Legal Aspects of The Regulation of European Cross-Border Interconnector Projects

Technical University of Berlin
Master in European and International Energy Law
Master thesis
Topic: Legal Aspects of the Regulation of European cross-border interconnector projects.

Examples derived from Germany
Supervisor: Dr. Jan Peter Sasse
Academic Year: 2018-2019
Name: Aikaterini Simou
Enrollment No: 0403693

Table of contents
List of abbreviations ...................................................................................................................ii
Bibliography .............................................................................................................................. iv
Introduction ............................................................................................................................. 1
1. Grid expansion and grid connection rules ......................................................................... 4
1.1 Establishing ENTSO-E and Ten-Year Network Development Plans.............................. 4
1.2 Network codes on grid connection of HVDC systems .................................................... 7
1.3 Changes introduced by the Winter Package .................................................................... 9
1.4 German rules ................................................................................................................... 9
1.4.1 Grid expansion ......................................................................................................... 9
1.4.2 Grid connection ...................................................................................................... 12
2. Authorization and planning procedures ........................................................................... 13
2.1 Projects of Common Interest ......................................................................................... 13
2.1.1 Selection Criteria and Implementation................................................................... 14
2.1.2 Cost-Benefit Analysis.............................................................................................. 16
2.1.3 Delays and rescheduling: underlying reasons ....................................................... 20
2.6 Duration of permitting and implementation .................................................................. 21
2.5 Planning and permit granting procedure in Germany .................................................. 23
3. Financing and cost sharing mechanisms ......................................................................... 27
3.1 Financing needs to be addressed ................................................................................... 27
3.2 Financing sources .......................................................................................................... 28
3.3 Enabling investments with cross-border cost allocation ............................................... 29
3.3.1 European Rules ...................................................................................................... 29
3.3.2 Cost-sharing mechanisms ....................................................................................... 31
3.3.3 Congestion rents ..................................................................................................... 32
3.3.4 EU funding mechanisms/EU financial assistance .................................................. 34
3.4 Incentives....................................................................................................................... 35
3.5 Incentive regulation: Germany ...................................................................................... 36
4. Project example: NordLink ............................................................................................. 38
4.1 Benefits of connecting the Nordic system to the Continental System........................... 38
4.2 Benefits from the TSOs’ perspective ............................................................................ 40
4.3 Benefits of NordLink in the context of TYNDP 2018 .................................................. 41
4.4 NordLink benefits as listed in the NEP ......................................................................... 42
Conclusions ............................................................................................................................ 43
i
List of abbreviations
ACER Agency for the Cooperation of Energy Regulators
ARegV German Incentive Regulation Ordinance
BBPIG Bundesbedarfsplangesetz (Federal Requirements Plan Act)
BNetzA Bundesnetzagentur
BSH Bundesamt für Seeschifffahrt und Hydrographie (Federal Maritime
and Hydrographic Agency)
CA Competent Authority
CBA Cost-benefit analysis
CBCA Cross-Border Cost Allocation
EC European Commission
EEA Exclusive Economic Zone
EEG Erneubare Energien Gesetz (Renewable Sources Energy Act)
EIA(s) Environmental Impact Assessment(s)
ENTSO-E European Network of Transmission System Operators for

Electricity
EnWG Energiewirtschaftsgesetz (Energy Industry Act)
EU European Union
HVDC High-Voltage Direct Current
IEM Internal Energy Market
ITC Inter-TSO Compensation (mechanism)
KraftNAV Kraftwerks-Netzanschlussverordnung (Ordinance on Grid

Connection of Power Plants)
MS Member States
NABEG Netzausbaubeschleunigungsgesetz (Network Expansion
ii
Acceleration Act)
NEP Netzentwicklungsplan (Network Development Plan)
NRA(s) National Regulatory Authority (/-ies)
PCI(s) Project(s) of Common Interest
R&D Research and Development
RE Renewable Energy
RES Renewable Energy Sources
TFEU Treaty on the Functioning of the European Union
TSO(s) Transmission System Operator(s)
TYNDP Ten Year Network Development Plan
iii
Bibliography
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ap2.pdf?__blob=publicationFile&v
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energy transition. Retrieved from https://www.bmwi.de/Redaktion/EN/Dossier/grids-
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(NordLink) [cit. 31.03.2019]. Retrieved from https://www.netzausbau.de/
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operators. Retrieved from
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ralInformationOnEnergyRegulation/IncentiveRegulation/IncentiveRegulation_node.htm
l
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ionOnEnergyRegulation/IncentiveRegulation/Mechanism/IncebtReg_Mechanism-
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g_Introduction-node.html
[14] Bürgerdialog-Stromnetz, n.d., Wer wir sind?. Retrieved from https://www.buerger
dialog-stromnetz.de/initiative/wer-wir-sind
vi
[15] ENTSO-E, n.d. Project 37—Norway—Germany, NordLink. Retrieved from
https://tyndp.entsoe.eu/tyndp2018/projects/projects/37
[16] ENTSO-E, n.d. Who is ENTSO-E? Retrieved from https://www.entsoe.eu/
about/inside-entsoe/objectives/
[17] Ofgem, n.d. Electricity interconnectors. Retrieved from https://www.ofgem.gov.uk/
electricity/transmission-networks/electricity-interconnectors
[18] Ministerium für Energiewende, Landwirtschaft, Umwelt und ländliche Räume des
Landes Schleswig-Holstein, Planfeststellungsänderungsbeschluss für den Neubau
eines NordLink + 500-kV-HGÜ Interkonnektor [cit. 17.05.2016]. Retrieved from
https://www.schleswig-
holstein.de/DE/Fachinhalte/E/energie/Downloads/aenderungsbeschlussNordLink.pdf?_
_blob=publicationFile&v=2
[19] Renewables Grid Initiative, n.d. TYNDP and PCIs. Retrieved from
https://renewables-grid.eu/topics/tyndp-and-pcis.html
[20] Statnett, n.d. NordLink-About the project. Retrieved from https://www.statnett.no
/en/our-projects/interconnectors/nordlink/#about-the-project
[21] TenneT Holding B.V., Technical design of the first HVDC link between Germany
and Norway [cit. January 2019]. Retrieved from https://www.tennet.eu/fileadmin/
user_upload/Our_Grid/Interconnections/NordLink/factsheets/2019_TenneT_Factsheet-
Nordlink_Technical-Aktualisierung-e-Web.pdf
[22] TenneT TSO GmbH., Grid Connection Regulations—High and Extra-High
Voltage [cit. 27.04.2019]. Retrieved from https://www.tennet.eu/electricity-
market/german -customers/grid-customers/grid-connection-regulations/
[23] TenneT TSO GmbH, NordLink-Benefits of the NordLink interconnector [cit.
January 2017] Retrieved from
https://www.tennet.eu/fileadmin/user_upload/Our_Grid/Interconn
ections/NordLink/factsheets/2019_TenneT_Factsheet-NordLink_Stakeholder-Benefits-
e-Web.pdf
[24] Transnet BW, n.d., Approval procedures. Retrieved from
https://www.transnetbw.com/en/grid-development/planning/approval-procedures
[25] VDE Verlag, n.d. VDE-AR-N 4131 Anwendungsregel: 2019-03. Retrieved from
http s://www.vde-verlag.de/standards/0100511/vde-ar-n-4131-anwendungsregel-
2019-03.html
[26] Williams R., Pumped Hydropower-The Green Battery [cit. 09.05.2019]. Retrieved
vii
from https://industryeurope.com/pumped-hydropower-the-green-battery/
[27] Windkraft Journal. (2014). 1.400 MW- Gleichstrom-Seekabel: BSH genehmigt
NordLink-Kabel nach Norwegen. Retrieved from http://www.windkraft-
journal.de/2014/10/12/1-400-mw-gleichstrom-seekabel-bsh-genehmigt-nordlink-kabel-
nach-norwegen
[28] Haverbeke D. et al., We need to talk about interconnectors [cit. 17.05.2009].
Retrieved from https://www.fieldfisher.com/publications/2019/05/we-need-to-talk-
about-intercctors
European Commission – Communications and Other Material
[1] European Commission. (n.d.). Transport and energy networks. Retrieved from
https://ec.europa.eu/regional_policy/en/policy/themes/transport-energy/
[2] European Commission, Evaluation of the TEN-E Regulation and Assessing the
Impacts of Alternative Policy Scenarios [cit. 27.12.2018]. Retrieved from
https://pub lications.europa.eu/en/publication-detail/-/publication/81f6baae-5efc-
11e8-ab9c-01aa75ed71a1/language-en
[3] European Commission, Electricity interconnection targets [cit. 23.09.2019].
Retrieved from https://ec.europa.eu/energy/en/topics/infrastructure/projects-
common- interest/electricity-interconnection-targets
[4] European Commission, n.d. Consultation on the list of candidate Projects of
Common Interest in electricity infrastructure. Retrieved from
https://ec.europa.eu/info/consultat ions/consultation-on-the-list-of-candidate-projects-
of-common-Interes-in-electricity-infrastructure_en
[5] European Commission, Regional Groups and their role in the PCI process [cit.
10.02.2018]. Retrieved from https://ec.europa.eu/energy/en/topics/infrastructure
/projects-common-interest/regional-groups-and-their-role-pci-process
[6] European Commission, n.d. 2030 climate & energy framework. Retrieved from
https://ec.europa.eu/clima/policies/strategies/2030_en
[7] European Commission, Electricity interconnection targets [cit. 11 October 2016].
Retrieved from https://ec.europa.eu/energy/en/topics/infrastructure/projects-
common- interest/electricity-interconnection-targets
[8] European Commission, Juncker Plan supports Nordlink interconnector with €100
million EIB investment [14.08.2018]. Retrieved from
https://ec.europa.eu/info/news/j uncker-plan-supports-nordlink-interconnector-eu100-
viii
million-eib-investment-2018-aug-14_en
[9] European Commission, n.d. Connecting Europe Facility. Retrieved from

https://ec.europa.eu/inea/en/connecting-europe-facility
[10] European Commission, n.d. Transport and energy networks. Retrieved from
https://ec.europa.eu/regional_policy/index.cfm/en/policy/themes/transport-energy/
[11] Communication from the Commission, A growth package for integrated European
infrastructures [cit. 19.10.2011] Retrieved from https://eur-lex.europa.eu/l egal-
content/EN/TXT/PDF/?uri=CELEX:52011DC0676&from=EN
Reports
[1] ACER, Consolidated Report on the Progress of Electricity and Gas Projects of
Common Interest [01.07.2019] Retrieved from https://www.acer.europa.eu/Official_
documents/Acts_of_the_Agency/Publication/CONSOLIDATED%20REPORT%20ON%20TH
E%20
[2] ENTSO-E, n.d., A push for Projects of Common Interest. Retrieved from
https://tyndp .entsoe.eu/2016/insight-reports/common-projects/
[3] ENTSO-E, n.d., TYNDP 2018 Executive Report Connecting Europe: Electricity
2025—2030—2040. Retrieved from https://tyndp.entsoe.eu/Documents/TYNDP%
20d
ocuments/TYNDP2018/consultation/Main%20Report/TYNDP2018_Executive%20Report
.pdf
[4] ENTSO-E, TYNDP 2016-Executive Report [cit. 20.12.2016]. Retrieved from
https://tyndp.entsoe.eu/ exec-report/sections/
[5] ENTSO-E, 2nd ENTSO-E Guideline For Cost Benefit Analysis of Grid
Development Projects [cit. 27.09.2018]. Retrieved from
https://docstore.entsoe.eu/Documents/
TYNDP%20documents/Cost%20Benefit%20Analysis/2018-10-11-tyndp-cba-20.pdf
[6] ENTSO-E, TYNDP 2018 Regional Insight Report-Northern Seas Offshore Grid
(NSOG) [cit. 26.10.2018]. Retrieved from
https://tyndp.entsoe.eu/Documents/TYNDP
%20documents/TYNDP2018/consultation/PCI%20Region/ENTSO_TYNDP_2018_NSOG.p
df
[7] ENTSO-E, ENTSO-G, n.d. TYNDP 2018 Scenario Report—Main Report.
ix
Retrieved from https://docstore.entsoe.eu/Documents/TYNDP%20documents/
TYNDP2018/Scenario_Report_2018_Final.pdf
[8] Netzentwicklungsplan Strom, Version 2019, 1. Entwurf, n.d. Retrieved from
https://www.netzentwicklungsplan.de/sites/default/files/paragraphs-
files/NEP_2030_V2019_1_Entwurf_Teil1_1.pdf
[9] Directorate General for Internal Policies, European Energy Industry Investments
[February 2017]. Retrieved from http://www.europarl.europa.eu/RegData
/etudes/STUD/2017/595356/IPOL_STU(2017)595356_EN.pdf
EU and German legislation

