Implementation of the BMWi policy paper 1 from 1 January 2019

Transcription

1 Implementation of the BMWi policy paper 1 from 1 January 2019 Berlin / Ratingen, 30 July 2018 GASPOOL Balancing Services GmbH Anna-Louisa-Karsch-Str. 2 D Berlin NetConnect Germany GmbH & Co. KG Kaiserswerther Str. 115 D Ratingen 1 In this document this refers to the policy paper on key principles for measures to improve natural gas supply security published on 16 December 2015 by the German Federal Ministry for Economic Affairs and Energy (BMWi), in German titled Maßnahmen zur weiteren Steigerung der Erdgasversorgungssicherheit

2 Table of contents I. Background and context... 3 II. Long-Term Options (LTO)... 5 i. Product parameters... 5 ii. Special rules for the tendering of LTOs for the low CV sectors of the market area... 6 iii. Criteria for the use of LTOs as a balancing tool... 7 III. Short-Term Balancing Services (STB)... 8 i. Product parameters... 8 ii. Criteria for the use of STBs as a balancing tool

3 I. Background and context In a policy paper describing key principles for measures to improve natural gas supply security published on 16 December 2015 the German Federal Ministry for Economic Affairs and Energy (BMWi) called on the two German gas market area managers (MAMs), GASPOOL Balancing Services GmbH (GASPOOL) and NetConnect Germany GmbH & Co. KG (NCG), to implement a range of balancing market measures. Specifically, the policy paper identified the following fields of action: 1. Stepping up the volumes contracted through the existing long-term balancing product Long-Term Options (LTO) to better target exceptional local supply constraints; 2. Launch of a new balancing product to realise the demand-side flexibility potential, allowing industrial end users to offer demand response services in the balancing market. Combined tender invitations based on the BMWi policy paper requesting bids for both LTOs as well as for the new Demand-Side Management (DSM) balancing product were first issued for the winter period 2016/2017, with only LTO contracts being awarded in both market areas. The MAMs, the BMWi and the German national regulatory authority Bundesnetzagentur (Federal Network Agency) analysed this first tendering round in a joint evaluation exercise conducted in the spring of 2017 and concluded that the rules governing the DSM balancing product would need to be adjusted. In order to improve the operational requirements for industrial end users to participate in the balancing market and increase their willingness to do so, the overall number of days on which the MAM would have the right to request service delivery during a contract period was to be limited and providers were to be given the option to pool several sources of flexibility. In addition, industrial end users who were able to meet the standardised product requirements were to be given the right to apply a capacity charge in return for their commitment to ensure service availability. In consultation with the BMWi and the Federal Network Agency it was thus decided to merge the LTO and DSM balancing products into a single product. Under the revised LTO balancing product designed on this basis providers may offer balancing services for delivery within a specified balancing zone under which they can supply/receive gas at both nomination and nonnomination points within that balancing zone 2. In order to provide greater flexibility to 2 This does not apply in the case of LTOs for the supply/receipt of low CV gas, under which providers can use neither the cross-border interconnection points on the German-Dutch border nor market area interconnection 3

4 industrial providers, the new LTO product also limits the number of permitted call days available to the MAM during each contract period. The maximum is currently set at 14 gas days per contract month. In addition, the MAMs introduced a new balancing product called Short-Term Balancing Services (STB) on 1 January 2018 in order to be able to access any additional short-term balancing potential not available to them under the standardised products or the LTO product. The STB product is a short-term balancing product that allows providers to offer any short-term demand-side flexibility at industrial sites they would not otherwise be able to offer on a longer-term basis given the standardised product parameters defined for the LTO product (most notably the required 3-hour call lead time to be complied with in the case of a call order). As is generally the case with the LTO balancing product, providers submitting bids for the STB product may also use additional sources of flexibility other than the demand-side flexibility available at industrial sites, e.g. storage connection points or cross-border interconnection points (IPs), to provide the agreed balancing services. They may also pool several sources of flexibility to meet the LTO and STB requirements. As a non-standardised balancing product, balancing services offered via the STB product will rank alongside the LTO balancing product at level four of the pre-defined merit order list (MOL) applied by the MAMs for the purpose of taking balancing actions. Consequently, STB contracts will only be awarded in the event of a locational balancing requirement and/or where the higher MOL ranks are not available or the products offered through the higher MOL ranks cannot be used to provide the required physical response. STB bids can only be submitted in short-term tendering rounds opened by the relevant MAM at short notice. Providers will be notified of such short-term STB tenders by the MAM. The detailed product parameters defining the LTO and STB products and the criteria the MAMs apply in deciding when to use these products are described below. points to provide the agreed balancing services (see II.ii. below). Providers are not permitted to use the crossborder interconnection points on the German-Dutch border under LTO contracts for high CV gas, either. 4

