Changes from report parliamentary committee draft to plenary report

Removed6. Regrets that delays in responding to requests for connection to distribution grids result in a slower pace of electrification, even in Member States where generation from renewables is rapidly increasing;

Added7. Highlights that a failure to modernise and expand the EU’s electricity grid, alongside the rapid deployment of the high volumes of variable renewable energy required to deliver on its targets, has and will continue to result in high levels of dispatch-down (instructions to reduce output); believes that the dispatch-down of renewables, caused by grid congestion and curtailment, represents an unacceptable waste of high-value renewable electricity and money; calls on the Commission, as part of its forthcoming European Grids Package, to set out an EU strategy to vastly reduce the dispatch-down of renewable electricity;

Added8. Highlights the role of smart grids in improving congestion management and optimising the electricity distribution of renewables; stresses their contribution to network flexibility by integrating digital tools that facilitate demand-side response and collective self-consumption; underlines that better grid management enhances energy resilience, reduces curtailments and secures supply during peak demand periods;

Added9. Highlights that the electricity grid infrastructure is a priority for achieving the EU’s strategic autonomy and its climate and energy targets; notes the Clean Industrial Deal’s commitment to electrification with a key performance indicator of a 32 % economy-wide electrification rate by 2030, which would necessitate a significant and continuous update and deployment of grids; regrets that delays in responding to requests for connection to grids result in a slower pace of electrification, even in Member States where generation from renewables is rapidly increasing;

Added10. Highlights, in particular, the crucial role that energy communities can play in supporting local economies; regrets that energy communities and smaller operators face disproportionate barriers to grid access and grid funding access due to regulatory hurdles and resource constraints; calls, therefore, on the Member States that are lagging behind in this regard to fully implement the Clean Energy Package, Fit for 55 and Renewable Energy Directive provisions, empowering citizens, municipalities, SMEs and companies to actively participate in the electricity market, in particular by developing enabling frameworks for renewable energy communities and the promotion of energy-sharing schemes; calls for grid-related EU and national level funding to take into account the specific needs of projects promoted by energy communities;

Regulatory situation and challenges

Change 7

Removed7. Underlines that the TEN-E Regulation and the Projects of Common Interest (PCI) are powerful tools in the development of the Union’s cross-border energy infrastructure; regrets the shortcomings in the current 10-year network development plan (TYNDP) for European electricity infrastructure, which results in investment interests falling short of cross-border needs, and that grid planning does not fully leverage cross-border and cross-sectoral savings; urges the Commission to introduce more coordinated, cross-sectoral planning; notes that, although the TEN-E Regulation enables smart electricity grid projects to obtain PCI status, even if such projects do not cross a physical border, the PCI list in 2023 included only five such projects; strongly believes, therefore, that the PCI process needs to be strengthened; calls on the Commission to urgently propose a targeted revision of the TEN-E Regulation in order to (1) introduce a robust planning process with a strengthened role for European Union Agency for the Cooperation of Energy Regulators (ACER) in this process, (2) ensure scenarios are drawn up in line with the decarbonisation agenda and enable easier access for smart electricity grid projects, and (3) introduce a simplified application process for small and medium-sized distribution system operators;

Added11. Is convinced that regulatory stability is a key condition for unlocking private investments in the electricity grid and, where feasible, enabling the affordable electrification of the EU’s economy, and reiterates the need to implement already adopted legislation before assessing potential new reviews;

Removed8. Strongly emphasises that the Connecting Europe Facility for Energy (CEF-E) has proven to be the crucial instrument for co-financing cross-border energy infrastructure and insists on its continuation; calls on the Commission to propose a targeted amendment to the CEF Regulation to revise the eligibility criteria to better reflect distribution-level projects relevant for the achievement of EU energy and climate targets;

Added12. Underlines that integrated grid planning across sectors at local, regional, national and EU levels will lead to increased system efficiency and reduced costs; calls, therefore, on the Commission and on the Member States to work towards integrated planning and to ensure that electricity network development plans are aligned with the 2021-2030 national energy and climate plans (NECPs) for all voltage levels; notes that a strengthened governance framework would help to ensure alignment between grid development plans and national and EU level policy objectives; recognises that, while the Member States are required to report on their contributions to EU targets through the NECPs, there is currently no equivalent obligation on TSOs to systematically report at EU level;

