, Vienna Platts Gas Supply and Infrastructure Conference

Transcription

1 1

2 The Gas Target Model: The European gas market 2014 and beyond Walter Boltz Executive Director E-Control Austria, Vice Chair of ACER s Regulatory Board

3 Agenda Gas in context to European energy policies Where we stand Vision for the European Gas Market 3

4 Agenda Gas in context to European energy policies Where we stand Vision for the European Gas Market 4

5 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? Many different discussions over the last years Need for implementation of established legal instruments 5

6 Energy Infrastructure Package 1 What we (used to) have: Rudimentary planning instruments Little or no cross-border coordination Slow permit procedures Financial uncertainty Lack of cost-allocation mechanisms Public resistance 6

7 Energy Infrastructure Package 2 What we need: Strategic and coherent planning Continuous cross-border coordination Efficient permit procedures Smart financing Fair cost-allocation Public support 7

8 Third package solutions for investments Ten Year Network Development Plans (TYNDP), Regional Gas Investment Plans (GRIPs) Produced by ENTSOs, ACER oversight Common scenarios & methodologies Organisational & operational cross-border coordination Institutions: ENTSOs, ACER Network Codes: binding market rules Unresolved issues: Permit procedures Financing Cost-allocation Public support 8

9 Agenda Gas in context to European energy policies Where we stand Vision for the European Gas Market 9

10 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 10

11 What are the challenges? - 1 High national market concentration Electricity: CR1 in capacity: France 87%, Spain 36%; Gas: incumbents dominate import market (some 90%), hub trading (up to 85%) (source: SI 2006) Price distortion Inefficient allocation Electricity: potential abuse of market power Gas: oil linkage and in general potential abuse of market power Electricity: inefficient power stations running when more efficient are available Gas: LNG vs Russian pipeline gas used in Europe 11

12 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 12

13 International gas prices Source: The Oxford Institute for Energy Studies 13

14 European Gas Prices vs Coal Source: The Oxford Institute for Energy Studies 14

15 Current developments

16 Current developments - 2 Source: Societe Generale, European Gas Market Outlook 16

17 Current developments - 3 Source: Societe Generale, European Gas Market Outlook 17

18 Share of energy sources in US electricity production 18

19 On the road to 2014 European Council set 2014 as the target date for the completion of the Internal Energy Market Steps to be taken: Implement 3 rd package Take unbundling further Create Entry/Exit zones all across Europe Enhance European cooperation through ENTSOG + ACER Promote development of liquid natural gas hubs for trading as opposed to relying heavily on long-term contracts Promote greater flexibility in price formula as opposed to oilindexed contracts Ensure that needed investments take place 19

20 Agenda Gas in context to European energy policies Where we stand Vision for the European Gas Market 20

21 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. Hub 21

22 Vision for the GTM - 1 Functioning wholesale markets in Europe If a country is able to create a functioning market within the country itself Market area If a country is not able to create a functioning market within the country itself Cross-border market area Trading region Connected functioning wholesale markets in Europe Explicit versus implicit allocations How to value short term capacities? Markets Connection 22

23 Vision for the GTM - 2 Secure supply patterns Short-term trading will allow to respond to the growing need for flexible gas demand Ensure that gas comes to Europe in the longer run Ensure that economic investments take place Regular bidding process for incremental capacities Supply Investment 23

24 The Market Area Model National market area Country A Market Area A VP Final customers (A) Features: One virtual point for wholesale trading Fully integrated wholesale market One balancing zone from import points to final customers Full integration of DSO networks Single set of balancing rules Single balancing entity Country A Country B Market Area AB Crossborder market area Final customers (A) Final customers (B) VP Symbols VP Virtual point of the market area serving as the sole marketplace of the market area Entry or exit contract Exit contract 24

25 The Trading Region Model End user zone A Country A Trading Region AB VP Country B End user zone B Features: One virtual point for wholesale trading Fully integrated wholesale market Trading region is basically kept free of imbalances Final customers are balanced in national end user zones that may reflect national specifics End user balancing may be done by national balancing entity Congestion-free interconnection between trading region and end user zones through the common virtual point ( virtual exit to end user zone) Final customers (A) Final customers (B) Legend and Symbols End user zone = National balancing zone for national final customers, no matter the system (distribution or transmission) they are connected to Trading Region AB = Cross-border entry/exit system including all nominated points on the transmission systems of countries A and B VP Entry or exit contract Exit contract Virtual point of the trading region serving as the sole marketplace of the trading region and all attached end user zones. Shifting of gas between trading region and end user zone is done by nominating a virtual exit on the VP. 25

26 MECO-S Model: Architecture at Large Country C Country D Market Area CD Country A VP Market Area A VP Country E Country F Trading Region EF VP Country B Market Area B VP End user zone E End user zone F Legend and Symbols VP2VP (also called Hub to Hub ) capacity product VP Virtual point. 26

27 SSE Regional Initiative Where do we go? Pilot projects in the Region Market Integration in SSE - models and steps towards a Trading Region 11 member countries 155bcm/year, covering 28% EU Gas Demand 27

28 Pilot Project on Enabling Market Integration Case study of the implementation of a CEE trading region including CZ, SK and AT How could a CEE trading region look like from an institutional perspective? How would a process model for the trading region look like? TSO - shipper processes inter TSO processes TSO - DSO processes Integrating markets of neighboring countries? What legal challenges exist (overview) and what needs to be done to overcome them? Which financial challenges exist regarding tariff income of TSOs and how could they be overcome? What macroeconomic effects are to be expected from a trading region? 12th GRI SSE Stakeholder Group meeting 31 May

29 Possibilites for market integration Significant excess capacities Excess capacities during most of the time Very high capacity utilization between FR/ES during winter time substantial excess capacities high capacity utilization between AT/IT and DE/PL Physical congestions between AT/DE 29

30 Technical data and flows in the analysed regions Region I: Consumption: 25,1 bcm Imports: 61,1 bcm Exports: 38,7 bcm Production: 2,0 bcm Storage capacity: 54 % of total consumption 29,5% (A) 11,1% (SK) 13,2%(CZ) Imports mainly from Russia Gas exchanges exist in Austria and the Czech Republic In the Slovac Republic, no VTP has been set up Region II Consumption: 92,5 bcm Imports: 87,6 bcm Exports: 5,1 bcm Production: 10,0 bcm Storage capacity: 24,8 % of total consumption 8%(A) 16,9% (I) Diversified imports VTPs exist in Austria and Italy 30

31 Gas Target Model Florence School of Regulation, A vision for the EU Gas Target Model: The MECO-S Model ublications/working_papers/2011/rscas_2011_38.r ev.pdf Council of European Energy Regulators, Vision for a Gas Target Model: Conclusions Paper UBLICATIONS/CEER_PAPERS/Gas/Tab/C11-GWG _GTM%20vision_Final.pdf 31

32 Contact Walter Boltz walter.boltz@e-control.at 32

33 33