5 II. Long-Term Options (LTO) i. Product parameters Parameter Provider Description Tendering process Lot size Call order quantity Long-Term Options (LTO) for the supply/receipt of gas on a Rest-of-the-Day basis 3 Balancing group managers (in their capacity as prequalified providers of balancing services) Provider promises to ensure its availability to supply gas to and/or receive gas from MAM in specified balancing zones/sectors or network areas (incl. demand response via RLM exit points 4 ) Tender invitations usually published several weeks ahead of contract period May vary, at least 10 MWh/h (greater delivery rates to be offered in increments of 1 MWh/h) Full lot size Point of delivery Balancing services under LTO contracts for low CV gas can only be provided at storage connection points and/or RLM exit points within the agreed balancing zone/sector or network area. Use of the low-cal IPs (cross-border or between the German market areas) is not permitted. Balancing services under LTO contracts for high CV gas can generally be provided at all types of eligible points (crossborder/market area IPs, storage, RLM) within the agreed balancing zone/sector or network area. However, providers must not use the IPs on the German-Dutch border. Pricing Call lead time Capacity charge ( ) for service availability plus commodity charge ( /MWh) for actual supply/receipt of gas in event of call order 3 hours 3 Differing specifications may apply to the Hour product variant of the LTO balancing product as described in the product descriptions published by the MAMs 4 RLM = intraday-metered exit points equipped with a supply meter installation which records hourly consumption 5

6 Delivery period 1 to 24 hours Call days Call priority Limited number of days during contract period, depending on requirements Currently: maximum of 14 gas days per contract month Only if and when bids available through higher MOL ranks have been exhausted or higher MOL ranks are technically unavailable ii. Exclusion of certain types of points under LTO contracts for low CV and high CV gas Under section 6(b)(bb) of the operative provisions set out in the so-called GaBi Gas 2.0 decision the administrative ruling by the Federal Network Agency governing the current German gas balancing regime (ref: BK ) the MAMs have the option to also trade gas on exchanges in adjacent market areas to take MOL 2 balancing actions. Both MAMs currently have the technical and operational prerequisites in place to procure gas for their balancing actions on the Dutch trading hub TTF. When taking such balancing actions the MAMs book the required transportation capacity and nominate the corresponding transports to ensure that the gas traded on the TTF for balancing purposes is actually physically made available as low CV gas or high CV gas in their respective market areas. As market liquidity at the TTF is very high and capacity at the cross-border IPs on the German-Dutch border can be booked on a within-day basis, the MAMs and TSOs believe that they can maximise utilisation of these IPs for imports of low CV gas and/or high CV gas as part of their own TTF-based balancing actions even in times of peak demand. So holding supply capacity reserves available at these points via the LTO balancing product would not mean that the MAMs could further increase imports when needed. To account for this situation, special rules apply when the MAMs tender out LTOs for the network areas directly connected to the Netherlands to procure reserves in case of supply constraints. Bids for LTOs for the supply/receipt of low CV gas are subject to the restriction that the provider cannot provide the agreed balancing services via the cross-border IPs on the German-Dutch border or the IPs on the border between the two German gas market areas. Bids for LTOs for the supply/receipt of high CV gas are subject to the restriction that the provider cannot provide the agreed balancing services via the cross-border IPs on the German-Dutch border. Instead providers will have to deliver the required physical effect using other entry and/or exit points located on the relevant networks, e.g. at storage points or exit points to industrial sites. 6

7 In addition, providers should note that in the NCG market area LTO contracts for the supply/receipt of low CV gas are awarded on a least cost basis across both low CV balancing zones (LO-East and LW-West) until the total balancing requirement determined on this basis is met. This approach was chosen to reflect the fact that the TSOs and MAMs ensure via their own TTF procurement activities that no capacity constraints arise between the LO and LW balancing zones in situations when LTO balancing services are actually being deployed. The above only applies to LTO contracts for the product variant Rest-of-the-Day and does not affect any of the other balancing procedures and products, which may be handled and procured separately for each low CV gas balancing zone to account for potential capacity constraints, for example in the case of LTO contracts for the Hour product variant in the NCG market area, which are used to structure gas inputs at the cross-border IPs for which they are procured. iii. Criteria for the use of LTOs as a balancing tool Under the rules governing the LTO balancing product providers may offer to ensure their availability to supply/receive gas at the agreed delivery rate for balancing purposes within a specified balancing zone/sector or network area on being instructed to do so by the MAM. The supply capacity required for this purpose may also be provided by industrial end users registered to the LTO provider s balancing group, provided they are connected to the system in the relevant balancing zone/sector or network area and provided they are able to provide the required demand response at any time (giving due consideration to the permitted maximum number of call days). Actual call orders instructing the relevant provider to deliver the agreed LTO balancing service are issued by the MAMs if and when the balancing products offered through the higher MOL ranks are unavailable or if due to their technical specifications they cannot be used to meet the balancing requirement in question. 7

