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Observations 4997 FsaichotnhuoinfantepnsdeeatpnEmrnsrnlUeeicyabarcibdgauluueleytrisnidooitunegynnpfrelrogtpytaofyoisaentrtm nhlrtituameefhrcrreoitkgtumefeyirtdeeld 62 According to information provided by the MemberThe 2013 TEN‑E regulation sought to 99 States to the Europeanaddress these problems by: Commission.(a) introducing an overall time The EU has allocated 3.7 billion euro to energy infrastructure investments 63 This figure excludes any limit of 3.5 years for permitting through several instruments in the potential future support to procedures; 2007-2013 period, and a further energy infrastructure from the(b) requiring Member States to 7.35 billion is envisaged for the 2014- European Fund for Strategic streamline their environmental 2020 period63. Although this is a signif- Investments, which envisages authorisation procedures; icant amount of funding, it only covers 16 billion euro guarantees(c) requiring Member States to con- approximately 5 % of the estimated from the EU budget. solidate permit-granting powers infrastructure investment needs iden- or coordination into one single tified in the TYNDPs for electricity and authority, a one‑stop‑shop, by gas. So the available EU funds need to November 2013. As at June 2015, be used strategically, for the most im- all Member States have established portant projects, based on a strategic one‑stop‑shops and all but one needs assessment (see paragraph 83). have published manuals on permit granting62. The one‑stop‑shops are still recent initiatives, however, and it is too soon to assess whether they are proving effective.98The European coordinator who workedon the France–Spain interconnector(see Box 10) observed that opposi-tion to infrastructure projects fromlocal communities is best addressedthrough direct, local communicationthat points out the benefits of ad-ditional interconnections especiallyfor consumers. In general, increasingconsumer knowledge about the wayenergy markets work, could also leadto intelligent consumption behaviours,and greater acceptability of such inter-connection projects.

Observations 50The EU has several funding οο list of projects applicable for sup-instruments to support port from the European Energyenergy infrastructure Programme for Recovery (EEPR);projects, but none have theinternal energy market as οο List of projects applicable for sup-a primary objective port from the European Fund for Strategic Investments.Insufficient prioritisationof projects has reduced the 101effectiveness of EU funding forenergy infrastructure The list of PCIs under the TEN‑E regula- tion has been developed in two stages:100 (a) the original PCI list was developedSince EU resources for financing ener- in 2006. It included 550 projectsgy infrastructure are limited, having of European interest in all of thesome means of prioritising projects is Member States at the time, but noimportant. Although there is no EU- clear guidance on which projectslevel needs assessment, the Commis- should be prioritised for EU fund-sion has used several lists of specific ing (see Box 12);projects as a way to seek to prioritiseinvestments from the EU budget andto identify projects that are eligible forfinancing:οο list of PCIs under the TEN‑E regulations;οο list of critical projects of common interest, presented in the 2014 Energy Security Strategy;Box 12 How can an energy infrastructure project obtain PCI status? The concept of PCIs has existed since the start of the trans‑European Networks programme. PCIs should be able to benefit from faster and more efficient permit‑granting procedures and improved regulatory treatment. Under the current TEN‑E regulation, PCIs are identified within ‘priority corridors’. The process of selecting projects to be included in the PCI list is built upon the TYNDPs developed by ENTSOG and ENTSO‑E. To be included on the list, a project has to present significant benefits for at least two Member States, contribute to market integration and further competition, enhance security of supply, and reduce CO2 emissions.

Observations 51(b) the 2013 TEN‑E regulation64 es- 103 64 Regulation (EU) No 347/2013. tablished a framework for prior- 65 Energy infrastructure: itisation of energy infrastructure All of these lists have been developed investments through the identi- without a clear, underlying, analytical Priorities for 2020 and beyond, fication of 12 priority corridors65. assessment of which projects should 2011, page 14. Electricity: The regulation also provided guid- be prioritised to enable the EU to Northern Seas offshore grid, ance concerning the identification achieve its energy policy objectives North–South interconnections and implementation of PCIs. The (see paragraph 82). Using such lists as in western Europe, North– PCI list under this regulation in- a basis for making decisions about EU South interconnections in cluded 248 projects, of which 132 financing entails a range of risks, and central eastern and south- were for electricity infrastructure if the Commission intends to continue eastern Europe, Baltic Energy and 107 for gas infrastructure66. to use such lists as a means to define Market Interconnection Plan, The PCI list under this regulation investment priorities, it should bear Smart grids deployment, contains fewer projects than the such risks in mind: long‑term electricity highways 2006 PCI list. However, accord- (a) A list may include so many projects Gas: North–South gas ing to Article 4(4) of the TEN‑E interconnections in western regulation, the Commission is not that the concept of the list repre- Europe, North–South gas entitled to rank the projects within senting priority projects is severely interconnections in central each priority corridor; undermined, as the list there- eastern and south-eastern fore does not focus on the small Europe, Southern Gas(c) the list of PCIs is updated every number of projects addressing the Corridor, Baltic Energy Market 2 years, and the next update is due most pressing EU needs. The initial Interconnection Plan. in November 2015. TEN‑E PCI included 550 projects, 66 The remaining nine consisted and after being rationalised in of seven oil projects and two 2006, still included 248 projects; smart grid projects. 67 COM(2014) 330 final, p. 10.102 (b) Because they are compiled based 68 In October 2014 the 400 kV on proposals from Member States, power line between BescanóIn 2014, a subsequent list of 33 projects rather than being a list of projects and Santa Llogaia in Spain waswas developed in the European Energy that address demonstrably EU-lev- completed, which was a stepSecurity Strategy67 which referred to el needs, a list may, in practice, be further towards the newthese projects as ‘critical PCIs’. This only an amalgamation of projects electricity interconnectionincluded some 27 projects in gas and which project promoters from between France and Spain.only six in electricity, with an estimat- Member States would like funding This project is still included ined cost of around 17 billion euro. The for domestic reasons, and; the list of the PCIs and EFSI.Commission considered these projectsto be essential for improving security (c) Some projects on such lists mayof supply and to connect better ener- already be in progress, or alreadygy markets in the short and medium completed using finance fromterms. other national or private sources68.

