Achieving a single European gas market. Walter Boltz Executive Director E-Control Austria, Vice Chair of ACER s Regulatory Board

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2 Achieving a single European gas market Walter Boltz Executive Director E-Control Austria, Vice Chair of ACER s Regulatory Board

3 Agenda Where we stand Vision for the European Gas Market The new Austrian Gas Market Model 3

4 Gas in context to European energy policies Third Energy Package Roadmap obligations Promotion of Renewable Energy Sources 2014 target for Internal Energy Market Security of Supply Regulation REMIT Energy Infrastructure Package What comes next? What is needed? (Too) much discussions over the last years Need for practical implementation of existing rules , Vienna European Gas Conference 4

5 Where do we stand Implementation of 3rd package Gas Target Model/Market Integration REMIT Energy Infrastructure Package/ Infrastructure Development CMP Framework Guidelines Transformation in national law Transparency TYNDP GRIPS CAM Balancing Interoperability Tariffs Development GTM Development pilot projects Regional market integration Legal Framework Implementation period until fully implementation transitional period , Vienna European Gas Conference 5

6 EC / ACER / ENTSOG 3 year work plan Version of 28 August

7 Internal EU gas market What do we want to achieve? Internal EU gas market How we want to achieve this? 1. We need to enable functioning wholesale markets, where they do not exist yet. 2. We need to connect these markets better to move forward to an integrated market. Basic conditions need to be established in all countries No one size fits all solution possible , Vienna European Gas Conference 7

8 What are the challenges? - 1 High national market concentration Price distortion Inefficient allocation Electricity: CR1 in capacity: France 87%, Spain 36%; retail markets highly concentrated Gas: incumbents dominate import market (some 90%), hub trading (up to 85%) (source: SI 2006), retail markets highly concentrated Electricity: significant share of regulated household prices, potential abuse of market power Gas: significant share of regulated household prices, oil linkage, potential abuse of market power Electricity: inefficient power stations running when more efficient are available Gas: LNG vs Russian pipeline gas used in Europe , Vienna European Gas Conference 8

9 What are the challenges? - 2 EU is highly dependent on gas produced outside of its borders. The obligations lead in many MS to a significant increase in e.g. wind generation and, thus, greater withinday fluctuations in gas demand. The current arrangements for gas trading are on a longterm contractual basis with producers outside of the EU rather than on wholesale gas markets in the EU. Trading at gas markets has made some progress over the last decade, but only in NW Europe. We need more flexibility in the market , Vienna European Gas Conference 9

10 Oil Indexation is a disadvantage for continental European gas traders , Vienna European Gas Conference Source: The Oxford Institute for Energy Studies 10

11 .. and coal puts gas out of the electricity production in Europe The competitiveness of European companies is at stake! , Vienna European Gas Conference 11

12 Prices show that we still don t have a Euopean market Source: DG ENER Quarterly Report on European Gas Markets , Vienna European Gas Conference 12

13 Will there be a Golden Age for Gas in Europe? Keeping in mind prices. From where could growth come? Power generation? Economic upturn? Residential customers? Transport sector? , Vienna European Gas Conference 13

14 Agenda Where we stand Vision for the European Gas Market The new Austrian Gas Market Model 14

15 Vision for the GTM in a nutshell Liquid hubs with sufficient and efficiently used infrastructure. Functioning markets in all of Europe. Ensure that gas flows to Europe. Zones drawn for illustration. Size of zones will depend on CBA , Vienna European Gas Conference Hub 15

16 Pilot Projects all over Europe Early implementation of NC CAM in all 3 Gas Regional Initiatives Joint Capacity Platform Initiative Bundling projects DE/NL,DE/BE, DE/ FR, BE/FR, DE/PL, AT/IT, HU/RO Annual Transmission Capacity Auction at the VIP between PT/ES Possibilities to implement GTM GRI South GRI South-South East , Vienna European Gas Conference 16

17 Possibilites for market integration Significant excess capacities Excess capacities during most of the time Very high capacity utilization between FR/ ES during winter time , Vienna European Gas Conference substantial excess capacities high capacity utilization between AT/IT and DE/PL Physical congestions between AT/DE Source: E-Bridge Consulting,

18 Macroeconomic effects of market integration calculated for CEE Region CZ/SK/AT positive effects to be expected Expected social welfare gain (> 15 Mio.) justifies establishment of an integrated market Capacities seem sufficient to allow for price convergence during most of the time Region could be expanded by Italy after promising experience has been gained , Vienna European Gas Conference 18

