The preconditions for market integration compatible gas transmission tariffs in the CESEC region

Transcription

1 The preconditions for market integration compatible gas transmission tariffs in the CESEC region Péter Kaderják Director Regional Centre for Energy Policy Research Corvinus University of Budapest CESEC Technical plenary group and meeting on tariffs May 12, Ljubljana

2 Outline CESEC gas cross-border tariff benchmarking Simulation of tariff reform scenario impacts on market integration and welfare Simulation of tariff scenarios for the Croatian and Greek LNG clusters Conclusions 2

3 Objectives of tariff benchmarking Identify outlier E/E tariffs potentially distorting market integration infrastructure utilization, wholesale price convergence Identify potential explanations for outlier tariffs initiate regulatory discussions no immediate regulatory proposals Stimulate broadly defined tariff reform alternatives purely hypothetic and only for analytical purposes stimulating thinking and discussion no regulatory or legal background Trans-Balkan: to include at later phase 3

4 Gas transmission tariff systems in CESEC countries Tariff system Average share Type of tariff system Application of capacity and commodity elements of commodity component Austria entry-exit only capacity 0% Bosnia and Herzegovina postage stamp only commodity 100% Bulgaria postage stamp only commodity 100% Croatia entry-exit commodity part at exit points 4% Greece entry-exit commodity part at entry points 14% Hungary entry-exit commodity part at exit points 12% Italy entry-exit commodity part at entry points 20% Macedonia postage stamp only commodity 100% Moldova postage stamp only commodity 100% Romania entry-exit commodity part at exit points 22% Serbia entry-exit commodity part at exit points 22% Slovakia entry-exit only capacity 0% Slovenia metering cost at entry and exit, other entry-exit commodity component at exit 17% Ukraine entry-exit only commodity 100% Variations of E/E and postage stamp Large variations in tariff structure 4

5 Benchmarking assumes a standard transportation service The duration of transmission contracts is one year Contracts refer to firm transportation services The booked maximum hourly capacity is kwh (/h/y) based on interviews Applied load factor is 56.2% - ACER MMR 2015 Tariffs are expressed in /MWh Load factor calculation: (Average flow)/(average booked capacity) 5

6 Tariffs benchmarks used in the analyses (end of January 2016 data) PL DE 1,36 1,30 CH 3,30 3,13 IT 1,49 CZ 1,31 0,94 0,84 0,76 AT 0,61 1,93 1,38 1,30 1,13 SI 0,93 1,38 SK 0,80 1,30 0,63 1,43 1,05 2,16 1,64 HU 7,07 3,08 HR 3,01 2,80 RS 3,47 3,60 3,90 5,42 2,01 2,17 1,97 2,60 UA 3,92 3,42 RO BG MD Coloured boxes indicate above average E+E tariffs B A To B from A (A exit + B entry) No reliable To A from B (B exit + A entry) information on tariffs is available BA MK GR Average CB tariff: 2.24 /MWh TR 6

7 Recent increase in Ukrainian tariffs PL DE 1,36 1,30 CH 3,30 3,13 IT B A 1,49 1,31 1,93 1,30 0,76 0,61 1,13 0,84 CZ 0,94 AT 1,38 SI 1,30 2,80 0,93 1,05 0,80 To B from A (A exit + B entry) No reliable To A from B (B exit + A entry) 1,38 1,64 0,63 SK 1,43 HU 7,07 3,08 HR 3,01 information on tariffs is available 2,16 RS BA 6,31 7,28 7,40 5,42 MK 3,16 3,33 UA 3,12 7,20 6,07 2,60 RO BG GR MD Likely implications: exit: Ukraine-Russia bargain entry: might decrease spot flows to Ukraine TR 7

8 Exit and entry tariffs compared to mean / median values Most problematic borders: HU-RO, HU-HR, AT-HU, SK-HU, HU-RS, SI-HR 8

9 Tariff levels and capacity utilization (2015) High utilization: transit routes; DE-CZ-SK-UA reverse flow New projects enhance SoS and support product price discounts 9

