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EU pledges Eur5.84 billion budget to fund energy projects in 2021-2027

Highlights

New Connecting Europe Facility approved by Council of EU

Follows compromise deal over Projects of Common Interest

First CEF round allocated Eur4.7 billion in 2014-2020

The Council of the EU has adopted the new framework for funding EU energy infrastructure projects, pledging Eur5.48 billion ($6.64 billion) in finance, it said June 14.

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The funds will be made available as part of the second Connecting Europe Facility (CEF) scheme to so-called Projects of Common Interest (PCI) in the period 2021-2027.

EU energy ministers on June 11 agreed a compromise deal on PCI project eligibility, ending support for new fossil gas and oil projects, but allowing a transitional period to the end of 2029 for funding of gas projects that would be fully converted to hydrogen.

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

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

'Further integration'

The Council said June 14 the new CEF aimed to contribute to "further integration of the European energy market."

It said it hoped the program would achieve this by "improving the interoperability of energy networks across borders and sectors, facilitating decarbonization, and ensuring security of supply."

Funding will also be available for cross-border projects in the field of renewable energy generation, it said.

"Consistency with EU and national energy and climate plans, including the principle of 'energy efficiency first', will be taken into account when defining award criteria," it said.

Pedro Nuno Santos, Portuguese Minister for Infrastructure and Housing, said: "CEF has made a great contribution to European integration, in particular by facilitating cross-border connections, promoting cohesion and sustainability, and strengthening competitiveness through targeted infrastructure investment."

"This second CEF is even stronger and will play a significant role in the post-COVID recovery and in building a climate-neutral EU," he said.

The Council said the program aimed to mainstream climate action, taking into account the EU's long-term decarbonization commitments such as the Paris Agreement.

The Council adopted its position at first reading and the legal act now needs to be adopted by the European Parliament at a second reading before being published in the EU Official Journal.

The regulation will enter into force the day after its publication and will apply retroactively from Jan. 1, 2021.

PCI list eligibility

There had been calls for all fossil gas projects to be excluded from eligibility for funding under the TEN-E process, which defines the projects to be allowed to be subsidized under the PCI scheme.

However, ministers agreed a compromise text, stating that: "During a transitional period until Dec. 31, 2029, dedicated hydrogen assets converted from natural gas can be used to transport or store a pre-defined blend of hydrogen with natural gas or biomethane."

Four member states -- Germany, Austria, Spain, and Luxembourg -- objected to the agreement on the blending issue. The four countries were among 11 that had called for an outright ban on fossil gas from the TEN-E process.

The transitional period was included in the compromise deal after the European Commission had proposed funding could be made available for infrastructure projects for the supply and trade of hydrogen, which would also include assets converted from gas.

Environmentalist groups slammed the compromise agreement. "EU energy ministers decided to keep subsidizing climate chaos with more needless gas infrastructure and to subsidize gas pipelines that mix in small amounts of hydrogen," Friends of the Earth Europe said.

"We call on the European Parliament now to take a firm stand on TEN-E for a 100% renewable future," it said.

The agreement on the revision of the TEN-E regulation will go to the European Parliament for negotiations on the text.