Observations 52EEPR, CEF and ESIF are not 105designed primarily to enhancethe internal energy market The objective of the Connecting Eur- ope Facility (CEF) in the energy field104 is to provide support to the imple- mentation of the PCIs. Only PCIs whichThe initial objective of the EEPR are not commercially viable underprogramme for Energy was to finance the existing regulatory framework,mature energy infrastructure projects complemented by cross‑border costthat could deliver economic growth allocations, are eligible for fundingwithin a short period of time. There- from CEF. It provides grants and otherfore developing an internal energy financial instruments for works andmarket and providing security of necessary technical studies throughenergy supply benefits were not the calls for proposals.primary objectives of the programme.All Member States were allocated 106some funding for energy infrastructureprojects. The programme has largely Aspects of the design of the CEF limitfailed to achieve its initial objective its potential to support the develop-of delivering economic growth within ment of the internal energy market:a short period of time, as: (a) the Commission can only finance(a) some of the projects to which projects that are submitted in the funds were allocated were not calls for proposals. This means that sufficiently mature. Projects worth the Commission has only limited 422 million euro, or 18.6 % of the possibilities to target specific PCIs; total EEPR grants awarded, have (b) because maturity is an important been terminated. For example, the award criterion for grants, the Nabucco gas pipeline, the ITGI– more mature actions are more Poseidon gas interconnector, the likely to be funded. Such projects GALSI pipelines and the Romanian do not necessarily have the high- gas reverse flow projects; est impact on the development of(b) there have been significant delays the internal energy market; to the implementation of pro- (c) as the state of internal energy jects and, as a result, only 1.1 bil- market implementation in the lion euro of payments under the Member States is not one of the EEPR have been executed as of criteria used for project selection, 28 February 2015. This represents the Commission has only limited 48 % of the amounts initially scope to use the CEF instrument to allocated. incentivise internal energy market- related reforms.

Observations 53107 Many EU co‑financed energy 69 For energy infrastructure infrastructures have yet to investments falling under theBetween 2007 and 2013, approximate- have impact on the internal thematic objective forly 1.3 billion euro was allocated from energy market promoting sustainablethe European Structural and Invest- transport and removingment Funds (ESIF) to finance electric- 110 bottlenecks in key networkity and gas infrastructure. Between infrastructures, projects with2014 and 2020, this figure should rise As part of the audit 15 energy infra- a total eligible cost overto approximately 2 billion euro. Eleven structure projects which benefited 75 million euro, for other ESIFMember States received funding be- from EU co‑financing were reviewed, energy infrastructuretween 2007 and 2013, Poland was the 10 concerning gas and 5 concerning investments, mainly fallinglargest recipient with 63 % of all ESIF electricity (see Table 6). We analysed outside the scope of thisallocations to energy infrastructure. the projects’ potential impact on the report, the threshold is functioning of the internal energy 50 million euro.108 market.Most of these allocations have beenused for regional level interconnec-tions and upgrading existing energyinfrastructure within a Member State.Some has also been used for con-structing cross‑border interconnec-tions, LNG terminals and undergroundgas storage. Between 2014 and 2020,six Member States — Bulgaria, CzechRepublic, Greece, Lithuania, Polandand Romania — plan to use ESIFallocations for energy infrastructureinvestments.109The project selection under the ESIFis up to the Member States. TheCommission only approves the majorprojects69. When negotiating the Mem-ber States’ Partnership Agreementsand Operational Programmes forthe 2014 to 2020 funding period, theCommission had the opportunity toseek to include internal energy marketdevelopment-related performanceindicators, but this did not happen.Investments in energy infrastructureare not a priority of the ESIF funds.They represent about 0.5 % of the totalallocation of the ERDF, Cohesion Fundand ESF allocations both in the periodof 2007 to 2013 and 2014 to 2020.

Observations 54111Out of these projects, as at July 2015:(a) one project has had a significant impact on the internal energy market — the EstLink 2 electricity interconnector between Finland and Estonia, which was completed and is fully in service (see Box 13).(b) one other significant project has been completed and has recently become available for use, namely, the France–Spain electricity interconnector (see also Box 10).EstLink 2 project changed the electricity market in the regionThe EstLink 2 received 100 million euro from the EEPR. The aim of the project was to construct a secondelectricity interconnector between Finland and Estonia with a transmission capacity of 650 MW. This projecthas proved successful insofar as having overcome the technical and other challenges to being completed andbrought into service. It is having a positive effect on the electricity market, particularly in Estonia, where elec-tricity prices have become less volatile and converged with those in Finland. 1. 330 kV Püssi substation 2. 650 MW Püssi converter station 3. Underground cable 4. Connection joints for the underground cable and submarine cable 5. Submarine cable 6. Connection station for the submarine cable and overhead power lines in Nikuviken 7. Overhead lines 8. 650 MW Anttila converter station 9. 400 kV Anttila substationBox 13 © Elering

Observations 55Table 6 List of projects reviewed for the audit Project Status Member States Project cost EU co‑financing EU funding (as at June 2015) (million euro) (million euro) instrument Bulgaria–Greece interconnector Bulgaria–Romania interconnector Expected 2018 Bulgaria, Greece 220 45 EEPR Nabucco pipeline Expected 2015 Bulgaria, Romania 24 9 EEPR Latvia–Lithuania interconnector Austria, Bulgaria, Hungary, 7 900 200 Jurbarkas–Klaipeda pipeline Terminated Germany, Romania (planned) (allocated) EEPR Klaipeda–Kiemenai capacity Lithuania, Latvia 33 13 enhancement Completed 2013 Lithuania 46 21 EEPR Swinuojscie LNG terminal Completed 2013 ESIF Gustorzyn–Odolanow pipeline Lithuania 64 Gas GIPL interconnector Ongoing 28 CEF France–Spain interconnector Expected 2015 Poland 657 55 EEPR France–Spain interconnector 199 ESIF Portugal–Spain reinforcement Completed 2014 Poland 102 49 ESIF EstLink 2 interconnector Ongoing Poland, Lithuania 558 306 CEF Nordbalt interconnector Completed 2012 France, Spain 617 45 EEPR 2 321 970 LitPol Entered service Sub‑total 721 interconnector June 2015 136 225 EEPR Completed 2011 France, Spain 320 Entered service 366 46 EEPR 2014 Portugal, Spain Expected 2015 528  100 EEPR Estonia, Finland Electricity 132  175 EEPR Sweden, Lithuania 207 ESIF 1 543 Expected 2015 Poland 3 864 2 TEN‑E Lithuania 2 TEN‑E 58 CEF (application) Sub‑total 815 Total 1 785

