walter boltz, chairman ergeg gas working group 19th madrid forum 21 march 2011 monitoring report...

Walter Boltz, Chairman ERGEG Gas Working Group19th Madrid Forum21 March 2011

Monitoring Report Capacity Allocation and Congestion Management

219th Madrid Forum, 21-22 March 2011

Starting point

• DG Competition’s energy sector inquiry report sets out some of the problems in accessing gas transmission capacity• It highlights contractual congestion and presents evidence of this occurring

on a number of key pipelines;

• Access to capacity is key to the development of a competitive

European gas market and facilitation of cross-border gas trade;

• Mechanisms applied today have not been successful in facilitating a

functioning capacity market;

• Two antitrust-settlements by DG Competition against incumbents show

that long-term capacity booking which prevents access of competitors to

infrastructure needed to supply gas to customers can be considered as

abuse of a dominant market position.


Experiences with existing measures Art. 5 and 8 Regulation (EC) 1775/2005

• 3 Surveys • NRAs 2008;• NRAs 2009;• TSOs and NRAs 2010 – 21 selected IPs representing a broad majority of EU

capacities.

• Crossing borders is often difficult for shippers• Capacity fully booked in the long-term mostly by incumbents;• Different legal frameworks appear to be an obstacle;• Lack of cooperation between TSOs in capacity calculation.

• Inconsistencies hamper TPA • Different allocation mechanisms: FCFS, pro-rata, auctions; • Short term capacity products exist in most (western) countries;• Different designs for interruptible capacity;• Different nomination procedures;• Implementation of congestion management procedures insufficient.


Physical congestion

Source: ERGEG 2010 monitoring


Contractual congestion



FCFS predominately used



Applied CMPs



Harmonisation of procedures is limited



CMP – Problem identification

• All capacity is booked long-term at most IPs but often not fully used;

• Currently, in many countries there are no mechanisms to bring unused capacity back to the market;

• Market participants ask for firm capacity;• The more shippers book the existing capacity the more

severe the impact of contractual congestion will be;• Secondary markets do not work properly.

Capacity should link markets and not result in a barrier to market integration


Macro Economic Effects of CMP Bunde / Bocholtz

Maximum aggregate technical capacity between market areas GTS (The Netherlands) and NCG-H (Germany) is higher than actual flows for most days of the years (contractual congestions)

Implementation of ERGEG principles (option 2) will increase gross social welfare by more than 10 Mio EUR p. a. while additional investments to increase physical capacities seem to have minor impact (< 2 Mio. EUR gross benefit p. a.)

Prices between markets will converge on more than 340 days p. a.

Additional capacity in million kWh p.d.Additional capacity in million kWh p.d.

Pric

e di

ffere

nce

D

A

in €

/MW

hP

rice

diffe

renc

e D

A

in

€/M

Wh Maximum price differenceMaximum price difference

Maximum price differenceMaximum price difference

average price differenceaverage price difference

0

100

200

300

400

500

-150 -100 -50 0 50 100 150

Wel

fare

gai

n i

n T

EU

R p

.d.

Additional gas flows in GWh / d to Germanyto Germanyto The Netherlandsto The Netherlands

Source: E-Bridge

-4

-3

-2

-1

0

1

2

3

4

5

6

1 21 41 61 81 101

days p. a.

Pri

ce d

iffe

ren

ce [

EU

R /

MW

h]:

E

EX

- T

TF

remaining price difference

initial price difference

Remaining price difference after elimination of contractual congestions (option 2)Remaining price difference after elimination of contractual congestions (option 2)

Higher day ahead price in The NetherlandsHigher day ahead price in The Netherlands


Conclusions

• Applied CMPs differ widely throughout Europe• Physical compared to contractual congestion seems to be a

smaller problem;• For ~ 50% of the surveyed IPs the EASEE-gas CBPs for nomination

procedures are not used;• Maximisation of available capacities is done via investment by about

2/3 of the TSOs• Measures which increase the efficient use of existing capacity

are only applied by a minor number of TSOs; • Little information is available on how the reservation for short term

capacity products is achieved.

Harmonised CMPs are essential for well functioning gas markets.


Recommendations

• A wider use of long-term UIOLI procedures appears as a reasonable possibility to reduce the problems linked to congestion for users;

• Further possibilities include the surrender of booked capacity and making available more firm day-ahead capacity;

• Harmonisation at both sides of IPs would decrease shipper’s transaction costs• Only for less than 1/4 of the selected IPs this could be affirmed at the

moment;

• There is further need for harmonisation and for common definitions.

Common CMPs should aim at maximising technical and available capacities on a firm basis.


Thank you for your attention!

www.energy-regulators.eu

walter boltz, chairman ergeg gas working group 19th madrid forum 21 march 2011 monitoring report...

Documents

longterm capacity

existing capacity

additional capacity

technical capacity

capacity calculation

unused capacity

contractual congestionsource

market integration