Target Model for a Standardized German Balancing Gas Market

Transcription

1 Target Model for a Standardized German Balancing Gas 1. Fundamentals The design of this target model and the definition of the balancing to be used are based on the Framework Guidelines Balancing as adopted on 18 October 2011 and the current state of the discussion regarding the Network Code Balancing. Balancing group managers are responsible for balancing the inputs to and offtakes from their balancing groups and are thus the primary party responsible for preventing system imbalances. Nevertheless, any system imbalances caused by imbalances in the balancing groups and the network balancing accounts are balanced by the market area managers (MAMs) on a centralized and nondiscriminatory basis through the selling and buying of the respective gas volumes. The network operators are responsible for maintaining system stability, a task which they must be able to fulfil at all times. When defining the and processes used to procure balancing gas the MAMs, to the extent possible given the physical circumstances, cooperate with the network operators and ensure that the and processes correspond to the product offering at wholesale trading hubs, thereby establishing a generally accepted market standard. In the German market areas GASPOOL and NCG balancing gas is to be procured primarily and to the extent possible via trades in the wholesale spot market (exchange-based and via MAM-operated platforms for the trading of standardized ). In order to assure the supply-side availability of volumes in cases of insufficient liquidity at the wholesale hubs may also be contracted on a long-term basis. For reasons of system integrity non-standardized balancing are to be contracted where the balancing requirements cannot be met by standardized. It is to be reviewed on a regular basis if changing circumstances allow for a higher proportion of balancing gas to be procured via standardized short-term or if there is an additional demand for standardized and/or non-standardized long-term. 1

2 2. Overview of balancing product groups Standardized short-term Standardized long-term Non-standardized long-term Product groups in detail Standardized short-term Standardized long-term Non-standardized longterm Exchange-based procurement within own market area Exchange-based procurement in adjacent market areas Procurement of standardized via bilateral platform Tendering and calling of long-term option (delivery option) via bilateral platform Meeting of individual physical balancing requirements that may not be met by standardized Standardized short-term Standardized short-term are all that can be offered and traded in the wholesale spot market. In the German market areas balancing gas can be procured via so-called within-day and day-ahead. Exchange-based procurement within own market area In connection with the buying and selling of balancing gas the exchange-based procurement of spot market is the most market-based approach. However, when it comes to the exchangebased procurement within the MAM's own market area it must be noted that as conversion fees decrease it is becoming increasingly difficult to forecast the physical effect in terms of gas quality that the traded volumes might have, and that volumes that must be of a certain gas quality can be bought and sold via the exchange located in the MAM's own market area to a limited extent only. 2

3 group Merit order rank 1 Standardized short-term balancing Title Transactions Own market area via exchange VTP Day-ahead/rest-of-day Title via exchange 1-24 hours Transaction on the exchange followed by single-sided nomination made by the exchange Fixed price ( /MWh) At least 3 hours Any time None For a maximization of the balancing gas volumes procured via the exchange of the MAM's own market area for gas quality-specific balancing requirements in times of decreasing conversion fees it might be an option to consider the introduction of exchange-traded that are subject to settlement restrictions. This would mean an offering of in line with current exchange-traded spot market that would, however, require a physical delivery in a specified part of the market area for settlement, for which verification would have to be provided. System imbalances requiring no specific gas quality would thus continue to be balanced by means of existing procured via the exchange within the MAM's own market area, gas quality-specific balancing requirements, however, could be met by using physical procured via the exchange of the MAM's own market area. However, when it comes to implementing such an approach the MAMs depend on third parties to introduce the relevant, so that for now the MAMs will have to take a passive role in this respect. Exchange-based procurement in adjacent market areas A second approach to maximize the proportion of balancing gas volumes procured via an exchange besides the exchange-based procurement within the MAM's own market area is to consider procurement at adjacent trading hubs, where technically and economically reasonable. Under this approach the MAM acts as a balancing group manager and shipper in an adjacent market area that has a liquid wholesale trading hub, on the one hand, and the appropriate transportation links with the MAM's own market area, on the other hand. Balancing gas traded in this way has a clearly definable effect in terms of gas quality and location and can thus contribute significantly to maintaining system integrity. The required capacities at the cross-border points are to be procured and utilized on a short-term basis as much as possible and in such a way so as not to restrict the possibilities of regular shippers. Given the aim of prioritising the exchange-based procurement within 3