[1] Commission Regulation 2016/1447 establishing a network code on requirements
for grid connection of high voltage direct current systems and direct current-
connected power park modules [cit. 26.08.2016]. Retrieved from https://eur-
lex.europa.eu/eli/reg/2016/1447/oj
[2] Directive 2018/2001 on the promotion of the use of energy from renewable sources
[cit. 11.12.2018]. Retrieved from https://eur-lex.
europa.eu/eli/dir/2018/2001/oj?locale=en
[3] Directive 2019/944 on common rules for the internal market for electricity and
amending [cit. 05.06.2019]. Retrieved from https://eur-lex.europa.eu/legal-content
/EN/TXT/?uri=CELLAR%3A8594f013-8e7c-11e9-9369-01aa75ed71a1
[4] Directive 2009/72/EC concerning common rules for the internal market [cit. 13.07.
2009]. Retrieved from https://eur-lex.europa.eu/legal-
content/EN/ALL/?uri=CELEX%3A3 2009L0072
[5] Gesetz über die Elektrizitäts- und Gasversorgung (Energiewirtschaftsgesetz -
EnWG), [cit. 07.07.2005]. Retrieved from http://www.gesetze-im-
internet.de/enwg_2005/ EnWG.pdf
[6] Erneuerbare-Energien-Gesetz - EEG 2017, [cit. 21.07.2014]. Retrieved from
http://www.gesetze-im-internet.de/eeg_2014/index.html
[7] Netzausbaubeschleunigungsgesetz Übertragungsnetz (NABEG), [cit. 28.07.2011].
Retrieved https://www.gesetze-im-internet.de/nabeg/NABEG.pdf
[8] Regulation 2018/1999 on the Governance of the Energy Union and Climate Action
[cit. 11 December 2018]. Retrieved from https://eur-lex.europa.eu/legal-content/
EN/TXT/PDF/?uri=CELEX:32018R1999&from=EN
[9] Regulation 2019/943 on the internal market for electricity [cit. 05.06.2019].
x
Retrieved from https://eur-lex.europa.eu/eli/ reg/2019/943/oj
[10] Regulation 2019/942 establishing a European Union Agency for the Cooperation
of Energy Regulators [cit. 05.06.2019]. Retrieved from https://eur-
lex.europa.eu/legal -content/EN/TXT/?uri=uriserv:OJ.L_.2019.158.01.0022.01.ENG
[11] Regulation 714/2009 on conditions for access to the network for cross-border
exchanges in electricity [cit. 13.07.2009]. Retrieved from https://eur-lex.europ
a.eu/legal-content/EN/ALL/?uri=CELEX%3A32009R0714
[12] Regulation 2019/943 on the internal market for electricity [cit. 05.06.2019].
Retrieved from https://eur-lex.europa.eu/legal-
content/EN/TXT/?uri=CELEX%3A32019R0943
[13] Regulation on guidelines for trans-European energy infrastructure 347/2013
[17.04. 2013]. Retrieved from https://eur-lex.europa.eu/legal-
content/en/TXT/?uri=celex%3A3 2013R0347
xi
Declaration of authorship
I affirm that I wrote the master’s work titled “Legal Aspects of the Regulation of
European cross-border interconnector projects. Examples derived from Germany”
on my own without any assistance of third persons and without other resources and
sources as denoted in my work. I indicated all parts which I integrated by wording
or by meaning. This work was not in part or in all issue of other examination
procedures and was not submitted to other examination authorities. This work was
not published in part or in all otherwise.
Date Signature
xii
Introduction
In an era where the transition towards cleaner energy dominates and changes global energy
markets, the recently ratified Paris Agreement –alongside national goals- provides the
necessary momentum to accelerate the energy transition and realize a sustainable energy
future. The rapid deployment of renewables introduced a profound progress in the
European energy sector over the last years, accelerating the switch from fossil fuels and
leading to the gradual decarbonization of the sector. This move to a diversified power
generation portfolio, backed by the rapid development of renewable energy technologies
in combination with the liberalization of the European electricity market has resulted in
more interdependent power flows across the European continent.
As part of the 2030 climate and energy framework, which was adopted by the European
Council in October 2014, ambitious EU-wide targets for decarbonizing the economy by
2030 were adopted:
▪ At least 40% cuts in greenhouse gas emissions (from 1990 levels)
▪ At least 32% share for renewable energy
1
▪ At least 32.5% improvement in energy efficiency
Adopting those binding Union targets for 2030 provides significant encouragement to the
development of RES technologies as well as certainty for investors.2 In order to ensure the
achievement of these targets, a financial framework facilitating investments in RES
projects (i.e. transmission grid infrastructure, interconnectors) is established, using tools
such as specific financial instruments and the allocation of funds;3 hence, the cost of capital
of the projects is reduced, making them in turn more competitive and promoting an
increased RE share.
Alongside these goals, EU countries are called to achieve at least 10% interconnection by
2020, i.e. each country should have electricity cables enabling at least 10% of the
1
European Commission, 2030 climate & energy framework
2
Directive 2018/2001 on the promotion of the use of energy from renewable sources, recital 9
3
Ibid, recital 12
1
electricity produced by domestic power plants to be transported across borders to
neighbouring countries. 4 The need to adopt further measures in order to ensure the
achievement of this minimum target has often been underlined by the European Council.
To further stress this need, the Commission adopted a communication on 23 November
2017 on strengthening the processes towards achieving the 10% interconnection target and
suggesting ways in which to realize the 2030 interconnection target of 15%.5
An increased market integration and the shift towards a more volatile electricity
production, hints at the need to coordinate national energy policies with neighbours when
6
trading electricity across borders. A more flexible adaptation of the European
transmission system to this new reality is therefore required, and when designing their grid
development Europe’s transmission system operators (TSOs) need to look beyond their
national boundaries.
Established by EU’s Third Legislative Package for the Internal Energy Market in 2009,
the European Network of Transmission System Operators for Electricity (ENTSO-E),
represents TSOs from 36 countries across Europe. 7 Close co-operation between the
ENTSO-E members, is required for a coordinated planning of the future development of
the European transmission system. A well-planned grid expansion remains of central
importance in achieving the goals set by a changing European as well as national energy
policy over the past years. Cooperation between the MS and their national regulatory
authorities on regulatory measures having cross-border effects, is deemed essential to
avoid any problems in closely interconnected markets, where the decisions of one MS can
have a notable impact on their counterparts.8
To this end, as part of the transformation process of Europe’s power sector, improved
cross-border electricity interconnections should be mentioned. The shift to renewables and
the extensive additional installations of RES that come along, inevitably give rise to the
issue of the intermittency of renewable electricity production on different timescales, an
aspect that can potentially put security of supply at risk.
4
European Commission, Electricity interconnection targets
5
Regulation 2018/1999 on the Governance of the Energy Union and Climate Action, recital 17
6
Regulation 2019/943 on the internal market for electricity, recital 8
7
ENTSO-E, Who is ENTSO-E?
8
Regulation 2019/942 establishing a European Union Agency for the Cooperation of Energy Regulators,
recital 4
2
These electricity transmission projects, known as interconnectors, apart from allowing the
exchange of electricity across borders, also facilitate the better integration of intermittent
renewable power sources like solar and wind. An exemplary case is Germany, setting a
national target of 80% share of power derived from RES by 2050. 9 Restructuring the
energy sector is a key aspect of the national plan known as Energiewende (energy
transition), which promotes the further expansion of renewable energies and the gradual
phasing out of electricity from fossil fuels, in order to reduce the energy sector's emissions.
This increased share of RES power will mostly be achieved due to the growth of solar and
wind power generation.10
Building or upgrading existing interconnectors to neighbouring countries plays a key role

in the efforts to successfully realize Germany’s energy transition. A characteristic example
is the combination of hydroelectric power from Scandinavia and the Alpine countries with
wind power and photovoltaics from Germany, allowing the export of surplus energy in
times of larger production, and the import of energy when due to environmental conditions
the power production does not meet the respective demand.11
While it is clear that decarbonising the electricity sector, through the deployment of energy
from RES, is one of the main goals set by the Energy Union, it is crucial that any barriers
to cross-border trade are removed so that investments in interconnection infrastructure are
encouraged. Some of those barriers identified in various studies are, for example, time
consuming administrative processes as well as lengthy procedures, regarding permitting
and public consultations, as well as barriers to cross-border transaction;12 The ways these
obstacles for infrastructure development are tackled by the existing European and German
legislation will also be analyzed in this thesis.
This Master’s Thesis aims at providing an overview of all the relevant legal provisions
regulating the development of an interconnector project. The NordLink interconnector,
connecting Norway and Germany, will be used as an example. The relevant European as
well as German legislation overlooking the i) grid connection and grid expansion processes
9
Umwelt Bundesamt, Energy Target 2050-100% renewable electricity supply, pg.4
10
Ibid, pg. 10
11
BMWi, An electricity grid for the energy transition
12
Puka L., and Szulecki K., Beyond the "Grid-Lock" in Electricity Interconnectors-The Case of Germany and
Poland, pg. 19
3
(Section 1), ii) the authorization and planning procedures for interconnectors (Section 2)
and iii) the main financing and cost-sharing mechanisms will be analysed (Section 3).
Moreover, the potential benefits of an interconnector project, namely NordLink, will be

presented in Section 4 of the Master´s Thesis, in an attempt to answer the questions of
whether interconnectors make economic sense and if they can provide a solution to the
problem of large-scale electricity storage. The changes introduced in the aforementioned
fields by the latest so-called “Winter Package”, a set of eight proposals proposed by
European instruments, which aims to facilitate the transition to a clean energy economy,
will also be approached.
1. Grid expansion and grid connection rules
1.1 Establishing ENTSO-E and Ten-Year Network Development Plans
ENTSO-E was established according to Regulation 714/2009. 13 Key objectives of the

ENTSO-E are the completion of the IEM in electricity and the enhancement of cross-
border trade between MS, through the development of a flexible and stable European
electricity transmission network.14 Among the main tasks of ENTSO-E is the adoption of
a non-binding Community-wide ten-year network development plan (TYNDP) every two
years, which shall contain “the modelling of the integrated network, scenario development,
a European generation adequacy outlook and an assessment of the resilience of the
system”. 15 Annex III of the TEN-E Regulation, specifically requires that electricity
transmission PCIs, are included in this TYNDP.
In addition to the EU-wide TYNDP, all European TSOs are required to annually draw up
a TYNDP, which is based on forecasts of the future development of power generation and
consumption; the plan identifies expansion requirements, necessary investments in
transmission infrastructure and sets a fixed timeframe for all PCIs for the upcoming ten
years.16 PCIs have to be included in those network development plans, according to Article
13
Regulation 714/2009 on conditions for access to the network for cross-border exchanges in electricity,
Art. 5
14
Ibid, Art. 4
15
Ibid, Art. 8 para. 3 (b), para. 10
16
Directive 2009/72/EC concerning common rules for the internal market in electricity, Art. 22 para. 1,
para. 2
4
3(6) of the TEN-E Regulation. The NRAs of each MS are required to monitor the
implementation of these plans;17 in case the TSO fails to execute some already agreed upon
investments, the NRA has to safeguard those investments by either requiring the TSO to
execute the investments (with relevant tariff regulations covering any resulting costs), by
organizing a tender procedure for attracting investors, or by imposing a capital increase on
the TSO aimed at financing the investments, and allowing independent investors to
participate in the capital.18
ACER is required to control the consistency of the national ten-year network development
plans with the Community-wide network development plan; if any inconsistencies arise,
the Agency shall propose any necessary amendments to both plans.19 In a nutshell, the
planning of the expansion of Europe’s grid is embedded in the respective National
Development Plans and the TYNDP – which are actually prepared by ENTSO-E, taking
into account the National Development Plans, submitted yearly by the TSOs.20
When approaching the TYNDP development process, four key issues should be
highlighted: i) future scenarios development, ii) identification of investment needs, iii)
collection of candidate projects and iii) CBA assessment of projects. 21 The different
scenarios on the potential future of the European electricity grid -developed by ENTSO-E
and various stakeholders- lay at the core of the TYNDP; the impacts each scenario has on
energy markets are analyzed with the help of specific scenario development methodologies
and modelling tools, which subsequently help identify any necessary investments in grid
optimization.22
Two steps are involved in the identification of investment needs: i) presentation of different
scenarios contributing to the acceleration of decarbonisation within varying timetables,
addressing any system needs (i.e. price differences, provision of support to continental
security of supply in variable RES production), ii) proposal of EU-wide candidate
17
Ibid, Art. 22 para. 6
18
Ibid, Art. 22 para. 7, para. 9
19
Art. 8 para. 11
20
European Commission, Evaluation of the TEN-E Regulation and Assessing the Impacts of Alternative
Policy Scenarios, pg. 22
21
ENTSO-E, TYNDP 2018 Executive Report Connecting Europe: Electricity 2025 - 2030 – 2040, pg. 7
22
ENTSO-E, ENTSO-G, TYNDP 2018 Scenario Report-Main Report, pg. 43-44
5
transmission and storage projects, including an assessment of their performance under the
different scenarios. 23 24
The 2018 TYNDP scenarios include first and foremost a “Best Estimate” scenario for the
short (2020) and medium term (2025), based on feedback provided by the TSOs.
Nonetheless, further storylines for the longer term (2030 and 2040) were also included,
namely the Sustainable Transition, the Distributed Generation, Global Climate Action and
the External Scenario from the EU Commission; all scenarios are in any case set to meet
the decarbonisation targets set out by the EU for 2030.25 26 The scenario pathways from
2020 to 2040 can be seen in Figure 1 in the Appendix.
It therefore becomes apparent that a close cooperation between the ENTSO-E and the
respective TSOs, provides an insightful look into possible future energy market scenarios,
and how any challenges that may arise in those scenarios can be successfully mitigated.
The expansion and optimisation measures of Europe’s grid are carefully outlined in the
TYNDP, tailored to the needs of every Regional Group.
With a view to the Northern Seas Offshore Grid (NSOG), of which the NordLink
interconnector is a part, the TYNDP 2018 Regional Insight Report provides valuable
information on the development of cross-border transmission infrastructure in the region.
The NSOG region consists of four separate systems, with Germany belonging to the
Continental system and Norway to the Nordic system.27 The main focus points of the
region according to the report, are the ever-increasing regional RES shares, a reduced
nuclear generation as well as a shift from coal to gas generation. In the efforts to ensure
security of supply, while allowing the integration of RE generation -which is by nature
intermittent-, interconnecting the hydro-based Nordic system with the wind-based
Continental system appears as a senseful solution. 28 Complementary measures such as
23
Ibid
24
For a detailed depiction of this process, please refer to Figure 4 in the Appendix.
25
ENTSO-E, ENTSO-G, TYNDP 2018 Scenario Report-Main Report, pg. 9
26
For further information on the scenario building framework for TYNDP 2018 please refer to pages 9-31
of the TYNDP 2018 Scenario Report-Main Report from the ENTSO-E and ENTSO-G. The different scenario
pathways from 2020 to 2040 are depicted in a graph in Figure 1 in this paper’s Appendix.
27
ENTSO-E, TYNDP 2018 Regional Insight Report-Northern Seas Offshore Grid (NSOG), pg.5
28
Ibid
6
demand side response or short- and long-term storage solutions, can also contribute to a
balanced and secure system.29
There are however some critics with regards to the TYNDP development process, focusing
on the fact that rather conservative approaches looking into a renewables-based future have
been adopted in the scenarios in question. Therefore, the question of what would happen
if more extreme low carbon scenarios were the basis scenarios, is not sufficiently
addressed, even though this is a burning question many stakeholders wish to get answers
to.30
1.2 Network codes on grid connection of HVDC systems
Alongside developing a Community-wide TYNDP, the ENTSO-E is required to elaborate

