and therefore cover the additional costs arising from cross-

border and multi-purpose infrastructure planning/ development; providing an incentive

for Member States to explore such cooperation instead of only planning and deploying

nationally and/or compensate for positive externalities occurring elsewhere e.g. for grid

stability and security of supply.

In the case of grants, it shall be provided in the form of upfront investment aid. The

resulting lower cost of the project to the Member State would be the incentive for them to

engage in such mutual beneficial cooperation In particular, it could help overcome

political acceptance issues (i.e. preference for deploying RES in the domestic market), by

making very visible the support cost reduction achieved thanks to the participation of EU

funds. The EU financial contribution would represent the EU's contribution to an EU-

level target, complementing thus Member States contributions.– based on which then

companies in competitive tenders could develop projects.

The expert workshop also revealed that financial instruments could be particularly useful

to ensure funding at attractive rates (e.g. loans, equity, junior debt or first loss guarantees,

EU budget guarantee). In line with Art. 3(4) of the recast Renewables Directive

119

that

stipulates that "the

Commission shall support the high ambition of Member States

through an enabling framework comprising the enhanced use of Union funds, in

particular financial instruments",

blending will be a significant component of the future

instrument and will be fully embedded in the future InvestEU Single Investment Fund.

VIII M

ONITORING AND EVALUATION

The main output indicator would be the number of cooperation mechanisms and Cross-

border projects in the field of renewable energy that emerges once the enabling

framework is in place. This main indicator could be complemented by the number of

intended cooperation (that do not materialize) and the number of preparatory studies by

Member States that were initiated.

A relevant source of information for the progress on cross-border cooperation on

renewables will be the reporting under the new Governance Regulation where if adopted

as proposed the annexed template to be used includes information on the role that

regional cooperation plays for all headings (one of which is renewables) and a section in

which Member States describe the impact of their plan on other Member States.

119COM/2016/0767 final

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NNEX

4: F

URTHER

ACKGROUND REGARDING THE SCOPE OF

CEF D

IGITAL

1. C

ONTEXT

Delivering a digital single market is the first priority set for the second half of the

Juncker Commission's mandate. The benefits of a functioning digital single

market (€

415 billion per year to the EU's economy, hundreds of thousands of new jobs) can only

be realised if the underlying broadband connectivity is in place. Flagship projects like

5G, the digitisation of European industry, or the modernisation of sectors like healthcare

or public administration depend on universal access to reliable, affordable and high-

quality digital networks. Tomorrow's innovations and their wide take-up can only emerge

if Europe becomes a truly connected continent.

Ubiquitous connectivity has become one of the decisive factors to close economic, social

and territorial divides, making sure that every EU region, including rural and peripheral

ones, contributes to growth. In education and life-long learning, all EU citizens should

have access to basic (e-)services. Connectivity increases the capacity of labour market to

adapt to new challenges even in the most disadvantaged areas, and allows for a better

link between demand and offer, regardless of geographic location. It creates new markets

and growth environment for SMEs. It also supports the modernisation of local economies

and sectors underpinning the diversification of economic activities. Telemedicine

technologies and electronic health records not only help reducing the costs of health care,

especially of elderly care, but also pave the way to a new generation of personalised care,

patient-centric and preventive. Connectivity improves mobility from an efficiency,

safety, and comfort perspective; it supports an efficient energy grid management and

consumption.

On October 2017, the European Council has called for a first rate infrastructure and

communications network in Europe, in order to successfully build a Digital Europe,

which requires cooperation at the EU level, inter alia with the aim of achieving world-

class very high-speed fixed and mobile networks (5G) all across the EU.