Removed9. Considers the lack of detailed, reliable and comparable data on national and EU grid planning an obstacle to more efficient grids; welcomes, therefore, DSO Entity’s report on good practices on Distribution Network Development Plans; urges the Commission to develop guidelines based on this report in cooperation with DSO Entity to harmonise national development planning and require all transmission and distribution operators to provide energy regulators with data about their current grid hosting capacity and grid planning to enable energy regulators to properly scrutinise grid planning, and to enable stakeholders to better take grid capacities into account when planning their investments;

Added13. Underlines that the TEN-E Regulation and the Projects of Common Interest (PCI) and Projects of Mutual Interest (PMI) are powerful tools in the development of the Union’s cross-border energy infrastructure; regrets the shortcomings in the current TYNDP for European electricity infrastructure, which results in investment interests falling short of cross-border needs, and that grid planning does not fully leverage cross-border and cross-sectoral savings; further regrets delays regarding to the completion of PCIs; urges the Commission to introduce more coordinated, long-term cross-sectoral planning to deliver the related savings and benefits across the EU; highlights that such coordinated planning could better inform cost sharing of infrastructure across the Member States; notes that, although the TEN-E Regulation enables smart electricity grid projects with a cross-border impact to obtain PCI status, even if such projects do not cross a physical border, the PCI list in 2023 included only five such projects; strongly believes, therefore, that the PCI process needs to be strengthened, simplified and streamlined for more clarity and transparency; calls on the Member States to fully complete the PCIs; calls on the Commission to urgently propose a targeted revision of the TEN-E Regulation in order to (1) introduce a robust planning process that combines system operators’ responsibilities with a strengthened role for ACER by mandating ACER to request amendments to the scenarios and the TYNDP, (2) ensure scenarios are drawn up in line with the decarbonisation agenda and enable easier access for smart electricity grid projects, and (3) introduce a simplified application process for small and medium-sized distribution system operators (DSOs);

Removed10. Notes the work done by ENTSO-E and DSO Entity on harmonised definitions of available grid hosting capacity for system operators and to establish a Union-wide overview thereof; calls on the national regulatory authorities (NRAs) to provide a clear framework to allow the ‘first-come first-serve’ approach to be abandoned by disincentivising applications for connection where these are not substantiated by a solid project or where the developer cannot show sufficient commitment to the realisation of a project;

Added14. Emphasises that network planning is a long-term process closely linked to investment stability; proposes, therefore, extending the time frame for network development plans to 20 years; highlights that grid investment is urgently required by the EU’s competitive agenda and should not be delayed;

Removed11. Regrets that some Member States did not achieve the 10 % interconnection target by 2020 and urges them to strive to achieve the current 15 % interconnection target;

Added15. Additionally notes that the EU will continue to have strong electricity links with its neighbouring countries and therefore believes the Commission should enhance such cooperation with neighbouring countries through PMIs with non-EU countries, as provided for in the TEN-E Regulation;

Removed12. Welcomes the provisions adopted in the latest revision of the Renewable Energy Directive to accelerate, streamline and simplify permit-granting procedures for grid and renewable energy projects;

Added16. Strongly emphasises that CEF-E has proven to be the crucial instrument for co-financing cross-border energy infrastructure and insists on its continuation; welcomes the inclusion of offshore electricity grid projects in the Commission’s most recent allocation of grants under CEF-E;

Added17. Considers the lack of detailed, reliable and comparable data on national and EU grid planning an obstacle to more efficient grids; calls therefore on the Member States to thoroughly implement the relevant provision in the Electricity Directive, in particular Article 32, and to encourage smaller DSOs to apply this Article’s provision;

Added18. Welcomes the EU DSO Entity’s report on good practices on Distribution Network Development Plans (DNDPs), which calls on the Member States to include cost-benefit analyses in their DNDPs, in order to evaluate investment opportunities; urges the Commission to develop guidelines based on this report, in cooperation with the EU DSO Entity, to harmonise and increase transparency of national development planning for distribution grids, to publish a European overview of the DNDPs and to require all transmission and distribution operators to provide energy regulators with the necessary data about their current and future grid hosting capacity information and grid planning, to enable energy regulators to properly scrutinise grid planning; calls on the Member States to implement Article 31(3) of Directive 2024/1711, which requests grid operators to publish information on the capacity available in their area of operation, in order to ensure transparency and enable stakeholders to make informed investment decisions; calls on the Commission to develop a centralised online repository for all transmission plans and DNDPs;