network codes, covering the areas referred to in Art. 6 (6) of Regulation 714/2009. 31 32
The network code on requirements for grid connection of high voltage direct current
systems and direct current-connected power park modules, known as Commission
Regulation 2016/1477 is binding and directly applicable to all Member States.
Article 5 of Directive 2009/72/EC already required that Member States or the respective
NRAs ensure “that objective and non-discriminatory technical rules are developed which
establish minimum technical design and operational requirements for the connection to
the system”, providing in that way network stability within an interconnected transmission
system. Regulation 2016/477 highlights those requirements specifically applying to High-
Voltage Direct Current (HVDC) systems, as is the case with interconnectors.
29
Ibid
30
Renewables Grid Initiative, TYNDP and PCIs
31
Art. 8, paras 1, 2
32
According to Article 6 (6): 6. “The network codes […] shall cover the following areas, […]: (a) network
security and reliability rules including rules for technical transmission reserve capacity for operational
network security; (b) network connection rules; (c) third-party access rules; (d) data exchange and
settlement rules; (e) interoperability rules; (f) operational procedures in an emergency; (g) capacity-
allocation and congestion-management rules; (h) rules for trading related to technical and operational
provision of network access services and system balancing; (i) transparency rules; (j) balancing rules
including network-related reserve power rules; (k) rules regarding harmonised transmission tariff structures
including locational signals and inter-transmission system operator compensation rules; and (l) energy
efficiency regarding electricity networks.”
7
The requirements of this Regulation apply, inter alia, to “embedded HVDC systems within
one control area and connected to the distribution network when a cross-border impact is
demonstrated by the relevant TSO”.33 The general technical requirements are presented in
detail in Articles 11 to 37 of the Regulation and cover issues ranging from maximum loss
of active power and frequency ranges to voltage limits and network characteristics. HVDC
system owners shall be able to design their system in such a way so that it can operate
within the range of short circuit power and the network characteristics specified by the
relevant TSO; hence, each TSO has to specify and publish the method and conditions for
the calculation of at least the minimum and maximum short circuit power as well as a
description of the behavior of the network at the connection points.34
Pursuant to Article 55 para. 1 of the Regulation, the HVDC system owner shall
demonstrate to the relevant TSO that compliance with the requirements set in the
aforementioned articles at the respective connection point is ensured. This is achieved by
completing the operational notification procedure for connection of the HVDC system,
which comprises of: i) the energization operational notification (EON), ii) the interim
operational notification (ION) and iii) the final operational notification (FON). 35 The
operation notification procedure is explicitly described in Articles 56 to 59.
Compliance of the HVDC system and HVDC converter stations with the requirements of
the Regulation has to be maintained throughout the lifetime of the facility; for that reason,
any planned modifications of the technical capabilities of the system have to be firstly
notified to the TSO. 36 The TSOs may request compliance tests and simulations, not only
during the time of the operational notification procedures, but also throughout the entire
lifetime of the project.37 The monitoring of the implementation of this Regulation is to be
carried out by ENTSO-E, as per Art. 8 (8) of Regulation 714/2009. Specifically,
identifying any divergences in the national implementation of the Regulation as well as
assessing whether the requirements applicable to HVDC systems under this Regulation
33
Commission Regulation 2016/1447 establishing a network code on requirements for grid connection of
high voltage direct current systems and direct current-connected power park modules, Art. 3, para. 1 (d)
34
Ibid, Art. 32
35
36
37
Ibid, Art. 70 para. 2. For further details on the compliance testing and compliance simulations
procedures, please refer to Articles 71 and 73 of the Regulation.
8
continue to be valid, are among the matters that should be covered during the monitoring
process. 38
1.3 Changes introduced by the Winter Package
With regards to grid connection, Directive 2019/944 establishes several obligations the
TSOs have to comply with, among which is “granting and managing third-party access
and giving reasoned explanations when it denies such access”.39 In specific, a system of
third-party access has to be implemented for the transmission system, which will be based
on published tariffs and will be applicable to all customers in a non-discriminatory way.40
Nevertheless, a TSO retains the right to refuse access where the necessary capacity is
lacking, by providing duly substantiated reasons for the refusal.41 In case of access denial,
MS or their respective NRAs, shall provide the system user to which the access has been
refused with, a dispute settlement procedure and ensure that the TSO provides information
on necessary measures for network reinforcement. 42
Regulation 2019/943 also underlines the importance of ensuring non-discriminatory access

to interconnectors, thus preventing TSOs from limiting the volume of the available
interconnector capacity. This is achieved by using tools such as counter-trading and cross-
border redispatch to maximize the available capacities, if needed. 43 A derogation from
those rules may be granted to TSOs maximum one year at a time, on the grounds of
maintenance of operational security.44 The TSOs should adhere to the given time limits
and avoid any discrimination between internal and cross-zonal exchanges.
1.4 German rules
1.4.1 Grid expansion
The expansion of cross-border transmission lines between Germany and its electrical
partners is based on a national planning forming the legal basis for facilitating the
38
39
Directive 2019/944 on common rules for the internal market for electricity, Art. 40 para. 1 (d)
40
41
42
Ibid
43
Regulation 2019/943 on the internal market for electricity, Art. 16 para. 8, para. 4
44
9
necessary expansions as well as the common regulatory framework at EU level. In order
to facilitate the grid expansion process and make it as transparent and inclusive as possible,
the German legislator developed procedures and regulations on conditions for grid
development, in great detail. These aim to prepare the network landscape for a swift and
optimized integration of RES. The grid expansion procedure is laid down in the German
Energy Industry Act (EnWG), in paragraphs 12 (a) to 12 (f).
It starts with an annual draft of a Scenario Framework -describing the possible

developments in the German energy landscape as well as the forecasted installed capacity
of fossil and renewable energy in Germany- by the four TSOs. Since 2016, the grid
operators are obliged to present the BNetzA with the Scenario Framework by the 10 th of
January of each calendar year.45 Five scenarios and their main aspects were identified in
the 2019 version of the NEP, namely:
▪ Short-term scenario B 2025: Ad-hoc-measures

▪ Target-scenarios A 2030, B 2030, C 2030: electricity demand development, more
flexibility and sector coupling.
▪ Long-term scenario B 2035: sustainability check for the identified measures46
The “Sustainable Transition” scenario developed in the Community-wide TYNDP, seems

to better reflect the scenarios presented in the NEP, all of which are in line with the targets
set by Germany’s climate policy.47
The framework is then approved by BNetzA, after public consultations, with the scenarios
helping the TSOs in identifying expansion requirements for the next ten years. 48 The
following step is the National Network Development Plan (NEP) and the respective
Environmental Assessment, in which the TSOs identify prospective generation at different
points in the system and in which nodes of the power grid bottlenecks are likely to occur,
pursuant to paragraph 12 (b) of the EnWG; 49 developing measures to address these
45
BNetzA, Energiewirtschaftsgesetz (EnWG)
46
Netzentwicklungsplan Strom, Version 2019, pg. 29, referring to all three points.
47
Ibid
48
BNetzA, How it works: Grid expansion in five steps
49
Puka L., and Szulecki K., Beyond the "Grid-Lock" in Electricity Interconnectors - The Case of Germany
and Poland, pg. 21
10
shortcomings (i.e. proposals to build or optimize existing power lines) are also a vital part
of the NEP.50
The proposal for the NEP consists of a report that includes, inter alia, maps containing
information on where existing power lines need to be optimized and where new power
lines need to be built, focusing rather on optimization rather than grid development, and it
highlights transmission requirements between two grid nodes that have not yet been
connected.51
If a need for optimization or extension is determined, the NOVA–principle is applied:
▪ Netzoptimierung/grid optimization (NO): Firstly, ways to optimize the existing

grid have to be employed (e.g. through the use of technologies such as electricity
temperature monitoring).
▪ Verstärkung/grid reinforcement (V): Secondly, the grids have to be strengthened
in case the proposed optimizations are exhausted (e.g. adding another power line
on an existing electricity pylon).
▪ Ausbau/grid extension (A): Thirdly, if neither optimization nor strengthening
measures are adequate to meet future grid needs, expansion measures have to be
52
planned.
Both of the NEP and EIA documents are published by the 10th of December of each
calendar year on the NEP’s website and are open to a public consultation.53 After adapting
the 1st draft of the NEP to the results of the public consultation, their plans are again handed
over (with a maximum time limit of ten months after the approval of the Scenario
Framework) to the BNetzA - that also documents any potential damage to the environment
in an environmental report54- and are subject to a second public consultation.
The participation of citizens, industry associations and public authorities in these

consultations, ensures adequate public involvement when drafting the Network
Development Plan and the Environmental Assessment. The BNetzA then assesses whether
50
Rottmann K., Recommendations on Transparency and Public Participation in the Context of Electricity
Transmission Lines, pg. 24
51
Ibid
52
dena, Transmission Grid Planning in systems with high shares of Renewable Energy, pg. 19, referring to
all three points.
53
BNetzA, Energiewirtschaftsgesetz (EnWG)
54
Pursuant to paragraph 12 (c) (2) of the EnWG and the requirements set by the Environmental Impact
Assessment Act.
11
the documents comply with the legal demands set out in paragraphs 12 (b) and 17 (a) of
the EnWG.55 The Network Development Plan is to be approved by the 31st of December
of each calendar year. 5657 Further technical details as well as the rationale justifying
investments in NordLink are also presented in the Annex of the 2019 version of the NEP.58
Lastly, based on the approved network development plan and the environmental report, a
Federal Requirements Plan is prepared at least every four years and voted on by the
Bundestag, containing a list of all necessary projects and creating the basis for the permit
granting procedures that are to follow.59 The projects which are incorporated in the Federal
Requirements Plan, acquire a priority status that underlines their necessity within the
German energy scenery.
The Renewable Energy Sources Act (EEG) also lays down specific rules concerning the
expansion of grid capacities and the subsequent obligations that arise for TSOs. In specific,
if requested by the parties interested in feeding in electricity, the TSO is obliged to
immediately optimise, enhance and expand his grid in accordance with the latest
technological stand, in order to guarantee the purchase, transmission and distribution of
electricity retrieved from RES.60 The aforementioned obligations are not applied in case it
is not economically reasonable for the grid operator to realise them.61 If the grid operator
fails to implement the obligations arising from para. 12 (1) of the EEG, those interested in
feeding in electricity are entitled to demand compensation for the damage incurred. 62
1.4.2 Grid connection
The German electricity grid market is subject to a comprehensive regulatory regime

governed by varying acts and ordinances. Detailed information on the rules and conditions
governing the grid connection and grid access regime in the German transmission system
are mainly provided by the EnWG. According to paragraph 19 (1) of EnWG, TSOs are
required “to set and publish on the Internet the minimum technical requirements for the
55
Ibid
56
Ibid
57
For a graph depiction of the Grid Development Plan process, please refer to Figure 5 in the Appendix.
58
Anhang zum NEP 2030 (2019), Zweiter Entwurf, pg. 338-339
59
EnWG, Para. 12 (e)
60
EEG, para. 12 (1)
61
Ibid, para. 12 (3)
62
Ibid, para. 13 (1)
12
design and operation of [..] interconnectors and direct lines, taking into account the
conditions laid down pursuant to paragraph 17 and the general minimum technical
requirements pursuant to paragraph 4”.63
Furthermore, paragraph 17 of the EnWG, obliges TSOs to connect end-customers to their

systems under technical and commercial terms that are non-discriminatory, transparent and
not favourable towards companies associated to the TSO.64 To this end, grid operators are
obliged to grant non-discriminatory grid access to everyone on the basis of objectively
justifiable criteria.65 However, they still maintain the right to refuse access to their grid, by
proving that operational or other reasons hinder the access granting process.66
Specific application guidelines are also developed, such as the VDE-AR-N 4131:2019-03,
which concretizes the technical requirements that may apply in the event of modifications,
expansions or modernisations of existing high voltage current systems, which can have
significant impacts on the behaviour of the grid link point.67 The implementation of this
VDE application guide essentially constitutes the national implementation of the
aforementioned Regulation 2016/1447.
An effective coordination between the TSO and the respective connecting party, is a
prerequisite when a new grid connection is established or when changes are underway in
an already existing connection. In the case of Tennet, the system’s requirements as well as
the characteristics of the equipment (i.e. nominal voltage, short-circuit strength, minimum
dimensions,) are defined in the “Technical Manual Grid, Chapter: Building and
Construction” document, published by the TSO.68
2. Authorization and planning procedure

