For many projects the regulatory framework is perceived as not being appropriate to ensure the delivery of new infrastructures even when they have been identified as necessary to complete the integration of the European gas market. The following graph shows in more detail the regulatory challenges faced by promoters according to their project submission. The category “Other” covers promoters responses where a specific category of barrier was not provided and the comments did not allow it to be further categorized 1) .
The level of rate of return is perceived as a major obstacle. Setting the level is exclusively subject to the national regulatory regimes but should encourage long-term investments with a reasonable rate of return. If the rate is too low or not sufficiently stable, then in- vestments will be put at risk and consequently the completion of the internal gas market. The setting of the rate should strike the right balance between the benefits of further market integration and the impact on transmission tariffs which represent a moderate share of the wholesale market price of gas. The practice of applying incentives, such as premium rates of return for higher risk projects, has already been adopted by some Member States. As part of the Framework Guidelines and Network Code processes on Capacity Allocation Mechanism and Harmonised Transmission Tariff Structures for
Rate of Return Low price of short term capacity Capacity quotas Lack of proper
transposition of EU regulations Other
Figure 3.3: Overview of Regulatory related project barriers
Gas, NRAs have followed the request of some market players in favouring low priced short term capacity products and quotas. In addition to revenue recovery issues, which such mechanisms could induce, they are inadequate for triggering new in- vestments. In addition, within the development process of the draft Tariff Network Code some network users have claimed the right to cancel all or part of their capacity bookings linked to tariff changes. If such situation would emerge, this will lead to cross-subsi- dies between network users as a result of revenue neutrality for the operators furthermore the value of any long term commitment would be weakened. This would be major risk for investment realization. The TEN-E Regulation was designed to support the delivery of key infrastructure projects necessary to the completion of the Integrated Energy Market. Many network users presume that associated EU financing will reduce their need of financial com- mitment. Such expectation could result in an even lower willingness of the market to commit in new infrastructures. In parallel, the cross-border cost allocation, which was anticipated as new tool to foster investment decision, now appears to many pro- moters as a source of delay and uncertainty. The second selection of PCIs should address some concerns regarding the efficien- cy of the selection process and could also help to identify good practices in terms of permitting and regulatory incentives. Such mechanisms should then be extended to all projects to help the market to deliver the required infrastructure projects. Feedback from some project promoters suggests that the TEN-E Regulation, Gas Target Model discussions and recent emphasis on Security of Supply seem to have shifted the focus away from the full implementation of the Third Energy Package and market-based solution across Europe. As identified by promoters, the resulting lack of implementation in some parts of Europe is an obstacle to new investment deci- sions.