Added19. Highlights the significant risk posed by curtailment to the viability of renewable energy investment, especially considering that many Member States fail to compensate market participants for curtailed electricity volumes, despite the requirements set out in Articles 12 and 13 of Regulation (EU) 2019/943; regrets the lack of transparency, availability and data granularity regarding curtailed renewable energy volumes and congestion management costs;

Added20. Highlights the value of putting clear metrics in place to measure whether the EU is on track to deliver the grid expansion and reinforcements needed to meet its 2050 objectives; notes that such metrics could include reductions in renewable energy curtailment, lower grid development costs relative to the amount of capacity delivered, increases in the efficient use of existing infrastructure, a reduction in losses and lower raw material intensity;

Added21. Notes the work done by ENTSO-E and the EU DSO Entity on harmonised definitions of available grid hosting capacity for system operators and to establish an Union-wide overview thereof; believes that national regulatory authorities (NRAs) could benefit from clear legislative provisions as to how Member States can prioritise grid connections, so as to abandon the ‘first-come, first-served’ principle; therefore asks the Commission to amend Article 6 of Directive (EU) 2019/944 on the internal market for electricity, as part of the implementation review that the Commission must complete by 31 December 2025, and to consequently introduce transparent priority connection criteria to be chosen and further defined by the Member States for (1) generation connection, such as quality and maturity of the project, level of commitment, contribution to decarbonisation, social value, and for (2) consumer connection, such as quality and maturity of the project, level of commitment, contribution to decarbonisation, public interest or its strategic and/or social value, and grid optimisation; calls on the NRAs and the Member States to provide clear prioritisation rules according to their local and national specificities to allow the ‘first-come, first-served’ approach to be abandoned by disincentivising applications for connection that are not substantiated by a solid project, that are speculative or where the developer cannot show sufficient commitment to the realisation of a project;

Added22. Underlines that improved cross-border interconnections offer substantial cost-saving potential at the system level, with annual reductions in generation costs estimated at EUR 9 billion up to 2040, while requiring annual investments of EUR 6 billion in cross-border infrastructure and storage capacity;

Added23. Regrets that some Member States did not achieve the 10% interconnection target by 2020 and urges them to strive to achieve the current 15% interconnection target for 2030, as set out in Regulation (EU) 2018/1999, since interconnection capacity is crucial for the functioning of the EU’s internal electricity market, leading to significant cost savings at system level and decreasing generation costs by EUR 9 billion annually to 2040; regrets that the 32 GW of cross-border capacity needed by 2030 remains unaddressed; deplores the delays and uncertainties regarding several interconnection projects; calls, therefore, on the Commission to propose, by June 2026 at the latest, a binding interconnection target for 2036 based on a needs assessment; stresses the need for cooperation with non-hosting Member States and for the EU and its neighbouring countries to be involved in negotiations, in order to ensure the projects’ finalisation;

Added24. Highlights the need to accelerate permitting procedures for electricity infrastructure; stresses that grid expansion should not be delayed by lengthy permitting procedures or excessive reporting requirements; therefore welcomes the positive progress made regarding provisions adopted in the latest revision of the Renewable Energy Directive, specifically Article 16f thereof, and the Emergency Regulation on Permitting to accelerate, streamline and simplify permit-granting procedures for grid and renewable energy projects, especially the principle of public overriding interest for grid projects; notes, however, that some of the Member States have not seen a material improvement in project permitting timelines, despite the ambitious frameworks set out at EU level; therefore urges the Member States to implement these measures without delay and calls on the Commission to closely monitor the implementation of the Renewable Energy Directive, and regularly assess if revised permitting provisions are sufficient to deliver on the EU’s objectives; additionally calls on the Commission to set out guidelines for the Member States to include a principle of tacit approval in their national planning systems, as described in Article 16a of the Renewable Energy Directive; stresses that reinforcing administrative capacity, including through adequate staffing of planning and permitting authorities, will accelerate permitting procedures;

