INVESTING IN LONG-TERM EUROPE:

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Percival Gardner
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1 INVESTING IN LONG-TERM EUROPE: RE-LAUNCHING FIXED, NETWORK AND SOCIAL INFRASTRUCTURE Conference Organized In Association With The Italian EU Presidency ROMA, 12 Dicembre 2014

2 Italian Energy Price Evolution since Jan - Nov 2014 SAPEI functionality: 100% Minimum Price (58) Minimum Price (83) Minimum Price (46) Pool Price 59 /MWh 63 Pool Price 87 /MWh 120 Pool Price 51 /MWh 81 Price Zone > Pool Price Price Zone < Pool Price Congestions have been gradually reduced, and price differential among zones has been significantly reduced, thanks to an intensive investment plan put in place by Terna during these years. 2

European Scenario and Terna Interconnections The geographical position makes Italy the

Italy can also rely on a strong electrical frontier with 24 ** interconnections already

France ( 4+2 ) 34,1 /MWh 36,8 /MWh Switzerland (12) Avg Price EPEX 2014*: 32,9 /MWh

Achieve pricing convergence and the integration of markets for the resources

Grid and, progressively, a single EU market); France ( 3 ) Tunisia Existing Under

(2 ) Greece (1+1) Avg Price 2014***: 40 /MWh Avg Price 2014****: 56,7 /MWh Increase the

3 European Scenario and Terna Interconnections The geographical position makes Italy the natural hub in the Mediterranean Sea. Italy can also rely on a strong electrical frontier with 24 ** interconnections already in operation and further 5 under costruction. France ( 4+2 ) 34,1 /MWh 36,8 /MWh Switzerland (12) Avg Price EPEX 2014*: 32,9 /MWh Austria (2+ 1 ) Slovenia (2) 40,3 /MWh Opportunities from interconnection development: Achieve pricing convergence and the integration of markets for the resources optimization (grid integration, coordination among TSOs, creation of a Single European Grid and, progressively, a single EU market); France ( 3 ) Tunisia Existing Under construction Undergoing study 51,4 /MWh Production Cost 2014: 85 /MWh***** Montenegro (2 ) Greece (1+1) Avg Price 2014***: 40 /MWh Avg Price 2014****: 56,7 /MWh Increase the huge potential resources and create synergies and fruitful cooperation with neighboring countries. * Average Price Period Jan - Nov 2014 ** 21 owned by Terna + 3 merchant lines operated (but not owned) by Terna; double circuit transmission lines are accounted twice *** Average Price HUPX - Hungarian Stock Exchange **** Average Price Period Jan Oct 2014 ***** Internal valuation 3

4 Overview Investing In Long-term Europe Europe needs infrastructure investments to ensure security of supply or to support large-scale deployment of energy from renewable sources; The new infrastructures represent a conditio sine qua non for the Single Market implementation; The development of the European energy infrastructure is also urgently required to comply with the European targets of increasing energetic independency; 315 bn foreseen in the Junker s Investment Plan will be a significant driver for EU economic recovery; It s crucial the full commitment of all the interested parties: European Commission, Governments, Regulators, TSOs, IFIs, etc.; 4

5 Market Integration (1/3) The European Electric Energy Union will be realized through «HARDWARE» physical electric connections «SOFTWARE» market integration and agreement among TSO s EUROPEAN POWER MARKETS 5

6 Market Integration (2/3) Hardware The new infrastructures represent a conditio sine qua non for the Single Market implementation, useful to remove barriers to long term investment and to create the optimal framework conditions for investments Performing a critical review of the regulation on Projects of Common Interest in order to guarantee: faster and harmonised permitting procedures financeability assessment of the effectiveness of their implementation eligibility as PCIs also for the projects between EU and non EU countries (ie. Italy-Tunisia) Financial support: by European Commission (i.e. CEF, Junker s Plan, other financial facilities) especially for such project not bankable under pure market conditions Nowadays the procedures set for project funding are very complicated, unstable and uncertain, especially with reference to financial support to works; Regulatory framework: clear, harmonized, stable & predictable PLUS incentive regulation such as the Italian regulation recognized as best practice 6

Market Integration (3/3) Software The European Commission has a stated goal of harmonising the European power markets.

capacities across national borders, the European Target Model for electricity market integration.

central auction office for cross-border transmission capacity allocation for Central Western Europe Regional projects have

7 Market Integration (3/3) Software The European Commission has a stated goal of harmonising the European power markets. The aim is to create a pan- European market with closer connecting of power markets to improve the efficient use of capacities across national borders, the European Target Model for electricity market integration. Examples of a successful experience in Market Integration: Is the largest market for electrical energy in Europe Is the central auction office for cross-border transmission capacity allocation for Central Western Europe Regional projects have been launched with the support of the European Commission and in accordance with ACER's roadmap for the integration of the European internal energy market. 7

Allegato A. Summary WHEREAS... 3 GENERAL PROVISIONS Article 1 Subject matter and scope Article 2 Definitions... 4

Allegato A. Summary WHEREAS... 3 GENERAL PROVISIONS Article 1 Subject matter and scope Article 2 Definitions... 4 Greece-Italy TSOs proposal for methodology for redispatching and countertrading cost-sharing in accordance with Article 74 of the Commission Regulation (EU) 2015/1222 of 24 July 2015 establishing a Guideline