Financing trans-European energy infrastructure – the Connecting Europe Facility

Financing trans-European energy infrastructure – the Connecting Europe Facility

European Commission - Fact Sheet

Energy infrastructure is usually financed by the market and through tariffs paid by users. However, in order to meet the challenge of interconnecting all EU Member States by 2020 and the €200 billion needed to that end, the European Union has set up funds contributing to leverage the investment needed. The most prominent of those funds is theConnecting Europe Facility (CEF). Investments in energy infrastructure can also be supported under certain conditions by EU Cohesion Policy. In addition, the recently proposed European Fund for Strategic Investments (EFSI) will offer financing opportunities for energy infrastructure going beyond CEF.

What is the Connecting Europe Facility (CEF)?

CEF is a multi-annual funding programme set up to finance improvements in Europe's transport, energy and digital networks. With an overall budget of close to €33 billion covering the three sectors,€5.85 billionhas been allocated to energy for the period of 2014-2020. The lion's share of this amount is set aside for grants while roughly 10% of it goes to financial instruments that should help facilitate the access of infrastructure projects to corporate and project financing.

For the CEF grants to make a difference they have to be targeted at a few critical projects and must be combined with the efforts of regulatory authorities to finance projects through network tariffs and other funding sources.

In 2014, grants worth€647 millionhave been allocated to proposals covering studies and works for key energy infrastructure projects. Grants for works went to projects which otherwise would not be commercially viable or simply not affordable for users in the Member States concerned. The money from the CEF is meant to act as a catalyst for raising more funding from private and public investors.

Who can apply for support from CEF?

To be eligible for financial support under the CEF, projects must first be included in the list ofprojects of common interest (PCIs). These are key infrastructure projects, which will help Member States integrate their energy markets and in particular end the isolation of some Member States from Europe-wide energy networks. The projects will also allow a greater diversity of sources to supply our networks. Moreover, they will help power grids cope with the increasing amounts of electricity generated from renewable energy sources and in doing so will help reduce CO2emissions.

Which projects are on the list of PCIs?

The first list of PCIs was published in October 2013. It contains248projects, a majority of which are electricity and gas transmission lines. Thirteen projects for electricity storage are on the list, which include innovative technologies such as compressed air electricity storage. Furthermore, the list also provides for underground gas storages, LNG terminals, and two smart grids projects. The list will be updated every two years and the next update is foreseen for the end of 2015.

The full list of projects by country:

What proposals are eligible for CEF funding?

EU support will be offered for preparatory studies, such as feasibility studies or environmental impact assessments. Support will also be given to build important gas infrastructure or electricity grids.

For the studies, all PCIs with the exception of oil projects are eligible for grants.

For construction works to be eligible for CEF funding, a PCI has to demonstrate that it:

  • has significant benefits, such as security of supply, solidarity between Member States or innovation
  • is commercially not viable;
  • has received a cross-border cost allocation as sometimes a big part of an investment needs to be made by project promoters in one Member State while there are benefits across the border in another Member State. In this case a decision on sharing the costs needs to be taken by the competent regulatory authorities.

How much of the costs can be covered by CEF?

In general, the amount of EU support cannot exceed50%of the eligible costs for both studies and works. In exceptional cases, when a project contributes significantly to the security of supply, enhances energy solidarity between Member States or offers highly innovative solutions, EU support may be increased to a maximum of 75 per cent of the costs for construction works.

What are the timeline and the amount for the first call for proposals in 2015?

The call for proposals, which has an indicative budget of €100 million, is open from 4 March until 29 April 2015. Important for project promoters intending to participate is the Info Day that will be organised in Brussels on 16 March 2015. Registration is open until 9 March:

Following the evaluation of the eligible applications received theEuropean Commissionwill propose a list of actions to be co-financed to theCEF Coordination Committee. The Committee, which consists of Member State representatives, is expected to give its opinion on the list by mid-July. The Commission will then formally adopt the list.

When will the next call for proposals be launched?

With a total of €650 million for grants foreseen in 2015, the first call for proposals will be followed by a second one with a substantially higher budget indicatively set at €550 million. This second call will be launched in June 2015 and it will remain open until the end of September allowing applicants who have failed in the first call to resubmit an application for the second call.

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