Added25. Encourages the Member States to draw up plans to designate dedicated infrastructure areas for grid projects, as outlined in Article 15e of the Renewable Energy Directive; stresses that such plans are essential to account for local specificities and ensure respect for protected areas; emphasises that these plans should be closely coordinated with the designation of acceleration areas for renewables, to ensure a streamlined, efficient and integrated approach to energy infrastructure development;

Added26. Notes that often documents need to be submitted in paper form; calls on the Member States to increase the digitalisation of these processes in order to accelerate permitting procedures; calls on the Commission and the Member States to revise all EU legislation relevant to permitting, such as the Environmental Impact Assessment Directive, with a view to introducing mandatory digital application, submission and processing requirements;

Added27. Highlights the importance of public acceptance and public engagement when developing new grid projects and calls on the Commission to develop a set of best practices to be shared among the Member States in this regard; highlights the critical importance of effective communication with citizens and communities regarding grid projects and reinforcement; notes that local-level support can help to accelerate the delivery of critical infrastructure and thus meet national and EU level objectives; urges the swift implementation of the EU’s pact for engagement with the electricity sector and coordination with national signatories (TSOs, DSOs, NRAs) to guarantee early, meaningful and regular public participation in grid projects;

Added28. Calls for the convening of a TAIEX Group on Permitting within the forthcoming European Grids Package to support the Member States in addressing administrative bottlenecks, enhancing regulatory capacity and accelerating project approvals through the sharing of best practices and cross-border coordination;

Added29. Welcomes the initiatives announced under the Action Plan for Affordable Energy; recommends that the Commission extend the ‘tripartite contract for affordable energy for Europe’s industry’ to smaller energy producers, including energy communities, SMEs and businesses, leveraging flexibility and demand response, and link the outcome of these cooperation structures with grid planning processes at national and EU level, in order to optimise planning, investment and grid utilisation from the outset;

Added30. Highlights the need for improvements to be made to the public procurement framework, in order to tackle the challenges to grid operators regarding supply chains; therefore welcomes the Commission communication on the Clean Industrial Deal and the announcement by the Commission of a forthcoming review of the Public Procurement Directives; stresses public procurement’s potential for the continued development of a strong EU manufacturing supply chain for electricity grid equipment, software and services; encourages the Commission to promote resilience, sustainability and security in public procurement procedures for grid operators; advocates for greater consistency between EU regulations on public procurement; calls on the Commission to adapt EU rules on public procurement with a view to harmonising and simplifying functional tendering specifications, in order to ramp up the production capacities of grid components;

Added31. Believes that adequate standardisation and common technical specifications are necessary for achieving economies of scale, and to speed up technological development; considers, additionally, that it is essential to ensure the right level of standardisation so that manufacturers’ capacity to innovate is not reduced;

Added32. Reiterates the need to consider new business models between equipment manufacturers and operators, such as long-term framework agreements that encourage the shift from one-off ‘grid projects’ to sustained and structured ‘grid programmes’, which result in more predictable planning for grid technology manufacturers; calls for the streamlining of tendering processes for the provision of grid equipment and services;

Added33. Stresses that this forthcoming revision of the Public Procurement Directives will allow the inclusion of sustainability, resilience and European preference criteria in EU public procurement processes for strategic sectors, in line with the provisions set out in Article 25 of Regulation (EU) 2024/1735; calls for grids and related technologies to be explicitly recognised as strategic sectors, to ensure their eligibility under the revised framework; underlines that strengthening European preference in public procurement processes is essential for reducing the EU’s dependence on non-EU suppliers, enhancing supply chain security, and fostering a resilient EU industrial base capable of supporting the energy transition; welcomes the introduction by the European Investment Bank (EIB) of a ‘Grids Manufacturing Package’ to support the European supply chain with at least EUR 1.5 billion in counter-guarantees for grid component manufacturers; calls for further similar financial instruments to be developed to provide long-term investment certainty and to accelerate the scaling-up of European production capacity;

Financing

Change 8

Removed13. Observes with concern that the budget allocated under CEF-Energy has been insufficient to expedite all PCI project categories; calls on the Commission and the Member States to significantly increase such funding when proposing the next multiannual financial framework (MFF);

Added34. Notes that over the past five years, global investment in power capacity has increased by nearly 40 %, while investment in grid infrastructure has lagged behind; notes that estimates of investment that the EU will need to make in its grid over the 2025-2050 period range from EUR 1 950 billion to EUR 2 600 billion;