4 the MAM's own market area this procurement method will be ranked below the former by being awarded a merit order rank of 2. group Merit order rank 2 Standardized short-term balancing Title Transactions Adjacent market areas via exchange VTP Day-ahead/rest-of-day Title via exchange 1-24 hours Transaction on the exchange followed by single-sided nomination made by the exchange, where applicable, else nominations submitted by trading participants Fixed price ( /MWh) At least 3 hours Any time None Procurement of standardized via bilateral platform It has been shown that in order to guarantee a functioning balancing mechanism even in cases where none of the offered at the exchange are suited to satisfy the demand for balancing gas or liquidity at the exchange is either insufficient or not accessible (exchanges in adjacent market areas) the balancing gas available via the MAM-operated platforms currently plays an indispensable part in maintaining system stability. Therefore, and with a view to achieving the highest number of active balancing market participants possible, balancing gas suppliers will continue to be able to offer on the MAM's bilateral platform day-ahead and within-day in a network-, network point- or zone-specific configuration under the future target model. As has been the case with the product group Procurement via adjacent market areas, this procurement method will also be awarded a merit order rank of 2 in order to prioritize the exchange-based procurement within the MAM's own market area. All available and appropriate with a merit order rank of 2 will generally be ordered by price; depending on the type of local balancing gas demand, however, the MAM may apply a different order. group Standardized short-term balancing Locational Transactions Own market area via bilateral platform Merit order rank 2 Specified physical zones, networks or network points Day-ahead/rest-of-day 4

5 Trades on bilateral platform settled by physical delivery Maximum lot size specified by the exchange (currently 10 MW) applied analogously 1-24 hours REQEST, followed by single-sided nomination made by MAM Fixed price ( /MWh) At least 3 hours Deadline specified by the exchange applied analogously Any time None MAM issues invoices and credit notes The MAM may determine, in cooperation with the respective network operators, which of the standardized short-term can be requested or called and which of the points or zones are available as a place of delivery. Standardized long-term The use of standardized long-term can be reserved for cases where liquidity in the spot market is insufficient and where a backup needs to be readily available for the purpose of guaranteeing system stability. Use of standardized via bilateral platform Day-ahead and within-day in the form of delivery options can be contracted on a long-term basis via the bilateral platform and thus be used as a safeguard against insufficient liquidity in the spot market. Maintaining system stability requires with a local effect, which are not available via the exchanges, where delivery is made at the VTP of the market area. In the standardized product group, the MAMs therefore only enter into contracts for whose characteristics are comparable to standardized short-term but which contain an option for delivery within a defined period of delivery and at a specified place of delivery. The MAM acts as the buyer of the delivery option and can request the seller to deliver or accept gas in accordance with the product specifications. The merit order rank of 3 is expressly limited to the actual calling of services under an option contract and does not apply with respect to the contracting of the option itself. group Standardized long-term balancing services Long-Term Option Own market area via bilateral platform Merit order rank of call 3 Specified physical zones or points Day-ahead/rest-of-day 5

6 Use of sale and purchase agreements which are guaranteed to be available as delivery options Locational Transaction applied analogously 1-24 hours REQEST, followed by single-sided nomination made by MAM Option premium ( /MW) + fixed commodity price ( /MWh) At least 3 hours As specified in tender specifications No adjustments during contract duration None MAM issues invoices and credit notes Week/Month/Quarter/Half-year/Year Non-standardized long-term In view of the fact that balancing actions are taken in accordance with physical requirements and that there may be situations where standardized do not meet the balancing requirements imposed by the given physical circumstances (e.g. uncertain spot market liquidity, local structuring requirements, need to use gas immediately with no lead times, general structuring requirements, virtual conversion etc.) the MAMs are to contract non-standardized long-term for use in such cases. group Merit order rank 4 Non-standardized long-term balancing services Flexibility services Own market area via bilateral platform Specified physical zones or points Within-day Ad-hoc parking and lending service, where applicable on an as available basis Use by MAM at variable increments according to requirements within the agreed scope 0 - n hours during contract duration Quarter/Half-year/Year Direct access or call, depending on circumstances Option premium ( /MW) and/or commodity price ( /MWh) per hour Depending on circumstances (see call format) Minimum lead time of 10 business days prior to contract's intended entry into force No adjustments during contract duration 6 Compensation rule required for residual account balances MAM issues invoices and credit notes