Observations 56112 (b) five of the 15 projects had been completed. The sooner projectsThe other projects have not yet had an are completed and enter intoimpact on the internal energy market service the greater their impactto the same extent, because: on the internal market. However,(a) one of the 10 gas projects is open- projects which were not fully mature when financing decisions ing new market perspectives, were made can take longer to namely the GIPL project between complete than planned. Having Poland and Lithuania will allow gas said that, large-scale infrastructure trade between countries that cur- projects are technically complex rently have no interconnections. and planned works often take The other nine were focussed longer than expected, in part due mainly on increasing the existing to unforeseen circumstances (see capacities or addressing security of example in Box 14). energy supply concerns directly;NordBalt projectThe NordBalt project involves the construction of an electricity interconnector between Sweden and Lithu-ania. It has the potential to have a significant impact on the functioning of the electricity market in theMember States which are cooperating under the BEMIP plan because it could increase trading in the commonNordic and Baltic power exchange. However, laying a cable through the Baltic Sea has proved to be a complexprocess and the project is planned to be completed only in June 2016, six and half years after its inclusion onthe list of projects financed from the EEPR instrument.Box 14 © Litgrid Photo 3 — NordBalt ground station in Klaipeda, Lithuania

Observations 57(c) the potential of interconnectors (d) the efficiency of two of the gas to facilitate the flow of energy interconnector projects is likely between neighbouring markets to be limited as they involve the depends on the capacity of the en- construction of new transmission ergy transmission systems within capacity alongside existing capac- Member States (see paragraph 73). ity, see examples in Box 16. This problem was observed in two of the projects reviewed for the audit (see Box 15).Box 15 Examples of interconnectors not supported by domestic networks The LitPol project involves the construction of an electricity interconnector between Poland and Lithuania in order to reduce the isolation of the three Baltic countries from the European Union energy market. However, its potential use to import electricity to Lithuania from Poland is limited due to the lack of generation capac- ity in Poland close to the border with Lithuania and insufficient interconnection to other Polish regions where there is higher electricity generation capacity. The bi‑directional energy flows will only be possible if the Pol- ish network is enhanced, but this is not foreseen before 2020. The Bulgaria–Romania gas interconnector will allow for 1.3 mcm/day natural gas supplies to flow from Romania to Bulgaria. However, under current conditions, low pressure in the Romanian gas system would pre- vent cross‑border flows to Bulgaria in this volume. Potential flows of gas to and from Hungary would also cur- rently face such constraints. Additional investments are needed in the Romanian gas transmission network to connect the internal transmission system with the transmission transit pipeline that crosses Romania. Romania would also need to repeal a domestic law forbidding such gas exports.Box 16 New gas pipelines being built alongside existing pipelines The gas interconnector projects between Romania, Bulgaria and Greece are constructing new gas pipe- lines in addition to existing pipelines. This is because the capacity of the existing gas transit network through Romania and Bulgaria to Greece has been reserved by a supplier from a third country under a long‑term contract.

Conclusions and 58recommendations113 115The EU’s objective of completing the There remains a long way to go beforeinternal energy market by 2014 was the Third Energy Package could benot achieved. Energy infrastructure in deemed to be fully implemented. TheEurope is generally not yet designed Commission’s monitoring of imple-for fully integrated markets and mentation of its provisions in thetherefore does not currently provide Member States is still ongoing aftereffective security of energy supply. the 2014 deadline passed (see para-Financial support from the EU budget graphs 30 to 33).in the field of energy infrastructure hasmade only a limited contribution to Recommendation 1:the internal energy market and securi- Cchoemcpksleting non‑conformityty of energy supply (see paragraph 27). With the internal energy marketThe objective of completing the not yet having been completed, theinternal energy market by 2014 Commission should complete its as-was not achieved sessments and open any necessary infringement procedures against114 Member States by the end of 2016.Since 2007, the internal energy markethas been at the centre of EU energypolicy development. The Third EnergyPackage, adopted in 2009, required thetransposition of the gas and electricitydirectives by 3 March 2011. However,this objective was not achieved inthat year. In 2011, the Council restatedits commitment to the internal ener-gy market, stating that it should becompleted by 2014. However, eventhis later objective was not achieveddue to a range of problems (seeparagraph 29).

Conclusions and recommendations 59116 117National regulatory authorities (NRAs) Important differences in how Memberaround the EU continue to face chal- States organise their energy marketslenges related to their independence hold back the further development ofand their freedom to exercise profes- the internal energy market. There are,sional judgement. Not all NRAs have in fact, 28 national legal frameworks,resources available to them which are which, in practice form a patchworkcommensurate with the tasks they of local, national and regional marketsneed to undertake, including coop- rather than an internal energy market.erating in EU-level activities, such as While the aim of unbundling and otherthose led by Agency for the Coopera- measures was to create the regulato-tion of Energy Regulators (ACER). ACER ry conditions for an internal energydoes not have powers to compel NRAs market, a liberalised and competitivein all Member States to provide it with market has often not emerged. Furtherrelevant energy market data (para- developing the EU internal energygraphs 35 to 36). market, by finding practical ways for these markets to operate together, Recommendation 2: remains a significant challenge. This NRAs and ACER is because there are several different trading mechanisms used in the EU(a) The Member States should make and energy markets are influenced by sure that NRAs are independent various interventions (paragraphs 39 and do not face restrictions to and 43 to 46). the scope of their role. The NRAs should have sufficient resources Recommendation 3: available for their activities, includ- Transparent trading ing allowing them to participate fully in EU‑level cooperation The Commission should promote activities; widespread development of transpar- ent trading mechanisms for both gas(b) The Commission should assure and electricity. This should include that ACER has the necessary pow- facilitating and supporting the es- ers to obtain from key institutions tablishment of exchanges in Member in the Member States the informa- States where they do not currently ex- tion it needs to carry out the tasks ist or where B2B trading mechanisms assigned to it. dominate.