2.1 Projects of Common Interest
The legal basis for the projects of common interest is provided by Regulation (EU) No
347/2013 on guidelines for trans-European energy infrastructure. This Regulation
63
EnWG, para. 19 (1)
64
EnWG, para. 17 (1)
65
EnWG, para. 20 (1)
66
EnWG, para. 20 (2)
67
VDE Verlag, VDE-AR-N 4131 Anwendungsregel: 2019-03
68
TenneT TSO GmbH, Grid Connection Regulations - High and Extra-High Voltage, pg. 7
13
identifies nine priority electricity corridors requiring urgent infrastructure upgrades. 69
NordLink is part of the Northern Seas offshore grid (NSOG), which addresses
interconnectors in the North Sea, inter alia, and concerns Germany.70 Every two years, the
EC draws a Union list of PCIs.71 The TEN-E Regulation lays down the procedure and
criteria for a project to become a Project of Common Interest (PCI) on any of these
corridors.
Some key figures on the currently approved electricity PCIs are provided below:
i. The 2017 PCI Union list includes 110 electricity PCIs, out of which 89 PCIs are
transmission projects.72
ii. Looking further into the distribution of electricity PCIs per priority corridor, the
NSOG appeared to host the second highest number of PCIs, following the North-
South electricity interconnections in Central Eastern and South Eastern Europe.73
iii. Regarding the status of the PCIs, ACER’s latest 2019 report demonstrates that 45%
of the PCIs are in the permitting phase, 21% are under construction, 19% are
planned but still not in permitting, 10% are under consideration, 4% are
commissioned and 1% are cancelled.74
2.1.1 Selection Criteria and Implementation
Electricity transmission projects are selected as PCIs, on the basis of the following criteria.
They need to:
i. have a significant cross-border impact on at least two EU countries, or one MS and

a European Economic Area country,
ii. be vital for at least one energy infrastructure priority corridor and its overall
benefits should outweigh its costs,
69
Regulation 347/2013 on guidelines for trans-European energy infrastructure, Annex I
70
Ibid
71
72
ACER, Consolidated Report on the Progress of Electricity and Gas Projects of Common Interest-2019,
pg.9
73
Ibid, pg. 10
74
Ibid, pg. 12
14
iii. enhance market integration and contribute to the integration of EU countries'
networks, thus reducing any bottlenecks,
iv. boost competition and subsequently system flexibility on energy markets,
v. enhance security of supply by diversifying sources and
vi. contribute to EU’s energy and climate goals, in specific facilitate the integration of
an increasing share of energy from variable RES. 75
Project promoters submit their project proposals, by providing an additional timetable

covering aspects such as approval by the NRAs, construction and commissioning of the
project, a cost benefit analysis of the project as well as the permit granting plan.76 The
candidate projects are then assessed by Regional Groups -which include representatives
from MS, the Commission, NRAs, as well as ACER and the ENTSO-E. 77 The groups
evaluate the PCIs based on their contribution to the PCI selection criteria mentioned
above.78 After these assessments, the Commission adopts the list of approved PCIs via a
delegated act procedure.79 The selection process gives preference to projects in priority
corridors, as identified in the Trans-European Networks for Energy Strategy. 80
Projects of common interest, which are eventually included on the Union list, become part
of the relevant regional investment plans referred to in Regulation 714/2009 81 and of the
national 10-year network development plans submitted yearly by the TSOs, pursuant to
Article 22 of Directive 2009/72/EC. Finally, it is worth mentioning that these projects
acquire the highest possible priority within each of the aforementioned plans.82 In case
PCIs face implementation difficulties, Art. 6 of the TEN-E Regulation provides for a
European coordinator, whose tasks mainly revolve around facilitating the dialogue
between all concerned stakeholders of the project (MS, project promoters).
75
Ibid, Art. 4 paras 1, 2
76
77
Ibid, Annex III
78
79
Ibid, Art.4 para. 4
80
European Commission, Regional Groups and their role in the PCI process
81
Art. 12 para. 1. TSOs are required to publish a regional investment plan every two years and may take
investment decisions based on that plan.
82
Regulation 347/2013 on guidelines for trans-European energy infrastructure, Art. 3 para. 6
15
2.1.2 Cost-Benefit Analysis
Within the framework of the TYNDPs as well as the selection processes for PCIs, the
assessments of the projects are based on a common cost-benefit analysis (CBA).83 When
developing further interconnectors, it is important to make an all-encompassing assessment
of their costs and benefits, including the full technical, socio-economic and environmental
impacts, while also taking into consideration any positive externalities (i.e. integration of
RES, security of supply and enhanced competition).84
The principles governing the methodology for an energy system-wide CBA for PCIs are
laid down in Annex V of Regulation 347/2013. Specifically, for electricity transmission
projects, the following impacts of the project shall be assessed: i) greenhouse gas emissions
and any transmission losses, ii) future costs for transmission investments, iii) operational
flexibility (i.e. ancillary services) and iv) system resilience, including disaster and climate
resilience, and system security.85
After consultations with stakeholders, MSs, ACER and the European Commission draft
and concretise the CBA procedure; the new ENTSO-E draft methodology was approved
in 2018. The ENTSO-E CBA guidelines (CBA 2.0) set out ENTSO-E criteria for the
assessment of the costs and benefits indicators of transmission projects, inter alia. 86 In
accordance with the development of the TYNDP scenarios, which present the potential
future evolution of the energy sector, an insight in the future benefits of transmission
projects is provided; on the other hand, costs mainly consist of factors such as routeing,
technology, material, which do not correlate with any scenario assumptions.87
Using a combined cost-benefit and multi-criteria approach, the overall assessment of costs
and benefits is carried out.88 The ultimate goal of this assessment is to estimate the impact
of additional transmission infrastructure, “in terms of added value for society (increase of
83
Regulation 347/ 2013 on guidelines for trans-European energy infrastructure, Art. 11
84
Regulation 2018/1999 on the Governance of the Energy Union and Climate Action, Recital 38
85
Regulation 347/ 2013 on guidelines for trans-European energy infrastructure, Annex V para. 6
86
ENTSO-E, 2nd ENTSO-E Guideline for Cost Benefit Analysis of Grid Development Projects, pg. 1
87
Ibid, pg. 11
88
Ibid, pg. 18. For a detailed description of the CBA procedure, please refer to Chapter 3 of the specific
document and Figure 8 in this thesis’ Appendix.
16
capacity for trading of energy and balancing services between bidding areas, RES
integration, increased security of supply), as well as in terms of costs”.89
2.1.3 Accelerated permit granting procedure
The TEN-E Regulation establishes that PCIs can benefit, inter alia, from accelerated
permitting and improved regulatory conditions. To fortify an efficient administrative
processing, improved regulatory treatment is given to projects having acquired the PCI
status.90 Specifically, the allocation of a high significance and priority to PCIs, within the
respective national network development plans, ensures accelerated permit granting
processes, including the processes related to environmental assessments.91 In an effort to
simplify and accelerate the permitting process, Article 8 of the TEN-E Regulation obliges
Member States to designate a single Competent Authority (CA) responsible for promoting
and coordinating the permit granting process for PCIs.92 For Germany, this authority is the
Federal Network Agency (BNetzA).
Article 8 (3) introduces the following three schemes, according to which the CA can
organize their permit granting process: “i) Integrated scheme –The CA issues the
comprehensive decision (which is the sole legally binding decision), taking into account
opinions from other relevant authorities. ii) Coordinated scheme –The comprehensive
decision comprises multiple individual legally binding decisions issued by several
authorities, coordinated by the CA. iii) Collaborative scheme –The comprehensive
decision is coordinated and monitored by the CA which, in consultation with other
authorities, establishes on a case-by-case basis a reasonable time limit within which the
individual decisions shall be issued.” 93 The collaborative scheme is also the scheme
Germany opted for. Nevertheless, the integrated scheme applies in practice, as the
comprehensive decision issued by the BNetzA is the only legally binding decision
resulting from the statutory permit granting procedure, making Germany an exceptional
case.
Moreover, Article 10 establishes two separate procedures with regards to the permit
granting process: a pre-application procedure and a statutory permit granting procedure.
89
Ibid
90
91
92
93
17
The pre-application procedure covers the period from the start of the permit granting
process until the acceptance of the application file by the competent authority -including
the preparation of any environmental reports by the project promoters- and it is advised
that it is carried out within two years.94
The CA shall then, following the provisions of Article 10(4)(b), draw up a detailed
schedule for the permit granting process. According to Annex VI. 2 of the TEN-E
Regulation, this schedule shall provide information on the following: “(a) the decisions
and opinions to be obtained; (b) the authorities, stakeholders, and the public likely to be
concerned; (c) the individual stages of the procedure and their duration; (d) major
milestones to be accomplished and their deadlines in view of the comprehensive decision
to be taken; (e) the resources planned by the authorities and possible additional resource
needs.”
In order to determine the start of the permit granting process, the project promoters need
to notify the project to the respective CA in written form. The date of signature of the
acknowledgement of the notification by the CA serves as the start of the permit granting
process.95 In the case of an interconnector, where two or more Member States are involved,
“the date of the acceptance of the last notification by the competent authority concerned
shall serve as the date of the start of the permit granting process”.96
Before submission of the notification, at least one public consultation by the project
promoters or the competent authority needs to take place, informing all relevant
stakeholders. 97 Adequate information on the project should be provided, including an
overview of benefits and cross-border impacts, the estimated timeline, the national network
development plans, potential alternative routes under consideration and a possible
mitigation plan; this information must be provided prior to the beginning of the
94
Ibid, Art. 10 para. 1 (a)
95
Ibid
96
Ibid
97
Ibid, Art. 9 para. 4. As per Annex VI.3(a), the stakeholders affected by a project of common interest,
which include “relevant national, regional and local authorities, landowners and citizens living in the vicinity
of the project, the general public and their associations, organisations or groups, shall be extensively
informed and consulted at an early stage, when potential concerns by the public can still be taken into
account and in an open and transparent manner.”
18
consultation. 98 All affected stakeholders must remain regularly updated by a website,
linked to the Commission website, with relevant information on the PCI.99
For interconnectors, the public consultations in each country concerned, need to take place
at the very most two months from the date on which the initial public consultation
started. 100 Ultimately, a report summarizing the results of these consultations, must be
submitted by the project promoters -alongside the application file- to the CA; these results
have to be take into account in the comprehensive decision. 101
The procedure described above essentially serves the purpose of engaging the public in a
transparent manner and subsequently reducing any public opposition, which might occur
later in the permitting process. It is key to foster a better understanding of projects and to
receive political support on all levels. Gaining public acceptance and adapting projects to
satisfy all concerned stakeholders may also lead to costly project changes, and in this case
a flexible regulatory approach in covering those additional costs is deemed necessary, in
order to realize the energy transition goals.
The statutory permit granting procedure covers the period from the acceptance of the
application file until the comprehensive decision is taken and it should not exceed the time
limit of one year and six months. 102 However, according to Art. 10 para. 2, the CAs “may
decide, before their expiry and on a case by case basis, to extend one or both of those time
limits by a maximum of nine months for both procedures combined”. A related point to
consider is that these time limits do not apply if they affect obligations arising from
international and Union law (i.e. specific environmental procedures, such as EIAs). 103 To
summarize, the permit granting for an interconnector PCI, such as NordLink, commences
on the date of signature of the acknowledgement of the notification by the CA and ends on
the date of the acceptance of the last notification by the respective CA.
Every year after a project is included in the Union List, by 31st of March, the project
promoters are required to submit an annual report, elaborating on the progress achieved in
the permit granting and consultation procedures, the reasons for any delays and ways to
98
Ibid, Annex VI.5
99
100
101
102
Ibid, Art. 10 para. 1 (b)
103
19
104
mitigate any occurring delays or difficulties. ACER is designated to monitor the
progress achieved in implementing electricity PCIs yearly and to present a consolidated
report to the Regional Groups by 30 June, three months after receiving the annual
reports.105
The latest published report revolves around 2018 activities and is based on the annual
progress reports submitted by the project promoters; the progress of works and activities,
which took place between 1 February 2018 and 31 January 2019, were submitted by the
responsible PCI promoters. 106 A vast majority of project promoters reported to have
focused on activities related to permitting, such as preparation of permitting files (55%),
negotiations with landowners and land acquisitions (44%), activities related to
environmental studies (37%) and technical feasibilities studies (37%).107
In each annual report, promoters indicate the progress of their projects, i.e. whether their
project is still within the frame set by the commissioning date in the previous year; hence,
projects may be qualified as “ahead of schedule”, “on time” or “behind schedule”.108 A
project can be behind schedule due to either “delays” or “rescheduling”. According to
ACER’s analysis, 67 PCIs are on time or even ahead of schedule, 26 PCIs are delayed –
with the average delays decreasing from 22 to 17 months- and 12 PCIs are rescheduled,
pointing at the ever increasing share of projects on time or ahead of schedule. 109 This
progress could maybe hint at improved permitting conditions for electricity PCIs and a
progressively better implementation of the TEN-E provisions overtime.
2.1.3 Delays and rescheduling: underlying reasons
In its 2019 Consolidated Report on the Progress of Electricity and Gas PCIs, ACER
touches upon the main reasons behind rescheduling and delays in the projects’
implementation. Regarding rescheduling, the most frequently cited reason was than in the
initial stages of the project the implementation plan was only preparatory; after the projects
104
105
106
ACER, Consolidated Report on the Progress of Electricity and Gas Projects of Common Interest - 2019,
pg.13
107
Ibid, pg. 13. For the extended list of activities reported and the respective share of PCIs please refer to
Figure 4 in the Appendix.
108
Ibid, pg. 15
109
Ibid, pg. 15
20
gained some maturity, a more accurate commissioning date was set.110 The prioritisation
of investments on other transmission projects was the second most important reason -
leading to a rescheduling of the investment in this instance - followed by reasons such as
changes on the generation side, or due to the consultation process, as analyzed above.111
Considering all the aspects which are involved in the permit granting procedure, it is
reasonable to expect that most delays occur during this phase of the project. Some critical
delay factors, such as environmental problems, public opposition, rules and regulation
changes affecting permitting and delays in obtaining permits after the public authorities’
requirements for further studies and more complex permit granting procedure than
normally, were identified.112
On the other hand, various other reasons, not related to permitting, caused those delays: “i)
delays in construction work, ii) delays due to lawsuit and court proceeding, iii) delays due
to risks related to the national regulatory framework or uncertainty of regulatory
opposition, iv) delays related to other infrastructure, v) complex negotiations due to
specific design, vi) financing problems, vii) lack of agreement between the involved
countries.” 113 For example NordLink, which is currently under construction and is
expected to be commissioned by 2020, reported delays in construction works. 114
Examining those delays and difficulties faced during project implementation, gives an
insightful look into the processes involved when planning a project. It is evident that
permitting plays a vital role in project planning and a lot of factors of inconsistent nature
have to be dealt with, making this process all the more complex and time-inefficient.
2.6 Duration of permitting and implementation
The Agency estimates that the average duration of permitting is approximately 4 years.
While the expected duration of permit granting for about 60% of the projects is less than
the average, the Agency also notes that 20% of the projects expect that the permit granting
process will take more than 5 years, including 2 PCIs, for which the duration of the permit
granting is expected to last more than 10 years. It should be mentioned that the provisions
110
Ibid, pg. 17
111
Ibid
112
Ibid
113
Ibid, pg. 17-18
114
Ibid, pg. 56
21
analyzed in chapters 2.1.1 and 2.1.2 apply to PCIs in the permit granting process for which
a project promoter has submitted an application file after 16 November 2013.115
ACER found that those PCIs which applied for a permit granting after 16 November 2013
are more confident with regards to the expected duration of the permit granting process
(average duration of 3 years) than those PCIs which applied before that date (average
duration of 6 years).116 However, the Agency also underlines that from the 57 PCIs which
submitted an application for permit granting after 16 November 2013, about 40% expect
the permit granting procedure to last longer than the 3.5 years period set by the pre-
application procedure and the statutory permit granting procedure. 117
Taking those timeframes from the permit granting procedure into consideration, the overall
duration -also considering the time period between the date of request for the planning
approval until the commissioning date- of the implementation of an electricity PCI is
estimated to cover 9.9 years.118 Some last key facts are provided in this detailed report by
ACER: while 1/3 of the PCIs are expected to be implemented within 7 years, for more than
1/3 of them the total implementation duration is expected to be 11 years or more. These
numbers provide a first indication of the timelines to be dealt with in the permitting and
general implementation progress of a PCI; country specific information will be provided
in the following subsection covering the permitting and planning procedure in Germany.
The importance of improving permit granting processes for the construction of new urgent
transmission infrastructure is pressing. Establishing clear time limits for the respective
authorities, regarding the permitting and construction phases of a project, contributes to
the overall simplification and efficiency of the permit granting procedure.
Notwithstanding, in case of any unprecedented changes or delays, a certain level of
flexibility should be maintained, to ultimately ensure the successful implementation of the
project.
115
Regulation 347/2013 on guidelines for trans-European energy infrastructure, Art. 19
116
ACER, Consolidated Report on the Progress of Electricity and Gas Projects of Common Interest – 2019,
pg. 19
117
Ibid, pg. 19
118
Ibid, pg. 18
22
2.5 Planning and permit granting procedure in Germany
Three legal bodies form the basis for a coordinated grid expansion in Germany:
i. the Federal Requirement Plan Act (BBPIG) entails the main instrument for the
expansion of the grid, the Federal Requirements Plan, which identifies the
necessary projects that need to be built to bring about the energy transition;
ii. the Network Expansion Acceleration Act (NABEG), which facilitates the planning
and permitting processes for cross border projects as well as projects, which cross
two Länder (German federated states) and
iii. the Energy Industry Act (ENWG), which lays the foundations for the planning of
the grid expansion for the German high voltage grid. 119
The relevant provisions applying to interconnectors will be examined. As already analyzed