In its report on the next MFF: "Preparing the Parliament’s position on the MFF post-

2020", the Parliament underlined the importance of ensuring financing for completing the

digital single market by making full use of the spectrum, 5G deployment and gigabit

connectivity

In the Opinion on "Boosting broadband connectivity in Europe"

120

, the European

Committee of the Regions "supports efforts to promote broadband expansion by

strengthening cohesion policy, inter alia to ensure it can address the most severe market

failures in the rural, sparsely populated areas of the EU" and "supports an enhanced role

for the Connecting Europe Facility (CEF) and EFSI in funding financial instruments and

blending facilities (combining grants with financial instruments) to address more

moderate types of market failures […]. Such complementary interventions would ensure

a high quality broadband connectivity across all regions of the EU".

The Proposal for a European Electronic Communications Code, revising the regulatory

framework for electronic communications networks and services providers, aims inter

120

SEDEC-VI/034

kom (2018) 0438 - Ingen titel

alia at promoting access to and take up of very high capacity connectivity, both fixed and

mobile by all Union citizens and businesses, by means of creating a regulatory

environment which incentivises private investments in digital connectivity networks. It is

nevertheless clear that network deployments will remain commercially unviable in many

areas throughout the European Union, due to various factors such as remoteness, low

population density, and various other socio-economic factors.

The Communication on "Connectivity for a Competitive Digital Single Market -

Towards a European Gigabit Society"

121

(the Gigabit Society Strategy) sets out strategic

objectives for 2025, in view of optimising investment in new very-high capacity

networks:

Gigabit connectivity for all main socio-economic drivers such as schools,

transport hubs and main providers of public services as well as digitally intensive

enterprises. Supporting connectivity for such anchor customers/engines of digital growth

will significantly improve the business case for operators to serve entire areas where they

are located, by stimulating demand and lowering deployment costs at the same time. In

2013 for example less than 10% of all schools

122

and only 16% of the European

hospitals

123

were connected to speeds of 100MBps or above. Nowadays Gigabit speeds

are still largely confined to some universities, university hospitals and some enterprises.

High performance 5G connectivity: by 2020 a fully-fledged commercial service

in at least one major city in each of the 28 Member States and by 2025 uninterrupted 5G

coverage of all urban areas and major terrestrial transport paths. The deployment of 5G is

expected to generate €

213 billion revenues worldwide in 2025 and could lead to

€

113 billion in benefits per year across four industrial sectors (automotive, health,

transport and energy). The success of the commercial deployment of 5G will depend

critically on the timeliness and intensity of investments in two key areas: (1) investments

in infrastructure, mainly to lay out a dense fibre network infrastructure to ensure the

backhauling of 5G cells, as well as to finance the installation of the actual 5G cell

equipment and (2) investments in service innovation to stimulate the emergence of the

new 5G-enabled services.

All European households, rural or urban, to have access to Internet connectivity

offering download speed of at least 100 Mbps, upgradable to Gigabit speeds. The

ultimate success of innovative digital services depends on the access of all Europeans to

high speed connectivity. In January 2017, less than 76 % of European households had

access to connections above 30 Mbps; in rural areas, that percentage goes down to less

than 40 %. Domestic demand is expected to grow exponentially with the launch of digital

services. For instance, while North America is the world's most advanced smart home

market, with almost 22 million smart homes, the European market only counted 8.5

million homes at the end of 2016 and is expected to grow at a compound annual rate of

57 % in the next five years, reaching 80.6 million smart homes by 2021.

121

122

COM(2016) 587 final

Survey of schools: ICT in Education - see

http://ec.europa.eu/information_society/newsroom/cf/dae/document.cfm?doc_id=1800

European Hospital Survey

–

Benchmarking Deployment of eHealth Services

–

see

https://ec.europa.eu/digital-single-market/en/news/european-hospital-survey-benchmarking-deployment-

ehealth-services-2012-2013

123

kom (2018) 0438 - Ingen titel

Important synergies can be achieved between the deployment of 5G and of other (mostly

fixed) connectivity networks. A dense 5G network reaching all urban areas and major

transport paths - based on backhaul fibre to the 5G cells - will also benefit the

deployment of wider networks for connectivity of both households and socio-economic

drivers located in the area, e.g. by bringing the fibre network closer to homes as domestic

needs and demand evolve. Connecting anchor customers lowers the costs of covering

households in the respective areas.

