The objective of the Connecting Europe Facility (CEF) is to accelerate investments in Europe’s transport, energy and digital infrastructure networks, so it is a key EU funding instrument for targeted infrastructure investment at European level.
CEF supports the development of high performing, sustainable and efficiently interconnected trans-European networks in the fields of transport, energy and digital services. CEF investments fill the missing links in Europe's energy, transport and digital backbone, and the facility is divided into three distinct instruments. The revised CEF Regulation for the MFF 2021-2027, which underpins this programme, iis expected to enter into force in July 2021.
CEF for Energy (CEF-E) is an envelope of CEF that supports the implementation of the Regulation on Trans-European Networks for Energy (TEN-E), a policy framework focused on linking the energy infrastructure of EU countries. To address the energy infrastructure needs at regional and European level, nine priority corridors and three priority thematic areas have been identified in the TEN-E framework. CEF supports the implementation of Projects of Common Interest (PCIs) in these priority corridors and thematic areas. Under the revised CEF Regulation the programme will also support cross-border projects in the field of renewable energy.
Under the revised CEF Regulation, an action that has received a contribution under CEF may also receive a contribution from any other Union funding programme, provided that the contributions do not cover the same costs.
For instance, CEF can benefit from synergies from the EU’s Innovation Fund. At the moment, only actions of electricity storage (except pumped hydro) and CO2 (Carbon Capture and Storage transportation part) Projects of Common Interest (PCIs) are eligible under both the Innovation Fund (IF) and the CEF. However, new types of project may be added in the revised TEN-E Revision including hydrogen-related projects (see next section for further details).
The general maximum co-funding rate for CEF is 50% of the project capital expenditure (CAPEX).
What type of hydrogen related actions can be funded
The fund is suited to demonstration projects, studies, and co-financing of development of energy infrastructure. Priority is given to projects with the highest value for all of Europe, particularly those which complete missing cross boarder links, remove bottlenecks or deploy EU-wide systems.
CEF-E can finance Projects of Common Interest (PCIs) as identified under the TEN-E Regulation as well as cross-border projects in the field of renewable energy which shall be included in a cooperation agreement between at least two EU countries or arrangement between at least one EU country and a third country or countries as set out in Articles 6, 7, 9 or 11 of Directive 2009/28/EC. The TEN-E Regulation currently in force does not include hydrogen infrastructure, electrolysers, or smart gas grids as eligible projects, however it does include CO2 (Carbon Capture and Storage transportation chunk) pipelines as eligible.
TEN-E revision and hydrogen related projects
In December 2020, the Commission presented a legislative proposal to revise the TEN-E Regulation. The Commission’s proposal envisages to support the roll-out of cross-border hydrogen infrastructure, certain types of electrolysers, and smart gas grids as new PCI categories. Negotiations with the European Parliament and the Council are currently under way, with a political agreement expect by early to mid-2022.
Turning to electrolysers, under the conditions in the Commission’s proposal, only 100 MW electrolysers and above can be eligible, if they have a network related function. Furthermore, hydrogen production must comply with life cycle greenhouse gas emissions savings requirement of 70 % relative to a fossil fuel comparator of 94g CO2e/MJ as set out in Article 25(2) and Annex V of the Renewable Energy Directive. Additionally, any related equipment for electrolyser equipment would fall under this category.
The Commission’s proposal includes cross-border hydrogen infrastructure that match some project archetypes of Transmission & Distribution, notably transmission pipelines for hydrogen, giving access to multiple network users on a transparent and non-discriminatory basis, which mainly contains high-pressure hydrogen pipelines, but excluding pipelines for the local distribution of hydrogen.
The category also includes underground storage facilities connected to the high-pressure hydrogen pipelines. The reception, storage and regasification or decompression facilities for liquefied hydrogen or hydrogen embedded in other chemical substances with the objective of injecting the hydrogen into the grid would also be eligible under the TEN-E revision, as well as any equipment or installation essential for the hydrogen system to operate safely, securely and efficiently or to enable bi-directional capacity, including compressor stations. Importantly, the provision also specifies that any of the above “may be newly constructed assets or assets converted from natural gas dedicated to hydrogen, or a combination of the two.”