Removed14. Deeply regrets that, whereas regional funds such as the Cohesion Fund or the European Regional Development Fund provide for grid investments, in principle, they are in practice underutilised for grid projects; calls on the Commission and Member States to ensure that a proportionate amount of such funds is also spent on grid investments;

Added35. Observes with concern that the budget allocated under CEF-E has been insufficient to expedite all PCI and PMI categories; notes that with a EUR 5.84 billion budget for 2021-2027, the programme has restricted capacity and may struggle to keep pace with investment needs; calls on the Commission and the Member States to significantly increase the CEF-E envelope and the percentage of CEF-E funds dedicated to electricity infrastructure as a separate adequate resource, when proposing the next multiannual financial framework (MFF), and to ensure that projects both at the distribution and at the transmission levels with an EU added value are eligible for budget allocated under CEF-E; encourages the Commission to further explore co-financing possibilities between CEF-E and the Renewable Energy Financing Mechanism;

Removed15. Calls on the Commission to propose a funding instrument, such as one based on revenues from the market-based emission reduction scheme, to support decentralised grid projects;

Added36. States that EU funding is predominantly allocated to transmission grids with relatively insignificant allocations to distribution grids, despite their significant role in the EU energy transition, demonstrated by the fact that, between 2014 and 2020, CEF-E funded around EUR 5.3 billion worth of projects, of which around EUR 1.7 billion went to transmission grids and EUR 237 million to smart distribution grids; notes that the last PCI list only contained five smart electricity projects;

Removed16. Is convinced that anticipatory investments will help to address grid bottlenecks and prevent curtailment; points out that the EMD Regulation sets out regulatory elements for anticipatory investments but lacks a harmonised definition and implementation across the Union; calls on the Member States to swiftly implement its provisions and remove national legal barriers, and on the Commission to urgently provide guidance regarding the approval of anticipatory investments, as announced; emphasises that Member States should encourage private investments by providing risk mitigation tools or Member State guarantees;

Added37. Deeply regrets that, whereas regional funds such as the Cohesion Fund, the European Regional Development Fund or the Recovery and Resilience Facility provide for grid investments in principle, in practice they are underutilised for grid projects; regrets also that the evaluation criteria applied to the assessment of projects submitted in response to the EU Innovation Fund’s calls for proposals prevent funding for the demonstration and manufacturing of grid technologies; calls on the Commission and the Member States to ensure that a proportionate amount of such funding is also spent on grid investment;

Removed17. Underlines that investments should not only be focused on capital expenditure, as investments increasing the existing infrastructure should equally be considered; therefore welcomes Article 18 of the EMD Regulation, which calls for tariff methodologies to give equal consideration to capital and operational expenditure; calls on the Commission and the Member States to thoroughly implement its provisions;

Added38. Calls on the Member States to simplify access to the EU funds managed by the Member States for grid operators, for instance through the establishment of a one-stop-shop in those Member States in which a large share of DSOs are of a small or medium size;

Removed18. Is concerned that experts forecast network tariff increases of around 50 % to 100 % by 2050; stresses, therefore, the need for instruments that support grid operators in efficiently managing available grid capacity, with a view to reducing imminent grid investment needs; highlights that flexible connection agreements and flexible network tariffs contribute to grid efficiency; invites NRAs to promote these flexible tariffs;

Added39. Calls on the Commission to propose a dedicated funding instrument, such as one based on revenues from the market-based emission reduction scheme, to allow the Member States to support decentralised and innovative grid projects with a clear EU added value, including smaller projects, ensuring its effective use by the Member States for these purposes;

Removed19. Points out that transmission infrastructure and availability of cross-zonal capacities are vital for an integrated market; notes that the EMD Regulation sets a 70 % target of capacities available for cross-zonal trade; regrets that achieving this target has often resulted in costs for redispatch; notes that existing cost sharing mechanisms, such as cross-border cost allocation (CBCA), inter-transmission system operator (TSO) compensation and re-dispatching cost sharing, are limited and difficult to implement, which does not encourage cross-border investments; calls on the Commission to improve such mechanisms;