Conclusions and recommendations 60118 119Network codes are technical rules that Although progress has been made, theseek to provide a basis for technical full price effects of the internal energyinteroperability within electricity and markets have not yet been realised,gas transmission systems in the EU. and there remain significant energyThe codes set out common techni- price differences between Membercal standards that should ensure the States.free flow of energy across borders.Although recently progress has been 120made with approval of the networkcodes for gas, none of the electricity Electricity wholesale prices have notnetwork codes have yet been finally converged in the EU, with substantialapproved via the comitology process. differences evident even betweenSome network codes are being ad- some neighbouring Member States.opted by Member States before being In order to stimulate cross‑borderfinally approved in a framework of ear- electricity trade, the EU set a targetly implementation regional initiatives that a Member States’ cross‑border(paragraphs 47 to 51). electricity interconnections should be at least 10 % of its installed production Recommendation 4: capacity. However, this target lacks iAcmopdppelresomvienngtianngdnetwork relevance because it focuses on in- frastructure development rather thanThe Commission should expedite the being based on demand dynamic withprocess of comitology, with a view to a view to achieving price convergencesecuring approval of the electricity (paragraphs 59 to 64).network codes by the end of 2015. Itshould also encourage ACER and the 121ENTSOs to support early implementa-tion of network codes by the Member Even if the current gas target mod-States in the framework of regional el, based on hub trading, were tocooperation initiatives. be implemented, it may only have limited effect on average wholesale gas prices. Constructing significant gas pipelines across the EU as a way to facilitate the development of competi- tive hub‑based trading all over Europe would require significant investment. However, the economic case for seeking to do so may not exist in some cases. There are alternative ways to in- troduce competition into gas markets, for example, by installing strategically placed LNG terminals to serve one or more national markets (paragraphs 65 to 71).

Conclusions and recommendations 61 RMeacrokmetmaennddinatfiroanst5ru: cture ORepctoimmaml uensedaotfitohne6e:xisting deleevcetlroicpitmyeanntdmgoadsels for infrastructureThe Commission should: The Commission should:(a) consider establishing electricity (a) identify cross‑border energy interconnection objectives based infrastructure that is not being on market needs, rather than on used to its full potential to support fixed national production capacity; the internal energy market, either(b) reassess the potential costs and because it is tied up in long-term benefits of the gas target model, bilateral contracts not allowing and consider, in the light of un- third party access, or because certain demand, whether there its technical capacities, such as are alternatives to the extensive reverse flows, are not being used; construction of gas pipelines, such (b) work with stakeholders in the as the installation of strategically Member States in order to improve placed LNG terminals to serve the extent to which such infra- one or more national markets structure is actually used continu- using internal energy market- ously for the benefit of the internal compatible solutions. This should energy market; be based on a comprehensive (c) explore the benefits for setting EU-level needs assessment (see up regional TSOs as a means Recommendation 7). to encourage and manage effi- ciently energy flows across bor-Energy infrastructure in ders, making the most of existingEurope is not yet suited for infrastructure.fully integrated markets andtherefore does not currently 123provide effective security ofenergy supply A comprehensive EU-level energy infrastructure needs assessment is122 necessary to inform decisions about the development of the internal ener-The energy infrastructure within and gy market and the security of energybetween Member States is not yet supply (paragraph 82). With significantsuited for the internal energy market. energy investments needed acrossIn practice, insufficient infrastructure the EU, such a comprehensive analysiscapacity within a Member State can is a crucial tool for targeting EU andhold back potential imports and ex- other funds in the sector (paragraphsports and the extent to which a Mem- 82, 84 and 99). At present, the plan-ber State can act as a transit country. ning tools used by the Commission,Gaps also remain in the cross-border mainly the lists of projects of com-gas and electricity transmission in- mon interest and the 10-year networkfrastructure between Member States development plans, have important(paragraphs 73 to 81). limitations (paragraphs 85 to 87). The Commission also does not have an ad- vanced market development model to support the necessary needs analysis (paragraph 83).

Conclusions and recommendations 62 RDeracowminmgeunpdation 7: 124 ale cvoeml inpfrreahsetrnuscivtuerEeUn-eeds assessment Developing cross-border energy infrastructure requires cooperationThe Commission should: amongst neighbouring Member(a) draw up a comprehensive EU level States. In this context, project fi- nancing, the allocation of costs and energy infrastructure needs assess- obtaining planning permits can be ment for the development of the challenging. There have been good internal energy market, this should experiences across the EU of region- function as a reference for the al cooperation in the energy sector, other documents such as TYNDPs; emerging in the form of both political(b) put in place, to support the needs and technical initiatives. Some of the assessment, a capacity to model Commission’s coordination activities energy markets including a broad have seen positive results (see para- range of demand projections, ei- graphs 88 to 93). ther in‑house or in the Agency for the Cooperation of Energy Regula- European Union financial tors (ACER); support in the field of energy(c) work with ENTSO‑E and ENTSO‑G infrastructure has made only so that the needs assessment a limited contribution to the functions as an input for internal development of the internal energy market-related infrastruc- energy market and security of ture planning in the EU, including energy supply ten‑year network development plans (TYNDPs). 125 Insufficient prioritisation of projects has reduced the effectiveness of EU funding for energy infrastructure. The Commission has used several lists of specific projects as a way to prioritise investments from the EU budget and to identify projects that are eligible for financing. However, the Commission has not defined these lists on the basis of a comprehensive assessment of EU-level infrastructure development needs. This entails risks that under- mine the usefulness of such lists as tools for prioritising investments and targeting EU funds (paragraphs 100 to 103).

Conclusions and recommendations 63 RReecfionme mtheenudsaetoiofnli8st:s of PRreocpoemrmanedndcaotniotinnu9o: us PCIs afu cnocntdiointiionngfoofrIEEUMeansergy fininfaransctirnugcture projectThe Commission should refine its plan-ning procedures and in particular the The Commission should make legis-prioritisation and funding of projects lative proposals on how to make itsof common interest (PCIs), in the light decisions to select energy infrastruc-of a comprehensive EU-level energy ture projects for funding subject to theinfrastructure needs assessment (see proper and continuous functioningRecommendation 7). of the energy market in the Member States.126 127The main EU funding instruments forfinancing energy infrastructure proj- There are examples of energy infra-ects, the EEPR, the Connecting Europe structure projects financed by theFacility and the European Structural EU that have had a positive effect onand Investment Funds, are not de- the internal energy market and thesigned primarily to enhance the inter- security of supply. However, the im-nal energy market, and this is evident pact of many other projects has beenin aspects of the way they are imple- limited so far. This is because somemented. CEF financing is not linked have lacked a focus on internal marketto energy market reforms, and the development needs; few have beenconditions concerning energy market completed and entered into service;development have not been included for some, capacity problems in neigh-in the ESIF partnership agreements for bouring Member States have held backthe 2014 to 2020 period (paragraphs their use; and the efficiency of some104 to 109). projects is limited because they seek to develop additional infrastructure alongside existing infrastructure (para- graphs 110 to 112).This report was adopted by Chamber II, headed by Mr Henri GRETHEN, Memberof the Court of Auditors, in Luxembourg at its meeting of 21 October 2015. For the Court of Auditors Vítor Manuel da SILVA CALDEIRA President

Annexes 64Annex I (a) Average retail electricity prices with taxes for household consumers: 1st quarter of 2015 in euro cents per 1 KWh Prices per kWh (c€) Grey: non-EU < 14.00 14.01 – 19.00 19.01 – 22.00 > 22.01 19.37 15.84 30.83 12.66 17.41 12.47 24.35 19.11 18.08 14.43 20.80 17.67 29.74 12.79 14.59 10.06 20.35 11.33 16.23 13.17 13.12 24.21 9.31 22.53 22.33 18.26 14.54 20.23 Note: The affordability of consumer prices is a separate issue, which should be considered in the context of the level of net disposable incomes in each Member State. As stated in paragraph 23, this audit did not cover energy poverty. Source: European Commission.