II. A

SSESSMENT OF THE

NVESTMENT NEEDS

The combined investment needed to meet the three connectivity objectives by 2025 and

to bring major benefits across sectors and across borders has been estimated at €

500

billion.

To meet this, an additional € 155 billion is required over and above a simple

continuation of the trend of current network investment and modernisation efforts of the

connectivity providers

124

.The improved regulatory environment that inter alia the future

Electronic Communications Code will bring about and the savings from increased

synergies across sectors will reduce this amount. However,, a significant infrastructure

investment gap to reach the EU's objectives is expected to persist after 2020, spread

throughout the entire territory of the EU and mostly affecting its rural areas. The EU

budget should support Member States' own efforts, to unlock, maximise and complement

private investments in digital networks in order to reach EU's connectivity objectives.

Based on the current trends, taking into account the existing public support for network

investment (national broadband plans) as well as the expected positive effects of the

regulatory changes, we estimate that 50-70 million households in various areas

–

both

sub-urban and rural areas across the EU

–

will have no access to very high capacity

connectivity in 2020. Unless the EU supports Member States and acts as a catalyst for

more commercial deployments and connects areas showing lower population density,

remoteness, or less developed demand, the broadband targets will not be met. Many areas

will not see the deployment of 5G or other Gigabit-ready networks in the next decade and

will miss out on economic growth and jobs. While 5G networks are believed to bring

significant growth and gains across sectors and services, their deployment is currently

associated with many risks and the scenarios regarding the participation of / agreement

among the various industries remain highly uncertain. It is important to note that gaps in

coverage

–

be them gaps in coverage of communities, of business/industrial areas, or o

transport paths

–

represent missed opportunities, unexploited potential and bottlenecks in

the completion of the Digital Singe Market, as discussed further below under sections IV

and V.

The next map below shows the estimated investment gap, limited to household coverage,

account taken of already planned national and EFSI funding (up to 2020) and after

expected market investments projected until 2025. The map differentiates areas where:



in yellow, the market is expected to cover

most

of the identified investment gap

until 2025 and/or sufficient public funding is currently available to address the

remaining (rural) market failure; and

Commission Communication "Connectivity

for a Competitive Digital Single Market - Towards a European

Gigabit Society"

(COM(2016) 587; 14.09.2016).

124

kom (2018) 0438 - Ingen titel

in red, areas where continued public intervention will be required in order to meet

the Gigabit Society strategic objectives.

Note that the map is based on NUT3 level statistics and that many smaller size areas of

market failure can be encountered within the regions identified in yellow.

The overall investment gap across the red areas is about EUR 70 billion. Within these

areas, it is estimated that the majority of households that will remain uncovered will be

rural households, representing an estimated investment gap for rural households of about

EUR 52,5 billion. To meet the Gigabit Society targets, it is evident that public

intervention is required to, on the one hand maximise the footprint of market investment

in areas bordering commercial viability and on the other hand ensure the availability of

funds for publicly driven deployments.

Map 1: Estimated NUTS3 regions needing public support post 2020



kom (2018) 0438 - Ingen titel

III. A

NALYSIS OF

REDECESSOR

ROGRAMMES

The current public interventions in support of broadband networks include: (i) national

Broadband Plans

amounting currently to €

13.5 billion

125

, (ii) a €

6 billion envelope

dedicated to broadband under ESIF (reaching an estimated €

10 billion together with

national co-funding),

(iii) EFSI support (€

2.3 billion until now) and (iv) smaller but

innovative interventions

under CEF (WiFi4EU, CEBF) for around €

240 million.

