The EU internal energy market

Vittorio MusazziGeneral Manager

6th WFER - Istanbul

Istanbul, May 25th 2015

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European Gas Transmission Network 2014

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Gas and power markets have different characteristics:

• Gas: 90% of gas flows across international borders and connected markets

• Power: mainly national markets with market coupling/price convergence • Transmission costs for gas is far lower than for electricity

Dimensions of EU gas and electricity

Source: TYNDP ENTSO-E/ENTSOG

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Energy covered in the EU:23,1%

Directly employed staff: 49,540

Length of high-pressure pipeline network:

242,000 km

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As laid down mainly in Article 4 of the Regulation 715/2009, the purpose of ENTSOG is that:

• All transmission system operators shall cooperate at Community level through the ENTSO for gas

• in order to promote the completion and functioning of the internal market in natural gas and cross-border trade

• and to ensure the optimal management, coordinated operation and sound technical evolution of the natural gas transmission network.

Role of ENTSOG

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ENTSOG structure

Capacity Balancing Tariffs Investment Interoperability Transparency

Board: President and 12 Members

General Assembly 44 TSOs, 3 Associated Partner and 4 Observers

Regional Co-operation

GeneralManager

SystemDevelopment

Market SystemOperation

Liaison Group

LegalFinancial

Ad hoc DTFSAdministrativeResearch Plan

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ENTSOG activities

• Pan-European Network Codes to cover cross-border/market integration issuesframework Stability

• Pan-European Ten-Year Network Development Plan (‘TYNDP’) • Regular gas supply/demand outlooks on the European market • Develop common operational tools (CNOTs): network security and reliability• Providing information/data (Transparency Platform, maps)

Network Code development: 12 months

Preparatory work Project planning

Prepare launch

document

Interactive draft code

development

Prepare final code

ACER review Comitology

Cooperation amongst Stakeholders, Institutions and TSOs made this possible!

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Market Opening through the implementation of the common rules and transparency and information availability

Internal Energy Market (1)

Rules and tools

TYNDP and Platforms

Network Codes

Implementation Transparency Information

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On the way to EU law Network Code development: 12 months

Preparatory work Project planning

Prepare launch

document

Interactive draft code

developmentConsultation Prepare final

code ACER review Comitology

ENTSOG second NC - published as Regulation (EU) No 312/2014 (26th March 2014)

BAL NC - Network Code on Gas Balancing of Transmission Networks

ACER Reasoned Opinion 26th March 2015: on going discussion ex art. 6(8) Reg. 715/2009.

Gas Committee meetings: Q4 2015 + Q1 2016

TAR NC - Network Code on Harmonised Transmission Tariff Structures for Gas

CAM NC Amendment for Incremental capacity

In line with the invitation from EC ENTSOG drafted the NC amendment and submitted to

ACER. Same timescale as TAR NC for Gas Committee

ENTSOG third NC - published as Regulation (EU) No 703/2015 (30th April 2015)

ENTSOG first NC - published as Regulation (EU) No 984/2013 (14th October 2013)

CAM NC -Network Code on Capacity Allocation Mechanisms in Gas Transmission Systems

INT NC - Network Code on Interoperability and Data Exchange Rules

CMP Guidelines Approved as amendment to the Reg. 715 on August 2012

FrameworkGuidelines

NetworkCode Evaluation Comitology Entry

into force

The objective of the EC is to meet the 2014 target from the EU Council Rules on priority topics are developed by 2014

ProjectPlan

LaunchDoc SJWS Draft

CodeFormal

Consult. RevisionFinalCode

12 months maximum

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Designing the EU Internal Market (3rd Package)

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TSOs‘ Commitment to ENTSOGBrussels based> Small ENTSOG team workingwith extensive inputs from member companies

ENTSOG Members’ commitment> Working Group participants

Stakeholders involvement> Stakeholders Joint Working Session>Up to 100 attendees per meeting

Institutions cooperation> Deep discussion and > High level of cooperation

ENTSOG team

Members’ staff

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ENTSOG working process

… involvement of all market participants is the key of success of the work done!

The real spirit and the results possible in line with the 3rd Energy Package!

ENTSOG

EC

ACER

Member StatesShippers

End users/Connected operators

> Stakeholder consultation is at the heart of the team’s work

> Huge progress made in engaging a range of market participants

> Market participants see ENTSOG as a fair partner

> Stakeholders have responded very positively to our processes and outputs

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Early Implementation of network codes

• Projects in the CAM Roadmap

• Review of national regulatory frameworks

• Issues and challenges being addressed in CAM implementation

Introduction

Projects in the CAM Roadmap

PILOT PROJECTS

• Rapid progress towards early implementation of CAM NC in large number of MSs spanning most EU

regions

• Driven by voluntary initiatives established by TSOs, with support from

NRAs.