Annexes 65Annex I (b) Average electricity prices without VAT and non‑recoverable taxes for industrial consumers: 1st quarter of 2015, euro cents per 1 kWh Prices per kWh (c€) Grey: non-EU < 9.00 9.01 – 12.00 12.01 – 14.00 > 14.01 7.44 6.97 8.47 8.87 14.94 10.95 13.52 12.84 10.23 8.38 10.85 10.24 15.82 10.06 8.27 11.15 10.95 8.61 8.62 9.56 8.96 17.02 8.35 12.04 12.35 13.80 16.09 15.43 Source: European Commission.

Annexes 66Annex II Assessed gas sourcing prices paid by suppliers in the EU Member States — 2014 yearly average (euro per MWh) 28.8 27.6 32.0 24.1 29.3 35.3 22.1 24.1 23.7 23.9 24.0 23.9 25.1 25.4 24.3 25.0 26.4 North South 24.7 26.4 27.6 28.9 27.8 24.7 27.0 25.7 26.7 30.9 31.8 26.2 28.2 Import prices declared at the border Hub price Source: ECA based on information provided by ACER. Cyprus and Malta do not currently have gas markets and are therefore not included.

Annexes 67Annex III Member States participation in the ACER working groups, January 2013 to May 2015 Board of Electricity Working Gas Working Group Implementation, Market Integrity Regulators Group Monitoring and and Transparency Benchmarking Working Group No of meetings held 22 24 25 Working Group Austria 20 Germany 22 24 25 24 20 United Kingdom 19 19 France 22 23 25 17 20 Belgium 15 20 Spain 22 24 24 17 11 Sweden 24 17 Portugal 20 23 24 19 19 Italy 17 16 Netherlands 22 21 25 5 16 Poland 11 16 Hungary 22 19 25 6 16 Denmark 2 19 Finland 22 23 21 0 11 Czech republic 6 16 Ireland 22 24 25 0 19 Luxembourg 4 12 Slovenia 22 20 21 0 14 Croatia 0 7 Greece 22 24 22 0 4 Lithuania 1 2 Latvia 21 22 25 0 2 Malta 0 1 Romania 22 18 22 0 0 Estonia 0 1 Cyprus 22 21 16 0 0 Bulgaria 0 0 Slovakia 22 21 15 0 0 0 0 22 13 9 0 22 14 14 19 8 9 18 0 8 15 3 5 20 1 5 18 1 3 16 0 6 22 0 0 18 1 2 18 0 0 14 0 0 200 100

Reply of the 68CommissionExecutive summary Recommendation 1IV The Commission accepts the recommendation. The Commission services have declared enforce-The Commission underlines the importance of ment of Third Package rules a priority in 2015. Thea well-functioning electricity and gas market for compliance checks on the Third Package implemen-security of supply. tation have been completed in all 28 Member States and all potential issues which are incompatible withV internal market legislation with the authorities of the Member States concerned are being raised.The communication ‘Progress towards complet-ing the Internal Energy Market’ (COM(2014) 634 Recommendation 2 (a)final) recognised that Europe was well underwaytowards completing the internal energy market. This recommendation is addressed to MemberCross-border trade is increasing, renewables are States. The Commission however agrees with thebeing successfully integrated in the system and recommendation and will exert a particular scrutinywork has begun on rolling out smart grids and on the independence of NRAs during the compli-facilitating distributed generation. But it was also ance assessment of Third Internal Energy Marketclear that the work is not completed yet; obstacles rules.prevent the market from functioning smoothly. TheEnergy Union project is designed to address these Recommendation 2 (b)obstacles. The Commission has taken concrete stepsto remove the remaining market barriers to the The Commission accepts the recommendation andinternal energy market, notably in its market design is looking into possibilities to reinforce the existinginitiative. powers of ACER, including vis-à-vis Member States,With regard to energy infrastructure, it is important in order to adapt it to the realities of the more inte-to note that: grated internal market.— energy infrastructure is expected to be financed Recommendation 3 by the market — that is user tariffs approved by independent regulatory authorities; financial The Commission accepts the recommendation. support from EU budget therefore should be In order to address the problem of underdeveloped the exception rather than the rule; trading via exchanges, the Commission has adopted— where financial support has been allocated, the regulations in the field of gas and electricity which security of supply has been significantly im- will make the installation of energy exchanges proved for certain regions (see for instance the obligatory (e.g. ‘CAM’ and ‘balancing’ regulations examples for EEPR under the Court’s observa- in gas, ‘CACM’ regulation, establishing the rules for tion in paragraph 103 or several of the audited EU-wide market coupling, in electricity). In addi- projects co-financed by CEF or ESIF mentioned tion, the implementation of Regulation (EU) No in the Court’s observation to paragraphs 1227/2011 of the European Parliament and of the 109-111). Council on wholesale energy market integrity and transparency (REMIT) is ongoing.