European Structural and Investment Funds (ESIF) on broadband have been concentrated

in a few countries (Poland, Italy, France, the Czech Republic and Spain account for over

half of the planned ERDF/EARDF investments)

126

, supporting mainly public driven

deployments through grants in market failure areas. Where there is no business case for

private operators ("white areas" according to state aid rules), so far progress has been

slow in closing digital and territorial divides as the areas addressed are not always the

ones most in need and the focus has often been on less performant technologies. In many

Member States, the ERDF investments focused primarily on productive sites in

urban/semi-urban areas while EARFD managing authorities also prefer to invest on other

rural development projects than broadband rollout

127

, so the most peripheral and rural

areas will therefore likely not even meet the current Digital Agenda for Europe (DAE)

targets by the end of the current programming period.

At the other end of the spectrum, European Fund for Strategic Investments (EFSI)

interventions along with European Investment Bank lending operations are improving

credit conditions and providing support to commercially driven, larger scale deployments

for which there is a medium-term

business case. Up to now, projects for above €

2.3

billion have been approved by the EIB, mostly undertaken by well-established operators.

With the very small envelope dedicated to broadband, the current Connecting Europe

Facility (CEF) is putting in place two innovative interventions, complemented by

technical assistance actions. Firstly, the CEF- and EFSI-funded Connecting Europe

Broadband Fund (CEBF) seeks to address a demand for equity/long-term finance for

smaller-scale and riskier commercially driven projects. This type of demand is currently

unmet by either the market or existing EC instruments. The CEBF will allow funding to

reach projects that would otherwise not meet current investment criteria and to address a

clearly identified gap in the finance market, an opportunity estimated by the EIB's

consultants at €33 billion

128

. The set-up of the fund has confirmed that, while there is a

persistent need for supporting the provision of equity (in particular for smaller operators

and smaller projects), it remains difficult to impose coverage obligations with this type of

instrument (for instance, to impose that project promoters include non-profitable

locations within the project deployment area).

125

126

127

128

Based o a study of the Natio al Broad a d Progra

es, we esti ate that urre tly €13.5 illio is

dedicated to broadband rollout via purely national schemes

–

see

https://ec.europa.eu/digital-single-

market/en/news/study-national-broadband-plans-eu-28-connectivity-targets-and-measures

Source: ICT Monitoring Tool:

http://s3platform.jrc.ec.europa.eu/ict-monitoring/-

/tool/search?code=7a3841fa59e74e34a67be9189f4f874b

As illustrated in the 2010 European Economic Recovery Package (EERP), only about a third of the resources

available were eventually programmed on broadband (Ares(2013)107783 - 29/01/2013).

Market study conducted for the EIB to assess the market potential for the CEBF: Assessment of potential for

a broadband infrastructure fund, May 2016.

kom (2018) 0438 - Ingen titel

Secondly, the WiFi4EU initiative is a demand-stimulating measure that aims to provide

free access to high-speed wireless connectivity in public spaces, thus promoting the take-

up of broadband by local authorities and facilitating the access of citizens to digital

services. This initiative is based on an innovative approach to direct management through

simple online tools of small-value grants, providing standardised support in the form of a

voucher scheme. The experience of launching the program has shown the great interest

generated at local level by the initiative, and the roaming functionality that will be

available in the future will further enhance the EU level effect anticipated.

The overview above illustrates that certain type of projects and interventions have been

clearly absent in the current multi-annual financial programme. For example, cross-

border links have clearly been totally absent under the existing intra-EU schemes,

including ESIF investments since it was decided that INTERREG 2014-2020 would not

invest in digital networks and since most other Operational Programmes are based on

(Member States') national core-to-periphery models. However, cross-border

infrastructure projects are important in the context of the Digital Single Market, e.g.

providing seamless connectivity along transport routes that cross national territories.

Cross-border international connectivity networks (e.g. submarine cables, interconnectors)

and associated servers form a key backbone for today's connectivity. These core digital

networks increase capacity and ensure vital redundancy, and thus improve investment

prospects for entire sub-regions of the European continent and islands to be more

attractive for the world's data centres.