in the grid expansion chapter of this thesis, the Network Development Plan, which is
approved by the BNetzA, alongside the environmental report -where BNetzA documents
any potential environmental harms- form the Federal Requirements Plan. This contains a
list of all the necessary projects for the grid expansion (NordLink is listed as project 33 in
the Plan) and creates the basis for specific permit granting procedures. 120
The steps referring to the permit granting procedure, are defined in the Grid Expansion
Acceleration Act (NABEG) and the EnWG. Projects falling under NABEG, acquire the
status of the highest national significance possible; hence the necessity and the priority of
these projects are recognized, leading to an accelerated permitting procedure.121 This law
has shifted the responsibility for approval of cross-border power lines to the BnetzA and
has introduced fixed timelines for the permit-granting procedure and established rules for
an increased transparency and enhanced public participation.122 However, in the case of
NordLink the plan approval is carried out according to EnWG by the federal state planning
authorities; this can be explained by the technical design of the power line. The sections of
the line which are covered by the German authorities are in total 208 km long:
119
BMWi, Rahmenbedingungen für den Netzausbau, referring to all three points
120
Bundesbedarfsplangesetz – BBPlG, pg. 5
121
European Commission, Analysis of the manuals of procedures for the permit granting process
applicable to projects of common interest prepared under Art.9 Regulation No 347/2013, pg. 28
122
23
i. the first onshore section covers the distance from the converter station in Wilster
to Büsum, areas belonging to the federal state of Schleswig-Holstein, and is 54 km
long. A land cable (Erdkabel) covers this distance and at the converter station, the
electricity is converted from direct (DC) to alternating current (AC) and fed into
the German transmission grid;123
ii. the second offshore section, also belonging to Schleswig Holstein, stretches from
Büsum to the borders of the coastal waters and is 64 km long and
iii. the third offshore section from the borders of the coastal waters up to the borders
of the Exclusive Economic Zone (EEA) is 90 km long. A 154 km long subsea cable
is built in the last two sections.124125
It therefore becomes evident, that NordLink does not technically cross any borders
between German federal states; thus, the plan approval is carried out by the Planning
approval Office for Energy of Schleswig-Holstein for the first two sections (which belong
to the state’s jurisdiction), whereas for the third section, which is part of the EEA, the
Federal Maritime and Hydrographic Agency (BSH), is responsible for the
authorization.126
With regards to spatial planning, the TSO prepares an application for a specific corridor
(500- 1000m wide), in which alternative courses of the line in question and the
127
environmental effects in the following plan approval procedure are assessed.
Nevertheless, the spatial planning assessment is not always a necessary step, as was the
case with NordLink. 128 In case a project crosses the national borders, the BNetzA is
responsible for deciding on the corridors proposed by the TSOs. It specifically examines
the route of the corridor in what is known as Federal Sectoral Planning, which includes a
Strategic EIA.129
123
According to the TenneT website, “NordLink is being implemented as a high voltage direct current
(HVDC) transmission between Germany and Norway with a [total] route length of 623 km. Due to its
length, direct current will be used to transmit the electricity through both cables (positive and negative
poles), which are connected to converter stations at each end. Direct current is especially advisable over
long distances and for large-scale transmissions of power”. TenneT, Technical design of the first HVDC link
between Germany and Norway
124
Ibid
125
BNetzA, BBPlG, Vorhaben 33: Schleswig-Holstein – Südnorwegen (NordLink) - Status
126
Windkraft Journal, 1.400 MW- Gleichstrom-Seekabel: BSH genehmigt NordLink-Kabel nach Norwegen
127
NABEG, para. 6
128
BNetzA, BBPlG, Vorhaben 33:Schleswig-Holstein – Südnorwegen (NordLink) - Status
129
BNetzA, Grid expansion in five steps
24
As a following step, once the application has been received by the BNetzA, a public
consultation conference takes place, in order to discuss questions. A public consultation is
organized involving representatives of public interests (cities, municipalities, competent
authorities, environmental associations, etc.) as well as the general public, and the plans
are announced.130 Public participation concerning the development of the electricity grid
in Germany is encouraged by the “Dialogue of Citizens on the Electricity Grid”
(Bürgerdialog Stromnetz), an initiative of the four TSOs.131
The last step consists of the plan approval procedure (Planfeststellungsverfahren). The
permitting procedure commences after the project promoter prepares and hands in a
proposal for the exact route of the project and makes an official application to the
competent planning authority.132 The competent planning authority carries out a last set of
consultations linked to an environmental impact assessment, where issues which might
have not been dealt with in the previous EIA are assessed now.
Any objections which may arise by environmental associations, for example, with regards
to an environmental field of activity affected by the proposed plan, are expressed in these
consultations and should be taken into account by the competent authority when adopting
the plan. The event should be announced in the Internet as well as in public newspapers.
Based on the results of the public consultation, BNetzA specifies which additional
documentation is needed by TSOs before the application can be considered final. 133
Some exemplary permits which had to be included in the application documents for
NordLink, in order to check the project’s compliance with the relevant legal provisions
regulating its potential impact on protected natural resources, are the following:
i) preservation of the countryside landscape,

ii) compatibility of the project with the Natura 2000 protection area,
iii) approval of the intervention in nature and landscape (for example,
compensations for the intervention in the landscape by the planned converter
station in the amount of 251.110,00 Euro had to paid by the project promoter),
130
NABEG, para. 7
131
Bürgerdialog-Stromnetz, Wer wir sind
132
EnWG, para. 43 section 2
133
EnWG, para. 43 (a)
25
iv) exemption from the relevant prohibitions found in the Federal Nature
134
Conservation Act on the protection of species.
During the planning and development of HVDC lines, a TSO’s activities can have an
impact on land owned by third-parties (if for example lines pass over a property). To permit
the use of their land, the property owners must confer their rights on the respective TSO;
in exchange for restricting the property owners from making full use of their land, a
compensation is paid to them.135
According to TransnetBW -one of the four German TSOs- when planning new lines, their
adherence with the following criteria has to be ensured: “compliance with threshold values,
legal requirements and technical regulations/ as far away as possible from residential
areas / bundling with existing line infrastructure, e.g. rail power line routes/ avoidance
and minimisation of environmental impacts/ space utilisation reduced to a minimum/
transmission line routes designed to be as straight as possible with minimum changes of
direction/ routes kept as short as possible/ technical feasibility/ cost-effectiveness”. 136
Once the finalized application documents have been handed in by the TSO and any
additional documentation added, a public consultation of public authorities, associations
and the citizens which may be affected by the project is carried out by the BNetzA on the
application file (written consultation and hearing).137 The responsible authority must issue
a final decision on the application within a 6-month period.138 The relevant documents,
including any obtained permits, are then published on the Internet as well as at the main
office of the BNetzA and after the plan has been approved, the TSO may start building the
new interconnector project.
To sum up, the plan approval procedure commences with the submission of the planning
documents by the TSO to the responsible plan approval authority and ends with the plan
approval decisions. An essential part of the entire process is the participation of citizens,
through the public announcement of the plans, as well as the EIA.
134
Ministerium für Energiewende, Landwirtschaft, Umwelt und ländliche Räume des Landes Schleswig-
Holstein, Planfeststellungsänderungsbeschluss für den Neubau eines NordLink + 500-kV-HGÜ
Interkonnektor, pg. 13-14, referring to all four points.
135
Transnet BW, Approval procedures
136
Ibid
137
138
EnWG, para. 4 (1)
26
3. Financing and cost sharing mechanisms
3.1 Financing needs to be addressed
In order to assist the Member States in their efforts to contribute to the Union target of a
minimum 32% share of RE in their final energy consumption139, establishing a legal and
financial framework, which paves the way for investments in RE projects, is considered
an essential prerequisite.
In its Communication "Energy infrastructure priorities for 2020 and beyond –A blueprint
for an integrated European energy network", the EC identified investment needs of
approximately EUR 200 billion for electricity and gas transmission projects of common
interest (EUR 140 billion in electricity and at least EUR 70 billion in gas) in order to meet
EU's 2020 targets. 140 Acer estimates in its Progress Monitoring Report the investment
costs for electricity transmission PCIs to reach €49.3 billion.141 Due to these significant
investment volumes, new approaches regarding the regulation and financing of cross-
142
border energy infrastructures in particular are required. Given the remarkable
investment volumes involved, the question of whether suitable and adequate financing is
available for TSOs inevitably arises.
In line with the third Internal Energy Market Legislation, most European TSOs have been
unbundled or partially privatized. While the European Commission is striving to promote
an interconnected energy infrastructure within the MS, an equivalent promotion of
increased investment for building this infrastructure should also take place.
Τhis chapter aims to ultimately answer two key questions:
1. What is the structure of energy transmission infrastructure investments in terms of

financing structures and financing sources?
2. What measures and instruments are implemented by the EU and/or the MS to

overcome challenges such as financing gaps?
139
European Commission, 2030 climate & energy framework
140
Regulation 347/2013 on guidelines for trans-European energy infrastructure, Recital 15
141
ACER, Consolidated report on the progress of electricity and gas Projects of Common Interest, pg. 49
142
Op. cit., Regulation 347/2013 on guidelines for trans-European energy infrastructure
27
An overview of the financing of energy transmission infrastructure projects in Europe, a
description of the typical financing structures of energy infrastructure investment projects
as well an analysis of the sources of financing will be presented in detail. The relevant
European and German legislation overlooking those processes will also be introduced.
3.2 Financing sources
Understanding how TSOs typically perform their financing operations, is a key factor
when analyzing the financing sources of energy infrastructure investments. In general, the
following key sources of financing for energy infrastructure investments have been
identified:
i. Debt, as in corporate bonds, commercial bank loans, loans from international

financing institutions.
ii. Equity.
iii. Grants, from the European Union, such as the European Structural Funds 2014-
2020 as well as public funding. 143
In this chapter, the focus will be shifted on the capital structure of one of the two TSOs
promoting the NordLink interconnector project: TenneT. When approaching the financing
sources of interconnector projects, two main sources of funding should be distinguished:
corporate finance and institutional funding. In Tennet’s Integrated Annual Report for
2018, the company’s capital structure regarding investments on 11 projects in the green
financing portfolio is presented in detail.
To summarize, the total spent by Tennet for 2018 on these 11 projects was equal to
approximately EUR 8.9 billion, 1.1 billion of which was subject to third party financing
(debt and equity). 144 For instance, on 13 August 2018, the European Investment Bank
(EIB) signed a €100 million financing agreement with TenneT, a transaction backed by
the European Fund for Strategic Investments (EFSI), thus reaffirming its support for the
143
Op. cit., Roland Berger, pg. 38-41
144
TenneT Holding B.V., Green Finance Report 2018, pg. 10
28
NordLink interconnector, following the previous loans to TenneT and Statnett in 2017.145
146
The remaining net funding requirement was around EUR 7.8 billion, of which
approximately EUR 6.4 billion were financed through the green financing program, which
consisted of the issuing of green bonds in the years from 2015 to 2018.147 Additionally, a
EUR 500 million Green United States Private Placement (USPP) transaction was signed
on December 2018. 148 It therefore becomes apparent that all green bonds which were
issued, have mainly been used to finance and invest in these 11 projects. Looking into the
future, TenneT “expect to meet their financial obligations for 2019 with (i) cash and cash
equivalents, (ii) funds from operations (iii) unused credit facilities, (iv) capital contribution
from the Dutch State and (v) capital market transactions”. 149
3.3 Enabling investments with cross-border cost allocation