Reply of the Commission 69Recommendation 4 VIIThe Commission accepts the recommendation. The Commission is of the view that trans-EuropeanThe Commissioner for Climate Action and Energy infrastructure needs to be improved to deliver itshas declared the adoption of the network codes full effect on the IEM. The Commission acknowl-a priority. The Commission has worked intensively, edges that a comprehensive assessment of EU-levelin cooperation with regulators, TSOs and other infrastructure needs is necessary, but also wishesstakeholders, to reformulate the proposed network to emphasise the extent to which infrastructurecodes in a manner that guarantees their neutrality planning does already take place at large degreeand ensures effective implementation. Eight of ten on EU level, and how this feeds into Commissionproposed electricity network codes are expected to policy. Although procedures and tools may need tobe voted by the Committee by the end of 2015. be optimised, there is already a sound assessmentThe Commission actively promotes early implemen- of what is needed in terms of key European energytation of the network codes in the framework of infrastructure. Please see Commission’s reply toregional cooperation initiatives. recommendation 7 and to paragraph 82.Recommendation 5 (a) Recommendation 6 (a)The Commission accepts the recommendation. The Commission accepts the recommendation. ItWhereas the current 10 % target for 2020 is based has already started to implement actions in thaton production capacity, cost aspects and the poten- sense. This is the case especially for the high-leveltial of commercial exchanges will be taken into group on gas connectivity in central and south-account and play an important role in modelling east Europe. The aim of the group is to coordinatethe 2030 interconnection target at the regional or efforts to facilitate cross-border and trans-Europeancountry level. This will add the necessary flexibility infrastructure that diversifies gas supplies to theto adjust the minimum 15 % interconnection target region, as well as to implement harmonised rules.for electricity in 2030 to market needs. Recommendation 6 (b)Recommendation 5 (b) The Commission accepts the recommendation. ItThe Commission accepts this recommendation. is already acting in that direction in the frameworkThe 2015 gas TYNDP already provides a good of the regional initiatives: one of the main objec-assessment of infrastructure needs under a wide tives of regional initiatives is to focus on the bot-variety of scenarios on future demand, prices, tlenecks (physical or regulatory) in cross-borderinfrastructure development and other aspects. The infrastructure.analysis clearly shows that not all of the plannedprojects will be needed. The ongoing PCI process Recommendation 6 (c)builds on this assessment. Furthermore, in orderto arrive at an enhanced needs assessment for the The Commission accepts the recommendation.EU gas market, preparatory work on an EU strategy TSO cooperation has already been made manda-for LNG and gas storage has started and the Com- tory in many implementing rules (‘Network Codes’)mission will publish its LNG and storage strategy in concerning grid operation and energy trading.January 2016. In the context of the electricity market design initiative, it is exploring possibilities for enhanced cooperation and shared responsibilities between TSOs, based on the concept of regional security coordination initiatives (RSCIs), in particular in closely connected regions, as a first step towards more integration of TSOs at regional level.

Reply of the Commission 70Recommendation 7 (a) For instance PCI project selection aims at identify- ing those projects that contribute most to achiev-The Commission accepts the recommendation. ing the EU energy policy objectives (affordability,It has already acted in that direction. There has security of supply, sustainability).been continuous work to develop the TYNDPs and A more robust needs analysis combining both elec-(since 2013) the accompanying cost-benefit analy- tricity and gas markets will be in place by the end ofsis. In addition, Article 11(8) of the TEN-E regulation 2016. Please see the Commission’s reply to recom-foresees an (interlinked) electricity and gas network mendation 7(a).model to be developed by the ENTSOs and submit- As regards the funding, when selecting actions forted to the Commission and ACER by 31 Decem- financial support, for those projects where a needber 2016. The Commission will ensure that this for public support has been identified, maturity ashappens on time. well as other evaluation criteria are also taken into account. The Commission is working closely withRecommendation 7 (b) the EIB and other stakeholders to increase techni- cal assistance for improving the pipeline of projectsThe Commission partially accepts the of strategic interest. Therefore, no further action isrecommendation. foreseen.Having analytical and modelling capacities to becreated in-house could have considerable resource Recommendation 9implications either for the Commission or for ACER.Having this capacity sourced out to the ENTSOs The Commission does not accept thewith oversight and supervision by ACER and the recommendation.Commission could be considered to be a relevant The Commission strongly believes that equalalternative. progress is needed on infrastructure and market regulation for ensuring an effective internal energyRecommendation 7 (c) market. However, a rigid conditionality would be too complex to implement in a legally enforceableThe Commission accepts the recommendation. manner and risks being detrimental to the develop-The energy system-wide cost–benefit analysis ment of needed infrastructure.underpinning the planning and needs assessmentand the TYNDPs are established by the ENTSOs inclose cooperation with both the Commission andACER.Recommendation 8The Commission partially accepts therecommendation.As regards the prioritisation, the Commission recallsthat improving the planning procedures is part ofthe regular cooperation mechanism with all stake-holders involved.

Reply of the Commission 71Introduction Common Commission reply to paragraphs 14 to 1803 In energy infrastructure, the interconnectivityΤhe primary responsibility for application and of the European electricity and gas transmissionenforcement of EU law lies with the Member States systems is increasing but significant infrastructureand their willingness to fully and correctly imple- investments are still needed. By the end of 2015,ment the legislation is of utmost importance. 13 projects from the first Union list of projects ofNational governments currently remain responsible common interest (PCIs) for gas and electricity willfor developing energy legislation and policies that be completed. Slightly more than 100 PCIs are ineffect the internal market. Also as owners of energy the permit granting phase and can be expected tosupply and transmission companies they remain enter the construction phase shortly. While mosta key player in EU energy markets. of the investments in energy infrastructure are made by the private sector, a set of dedicated EU05 tools is available to help overcome further finan- cial challenges. Since the launch of the Connect-The Commission considers that a truly open, com- ing Europe Facility (CEF) in 2014, €796 million havepetitive and well-connected energy market is the been allocated in the form of grants to proposalsbest way to ensure security of energy supply and for key energy infrastructure projects across Europe.will allow Europe to make the necessary transition Complementary support is also available from theto a low-carbon energy sector in the most cost- European Structural and Investment Funds (ESIF).efficient and secure way. Furthermore, the European Fund for StrategicThe Commission, endorsed by Council and Parlia- Investments will provide further support to energyment, has therefore developed a Strategy for an projects of strategic significance.Energy Union, and a key part of this strategy con- To address more effectively specific infrastructurecerns the commitment to remove the main obsta- problems in some regions of Europe, enhancedcles to more integrated energy markets in Europe. regional cooperation between concerned MemberAs part of this strategy, it will reinforce its efforts to States has been stepped up. It resulted in the crea-enforce the full implementation of existing energy- tion of High-Level Groups for the gas and electric-and related legislation. The Commission has also ity interconnectivity of the Iberian Peninsula andlaunched a comprehensive review of the existing Central East South Europe Gas Connectivity (CESEC)EU energy legislation, notably in the field of elec- as well as a reform of the High-Level Group for thetricity (‘Market Design Initiative’), in order to adapt Baltic Sea region (BEMIP). The Groups are expectedthe existing ‘Third Package’ rules where necessary to propose concrete solutions to infrastructureto promote market integration. In addition, it has problems and to ensure implementation of thestarted a comprehensive revision process of its relevant projects.legislation related to security of supply.13See Commission reply to paragraph 5.The Commission considers that since MemberStates are obliged to take into account the effectsof their national decisions on neighbouring coun-tries under EU law, the organisation of an internalenergy market requires close cooperation betweenthe EU and Member States/national governments.