10 Possible typology of outliers EXIT EXIT Low High Low High ENTRY Low No problem CH-IT; UA-SK ENTRY Low No problem (a) Low cost country export limitation; (b) former transit fee translated into high exit fee; (c) single route dependence High AT-HU; HU-UA; PL-UA;SK-HU; SK-UA; HU-HR; IT-CH; SI-HR; HR-HU; HU-RO; HU-RS; RO-HU; UA-HU; UA-PL; UA-RO High (d) Market protection of incumbent supplier (e) New built regulatory trap; and/or combination of cases (a)-(d) Above-average cross border total transmission tariff cases (bold letters) and outlier entry tariffs (italic letters) in the CESEC region (left, January 2016 data) and potential underlying explanations (right) How to verify? How to address? 10

11 Outline CESEC gas cross-border tariff benchmarking Simulation of tariff reform scenario impacts on market integration and welfare Simulation of tariff scenarios for the Croatian and Greek LNG clusters Conclusions 11

12 Methodology Gas market modelling (EGMM) Establishing the 2016 reference scenario Scenario analyses Uniform tariffs adjustments Reduction of each pair of E/E tariffs to the assumed marginal cost of operating the interconnectors (0.13 /MWh) at CESEC borders without compensating the tariff decrease in any other way for TSOs Uniform cross border tariff based on the weighted average of entry tariffs and weighted average of exit tariffs by 2015 observed cross-border flows Selective tariff adjustments Investigation of the effects of gradually decreasing tariffs on outliers and their impact on welfare and market outcomes Reduction of outlier tariffs to the average level (without compensation) Market integration (infrastructure utilization, price convergence) and regional welfare impacts assessed by country and stakeholder 12

13 Methodology notes, limitations Trans-Balkan and Ukraine: limitations on TPA and transparency; later phase Static modelling disregards adaptive behaviour of market participants Equal weights for market participants to measure social welfare change conservative approach Present low price environment consciously reproduced reduced social welfare impacts 13

14 2016 reference scenario 2016 Q1 European price landscape Flows modelled are in line with the 2015 flow pattern (IEA, ENTSOG, Eurostat) 50bcm/year of LNG reaching Europe Compared to North-West Europe, prices remain higher in some CESEC countries Reason: LNG terminals are distant and tariffs absorb the price difference between countries 14

15 Relative change of spot traded gas flows compared to the reference 100% 80% 60% 40% 20% 0% -20% -40% 15 Cut to 0.13 Change to weighted RO-HU 25% reduction RO-HU 50% reduction HR-HU 25% reduction HR-HU 50% reduction HU-RS 25% reduction HU-RS 50% reduction SK-HU 25% reduction SK-HU 50% reduction HU-HR 25% reduction HU-HR 50% reduction Cut outliers to average Relative change of spot flows on all CESEC interconnectors compared to reference (%) Over 80% increase of spot flow to the region when E/E cut to marginal cost

16 Change in pipeline flows in Scenario a compared to reference case, TWh Change in flows compared to reference, TWh AT-SK SB-BA UA-MV SI-IT RO-HU SI-HR HU-HR UA-SK HR-HU AT-SI HU-SB SK-UA SK-HU AT-HU HU-UA DE-AT SK-AT CZ-SK AT-IT spot ltc Significant additional spot on the CZ-SK-AT-IT, AT-HU, SK-HU and DE-AT routs

17 Changes in regional consumer welfare per tariff reform scenario Scenario name Code RCCI Change in RCCI (percenta ge points) Absolute change in consume r surplus (M ) ref 22.16% Cut to 0.13 a 15.09% -7.07% Change to weighted average b 25.59% 3.43% RO-HU 25% reduction c % 0.14% RO-HU 50% reduction c % 0.16% HR-HU 25% reduction c % 0.00% 0.0 HR-HU 50% reduction c % 0.00% 0.0 HU-RS 25% reduction c % -0.03% 6.9 HU-RS 50% reduction c % -0.07% 15.0 SK-HU 25% reduction c % -0.09% 14.2 SK-HU 50% reduction c % -0.20% 35.7 HU-HR 25% reduction c % 0.04% -7.8 HU-HR 50% reduction c % -0.05% 9.4 Cut outliers to average d 21.87% -0.28% 45.2 Convincing consumer benefits in the cross-border E/E tariff-free zone (a) and the selective tariff reform scenarios 17

