ENTSOG Annual Report 2013

COST-BENEFIT ANALYSIS METHODOLOGY

Regulation (EC) 347 / 2013 came into effect in May 2013. This legislation will expand the role of TYNDP so that it effec- tively serves as a gateway to the selection process for for Pro- jects of Common Interest (PCI). It also requires that ENTSOG develops a Cost-Benefit Analysis (CBA) methodology to be used at different stages of the PCI process. This regulation presents a challenging task to ENTSOG with the requirement of developing – in just six months time – a detailed CBA methodology to be used by the association and project promoters alike. The role of these CBAs is to measure the im- pact of infrastructure projects on the basis of security of supply, competition, sustainability and market integration. At the same time, the methodology should identify the impacted countries and compare the project impact with its cost. This 6-month deadline is equivalent to one-third of the frame- work guidelines and network code process for a similar deliver- able. ENTSOG has therefore anticipated this task as much as possible by analysing existing practices and consulting with stakeholders before the legislation comes into effect. Since May 2013, ENTSOG has organised two public consulta- tions, two Stakeholder Joint Working Sessions, many bilateral meetings with institutions such as the European Investment Bank (EIB), and a joint workshop with ENTSO-E targeting the Member States and National Regulatory Authorities (NRAs). \\ Dual structure methodology: –– Energy System-Wide (ESW) CBA to be carried out by ENTSOG as part of TYNDP and serving as the basis for individual project assessments –– Project-Specific CBAs to be carried out by each project promoter in order to capture the marginal impact of his project and to compare it to the associated cost \\ Combined approach capturing project impact through: –– Quantitative analysis based on indicators reflecting criteria set by regulators –– Monetization of main project benefits –– Qualitative analysis commenting and developing the previous steps As the Regulation stipulates, the methodology developed by ENTSOG aims to inform the selection of PCIs by Regional Groups and to support the later stages of the process such as cross-border cost allocation. It is not intended as a means of ranking projects and particular attention is given to identifying how sensitive the results are to inputs. Along this process, stakeholders have backed the following main elements proposed by ENTSOG:

Moreover, the availability and the meaningfulness of the data are among the main challenges for 2014. ENTSOG has drawn attention to this point so that stakeholders and institutions can help with these matters. The unavailability of certain data could force ENTSOG to downscale the methodol- ogy in order to ensure its applicability. ENTSOG published the methodologies for ESW CBA and project-specific CBA on 15 November, one day ahead of the regulatory deadline. Prior to adaptation by ENTSOG, these methodologies must be assessed by ACER, the European Com- mission and Member States by May 2014.

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ENTSOG Annual Report 2013 |

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