Reply of the Commission 72Observations 4029 — First alinea The Commission’s market design initiative launched on 15 July 2015 (COM (2015)340) aims precisely atMember States hold the key to the creation of strengthening the legal framework for the coopera-an internal market. See also Commission reply to tion between TSOs.paragraph 3. Their action determines whether bar-riers to cross-border trade of energy are actually 44removed and whether system operation is coordi-nated with neighbours. Only with Member States The Commission also considers that in the currentwho work proactively towards removing barriers to context, the existing mechanisms are heterogene-cross-border trade can the Commission succeed in ous. To overcome this situation, the Commission hasits task to create an internal energy market. adopted legislation to harmonise trading mecha- nisms for gas and electricity. The implementation of32 — Third alinea this legislation is ongoing (notably by the adoption of the Guideline on Capacity Allocation and Con-The issues related to consumer protection in the gestion Management (CACM) in electricity and theThird Package are an additional important aspect CAM/CMP and Balancing network codes/Guidelineswhich the Commission verifies in its transposition in gas) and will significantly reduce the inefficien-and conformity checks. cies in the current regulatory framework concerning energy trading.35 46The Commission considers that solutions forcontentious cross-border issues between Member The Commission considers the issue of uncoordi-States become increasingly important. The closer nated state interventions in energy markets as onemarkets become integrated, the more there is of the major obstacles to an integrated market, anda need for an independent authority to moderate therefore of utmost importance for the functioningand ultimately solve conflicts between Member of the IEM — and security of supply. The Commis-States on regulatory issues. sion has outlined the main issues and its proposedThe Commission continues to encourage all Mem- measures in its communication ‘Delivering theber States to participate in working group meet- internal electricity market and making the most ofings. To ensure transparency as regards their work, public intervention’ (C(2013) 7243 final) and putsthe meeting results are made accessible to all a specific emphasis on the removal of unnecessaryMember States. interventions in its ongoing market design initiative (see ‘Communication launching the public consulta- tion process on a new energy market design’, (COM 2015(340))). 50 (a) The Commission notes that national TSOs, NRAs and Member States have often been reluctant to agree to an adaptation of existing national or regional rules in favour of a compromise solution which would create a more integrated/larger regional or EU-wide market. The Commission is promoting further IEM integration even for markets which are adequately functioning so that European integra- tion can fully materialise its potential benefits, such as more competition, liquidity-increased supply security.

Reply of the Commission 7350 (b) 51Adopting EU legislation on technical rules requires The Commission notes that in particular in the fieldchanges to established national systems and of electricity TSOs and NRAs have been very activetherefore finding compromises between 28 Mem- in early implementation projects of network codesber States on often complex technical questions of (see e.g. the voluntary market coupling process, thesystem operation or energy trading, with significant balancing initiatives or the work on Regional Secu-distributive effects. This limits the ability to plan rity Coordination Centres).precisely how long it takes to find the necessarycompromises. 53The Commission has taken steps to provide for clearand transparent planning by regularly publishing The Commission is actively working with Bulgariathe expected adoption process. to speed up the process of establishing an energy exchange in order to take part fully in EU-wide50 (c) energy trading (‘market coupling’), including with Energy Community countries (together forming theThe Commission is looking at possible improve- ‘8. Region’).ments for the network code adoption process in theframework of its market design initiative. 5450 (d) The Commission notes that the REMIT monitoring framework created by the REMIT ImplementingNetwork codes and guidelines are Commission doc- Regulation EU 1348/2014 has not yet entered intouments aiming at removing trade barriers through force as concerns ‘B2B-trade’ (so-called ‘non-stand-an alignment of market and grid operation rules. ard transactions’). The regulation so far only coversIt is the Commission’s task to ensure that the draft so-called ‘standard transactions’ (i.e. transaction attexts as proposed by ENTSO-E and ACER comply trading places). The provisions covering ‘non-stand-with EU law, are neutral towards all stakeholders ard’ transactions (i.e. bilateral transactions outsideand do not just confirm the status quo, but deliver trading places) will enter into force in March 2016.actual progress for the internal energy market (seeCommission’s reply to paragraph 50(a)). 59In the case of the proposed electricity codes, theCommission had to work intensively on the pro- Price convergence is behind expectations, mainlyposed texts before being able to adopt them as EU due to largely differing state interventions, whichlaw. The adoption process therefore took longer favour very different forms of electricity supply.than originally expected, also because of the signifi- However, internal market initiatives such as marketcant economic relevance and the possible distribu- coupling have certainly aligned prices (see recenttive effects of the adopted rules. The time spent to experience with flow-based market coupling) andredraft the codes and to negotiate with Member have the potential to do so further — in particular,States and stakeholders concerning the need for when Member States decide for a greater alignmentambitious legislation was well invested, as the ulti- of their state interventions.mately adopted codes will bring true harmonisationprogress. 61 The CACM regulation, becoming legally binding in all Member States in August 2015, has created harmonised trading mechanisms. The Commission agrees that full price convergence is still hampered by other factors (such as missing interconnection, uncoordinated state interventions in different Member States, etc.).

