ENTSOG TYNDP 2017 - Main Report

5.3.1 REGULATORY FRAMEWORK

For many projects the regulatory framework is perceived as not being appropriate to ensure the delivery of new infrastructures even when they have been identified as necessary to complete the integration of the European gas market. The follow- ing graph shows in more detail the regulatory challenges faced by promoters according to their project submission. The category “Other” covers promoter responses where a specific category of barrier was not provided and the comments did not allow it to be further categorised  1) .

2 5

Rate of Return Low price of short term capacity Capacity quotas

7

31

%

Lack of proper transposition of EU regulations Significant changes in national/EU legislation Missing or not uniform regulatory framework Other

35

15

5

Figure 5.4: Overview of Regulatory related project barriers

The level of rate of return is perceived as one of the major obstacles. Setting such level is subject to European or national regulatory regimes, but these should encour- age long-term investments with a reasonable return. A rate of return that is too low or is subject to high risks hampers new investments in gas infrastructure and may hinder the completion of the internal gas market. The setting of the rate should strike the right balance between the benefits of further market integration and the impact on transmission tariffs which represent a moderate share of the wholesale market price of gas. Besides, this barrier can be mitigated, as stated in ACER’s Recommen- dation No. 03/2014   2) , by ensuring that the remuneration of the project promoter in- cludes a premium in certain projects. The practice of applying incentives, such as premium rates of return for some cate- gories of projects, has already been adopted and applied by some Member States. Some NRAs have followed the request of some market players in favouring low priced short term capacity products and quotas. Short term capacity products should be priced in line with the value they have for users in providing them with flexibility in terms of associated profiling possibilities. If short term products are priced too low and users move to short term bookings, this is likely to have a detrimental effect on long term capacity, relevant in providing sig- nals to TSOs on the future peak requirements of the system and congestion reduc- tion. The introduction of quotas of newly built capacity for medium and short-term use could distort the process for creating new capacity leading to the risk of over-invest- ment. In addition, within the development process of the draft Tariff Network Code some network users have claimed the right to cancel all or part of their capacity bookings linked to tariff changes. Such partial or total cancellation of initial users’ commit- ments could lead to cross-subsidies between network users as a result of revenue neutrality for the operators. Furthermore the value of any long term commitment would be weakened, with possible impacts also on planning and commissioning for new projects. This would constitute a major risk for investment realisation.

 1) Further explanation can be found in Annex A  2) http://www.acer.europa.eu/official_documents/acts_of_the_agency/recommendations/acer%20recommendation%20 03-2014.pdf

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Ten-Year Network Development Plan 2017 Main Report