3.3.1 European Rules
In an increasingly integrated IEM, clear and transparent rules for cross-border cost
allocation are viewed as necessary in order to mitigate investment in cross- border
infrastructure. Developing essential transmission infrastructure, such as cross-border
electricity cables, plays a vital role in decarbonising EU’s energy supply, since those lines
allow energy to be transmitted from a region where it is most economically produced to
regions where it mostly needed. 150 Investments in major new infrastructure should be
strongly encouraged, in order to promote the positive effects interconnectors can have on
competition and security of supply.
Firstly, the relevant provisions of Regulation 347/2013 will be examined, that lay down
the rules for the development of trans-European energy networks and which apply to the
so-called PCIs.151 According to Art. 12 of Regulation 347/2013 – which also applies to the
145
European Commission, Juncker Plan supports Nordlink interconnector with €100 million EIB
investment
146
According to the report conducted by Ronald Berger “The European Investment Bank (EIB) is a key
financing partner providing debt capital and its conditions are geared towards the need of the industry
(e.g. long maturities and preferable conditions).” Op.cit., Ronald Berger, pg. 7
147
Op.cit., TenneT Holding B.V., pg. 10
148
TenneT Holding B.V., Integrated Annual Report 2018, pg. 45
149
Ibid, pg. 132
150
Haverbeke et al., We need to talk about interconnectors
151
Regulation 347/2013 on guidelines for trans-European energy infrastructure, Recital 17
29
Northern Seas offshore grid, where NordLink is a part of - “the efficiently incurred
investment costs, which excludes maintenance costs, related to a project of common
interest […] shall be borne by the relevant TSO or the project promoters of the
transmission infrastructure of the Member States to which the project provides a net
positive impact, and, to the extent not covered by congestion rents or other charges, be
paid for by network users through tariffs for network access in that or those Member
States.152
As a general rule, the costs for the development, construction and operation of those
projects are ultimately borne by the users of an interconnector.153 In any case, PCIs should
be eligible for cross-border cost allocation when the hosting countries are not able/willing
to recover the full investment cost by the tariffs paid by the infrastructure users.154 For that
purpose, a cost-benefit analysis is deemed necessary; Article 11 of the Regulation,
introduces the necessary procedure for a CBA, which should also be included in the
TYNDP.155 These CBAs subsequently provide the basis for a CBCA and the selection of
PCIs eligible for EU funding.
In accordance with Art. 12 (3), once a project has reached sufficient maturity156, the project
promoters submit an investment request - which also includes a request for a CBCA- to
all concerned NRAs (i.e. the NRAs of the Member States hosting the project as well as the
NRAs of other MS, which might have a net positive impact based on the project-specific
CBA 157 ). 158 In the case of an interconnector, where there are usually several project
promoters, the investment request is submitted jointly.159 Moreover, it is required that the
investment request is accompanied by a CBA, which is in accordance with the
methodology laid out in Article 11. 160
152
Regulation 347/2013 on guidelines for trans-European energy infrastructure, Article 12 para. 1
153
Op.cit., Recital 35
154
Ibid
155
For further reference as to the guiding principles the methodology for a CBA of PCIs in electricity
should satisfy, see ANNEX V para. 1 (a) of Regulation 347/2013.
156
In ACER’s Recommendation No. 5/2015, the Agency’s criteria for determining when a project has
reached the aforementioned “sufficient maturity” are explained in detail (see pages 3-4).
157
Recommendation No.5/2015 of the Agency of 18 December 2015, pg. 5
158
159
ibid
160
Further information which should be submitted with the investment request can be found in
Recommendation No. 5/2015, pg. 5-7
30
It is worth mentioning that even though the project-specific CBA which has to accompany
an investment request considers the project’s total costs, when deciding for a cross-border
cost allocation only the “efficiently incurred investment costs” need to be taken into
consideration as a basis for the allocation, i.e. only investment costs related to the project
subjected to the investment request and which are considered in the Regulatory Asset
Base.161
For cross-border electricity projects, ACER recommends that the NRA of the MS in which
the longest part of the interconnector is situated, should be appointed as “a coordinating
NRA”, in order to ensure a timely and efficient treatment of an investment request. 162 In
the end, the NRAs may decide to allocate part of the costs, or to allocate costs among
several PCIs, always reflecting on the economic, social and environmental costs and
benefits of the project in all MS affected and the potential need for financial support.163
During the cost allocation, the NRAs shall take into account congestion rents or other
charges as well as revenues resulting from the inter-transmission system operator
compensation mechanism.164
3.3.2 Cost-sharing mechanisms
When allocating costs across borders, ACER recommends that in case at least one MS
could have a net negative impact from hosting the project in question, this impact should
be compensated.165 To sum up: “If the net negative impact is higher than the total amount
of the expected efficient investment costs, the CBCA decisions should compensate the net
negative impact up to the maximum amount of the expect efficient investment costs. When
deciding on CBCA, NRAs should allocate 100% of the expected efficient investment costs
[…] In general, countries to which a project provides a net positive impact should provide
compensation. However, it is possible that not every expected net positive impact for a
country actually justifies that this country provides compensation. […] (A) Compensation
161
Ibid, pg. 10. Examples of what those investment costs may cover can be found in Annex II of the
Regulation: “Development costs (e.g. studies, rights of way, environmental planning) and project
management costs. Material and assembly cost, including installation and commissioning. Other
construction costs, including temporary solutions, waste management and environmental costs.”
162
Ibid, pg. 8
163
164
ibid
165
Recommendation No.5/2015 of the Agency of 18 December 2015, pg. 11
31
Indicator ensures that the required compensation is allocated proportionally between the
countries with significant net positive impacts.”166 167
There are several options of payments for implementation of cost allocation, such as a
lump sum payment after the project has been commissioned but also alternative payment
schedules, which depend on the size of the compensations.168
The inter-TSO compensation mechanism (ITC), firstly established in Art. 13 of Regulation

714/2009, is also found in the recently adopted Regulation 2019/943. Article 49 (1) of the
latter Regulation stipulates that TSOs can receive compensation for any costs arising from
hosting cross-border flows of electricity on their networks, which is to be paid by the TSOs
from whose systems cross-border flows originate and/or end. Further rules and
mechanisms for determining the magnitude of cross-border flows as well as any
compensation, are also present in the Regulation.169
For the year 2015, the total compensation costs provided by the ITC mechanism were
approximately EUR 253 million, of which EUR 153 million were designated for grid losses
and EUR 100 million for the usage of the respective TSO’s infrastructure. 170 In 2015,
Germany received from the ITC mechanism EUR 14,8 million for grid losses and EUR
10,9 million for usage of its infrastructure.171 However, Germany’s net contributions to the
ITC mechanism exceeded the compensations received, leading to a net contribution to the
mechanism amounting to EUR 6,1 million; thus, Germany’s status as a net recipient
switched to that of a net contributor to the ITC mechanism.172
3.3.3 Congestion rents
In cases where MS are unwilling to finance investments that primarily benefit other
countries, a co-financing mechanism at EU level is a possible option. Such a mechanism
can be financed by the revenues from congestion at the borders. Pursuant to Article 16(6)
166
Ibid, pg. 11-13
167
Further information regarding the mechanisms for the adjustment of cost allocation, can be found in
pg. 13 of Recommendation no. 05/2015
168
Op.cit., pg. 14
169
REGULATION 2019/943 on the internal market for electricity, Art. 49 paras 5, 6
170
BMWi, Ziele, Anreize und Hemmnisse für den grenzüberschreitenden Ausbau der Stromnetze, pg. 63
171
Ibid
172
Ibid
32
of Regulation 714/2009, congestion revenues shall be used to maintain or increase
interconnection capacity via network investments, especially in new interconnectors.173
According to Duthaler and Finger, the term congestion rent or congestion revenue is
defined “as the price difference times the flow over a network constraint”.174 Congestion
rent is subsequently collected by those who transfer the energy over this constraint; thus,
interconnectors derive their revenues from congestion rents.175 It is important to mention
that congestion revenues are dependent on the price differences observed between the
markets which are located at each of the two ends of the interconnector.176
In the most recent Regulation 2019/943, some changes are introduced regarding the use of
congestion income. According to Article 19, “congestion-management procedures
associated with a pre-specified timeframe may generate revenue only in the event of
congestion which arises for that timeframe”.177. Furthermore, in para. 2 it is stipulated that
when allocating the revenues resulting from congestion rents, the following objectives
should be prioritized:
i. guaranteeing the actual availability of the allocated capacity including firmness

compensation; or
ii. maintaining or increasing cross-zonal capacities through optimization of the usage
of existing interconnectors by means of coordinated remedial actions, where
applicable, or covering costs resulting from network investments that are relevant
to reduce interconnector congestion.”178
It becomes apparent that these provisions, reinforce the ones which first appeared in
Regulation 714/2009. Lastly, in case these objectives are fulfilled, the revenues can be
used as an income source, the NRAs could take into account when calculating network
tariffs or fixing network tariffs; the remaining revenues are to be placed on a separate
173
Art. 16 para. 6
174
Dunthaler C., Finger M., Evolution of Transmission Rights in the European Electricity Market, pg. 1
175
According ENTSO-E data, the total amount of TSO revenues from congestion management on interconnections in
the period 2011-2015 was approximately EUR 2 billion/ year. The income levels per MS and the ways these revenues
were spent, are presented in figures 1 and 2 in the Appendix. European Commission, Evaluation of the TEN-E
Regulation and Assessing the Impacts of Alternative Policy Scenarios, pg. 136
176
OFGEM, Electricity Interconnectors
177
Regulation 2019/943 on the internal market for electricity, Art. 19 para. 1
178
33
internal account line until they can be spent for the processes mentioned in paragraph 2 of
the Regulation.179
As mentioned above, congestion rents can be used to address issues such as avoiding or
reducing congestion (e.g. redispatch), investing in network reinforcements, upgrading
existing interconnections or investing in new interconnection. 180 Therefore, another
recommended way to fund interconnector investments are through the use of congestion
rents.
3.3.4 EU funding mechanisms/EU financial assistance
Another important source of co-funding are grants from the EU. Since PCIs with positive
externalities can also benefit from EU grants, some interconnectors which have acquired
the PCI status, are eligible for Union financial assistance in the form of grants for studies
and other financial instruments. 181 EU grants are essentially direct financial contributions,
which are issued from specific programs. Articles 14 and 15 of the TEN-E Regulation
specify which projects are eligible for Union financial assistance, and contain guidance for
the award criteria for such assistance (those criteria may be found in Regulation 1316/2013
establishing the CEF).182
Connecting Europe Facility (CEF) is a funding mechanism aiming to facilitate EU’s

support to the development of cross-border infrastructure as well as to attract private sector
financing by reducing the uncertainties connected to certain infrastructure projects and the
financial markets.183 A total budget of EUR 5.35 billion is available from this program for
energy projects for the 2014-2020 period.184
Regarding energy infrastructure projects, EU co-financing of projects is also provided by

the European Regional Development Fund (ERDF) and the European Fund for Strategic
investments (EFSI).185 Ultimately, the effectiveness of these instruments can be enhanced
179
180
Op.cit., European Commission, pg. 136
181
182
Ibid., Art. 14, 15
183
COM (2011) 676: A growth package for integrated European infrastructures, pg. 6
184
European Commission, Innovation and Networks Executive Agency, CEF-Energy
185
European Commission, Transport and energy Networks
34
by avoiding overlaps between EU funding programs and facilitating the access of new
entrants to the aforementioned funding instruments.186
3.4 Incentives
Article 13 of Regulation 347/2013 states that if “a project promoter incurs higher risks for
the development, construction, operation or maintenance of a PCI […] compared to the
risks normally incurred by a comparable infrastructure project […] and if and the
project’s net positive impact is confirmed by a cost-benefit analysis (CBA), […] Member
States and national regulatory authorities shall ensure that appropriate incentives are
granted to that project (by the NRA)”.187 These incentives are also aimed at “regulated”
electricity PCIs and the NRAs are free to decide on the combination of regulatory
measures.188 The incentives may cover, inter alia:
▪ “the rules for anticipatory investment; or