19 Case study for Central-East Europe CEE Trading Region (CEETR) pilot project to assess possible implementation steps of the GTM measures CEETR partners: eustream, NET4GAS, CEGH, E-Control consulting supported by Wagner, Elbling & Company , Vienna European Gas Conference 19

20 Basic structure of CEETR 1 CEE Trading Region CEETR Czech Republic Slovak Republic Republic of Austria Trading Region Virtual Trading Point Czech End User Balancing Zone Slovak End User Balancing Zone Austrian End User Balancing Zone Nominated transfer of gas into / out of the trading region (physical mainflow or counterflow transport) Nominated transfer of gas from the balancing system of the trading region to an end user balancing zone Structurally, CEETR is made up of the following components: 1. One Trading Region 2. One Virtual Trading Point 3. Three End User Balancing Zones, one per participating country 20

21 Basic structure of CEETR 2 CEETR includes gas transmission systems of all 3 participating countries. Network access to CEETR is organized as an integrated E/E zone spanning all 3 participating countries. Within CEETR, national borders are irrelevant for shippers (and respective IPs need not be booked by shippers anymore). CEETR is a single, integrated balancing zone. CEETR enables a single wholesale market including three EU member states , Vienna European Gas Conference 21

22 Enabling market integration Basic principles Capacity model: Definition of harmonized types of capacities being used and how the joint capacity model can be derived Tariffs: avoidance of CEETR-induced loss of tariff income for TSOs ensured by ITC mechanism Plus: Avoidance of any losses in tariff income from abolition of current long-term contracts Balancing: distinction between CEETR and End User Balancing Zone CEETR balancing: Allocated as nominated principle Consistency with BAL NC to be assured Market based balancing by procurement of system energy on CEETR VTP gas exchange Balancing in End User Zone according to national rules , Vienna European Gas Conference

23 Requirements for realisation All key stakeholders need to be closely involved in the future development of the CEETR model. Successfully overcoming all legal and financial challenges. Acceptance by market participants. CEETR model and the respective European regulations have to be in line , Vienna European Gas Conference 23

24 Gas Target Model Florence School of Regulation, A vision for the EU Gas Target Model: The MECO-S Model ENERGY/Publications/Working_Papers/2011/ RSCAS_2011_38.rev.pdf Council of European Energy Regulators, Vision for a Gas Target Model: Conclusions Paper EER_PUBLICATIONS/CEER_PAPERS/Gas/Tab/C11- GWG-82-03_GTM%20vision_Final.pdf Design Principles of the CEE Trading Region , Vienna European Gas Conference 24

25 Agenda Where we stand Vision for the European Gas Market The new Austrian Gas Market Model 25

26 The New Gas Market Model Three Market Areas (MA) in Austria - MA East (B, C, LA, UA, S, ST, V) - MA Tirol (distribution system) - MA Vorarlberg (distribution system) Physical connection between MA leads to one integrated MA MA East is one Entry-Exit zone (transmission system) concentration of the trading activites at one virtual trading point (VTP) Several physical trading points + 3 control areas One VTP in the MA East = one Entry-Exit zone NCG VTP MA Vorarlberg MA Tirol 26

27 From P2P to Entry Exit Booking and Virtual Trading Point Entry (Baumgarten etc.) Traders/suppliers/consumers book capacity with relevant TSO Transmission system BUY / SELL Virtual trading point (VTP) Exit (Baumgarten etc.) Traders/suppliers/consumers book capacity with relevant TSO Supply-related exit DAM (AGGM) books capacity Entry from production Booking by producer Exit to storage Booking by SSO Distribution system Consumer rucksack upstream to VTP/entry point System access by consumer Market Area 27

28 Actors in the New Gas Market Model Market Area Manager Gas Connect Austria GmbH Distribution Area Manager Austrian Gas Grid Management AG Operator of the Virtual Trading Point Central European Gas Hub AG Clearing and Settlement Agency for Transactions and Price Formation for Balancing Energy Austrian Gas Clearing and Settlement AG Some new names, but well-known companies , Vienna European Gas Conference 28

29 New regulatory framework entered into force on Documents available under (Deutsch & English) GSNE (E/E Tarife) 29

30 Experiences in the first month of the new era Late registrations with MAM and VTP operator caused busy weeks in December The transition to the new model went smoothly No difficulties occured so far CEGHIX does not show major differences compared to December Hard facts will be available after Clearing in February kwh 400, , , , , , , ,000 Market Area Balance (MAM) : : : : : : : : : : : : : : : : : : : : : : : : : : , Vienna European Gas Conference 30

31 Contact Walter Boltz ' * walter.boltz@e-control.at 31

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