Border areas and international connectivity are however not the only areas/types of

intervention which remain uncovered by the current programmes: several gaps in

connectivity

–

"pockets" of small but not insignificant size - persist in otherwise well-

developed regions throughout the EU. Covering relatively small areas in an otherwise

covered territory is extremely uneconomic and therefore not done by private investors.

Covering such areas is also not among the objectives of any of the current programmes.

On the other hand, such gaps represent significant unexploited potential on the Digital

Single Market, and handicaps for socio-economic drivers in these areas.

IV. P

OLICY

PTIONS

Continuing the status quo would amount to seeing the EU efforts for the deployment of

broadband continue, yet far below what is required to meet the EU Gigabit Society

strategic objectives. De facto, this scenario entails broadening the digital divide and

leaving a majority of rural households uncovered, as well as putting at risking the

achievement of the second Gigabit Society target concerning the deployment of 5G.

While a broader geographic deployment of broadband networks may contribute to some

extent to the availability of high capacity networks that form the underlying prerequisite

(fixed backhaul) for 5G deployment, it would not permit the deployment of 5G along

major EU transport corridors, nor the deployment of a dense network of 5G cells to cover

all urban areas. In addition, international connectivity and other cross-border deployment

would not be addressed.

Should these investments not be prioritised within the envelope foreseen in this scenario,

the investment gap in rural areas would be significantly higher. This would also imply

that socio-economic drivers would not be sufficiently supported in particular, making the

investment in disadvantaged areas, of which many are rural areas, more difficult. The

kom (2018) 0438 - Ingen titel

challenge of reaching the Gigabit Society strategic objectives and of delivering the

underlying connectivity for a functional Digital Single Market is therefore not only

quantitative: the nature of the current public interventions supporting broadband rollout

leave several areas and types of projects uncovered, across the whole EU territory.

Given the importance of investments in very high capacity networks, size of the

investment gap and based on the profiles and strengths of the current programmes, it is

necessary for rollouts to be supported via a set of well-targeted, efficient and

complementary interventions beyond 2020. Based on the experience gained in the current

MFF, a mix of instruments using grants, financial instruments (including budgetary

guarantees and thematic instruments) and blending between these various forms of

assistance will maximise the impact of EU support in the next Multi-annual Financial

Framework.

In this context, the intervention via the Connecting Europe Facility must be

complementary to other sources of funding for the deployment of very high capacity

networks, in particular ESIF and InvestEU. It is also necessary to address the scope of

CEF Digital in view of the new Digital Europe Programme. The resulting scope of CEF

Digital has been a re-focus on the core business of CEF, namely support of digital

connectivity infrastructure, whereas digital services will be supported through the Digital

Europe Programme. Moreover, CEF Digital will now strongly focus on strategic projects

aligned with the EU strategic connectivity objectives, considered essential to the success

of the Digital Single Market.

As regards the cross-border focus, the particularity of Internet networks is that, even

when deployed locally, they have global effects, due to the structure of the network and

scale effects of the applications and services running over the Internet. In that sense, all

digital connectivity networks, which are connected to the Internet, are intrinsically cross-

border. For this reason, all deployments into very high capacity networks in the digital

area, which are able to support EU's digital transformation, are considered projects of

common interest in the sense of trans-European digital networks. In view of the limited

resources available, priority for support via the Connecting Europe Facility should be

given to projects with the highest expected impact on the Digital Single Market, inter alia

through their alignment with the objectives of the Gigabit Society Strategy

Communication or through their strong cross-sector and/or cross-border characteristics,

and for which market failures have been observed. The proposed areas of intervention for

CEF Digital are presented in detail below.