▪ the rules for recognition of efficiently incurred costs before commissioning of the
project;
▪ the rules for providing additional return on the capital invested for the project; or
▪ any other measure deemed necessary and appropriate” 189
Even though many national regulators take these incentives for cross-border projects into
account, not all additional costs -e.g. R&D costs for developing alternative technical
solutions or alternative routes layout- are always considered. 190 The ENTSO-E addresses
these issues in the following recommendation:
“In addition to MS applying appropriate incentives to cover the additional costs incurred
by cross border projects compared to comparable national projects risk of cross border
projects, additional research and development costs for developing alternative technical
solutions or additional routes layout should be considered in the project costs.”191
186
Directorate General for Internal Policies, European Energy Industry Investments, pg. 63
187
Regulation 347/2013 on guidelines for trans-European energy infrastructure, Art. 13
188
189
190
ENTSO-E, A push for Projects of Common Interest
191
Ibid
35
According to Article 13(6) of the TEN-E Regulation, each NRA must publish its
methodology and the criteria used to evaluate investments in electricity infrastructure
projects and the higher risks, which are incurred by them.192 In general, the regulatory
authorities shall ensure that TSOs are granted appropriate incentives, over both the short
and long term, to cover any activities contributing to the goals of security of supply and
market integration.193
National support schemes should be carefully designed and coordinated at regional or EU

level and focus on technologies that can make a significant contribution to reaching the
energy and climate goals and targets, which may not yet be competitive but have a
sufficient potential for cost reduction.194 Ultimately, when applying the internal energy
market regulations, NRAs should establish a regulatory framework with appropriate
incentives for PCIs, in particular transmission projects facilitating a large scale deployment
of energy derived from RES and offering additional flexibility and security to the market
at the same time.
3.5 Incentive regulation: Germany
At national level, Germany has implemented a fully regulated regime for electricity
networks, which consists of cost or incentive-based models. The costs for the development
and maintenance of an electricity transmission system – which can essentially be
characterized as a regulated monopoly- are usually recovered by users through system
charges, which are calculated based on an “allowed revenue” mechanism. Since
investments in electricity infrastructure are a regulated activity which needs to raise a lot
of capital in order to materialize, the remuneration as well as financeability of this capital,
have to be assessed by each country’s regulatory regime.195 Taking into account the capital
intensive nature of interconnectors, the remuneration of capital associated with the
required investments, usually accounts for a significant share of the allowed revenue.196
In case the obligations of a TSO involve investments in network expansion or restructuring,

the option to have the revenue cap adjusted (even if the planned investment costs exceed
192
Ibid., Art. 13 para. 6
193
Directive 2009/72/EC concerning common rules for the internal market in electricity, Art. 37 para. 8
194
Directorate General for Internal Policies, European Energy Industry Investments, pg. 105
195
Glachant J. et al., Incentives for investments: Comparing EU electricity TSO regulatory regimes, pg. 20
196
Ibid
36
the approved revenue cap) must be available to the operator. 197 The German Incentive
Regulation Ordinance (ARegV) enables the four TSOs to include the costs stemming from
investments in expansion and restructuring, in the network tariffs, hence getting an
adjusted revenue cap.198
Since it was first introduced in 2007, the incentive regulation scheme is applied to regulate
German electricity and gas network operators. 199 A brief overview of the incentive
regulation mechanism is described below:
▪ The incentive regulation takes place in regulatory periods which usually last five
years.200 The revenue cap and consequently the network charges are set for each
TSO in the first regulatory period in accordance with the TSO’s base level costs
(distinguished in permanently non-controllable costs and generally controllable
costs) and its efficiency level.201
▪ When setting the revenue cap – which depicts the allowed amount the grid operator
may allocate to its customers in the form of network charges- the TSO is subject to
a cost examination, where the base year is the review basis.202 What is referred to
as a “base year”, is the business year taking place three years before the start of the
respective regulatory period.203
▪ Each year of the regulatory period a network operator's costs may appear to be
higher or lower than the revenue cap.204 If the costs are higher, this results in a loss
and the revenue cap increases accordingly; on the other hand, if costs are lower
than the set revenue cap, this results in a profit and the revenue cap decreases in the
following regulatory period.205 206
▪ The overarching aim is to keep the overall costs of the TSO as low as possible.
However, this aim is achievable when the network operators’ responsibilities
197
BNetzA, The main tools of incentive regulation in Germany
198
Ibid
199
BNetzA, The introduction of incentive regulation
200
BNetzA, Incentive regulation: the mechanism
201
BNetzA, The main tools of incentive regulation in Germany
202
Ibid
203
Matschoss P. et al, The German incentive regulation and its practical impact on the grid
integration of renewable energy systems, pg. 730
204
BNetzA, Incentive regulation: the mechanism
205
ibid
206
For a graph depiction of this mechanism see Figure 1 in Appendix.
37
remain stable; if there is a need to invest in additional infrastructure, as mentioned
above, the regulatory regime also allows for the revenue cap to rise over time.207
It becomes evident that for permanently non-influenceable costs -i.e. the costs recognized
under approved investment measures for the construction of additional transmission lines,
such as interconnectors, among other assets-208 the operator should have the option of an
adjustable revenue cap during the course of the regulatory period. 209 That is where
ARegV steps in, providing the investment measure for gas and electricity TSOs, an
instrument enabling network operators to acquire an adjusted revenue cap in order to cover
any costs arising from expansion investments – which are not included in the TSO’s regular
operations - within the regulatory period.210
4. Project example: NordLink
4.1 Benefits of connecting the Nordic system to the Continental System
In an effort to answer the question of whether interconnectors make economic sense or not,
an analysis of their potential benefits, also in the long-term will be provided. As mentioned
in the grid connection chapter, NordLink belongs to the NSOG region, connecting the
Nordic system (Norway) to the Continental system (Germany). Interconnecting the hydro-
based Nordic system with the, inter alia, wind-based Continental system is definitely
contributing to the integration of RES generation and security of supply both in Norway
in dry years as well Germany in periods of a negative power balance – i.e. balancing low
211
wind with a high demand. A particular characteristic of variable generation
technologies, such as wind, is the inability to dispatch energy on demand, which is a result
of the dependence on changing weather conditions.
This variability and the subsequent uncertainty inevitably lead to a need for enhanced
flexibility, in order to balance demand and generation across the grid; this is where
207
Op.cit, Incentive regulation: the mechanism
208
TenneT Holding B.V., EMTN Base Prospectus 2018, pg. 12
209
If the new infrastructure is assessed in the next cost assessment, the TSO will have to finance the
capital costs occurring from these expansion investments in the following regulatory period and the
returns from the revenue cap might not be suffice to cover those investments. BnetzA, The main tools of
incentive regulation in Germany
210
Op.cit, The main tools of incentive regulation in Germany
211
ENTSO-E, TYNDP 2016-Executive Report, Section 1.12.3
38
hydropower steps in to address these challenges occurring from variable generation. In
general, hydropower facilities can provide a significant amount of flexibility to the
electricity grid, because of the possibilities provided by the pumped hydro storage
technology, which is essentially a kind of large-scale energy storage.212
Norway acting as a kind of “battery” for balancing Germany’s power system, which is
increasingly relying on variable RE generation, and provide a possible solution to the
problem of electricity storage is a view shared by many; however, hydropower facilities
still remain subject to a number of environmental, operational, and regulatory constraints,
which need to be highlighted when analysing the capabilities of these facilities in
enhancing the integration of RE, which is intermittent by nature.213
These primary aspects are the main drivers for investments in interconnectors in this
region, which in turn aid to the decarbonisation of generation production. Hence, benefits
are primarily derived by integrating renewable generation and utilising the flexible Nordic
hydropower (with its associated seasonal dispatch pattern) in the Continental system.
Additional interconnection capacity across the region is also important for European
market integration, facilitating the interconnection targets set by the EU for 2030. Taking
into consideration social welfare gains and infrastructure investment costs arising from
new interconnection projects, the optimal level of interconnection lays within the range of
4,5 GW to 7 GW.214 ENTSO-E mentions that present and planned investments between
the Continental and the Nordic system -alongside NordLink, the Hansa PowerBridge
interconnector should also be mentioned- show that the necessary target capacity will
indeed be reached by 2030.215
Furthermore, the results presented in the 2018 version of the TYNDP show that under the
Sustainable Transition and Distributed Generation visions of the 2018 TYNDP, projects
212
Williams R., Pumped Hydropower-The Green Battery. A brief overview of the pumped storage
mechanism is also provided in the article: “Two reservoirs at different altitudes are required and when the
water is released from the upper reservoir to the lower reservoir, energy is created by the downflow,
which is directed through a turbine and generator to create electricity. The water is then pumped back to
the upper reservoir during periods of low demand.”
213
Stoll B. et al., Hydropower Modeling Challenges
214
Ibid
215
Ibid
39
between the Nordics and the Continental system have a considerable socio-economic
cost/benefit ratio and can lead to decreased CO2-emmissions.216
4.2 Benefits from the TSOs’ perspective
NordLink, a 1400 MW interconnection, is the first direct power link between the German
and Norwegian electricity markets. With a route length of 623 km, of which 516 km are a
subsea cable, this HVDC line enables the exchange of 1,400 megawatts of renewable
energy - specifically wind power from Germany and hydropower from Norway.217 After
completion of the necessary permitting procedures the project, which is still under
construction, is to be commissioned in 2020. 218 In specific, energy exchange will
commence in December 2020 and the trial operation is expected to be completed by March
2021.219
The incorporation of the project in Germany’s Federal Requirements Plan Act dictated the
necessity and urgent need for the implementation of the project; in a similar manner, the
PCI status was conferred to the project by the European Union, a status that underlines the
high importance regarding socio-economic and energy market aspects of the project at
European level.220
From the project promoter’s point of view, which are the TSOs TenneT and Statnett, the
potential benefits of the project can be summarized as follows:
▪ Increased security of supply, since either country can import and export electricity
in cases of a surplus of wind energy and cases of high demand but low generation.
▪ Integration of RES in both countries’ generation mix. Connecting the RES
capacities of both countries, creates significant momentum in the realisation of
their energy transitions.
▪ Contribution to future climate-friendly energy and reduction of carbon emissions,
though increased production and consumption of RE in Norway and Germany,
216
ENTSO-E, TYNDP 2018 Regional Insight Report-Northern Seas Offshore Grid (NSOG), pg. 26
217
TenneT TSO GmbH, About NordLink
218
ACER, Consolidated Report on the Progress of Electricity and Gas Projects of Common Interest - 2019,
pg. 56
219
Statnett, NordLink-About the project
220
TenneT TSO GmbH, NordLink-Benefits of the NordLink interconnector, pg. 1
40
something that inevitably paves the way for the reduction of fossil fuel power
generation.
▪ European market integration.
▪ “Storage” of variable wind energy. In case of a surplus of wind produced energy in
Germany, this can be transmitted via NordLink to Norway; thus, the water is
retained in Norway’s reservoirs acting as natural storage for wind energy. Vice
versa, Germany can import hydropower from Norway in times of high demand, but
low production of wind energy.
▪ Predictability of energy supply and subsequently more stable electricity prices.
221 222
It becomes apparent that this interconnector makes the most use of RES production on both
sides. In optimal weather conditions, the surplus of RE in Germany, leads to lower
electricity prices than in Norway, which can then import this power and conserve the water
in the hydropower reservoirs.223 Conversely, when RE production is limited in Germany
but power consumption is increases, prices are likely to become higher than in Norway.
Norway can produce hydropower in such a situation and export it to Germany.224 This
system not only creates grid stability and security but also contributes to market balance
and stabilises power prices overtime.
4.3 Benefits of NordLink in the context of TYNDP 2018
The particular details of the project as well as its potential socio-economic benefits, are
explicitly presented in the ENTSO-E’s website. First and foremost, the most relevant needs
and problems of the European electricity system followed by the ways in which the project
helps to address and solve them are presented:
▪ High price differentials. The project enables the reduction of high price
differentials by increasing the interconnectivity between the Norwegian and
German bidding zone. Increased market exchanges between the bidding zones lead
221
Ibid, pg. 1-2 (referring to all six points)
222
Statnett, NordLink-About the project (referring to all six points)
223
Ibid
224
Ibid
41
to a higher price convergence in more hours of the year and thus reduce any price
differentials.
▪ RES curtailment and accommodation of flows. The project mitigates RES
curtailment and subsequently hints at higher flows within the shared AC-grid.
NordLink connects the Nordic and Continental markets and RES (wind and solar
power from Germany and hydropower from Norway) at both sides of the cable are
effectively utilized.
▪ System adequacy deficiencies caused by changes in generation mix (decreasing
numbers of conventional power facilities and nuclear phase-out in Germany). This
project has an important contribution in system adequacy, since it enables the
integration of other electricity generation sources in a generation mix altered by the
ongoing energy transition.
▪ Decreasing system stability and flexibility. This HVDC-link enables the balancing
of power in the Norwegian and German grid respectively.
225
All these factors combined make the case for public and private investment in the
NordLink interconnector. It is evident that the proposed ways in which NordLink addresses
those issues are complementary to the benefits presented by the TSOs. The results of the
CBA -as analyzed in the Authorization and Planning procedure chapter of this thesis- of
the projects also provide an insightful look in the overall benefits of NordLink.
4.4 NordLink benefits as listed in the NEP
A list of reasons justifying the construction of the planned interconnector between