8 III. Short-Term Balancing Services (STB) i. Product parameters Parameter Short-Term Balancing Services (STB) Provider Description Tendering process Lot size Call order quantity Point of delivery Pricing Call lead time Balancing group managers (in their capacity as prequalified providers of balancing services) Provider places short-term bids offering to supply gas to and/or receive gas from MAM in specified balancing zones/sectors or network areas (incl. demand response via RLM exit points) Tender invitations published at short notice as and when needed May vary, at least 10 MWh/h (greater delivery rates to be offered in increments of 1 MWh/h) Full lot size All points (cross-border and market area IPs, storage, RLM) within relevant balancing zone/sector or network area Commodity charge ( /MWh) for actual supply/receipt of gas in event of call order May vary, 1 to 23 hours Delivery period Call days Call priority 1 to 24 hours Only gas day offered by provider at short notice (following days only if so specified in bid) In case of short-term local supply constraints after bids in higher merit order ranks have been exhausted or in case higher MOL ranks are not available for technical reasons 8

9 ii. Criteria for the use of STBs as a balancing tool The STB balancing product is a market-based balancing tool that allows providers, especially industrial end users who have not yet marketed their demand-side potential in any other way e.g. under LTO contracts or via interruption arrangements pursuant to section 14b of the German Energy Industry Act (EnWG), to offer additional flexibility to the MAMs as and when needed (System Buy or System Sell). Via the STB balancing product industrial end users can provide external balancing services to the MAM by offering to turn down or interrupt their gas demand in return for a fee in the event of short-term local supply constraints. STB balancing services will only be used, however, where they can actually help mitigate or remove a specific threat or disruption on the network or in the network area affected. In order to avoid that the product s specifications conflict with section 16(3) of the Energy Industry Act, under which liability for any damage to property arising as a consequence of a threat or disturbance as defined in section 16(2) of the Energy Industry Act is excluded, the criteria for use of the STB product have been defined accordingly and subsequently agreed with the BMWi. STB balancing services will thus only be used in specific and clearly defined cases as described below. Case 1: Use of STB balancing services to address a short-term local supply constraint In this case STB balancing services are only used if all the criteria below are satisfied: Criterion Balancing action needs to be taken on the same gas day (rest-of-the-day) and/or on the following gas day (day-ahead) Balancing response is required in a specific limited network area or in a specific balancing zone within the market area Quantities available under higher-ranking bids meeting the necessary specific locational balancing criteria are insufficient to provide the required response Due to their specifications the balancing products available in the higher MOL ranks cannot provide the specific locational physical response required 9

10 Balancing actions according to the above criteria need to be taken in no more than one or a few balancing zone(s) or network area(s) within the market area Case 2: Use of STB balancing services to address technical non-availability of balancing products in higher merit order ranks In this case STB balancing services are used if at least one of the criteria below is satisfied: Criterion Exchange systems are down or under maintenance, limiting the availability of higherranking balancing products MAM s systems are down or under maintenance, forcing the MAM to suspend trading activities on exchange It should be noted that neither the existence of a short-term local supply constraint nor the technical non-availability of balancing products offered in the higher MOL ranks means that the MAM affected will automatically open a tendering round for the STB product. The MAMs will only do so where it is necessary from a supply security perspective and where time is of the essence. STB balancing services will never be used in the case of a general gas deficit affecting the entire market area. For example, such a general gas deficit will be deemed to be given in situations when all bids available in the higher MOL ranks have already been fully exhausted and further balancing actions are required in more than just a single network area or balancing zone. If and when an MAM actually uses an STB balancing service, the MAM will publish the relevant parameters of the balancing action in question on its website. In addition, the MAM will subsequently inform the BMWi of the circumstances that gave rise to the MAM s decision to do so. 10