7 3. Merit order Each balancing gas call is caused by a balancing requirement that may place varying requirements (gas quality-specific effect, time-specific effect, network-/zone-specific effect, lead times etc.) on the balancing to be used. The different product groups and their respective ranks in the merit order list (MOL) are shown in the following illustration: Title Transactions area via exchange (title ) Locational Transaction area via exchange (phys. ) area via bilateral platform Adjacent market area via exchange Standardized long-term area via bilateral platform Nonstandardized long-term area via bilateral platform The are called according to the following procedure: 1. As a general principle, each balancing requirement is to be satisfied through the use of procurement methods with a merit order rank of 1 2. Procurement methods with a merit order rank of 2 are to be used in all cases a. where procurement methods with a merit order rank of 1 are not or no longer available (e.g. if no bids are placed in the wholesale market); or b. where a quality-specific requirement cannot be satisfied by any of the procurement methods with a merit order rank of 1; or c. where a locational requirement cannot be satisfied by any of the procurement methods with a merit order rank of Procurement methods with a merit order rank of 3 are to be used in cases a. where procurement methods with a merit order rank of 1 or 2 are not or no longer available (e.g. if no short-term bids are placed in the wholesale market or on the

8 balancing platforms, or if no transportation capacity is available for procuring balancing gas in adjacent market areas); or b. where a quality-specific requirement cannot be satisfied by any of the procurement methods with a merit order rank of 1 or 2; or c. where a locational requirement cannot be satisfied by any of the procurement methods with a merit order rank of 1 or 2 4. Procurement methods with a merit order rank of 4 are to be used in cases a. where procurement methods with a merit order rank of 1, 2 or 3 are not or no longer available (e.g. if no bids are placed in the wholesale market or on the balancing platforms); or b. where a locational requirement cannot be satisfied by any of the procurement methods with a merit order rank of 1, 2 or 3; or c. where the requirement must be satisfied within a timeframe that does not allow for the use of a procurement method with a merit order rank of 1-3 The use of standardized short-term with a merit order rank of 1 is to contribute to the development of the wholesale spot market and to increase liquidity. The MAMs will therefore endeavour to meet any balancing requirements via the exchange of their own market area first, and only if this should prove to be impossible are they to select according to the merit order list described above. In justified cases requiring an exception from this procedure the MAM may impose an order of calls varying from the merit order ranking. Such variations will be highlighted in the relevant data published by the MAM. 4. Procurement procedures and framework In addition to harmonising the balancing further steps of standardisation are planned with a view to achieving the highest degree of harmonisation possible. Common balancing gas contracts The tender specifications, framework contracts and product descriptions of the two MAMs will be summarized into one common standardized contract. 5. Timeline Independent of this target model the MAMs already harmonized the commodity requested via the bilateral platforms as of 1 July 2012, including common standards as regards the lead times for the submission of bids, price adjustments and the calling of the through the MAMs. The target model which meets the regulatory requirements while also creating momentum for the wholesale markets in both market areas will be implemented by the MAMs until 1 October In the meantime the MAMs and TSOs of the market areas will align their in-house processes relating to 8

9 balancing gas management with the target model and define the procurement and tendering procedures to be followed in the market areas in accordance with the target model. The target model's being in alignment as far as possible with the Network Code Balancing, which had not been finalized at the time of preparation of this target model description, will help to create a sustainable basis for a cross-market area balancing market. 9