Germany and Norway is presented in the Network Development Plan (NEP), drafted by
the four German TSOs. It is stated that while there were indirect links between Germany
and Norway (through Denmark, the Netherlands and Sweden), no direct links existed
between the two countries prior to this project.226 Even though the generation mixes of the
two countries are differing, it remains a fact that the production of energy must be
corresponding to the demand at all times.
225
ENTSO-E, Project 37 - Norway - Germany, NordLink (referring to all four points)
226
Anhang zum NEP 2030 (2019), Zweiter Entwurf, pg. 338
42
The need to offset Germany’s increasing feed-in of energy derived from RES is more
pressing than ever; further developing interconnection infrastructure to countries with
large scale pump storage hydropower, such as Austria, Switzerland and Norway, seems as
a possible solution to this issue. 227 Building cross-border infrastructure connecting
Germany and Norway also contributes to ensure the latter’s energy security of supply,
especially in longer dry seasons.
Taking into account all the potential benefits of this project as analysed above, it can be
concluded that NordLink is rightfully considered a necessary project addressing many grid
and power supply issues. Its most important contribution might probably be in the issues
of price stability and electricity storage. At this initial point of market integration between
the Nordic and Continental countries, it remains to be seen if and for how long Norway
can indeed serve as Germany’s “green battery”. For the time being it provides a politically
acceptable way of decarbonizing the energy generation in both countries, therefore
offsetting any environmental impacts caused by building this project or any pumped
storage facilities.
The overall costs for the NordLink construction are estimated at approximately Euro 1.85
billion 228 . For such a high investment it only makes sense to examine whether the
infrastructure in question enables the overtime reduction of price differentials -by adding
capacity- between the two electricity markets concerned. The case for further
interconnection projects between European neighbouring countries, will need to be
assessed on a case-by-case basis; in light of this assessment the proposed CBA
methodologies should be properly applied before building additional interconnectors and
a regular assessment of the performance of the interconnector after it has been built should
take place.
Conclusions
The emerging public awareness of the international community on climate change issues,
particularly the reduction of CO2 and GHG emissions, forces power production to become
more sustainable; hence, European electricity markets are currently undergoing a transition
227
Ibid
228
ENTSO-E, Project 37 - Norway - Germany, NordLink
43
towards a system based on low carbon generation. European interconnectors, which are
among the selected PCI projects, make the integration of renewable energy and its
transmission over long distances a reality.
The overarching aim of the European and German legislation, i.e. to facilitate the
development of trans-European energy infrastructure, will remain relevant for the
electricity market in the upcoming years, since the need to accommodate higher RES
penetration is only expected to increase. Further reinforcement and extension of the
interconnected transmission grid is necessary, to enable deeper system and market
integration as well as security of supply.
Nonetheless, it is of vital importance to concentrate rather on the optimization than the

extension of the grid, since the transmission system, particularly in the case of Germany,
is congested. Building a wide network of new additional lines, could lead to public
opposition to the projects, raising the question of whether these new power lines or relevant
or even necessary. However, acceptance problems have often been mitigated with
alternative cable solutions buried underground or in the sea – NordLink implemented those
alternatives to its technical design.229
PCIs can benefit from accelerated planning and permit granting, and generally improved
regulatory conditions, due to the allocation of a priority status of the highest national
significance possible, within the framework of the national network development plans
and the TYNDP. This is an important step towards streamlining a more time efficient legal
treatment of interconnectors, removing many administrative and financial barriers. While
ACER’s annual report highlighted the fact that there is still room for improvement for the
permitting procedures, the European as well as regulatory framework in place provides
adequate support to those projects.
Even though there is a strong public demand, especially in Germany, for adhering to the
goals set in international climate conventions or in national politics – by even increasing
the target setting- it still remains difficult to realize these ambitious goals. The steps leading
up to the final construction and commissioning of a project, have definitely been
optimized, but are still very long processes and may require further improvement, to
become more time-efficient.
229
BMWi, Ziele, Anreize und Hemmnisse für den grenzüberschreitenden Ausbau der Stromnetze, pg. 16
44
The legal requirements on transparency and increased public participation via
consultations, present in both the German and European rules, make sure all the actors
concerned are consulted, leading to all-encompassing EIAs and an enhanced public
acceptance of the project. Nevertheless, it is evident that the public consultations involved
in every step of the planning process are time-consuming; but since they are necessary to
improve the quality, transparency of public engagement and possibly reduce public
opposition to the project, new mechanisms of conducting them in a more time-efficient
manner should be devised.
When approaching the ways an interconnector project such as NordLink is financed,

several aspects and legal regimes are taken into consideration. As presented in the
financing chapter, the rules governing areas such CBCA decisions, cost sharing
mechanisms, congestion rents and incentives are mainly European, and are subsequently
implemented by the MS. Non-discriminatory charges for network use including the
interconnectors in the transmission system, are a prerequisite for fostering healthy
competition in the IEM.230
It is generally accepted that opening support schemes to cross-border participation can aid
MS in their efforts to achieve the Union interconnection binding target more cost- and
time-efficiently. Encouraging MS to support projects located in other MS and define
constructive ways in which the interconnection may be implemented - ensuring at the same
time compliance with the TFEU, particularly Articles 30, 34 and 110- is deemed necessary
by the European institutions.231
Another important element contributing to the realization of cross-border electricity

transmission projects are the several European funding mechanisms, which were presented
in Section 3. With regards to congestion rents, the revenues resulting from those should
preferably be used to increase or maintain interconnection capacity and to mitigate
congestion risks. Further amended rules on the usage of congestion rents can also be found
in the recent “Clean Energy for all Europeans Package”.
Shifting the view to Germany, the expansion of the electricity grid needed for the
"Energiewende" will require extensive investments from the network operators. BNetzA
230
Regulation 2019/ 942 on the internal market for electricity, recital 26
231
45
is tasked with calculating fair network tariffs and providing a reliable economic framework
for those large-scale investments, by implementing a specific regulatory approach known
as the "incentive regulation".232
To tackle the issue of security of supply, connecting Germany’s and Norway’s relative
power grids via NordLink, a direct current connection, appears to provide an important
contribution to both countries’ economies and energy markets. Apart from stabilizing the
electricity prices, the security of the transmission system, through the indirect storage of
electricity from RES, is also greatly enhanced. Given that electricity from RES cannot
always be consumed immediately, unlocking the flexible storage capacity available in
Norway (i.e. hydro-electric power stations, which also produce CO2-free power) is key to
the successful realization of the energy transition.
To sum up, some recommended actions for promoting the expansion of cross-border
electricity grids, can be summarized in the following points: i) harmonization of national
planning steps and processes, ii) regular monitoring of a project’s progress by European
instruments, such as ACER, even after its commissioning, iii) ensuring the project’s
widespread acceptance, through compliance with the applicable legal provisions on the
protection of natural resources, iv) provision of guidance to applicants throughout their
administrative permit application and granting processes through an administrative contact
point, in order to reduce complex and lengthy procedures.233
Ultimately, any financial or regulatory support provided to interconnector projects,

whether on EU or MS level, is detrimental in achieving the transition from a carbon
intensive generation towards increased shares of renewable energy. Developing adequate
transmission infrastructure -enabling the cross-border exchange of electricity between
neighbouring MS- facilitates the integration of RE. At the same time, due to these enhanced
exchanges of electricity, the system’s security is not as comprised as expected. It remains
to be seen how the interconnection process, which has gained significant momentum in the
last years, will be implemented, and whether the expected contributions of this process in
Europe’s energy transition will be fulfilled.
232
BNetzA, Incentive regulation of gas and electricity network operators
233
46
APPENDIX
Figure 1: Income levels derived from congestion rents, per MS
Source: Trinomics, ECN, DCision!, Study supporting the Impact Assessment concerning
Transmission Tarrifs and Congestion Icome Policies, pg. 88. Retrieved from http://trinomics.eu/wp-
content/uploads/2017/07/final_report_clean_version_may_3_2017.pdf
Figure 2: Spending of congestion rents
a
Source: Trinomics, ECN, DCision!, Study supporting the Impact Assessment concerning
Transmission Tarrifs and Congestion Income Policies, pg. 91. Retrieved from
http://trinomics.eu/wp-content/uploads/2017/07/final_report_clean_version_may_3_2017.pdf
Figure 3: Incentive Regulation Mechanism
Source: BNetzA, Incentive regulation mechanism, Retrieved from https://www.bundesnetz

agentur.de/SharedDocs/Bilder/EN/BNetzA/Areas/Energy/IncentiveReg_Stairs.jpg?__blob=post
er&v=1
Figure 4: List of reported activities and share of PCIs
Reported activities SHARE AND NUMBER OF PROJECTS

reporting this activity
Preparation of permitting files, contracts and 55% (58)
other documents
Negotiations with landowners and land 44% (46)
acquisition
Environmental study 37% (39)
Technical feasibility study 37% (39)

Tendering 36% (38)
16% (17)
Detailed technical design 34% (36)

Public consultation 32% (34)
Identification of alternative solutions / site 31% (33)
identification
b
Spatial planning study 27% (29)
Socio-economic feasibility study 25% (26)
Construction 21% (22)

Other work or activity (please specify) 16% (17)
Preparatory works for construction (e.g. land 13% (14)
preparation)
Source: ACER, Consolidated Report on the Progress of Electricity and Gas Projects of Common
Interest - 2019, pg.13-14, Retrieved from https://www.acer.europa.eu/Official
_documents/Acts_of_the_Agency/Publication/CONSOLIDATED%20REPORT%20ON%20TH
Figure 5: TYNDP development process
Source: ENTSO-E, TYNDP 2018 Executive Report Connecting Europe: Electricity 2025 -
2030 – 2040, pg. 7, Retrieved from
https://tyndp.entsoe.eu/Documents/TYNDP%20documents/TYNDP2018/consultation/
Main%20Report/TYNDP2018_Executive%20Report.pdf
c
Figure 6: Scenario pathways-TYNDP 2018
Source: ENTSO-E, ENTSO-G, TYNDP 2018 Scenario Report-Main Report, pg. 8. Retrieved
from https://docstore.entsoe.eu/Documents/TYNDP%20documents/TYNDP2018
/Scenario_Report_2018_Final.pdf
Figure 7: NEP process
Source: Grid Development Plan 2030 (2019), second draft, pg. 4. Retrieved from
https://www.netzentwicklungsplan.de/sites/default/files/paragraphs-files/Standard_
presentation_ GDP_2030_V2019_2nd_draft.pdf
d
Figure 8: Categories of project assessment methodology
Source: ENTSO-E, 2nd ENTSO-E Guideline for Cost Benefit Analysis of Grid Development
Projects, pg. 25. Retrieved from https://docstore.entsoe.eu/Documents/
TYNDP%20documents/Cost%20Benefit%20Analysis/2018-10-11-tyndp-cba-20.pdf

Legal Aspects of The Regulation of European Cross-Border Interconnector Projects

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Legal Aspects of The Regulation of European Cross-Border Interconnector Projects

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Technical University of Berlin

Master in European and International Energy Law

Topic: Legal Aspects of the Regulation of European cross-border interconnector projects.

Supervisor: Dr. Jan Peter Sasse

Academic Year: 2018-2019

Name: Aikaterini Simou

Enrollment No: 0403693

ACER Agency for the Cooperation of Energy Regulators

ARegV German Incentive Regulation Ordinance

BBPIG Bundesbedarfsplangesetz (Federal Requirements Plan Act)

BSH Bundesamt für Seeschifffahrt und Hydrographie (Federal Maritime

and Hydrographic Agency)

CBA Cost-benefit analysis

CBCA Cross-Border Cost Allocation

EEA Exclusive Economic Zone

EEG Erneubare Energien Gesetz (Renewable Sources Energy Act)

EIA(s) Environmental Impact Assessment(s)

ENTSO-E European Network of Transmission System Operators for

EnWG Energiewirtschaftsgesetz (Energy Industry Act)

HVDC High-Voltage Direct Current

IEM Internal Energy Market

ITC Inter-TSO Compensation (mechanism)

KraftNAV Kraftwerks-Netzanschlussverordnung (Ordinance on Grid

NABEG Netzausbaubeschleunigungsgesetz (Network Expansion

NEP Netzentwicklungsplan (Network Development Plan)

NRA(s) National Regulatory Authority (/-ies)

PCI(s) Project(s) of Common Interest

R&D Research and Development

RES Renewable Energy Sources

TFEU Treaty on the Functioning of the European Union

TSO(s) Transmission System Operator(s)

TYNDP Ten Year Network Development Plan

[9] European Commission, n.d. Connecting Europe Facility. Retrieved from

EU and German legislation

▪ At least 40% cuts in greenhouse gas emissions (from 1990 levels)

▪ At least 32% share for renewable energy

Building or upgrading existing interconnectors to neighbouring countries plays a key role

Moreover, the potential benefits of an interconnector project, namely NordLink, will be

1. Grid expansion and grid connection rules

1.1 Establishing ENTSO-E and Ten-Year Network Development Plans

ENTSO-E was established according to Regulation 714/2009. 13 Key objectives of the

1.2 Network codes on grid connection of HVDC systems

Alongside developing a Community-wide TYNDP, the ENTSO-E is required to elaborate

1.3 Changes introduced by the Winter Package

Regulation 2019/943 also underlines the importance of ensuring non-discriminatory access

1.4 German rules

1.4.1 Grid expansion

It starts with an annual draft of a Scenario Framework -describing the possible

▪ Short-term scenario B 2025: Ad-hoc-measures

The “Sustainable Transition” scenario developed in the Community-wide TYNDP, seems

If a need for optimization or extension is determined, the NOVA–principle is applied:

▪ Netzoptimierung/grid optimization (NO): Firstly, ways to optimize the existing

The participation of citizens, industry associations and public authorities in these

1.4.2 Grid connection

The German electricity grid market is subject to a comprehensive regulatory regime

Furthermore, paragraph 17 of the EnWG, obliges TSOs to connect end-customers to their

2. Authorization and planning procedure

2.1.1 Selection Criteria and Implementation

i. have a significant cross-border impact on at least two EU countries, or one MS and

iv. boost competition and subsequently system flexibility on energy markets,

v. enhance security of supply by diversifying sources and

Project promoters submit their project proposals, by providing an additional timetable

2.1.3 Accelerated permit granting procedure