V. N

COPE OF

NTERVENTION UNDER

CEF D

IGITAL

In view of the above, the scope of CEF Digital has been adjusted with a view to:

continue supporting measures which enhance connectivity for citizens, such as

the WiFi4EU initiative, a voucher scheme for providing local wireless

connectivity to citizens and visitors;

focus its new scope on digital connectivity infrastructure projects contributing to

the achievement of the strategic objectives set out in the 2016 Communication for

a Gigabit Society, by scaling up support for coverage of territories and

households with very high capacity networks, by providing support to Gigabit

connectivity to socio-economic drivers as well as grant-based schemes to deploy

5G corridors and backbone networks; and to

kom (2018) 0438 - Ingen titel

enhance synergies within the programme and by contributing to the digitisation of

transport and energy networks.

In particular, CEF should provide support for the following actions:

1. Gigabit connectivity for socio-economic drivers

Schools, universities, libraries, local, regional or national administrations, main providers

of public services, hospitals and medical centres, transport hubs and digitally intensive

enterprises, etc. are entities and places that can drive important socio-economic

developments in the area where they are located. Such socio-economic drivers need to be

at the cutting edge of Gigabit connectivity and to provide access to the best services and

applications for European citizens, business and local communities in order to maximise

the positive spill-over effects on the wider economy and society, including by generating

wider demand for such connectivity and services.

This type of intervention will directly support important digitisation efforts uand also

(through the infrastructures funded) improve the business case for wider network

deployments in the respective areas. It will also stimulate future demand for Gigabit

connectivity by exposing whole communities to the benefits of advanced digital services.

This grant-based scheme, taking the form of simplified forms of grants (i.e. vouchers)

would complement ESIF intervention and a few existing national schemes.

As an example, Europe has achieved important progress as regards eHealth services and

their interoperability. These eHealth services are expected to improve quality of services

and realise important savings. For instance, large net savings in elderly/home care have

been estimated in Sweden resulting from a more extensive introduction of digital health

services (e.g. net savings of about EUR 60 million per large city with 500.000 residents

by 2020). The successful deployment of many new digital applications and services will

however depend on the availability of 5G/Gigabit connectivity for hospitals and smaller

medical centres, as well as the connectivity of patients (i.e. households).

2. Wireless connectivity for local communities

Building on the experience and significant success of the WiFi4EU initiative so far, very

high quality local wireless connectivity should be provided free of charge in the centres

of local public life, including entities with a public mission such as public authorities and

providers of public services as well as outdoor spaces accessible to the general public, in

order to support EU's digital vision. As in the current period, the scheme should be

implemented without interfering with the commercial deployments and offers and by

using simplified forms of grants (i.e. vouchers).

3. Support for the deployment of 5G corridors

In the context of the 5G Action Plan129, the Commission is working on the definition of

a network of 5G corridors together with the Member States, to ensure uninterrupted 5G

coverage for Connected and Automated Driving / Mobility. The investment in such

major terrestrial transport paths is a prerequisite to achieve the key benefits of 5G

129

Communication of the Commission : "5G

for Europe: an Action Plan";

COM(2016) 588 of 14.09.2016.

kom (2018) 0438 - Ingen titel

technologies and ensure a scalable rollout across sectors and across borders. Once such a

major enabling infrastructure is deployed, for which market investment is not foreseeable

on an optimal timeline or scale because of the many beneficial externalities, major

impacts are expected in several areas including mobility, health and public connectivity.

This grant-based scheme would help funding deployments complementing any private

initiative.

4. Backbone and international connectivity projects

Today only 4% of the world's data is stored in the EU and the EU has only 14% of

revenues in the cloud service providers market.130 To make the EU more attractive for

the world's data centres, the underlying connectivity needs to be ensured. Several

Member States have recognised the importance of connectivity as a 'digital harbour' for

'digital goods' as a key enabler for the digital economy. For example in France Marseille

is a key hub for international connectivity; after the completion of the new submarine

cable between Germany and Finland (providing more bandwidth and improved latency)

the Finnish government is now actively pursuing an extension to Japan and China via the

Arctic route; similarly Malta is today only linked to Sicily and is concerned about the

reliability and resilience of this link and prices that are significantly higher compared to

others. In addition, to further international bandwidth for research

131

the EU has

supported the establishment of Ella Link, linking Brazil with the EU and offering a

competitive alternative to the US submarine cables that currently channel most traffic

between the continents.

