EU Council approves final regulation on priority EU energy projects

The EU Council on May 16 adopted the revised regulation on funding for priority EU energy projects, the final step in the TEN-E approval process that defines the projects that will allowed to be subsidized under the Projects of Common Interest (PCI) program.

The new rules -- set to enter into force once published in the EU Official Journal -- aim to modernize, decarbonize and interconnect member states' cross-border energy infrastructure to help the EU achieve its 2050 climate neutrality objectives.

EU Council and European Parliament negotiators reached a provisional political agreement on the criteria for funding key EU energy projects in December last year.

It was agreed to end support for new fossil gas and oil projects, but to allow a transitional period to the end of 2029 for funding of gas projects that would be converted to hydrogen.

The revised regulation also aims to continue ensuring market integration, competitiveness and security of supply, the Council said.

"The new rules will end support for new gas and oil projects and introduce mandatory sustainability criteria for all projects," it said.

"They will simplify and accelerate permitting and authorization procedures, and put the emphasis on the role of energy from renewable sources regarding all assets, including smart gas grids," it said.

The EU has already pledged Eur5.48 billion ($6.64 billion) in finance for the Connecting Europe Facility (CEF) for the 2021-27 period.

PCI list

The fifth PCI list was published in November 2021 and included 67 projects in electricity transmission and storage, 20 existing projects in gas, six CO2 network projects and five smart grid projects.

No new gas infrastructure projects are on the list, and the few that remain from previous lists are viewed as necessary to security of supply.

They include planned LNG import infrastructure in Poland and Cyprus, new pipeline interconnectors, and gas storage sites in Southeast Europe.

Eastern Europe in particular is currently dealing with a loss of Russian gas imports, with Gazprom on April 27 halting supplies to Poland and Bulgaria.

The cut-off triggered new concerns on the European gas market over Russian supply reliability, leaving gas prices at sustained highs.

The TTF month-ahead price reached a record of Eur212.15/MWh on March 8, according to Platts assessments by S&P Global Commodity Insights, and was last assessed on May 13 at Eur96.25/MWh, still 270% higher year on year.

Cyprus, Malta

In the case of Cyprus and Malta, which are still not interconnected to the trans-European gas network, the EU is to allow one interconnection per member state for a project granted PCI status.

Under the first CEF -- which ran from 2014 to 2020 -- a total of Eur4.7 billion in funds were allocated to PCIs, with numerous gas infrastructure projects receiving grants.

These included the TAP gas pipeline to bring gas from Azerbaijan to Italy, the Balticconnector between Finland and Estonia, and the Baltic Pipe from Norway to Poland.

Before the latest list was published, there had been growing calls for gas projects to be excluded completely because they were not in line with the EU's net-zero ambitions.

However, EU energy ministers in June last year came to an agreement on a "general approach" to the funding of European energy projects under the TEN-E process.