Added40. Emphasises the need for regulatory frameworks to attract private investment and ensure cost-reflective tariffs, in addition to public funding mechanisms;

RemovedGrid enhancing technologies

Added41. Is convinced that anticipatory investments and forward-looking investments will help to address grid bottlenecks and prevent curtailment; points out that the EMD Regulation sets out regulatory elements for anticipatory investments but lacks a harmonised definition and implementation across the Union; calls on the Member States to swiftly implement the aforementioned provisions of the EMD Regulation and remove national legal barriers, on NRAs to remove barriers as regards regulatory incentives and disincentives, and on the Commission to urgently provide guidance regarding the approval of anticipatory investments, as announced in its Action Plan for Grids; believes that further harmonisation in this respect might be beneficial; calls for detailed cost-benefit analyses and scenario-based planning to assess the likelihood of future utilisation, and recommends a two-step approval process for projects with a higher risk level by first approving smaller budgets for studies or planning, followed by a second approval for the more costly steps, in order to reduce the risk of stranded assets;

Removed20. Underlines that grid-enhancing technologies can significantly increase the efficiency of existing grid capacities without an immediate need for new lines; urges NRAs to incentivise TSOs and DSOs to rely more on such technologies, through remuneration schemes based on benefits rather than costs, and to benchmark them on their uptake of such technologies;

Added42. Acknowledges that grid investments from capital markets can be incentivised by providing market-oriented conditions, such as suitable rates of return and a robust regulatory framework; emphasises that the EU and the Member States should encourage private investments by providing risk mitigation tools or Member State guarantees; calls on the Commission and the EIB to further strengthen financing and de-risking initiatives and tools, such as counter-guarantees, to support additional electricity grid expansion and modernisation at affordable rates for system operators; emphasises the relevance of ensuring that the EU’s electricity grid is financed and therefore owned by public and private capital only from EU actors, or previously screened non-EU investors, in view of the criticality of the infrastructure;

Removed21. Welcomes the work accomplished by ENTSO-E and DSO Entity in developing the TSO/DSO Technopedia;

Added43. Underlines that, while investment decisions should be guided by efficiencies, including energy and cost efficiency, investments should not only be focused on capital expenditure, and that investments optimising, renewing and modernising the existing infrastructure should be equally considered; therefore welcomes Article 18 of the EMD Regulation, which calls for tariff methodologies to give equal consideration to capital and operational expenditure, and remunerate operators to increase efficiencies in the operation and development of their networks, including through energy efficiency, flexibility and digitalisation; calls on the Commission and the Member States to thoroughly implement its provisions and to focus on ensuring fair and timely compensation to system operators for the costs borne by them;

Removed22. Recalls the importance of the rapid implementation of the cybersecurity network code and the related legislation; considers that NRAs should acknoweldge the costs incurred by operators in adopting cybersecurity measures;

Added44. Notes that the electrification of the EU economy, where technically and economically feasible, would help to drive down network tariffs by spreading the costs across a wider range of users; highlights, therefore, the importance of ensuring that the development of the future network is fully aligned with demand projections driven by increases in the level of electrification; is concerned by experts’ forecasts of network tariff increases of around 50% to 100% by 2050; stresses, therefore, the need for instruments and incentives that support grid operators in efficiently managing available grid capacity, including through procuring flexibility services, with a view to reducing imminent grid investment needs; highlights that flexible connection agreements, flexible network tariffs and local flexibility markets contribute to grid efficiency; invites NRAs to promote these flexible tariffs that allow consumers to easily react to price signals while shielding vulnerable households and businesses from price peaks; calls on the Commission and the Member States to actively address bottlenecks in tariffs, connection fees and regulations to facilitate cross-border and offshore hybrid grid investment;

Added45. Calls on the Member States to implement the relevant EU legal framework to unlock demand-side flexibility by accelerating the deployment of smart meters, enabling access to data from all metering devices and ensuring efficient price signals, to allow industries and households to optimise their consumption and reduce their electricity bills, and at the same time help reduce operational costs and the need for additional grid investment;

Added46. Stresses that the relaxation of network tariffs and certain charges, which could have the effect of lowering electricity prices, as proposed in the Affordable Energy Action Plan, has to be accompanied by a plan to replace the sources of the funds needed for grid investment with alternatives, in order to avoid facing underinvestment of the grids in the future;