When it comes to categories of smart gas grids, the TEN-E revision would support equipment or installation aiming at enabling and facilitating the integration of renewable and low-carbon gases (including biomethane or hydrogen) into the network. These would be digital systems and components integrating ICT, control systems and sensor technologies to enable the interactive and intelligent monitoring, metering, quality control and management of gas production, transmission, distribution and consumption within a gas network. Furthermore, such projects may also include equipment to enable reverse flows from the distribution to the transmission level and related necessary upgrades to the existing network.
CEF shall contribute 60% of its overall financial envelope to climate objectives.
CEF-E has total budget of €5.84 billion, out of which 15%, subject to market uptake, should be allocated to cross-border renewable energy projects (which may be increased to 20% should that threshold be reached).
CEF is implemented through a mix of grants, procurement and financial instruments.
Conditions for application
The specificities of the conditions for application will be defined in specific calls under the upcoming Work Programme. In terms of eligible entities, only legal entities and joint ventures established in EU countries, from third country associated to the Programme shall be eligible. See the Guidelines on the Eligibility of Costs under the Connecting Europe Facility, a guidance document from CEF 2014-2020, illustrating examples of eligible and non-eligible costs.
Importantly, project promoters seeking to benefit from CEF Energy funding for PCIs need to be linked to a Project of Common Interest. The process of applying for inclusion on a PCI list is reported in the next section.
How to apply and when
CINEA, the European Climate, Infrastructure and Environment Executive Agency implements the Connecting Europe Facility. Applicants are invited to apply for financial support for eligible projects following a call for proposals issued by the European Commission after consultation with EU countries. Proposals can apply via the EU Funding and Tenders portal.
For PCIs, the Project of Common Interest (PCI) status is a pre-requisite for any CEF-E funding. The Commission, with the assistance of its implementing executive agency, will carry out the evaluation and selection of submitted proposals for the PCI list. Proposals which meet the eligibility criteria and formal requirements specified for a call are evaluated on the basis of the criteria defined in the relevant Work programme and call texts (see 2019 example). These are primarily linked to maturity, quality, cross-border dimension, positive externalities, the need to overcome financial obstacles, stimulating effect of the CEF financial assistance, priority and urgency, and complementarity with other actions financed by the CEF. A list of proposals recommended for funding is then prepared by Commission. Successful applicants are then invited by the implementing executive agency to prepare and sign individual grant agreements.
The identification and selection of PCIs is carried out by Regional Groups consisting of representatives of competent ministries, national regulatory authorities, individual gas and electricity transmission system operators and other project promoters, the European Network of Transmission System Operators (ENTSO) for electricity and gas, the EU Agency ACER and the Commission. The meetings of the Regional Groups are open to all interested parties.
The project proposals become candidates for the status of Project of Common Interest by submitting their project proposals for electricity, gas, smart grids, oil and CO2 networks to the dedicated Regional Groups for assessment through the responding to a number of Commission public calls. See past examples here and here and here. Regional Groups evaluate the projects against the general and specific criteria as defined in the TEN-E Regulation, focusing especially on the contribution of these projects to market integration, sustainability, security of supply and competition.
Before and during the implementation of PCIs, impact assessments and public consultation processes are organized with a wide range of stakeholders.
For cross-border projects in the field of renewable energy, the status of ss-border projects in the field of renewable energy is a prerequisite for funding for sutdies and works except for pre-feasibility studies.
The position agreed between the EU institutions on the upcoming revised Regulation on CEF sets general elements that need to be taken into account. The specificities of the award criteria shall be defined in the Work Programme for CEF, which is planned to be released in 2021 following the entry into force of the revised Regulation. Likewise, in light of the revision of the TEN-E Regulation and the PCI selection, the award criteria remain unfinalized. However, it must be underlined that obtaining a PCI status does not automatically presuppose a successful funding application for CEF funding.
The grant support is provided in the form of lump-sum payments, in the form of reimbursement of costs actually incurred by the beneficiary. The disbursement of grants are governed by grant agreements and by Title VIII EU Financial Regulation.
Background: Connecting Europe Facility (2014-2020) (European Commission).
Policy background: Trans-European Networks for Energy (European Commission).
CINEA Executive Agency Energy Infrastructure (Connecting Europe Facility) (europa.eu)
Example(s) of supported projects
Not available yet