Reply of the Commission 7464 common interest (PCI). The process of selecting PCIs is done in a transparent and robust manner.The Commission agrees that price regulation lead-ing to energy prices below cost should be forced 83out and has taken up this issue in discussions withMember States, as well as in infringement proce- Taking into account restrictions on its staffing levelsdures. The European Court of Justice has recently (and similar limitations at ACER), the Commissionendorsed the Commission’s enforcement action considers that infrastructure modelling as well asagainst regulated prices (C-36/14). developing a range of scenarios could be done by the ENTSOs under close supervision of the Commis-70 sion and ACER. It should be noted that the 2014 version of theThe Commission has a department working on TYNDP in electricity already includes four scenarios.market monitoring and energy forecasts. The Com- Methodology and scenario building can be refinedmission acknowledges that its capacity on complex and updated, and the Commission as well as ACERanalysis is limited due to resource constraints. It closely cooperate with the ENTSOs on this.would welcome the strengthening of its capacities.In any case, the Commission may need to refer to 84external expertise. Funding is not only based on a predefined needs75 assessment (top down) but necessarily must be assessed and evaluated against specific require-The main instrument for helping Member States to ments. When assessing specific projects, maturityachieve the 10 % target is identifying and support- is one of the key criteria, together with the benefitsing the implementation of relevant projects of com- a project will deliver to the region it is located in.mon interest. For example, a substantial part of the This goes for both financial instruments and grants.action plan of the regional initiative in south-westEurope is dedicated to increase the interconnection 86 — Fourth alinearate between the Iberian Peninsula and the conti-nental electricity market. TYNDPs are not aiming at fully corresponding to national plans, as they are meant to be more than82 the listing of all national plans. They focus on trans- European infrastructure development serving theThe Commission acknowledges that the com- principal objectives of market integration, securityprehensive assessment of EU-level infrastructure of supply and sustainability.needs is necessary, but also wishes to emphasisethe extent to which infrastructure planning does 87already take place at EU level and how this feedsinto Commission policy. Planning has to rely on sets of complete, reliableThe ten-year network development plans (TYNDPs) and robust data. Obtaining this data, notably fromprepared by the European Network of Transmission project promoters, but also from Member States, isSystems Operators (ENTSO) are based on a thorough indeed one of the key challenges for the next roundevaluation of infrastructure needs, which also fac- of TYNDPs.tors in demand. The frequency with which they areupdated, i.e. every 2 years, ensures that the change inboth demand and generation patterns is reflected inthe plan. Based on these plans and using the meth-odology from the energy system-wide cost–benefitanalysis as prescribed in the TEN-E regulation pro-jects are then selected for the Union list of projects of

Reply of the Commission 7590 104The Commission has declared regional market The Commission concedes that delays in projectintegration as a key instrument to achieve progress implementation have prevented the EEPR pro-with the internal energy market. It will continue gramme from rapidly delivering economic growth.to actively support and further develop regional However, their long-term benefits are considerable,initiatives in all fields of the internal market (e.g. especially with regard to security of supply:infrastructure, energy trading, system opera- All but one of the reverse flow and interconnectionstion, generation adequacy, renewables support projects in central and eastern Europe have beenschemes), without losing the ultimate goal of an completed, thereby significantly improving theEU-wide integrated market. resilience of the EU gas grid in case of disruptions of supply similar to the one experienced in early 2009.100 The ‘Nordbalt 02’ project helped complete the nec- essary upgrade in the Lithuanian transmission gridIn both gas and electricity the process of develop- to facilitate the flow of electricity through the inter-ing the ten-year network development plans by the connector. ‘Estlink 2’ connected the Estonian grid/respective ENTSOs gives a good oversight of where Baltic grid to the Nordic power market by a sub-seagrid investments are required at a European level. cable to Finland.These feed into procedures such as the PCI list. A new sub-sea cable connection between Italy andHowever, it is important to recall that priority or Malta put an end to the isolation of the Maltese gridstrategically important projects do not necessarily from the rest of Europe.require EU-level funding to proceed. Other non-financial barriers (e.g. permit granting) are often 109more important. The PCI process aims to allowthese barriers to be addressed. If there are specific For the Operational Programmes of the 2014-2020barriers related to finance, then support from the period, only six Member States have chosen theEU budget is considered (for example under the ERDF Investment Priority linked, inter alia, withConnecting Europe Facility). This is why generally improving security of supply through the develop-lists are not established with the sole aim of prior- ment of smart energy storage and transmissionitising investments from the EU budget. systems. A specific ex ante conditionality is foreseen in the legislation related to this investment priority,103 ensuring consistency with relevant parts of internal energy market legislation and the PCI framework.The list of projects of common interest is based on Result indicators are set in the relevant Operationala thorough assessment which is being improved by Programmes (rather than Partnership Agreements)refining various aspects of the cost–benefit analysis for each of the specific objectives agreed and(for example, how to value the security of supply). include result indicators related to aspects of theAccording to the legislation in place on the Con- internal energy market.necting Europe Facility being on the list is one pre-requisite for obtaining financial support. However,the decision on giving support is taken, in line withthe current legal framework, after having examinedthe application on the basis of a set of award criteriathat take into account policy objectives as well astechnical and financial aspects.

Reply of the Commission 76Supporting the shift towards a low-carbon econ- Recommendation 1omy, including investments in energy efficiency,renewable energy and smart distribution grids, is The Commission accepts the recommendation.a priority for the ESIF in the 2014-2020 period, in The Commission services have declared enforce-particular with mandatory minimum allocations for ment of Third Package rules a priority in 2015. Thethe ERDF. Investments in other energy infrastruc- compliance checks on the Third Package implemen-ture such as removing bottlenecks in key network tation have been completed in all 28 Member Statesinfrastructures is important for specific Member and all potential issues which are incompatible withStates. Such investments indeed represent on aver- internal market legislation with the authorities ofage about 0.5 % of the total allocation of the ERDF, the Member States concerned are being raised.CF and ESF, both in the period of 2007 to 2013 and2014 to 2020, but in some Member States the share Recommendation 2 (a)is higher (around 2 %), reflecting national needsand priorities. This recommendation is addressed to Member States. The Commission, however, agrees with the112(b) recommendation and will exert a particular scrutiny on the independence of NRAs during the compli-The implementation of all projects co-funded by ance assessment of Third Internal Energy Marketthe EU budget is closely monitored and requests by rules.the project promoters to amend the grant decisionsare carefully examined and also rejected in case the Recommendation 2 (b)arguments brought forward are insufficient. The Commission accepts the recommendation andConclusions and recommendations is looking into possibilities to reinforce the existing powers of ACER, including vis-à-vis Member States113 in order to adapt to the realities of the more inte- grated internal market.It is important to note that:— Energy infrastructure is expected to be financed Recommendation 3 by user tariffs and the market; financial support The Commission accepts the recommendation. from the EU budget therefore should be the In order to address the problem of underdeveloped exception rather than the rule. trading via exchanges, the Commission has adopted— Where financial support has been allocated, regulations in the field of gas and electricity which the security of supply has been significantly im- will make the installation of energy exchanges proved for certain regions (see for instance the obligatory (e.g. ‘CAM’ and ‘Balancing’ Regulations examples for EEPR in the Court’s observation in in gas, ‘CACM Regulation, establishing the rules for paragraph 103 or several of the audited projects EU-wide market coupling, in electricity. In addi- co-financed by CEF or ESIF mentioned in the tion, the implementation of Regulation (EU) No Court’s observations in paragraphs 109-111). 1227/2011 of the European Parliament and of the Council on wholesale energy market integrity and transparency (REMIT) is ongoing.