18 Comparing the total welfare effects of scenarios Total welfare change (MEUR) Cut all to 0.13 Weighted average RO-HU -25% RO-HU -50% HR-HU -25% HR-HU -50 HU-RS -25% HU-RS -50% SK-HU -25% SK-HU -50% HU-HR -25% HU-HR -50% Cut outliers to average Marginal overall welfare changes Several opportunities for welfare improvement

19 Total welfare effects without LTC holder profit change 100 Welfare change without LTC profit Total welfare change Cut outliers to average Total Welfare welfare change (MEUR) Cut all to 0.13 Weighted average RO-HU -25% RO-HU -50% HR-HU -25% HR-HU -50 HU-RS -25% HU-RS -50% SK-HU -25% SK-HU -50% HU-HR -25% HU-HR -50% Correction for LTC holder profit change makes the tariff free zone an interesting option + SK-HU, HU-RS and RO-HU

20 Outline CESEC gas cross-border tariff benchmarking Simulation of tariff reform scenario impacts on market integration and welfare Simulation of tariff scenarios for the Croatian and Greek LNG clusters Conclusions 20

21 HR_LNG and HR-HU cluster (TWh/yr) ref HR_LNG 8b 8c 8c-ref no HR_LNG regas: 3.2 /MWh regas: 3.2 /MWh regas: 1 /MWh HR-HU: 7.07 /MWh HR-HU: 7.07 /MWh HR-HU: 2 /MWh HR-HU: 2 /MWh HR_LNG HR-HU HU-RS HU-UA HU-RO SK-HU AT-HU Proposed regas and present HU-HR tariffs prohibit LNG leaving Croatia Significant regas + CB tariff decrease allows regional marketing 21

22 Greek LNG cluster (TWh/yr) ref IGB IGB+BG-RO IGB+BG-RO+RO-HU IGB+IBS IGB (with TAP) GR_LNG: 1.33 /MWhGR_LNG: 1.33 /MWh GR_LNG: 1.33 /MWh GR_LNG: 1.33 /MWh GR_LNG: 1.33 /MWh GR_LNG: 1.33 /MWh GR-BG: 2 /MWh GR-BG: 2 /MWh GR-BG: 2 /MWh GR-BG: 2 /MWh BG-RO: 2 /MWh BG-RO: 2 /MWh BG-RO: 2 /MWh BG-RO: 2 /MWh RO-HU: 5.04 /MWh RO-HU: 5.04 /MWh RO-HU: 5.04 /MWh RO-HU: 2 /MWh RO-HU: 5.04 /MWh BG-RS: 2 /MWh TAP: each border 2 /MWh GR_LNG GR-BG n.a BG-SB n.a n.a n.a n.a 20 n.a BG-RO n.a RO-HU Implementation of GR-BG, BG-RO-HU and BG-RS at normal tariffs double the utilization of Greek LNG TAP creates sharp competition for Greek LNG 22

23 Outline CESEC gas cross-border tariff benchmarking Simulation of tariff reform scenario impacts on market integration and welfare Simulation of tariff scenarios for the Croatian and Greek LNG clusters Conclusions 23

24 Selected regulatory messages Important distortions in applied E/E tariffs detected in the region Several selective tariff reforms to correct outliers can clearly improve regional welfare Tariffs on interconnection points (existing and new) bringing spot gas to the region are critical for competition and market integration The scenario to lower tariffs across the board to marginal cost is worth to further explore 24

25 THANK YOU FOR YOUR ATTENTION!