France Daily Monthly Quarterly Yearly

Netherlands Daily Monthly Quarterly Yearly

Belgium Daily Monthly Quarterly Yearly

Hungary & Romania Daily Monthly Quarterly Yearly

Italy Daily Monthly Quarterly Yearly Interruptible

capacities

Denmark Daily Monthly Quarterly Yearly

Germany Daily Monthly Quarterly Yearly

Austria Daily Monthly Quarterly Yearly

Portugal Monthly Quarterly Yearly Interruptible

capacities

Poland• TBC

Czech RepublicPilot project via Prisma (Monthly, Daily)Pilot project via GSA

Spain Monthly Quarterly Yearly Interruptible

capacities

UK• TBC

Ireland• TBC

PRISMA

GSA

RBP

Capacity Platforms

SlovakiaPilot project via Prisma (Q2 2015)

Slovenia Daily Monthly Quarterly Yearly

LuxembourgPilot project via Prisma (Q2 2015)

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Transparency Platform:

Legal Obligation1. Transparency guidelines (Reg. (EC) 715/2009, Chapter 3 of Annex 1)

Definition of the technical information necessary for network users to gain

effective access to the system

Definition of all relevant points for transparency requirements

Definition of the information to be published at all relevant points and the time

schedule according to which that information shall be published

2. Congestion Management Procedure

Amendment of Transparency Guidelines by CMP Commission Decision of 24th

august 2012 (2012/490/EU)

TSOs obliged to publish data on a Union-wide central platform, established by

ENTSOG

New data to be published (CMP data)18

Transparency Platform 2.0

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Next step: Implementation of network codes

• Implementation of the network codes

• 01/10/2015 Balancing

• 01/11/2015 CAM

• 01/05/2016 Interoperability

Introduction

Integration and Diversification

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Regulatory framework Stability and vision for investments are needed

Internal Energy Market (2)

Information and visionInvestments

supplies, routesInterconnections

New routes

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Ten Year Network Development Plan2015 2035

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From projects to commissioned infrastructure> 259 projects (South Stream withdrawn)> A bit less projects than previous edition> Construction works are on time but FID are often

delayed

Main barriers to investments> Based on project promoter feedback> Regulatory frameworks are often perceived as focusing

too much on tariff reduction ignoring the economic benefits of well-integrated markets

> Market is not able to provide necessary investment signals due to economic situation, short term orientation given by regulation and lack of visibility on the role of gas in the EU energy mix

Executive Summary - Infrastructures

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Stable demand driven by global context > Gas demand for power generation is the major driver> Use of two demand scenario differentiated by commodity price (gas, coal, CO2),

power generation capacity mix, economic environment...> Scenarios in the upper half of other outloks (IEA 450 and DG ENER trends to 2050

and Eurogas slow progression are lower)> 0.4% increase per annum but situation is heterogenous from one region to the other

Executive Summary - Demand

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Europe needs to enlarge its supply portfolio> In line with current situation of midstreamer having difficulty to manage ToP> Situation will become tighter with the continuous decrease of indigenous production> Under current perspective Russian gas and LNG will be the sources compensating this

decrease with negative consequence on Europe control on import prices> Potential exist to further diversify European supply and limit the import bill

Executive Summary - Supply

Russia

LNG

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Market integration, a constant challenge> Confirmation of results of previous edition> Extension of the time horizon shows how regional issues may impact the whole

Europe without the proper investment decisions

Executive Summary – Assessment - 1

or

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Facing national production decline…

The basic blocks: Supply

… Europe will have to develop new imports and indigenous production

Biomethane

Shale gas

This can materialize through the

implementation of many projects of

different sizes

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High capital intensive infrastructures> Economic lifetime of gas infrastructures is 30 to 55 years > What will be the situation in 2045-2070?

Private investor interest> The bulk of the investment has to continue to come from private investors> This requires the attractiveness of the sector which has to be insured through:

Stable and incentivising regulatory framework recognizing the social benefits of market integration

Visibility on the long term role of gas

Funding from European Institutions> This funding can only represent only few percent of the investment need> But as it is tax payer money, supported projects should be thoroughly selected

Stable Regulatory Framework: Why?

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European Gas Transmission Network 2014

Thank You for Your Attention

ENTSOG -- European Network of Transmission System Operators for GasAvenue de Cortenbergh 100, B-1000 Brussels

EML:WWW: www.entsog.eu

Vittorio MusazziENTSOG General Manager

vittorio.musazzi@entsog.eu