The deployment of backbone electronic communications networks, including with

submarine cables connecting European territories to third countries on other continents or

connecting European islands or overseas territories to the mainland, are needed in order

to build redundancy, and increase the capacity and resilience of EU's digital networks.

However, such projects are often commercially non-viable.

5. Targeted support for household and territories coverage

All European households, rural or urban, should have access to adequate fixed or

wireless connectivity. In view of ensuring coherence with other funding programmes and

taking into account the new forms of interventions foreseen (grants instead of financial

instruments), CEF should focus on those local deployments which contribute to this

objective, for which market failures are observed, but which can be deployed using low

intensity grants, alone or in combination with financial instruments.

As explained above, financial instruments only work within certain territories, in

particular in urban and sub-urban territories, or in wealthier areas where there is a

commercial case for deployment, even if the investment is riskier than market standard

130

Commission staff working document on the free flow of data and emerging issues of the European data

economy, January 2017, see:

http://ec.europa.eu/newsroom/dae/document.cfm?doc_id=41247

131

International connectivity investments allow the scientific community to fully exploit research data produced by

big-data factories and HPCs. Existing communication networks will have to be upgraded (e.g. the link

Bologna

–

Trento

–

Innsbruck to enable for transfer of Copernicus data, or the Nordic network to exploit new

Artic links) and new networks will have to be laid down (e.g. between Italy and the Balkans, to improve

connectivity with that region). If properly funded, the pull effect created by the scientific demand for

increased network capacity will improve the bankability of international connectivity projects.

kom (2018) 0438 - Ingen titel

ones. Financial instruments can improve the business case, but cannot create one. On the

other hand, ESIF often focuses on deployments which are purely public driven, and

where high-intensity grants are necessary, typically covering more rural and poorer semi-

urban territories. In between these extremes, there are several areas throughout the EU

which, as discussed above, risk to remain uncovered in the absence of public

intervention, and which represent significant unexploited potential and bottlenecks for

the Digital Single Market.

In view of an efficient and effective intervention, CEF seek to focus on these "middle"

areas, and to cover them comprehensively via low intensity grants, including via

blending. Such intervention would bring the principles and efficiency of financial

instruments to poorer and more rural areas, including in poorer Member States, where

risk capital alone would typically not go. Moreover, providing a grant allows also

imposing conditionalities, in terms of which households and which socio-economic

drivers are to be covered in a certain area. The intervention will be done in full respect of

state aid principles, in particular by taking into account existing and planned private

investments.

6. Contributing to the digitisation of transport and energy networks

Significant positive impacts, for the sectors, and for the economy and society as a whole,

are expected from the digitalisation of energy and transport networks. The funding of 5G

corridors are one example of synergy action, expected to be followed by many others.

One of the objectives of CEF Digital is to contribute indeed the digitalisation of transport

and energy networks.

VII. C

OMPLEMENTARITY WITH

THER

ROGRAMMES

In the new MFF, the intervention under CEF described above will be complementary in

particular with:



InvestEU will intervene to support economically viable projects, which present a

potential capacity to generate revenues, via budgetary guarantees, in order to

overcome issues of access to finance, to support an increased risk taken by private

investors and to support the rapid deployment of the newest technologies

throughout Europe;

ESIF is expected to ensure the rollout of digital networks in view of covering all

territories throughout the EU, including rural, isolated, and sparsely populated

areas, focusing on areas where more severe market failures are observed and

where higher intensity grants are required to render the network deployment

viable. ESIF intervention can be complemented by high speed connectivity

vouchers to specific demand drivers and anchor customers, e.g. eHealth

practitioners, schools, local administrations, etc. located in these areas, which can

be implemented through a simplified direct management approach;

Digital Europe Programme will fund digital services, while CEF refocuses on the

underlying digital infrastructure.

