User group
- Market Development in
Germany and Europe
Programme – User group meeting
Market development in Germany and Europe –
Impact on the Danish gas market
Welcome
Introduction on EU Time Schedule for Network Code Development
Gasunie Transport Services presents the latest status on new German market
model adjustments
Energinet.dk presents final guidelines for EU Network Code development
Topics for discussion:
- Auctioning models functioning as capacity allocation mechanism
- Bundling versus coordinated products
- Restriction on renomination rights
- Interruptible products
Time plan for market development in EU
Commission
Consumers
Shippers
Traders
Ag
en
Producers
cy
2010
O
TS
EN
G
2011
Capacity allocation
methodologies (CAM)
Framw. Net Work Code
Guide (ENTSOG)
Congestion Management Principles (CMP)
Framw.
Guide
Balancing
Harmonisation of
tariff structures
Interoperability rules
Rules for trading
Third Party Access
Security and reliability
2012
Comitology
Comitology
Framw. Net Work Code
Comitology
Guide (ENTSOG)
Framw. Net Work Code
Comitol
Guide (ENTSOG)
Framw. Net Work Code
Guide (ENTSOG)
C
Framw. Net Work Code
Guide (ENTSOG)
Framw. Net Wor
Guide (ENTSO
Framw.
Guide
Latest status from
Germany
Matthias Schulz – Gasunie Transport Services
Gasunie takes gas transport further
Current developments in Germany
Energinet.dk User Group Meeting 09.09.2010
Matthias Schulz
Agenda
 Overview on current developments in Germany
 Market areas in Germany
 Current situation / ongoing developments
 Consultation process initiated by BNetzA
 KEMA study
 Capacity management (allocation & congestion) in
Germany
 Current situation
 Principles laid down in the new grid access order
(GasNZV)
 Consultation process initiated by BNetzA
 Investment climate in Germany
 Recent developments / current situation
 Remaining obstacles
 Status IOS
6
Overview on current developments in Germany (1)
- Background -
 Regulated TPA introduced in 2005
 Market area model (inter TSO entry/exit model)
with initially 19 market areas implemented in
2006
 Currently 3 L-gas market areas and 3 H-gas
market areas
 New balancing regime (“GABi Gas”) since 10/2008
 Change of supplier for households possible,
increasing gas-to-gas competition for households
7
Overview on current developments in Germany (2)
- Recent developments 
New grid access order (GasNZV) as of xx.09.2010, a.o.

Amendments of ARegV / GasNEV: Improvements for
conditions on new investments, further tightening wrt return
from base business
Pending decision of BNetzA on regulated tariffs for supraregional TSOs (outcome of the efficiency benchmarking)
Consultation process wrt combining H- and L-gas market
areas
Consultation process wrt capacity allocation and congestion
management



– Modernisation / alignment with current status of development,
e.g. balancing regime, grid access model, etc.
– Explicit and detailed rules for green gas
– Further reduction of market areas ( next charts)
– Capacity allocation and congestion management ( next charts)
– Extensive competences for BNetzA
 High momentum in German market development combined
with high level of uncertainty (for TSOs)
 Interferences with European developments / wishes
8
Market areas (1)
- Current situation 
Currently 3 H-gas and 3 L-gas market areas:
H-gas market areas
TSOs involved
L-gas market areas
TSOs involved
GASPOOL
DEP, GUD,
ONTRAS,
STATOIL, WTKG
AEQUAMUS
EGMT, EWE,
GUD
NCG
OGE*),
bayernets, GVS,
Eni, GDF
OGE L-gas
OGE
TG H-gas
TG
TG L-gas
TG
*) former EON Gastransport

Requirements new GasNZV:
– 3 market areas as of 01.04.2011 (2 H-gas & 1 L-gas)
– Cost-benefit analysis re further consolidation by 01.10.2012
– Max 2 market areas as of 01.08.2013
 Further consolidation wrt smaller market areas expected by
April 2011
9
Market areas (2)
- Consultation process initiated by BNetzA 
BNetzA has initiated an open consultation process re the
combination of H- and L-gas market areas; open for
comments until 22nd of September;
– GUD has performed a study together with KEMA
– GUD as well as OGE are in favour of commercially combining
their respective L-gas market areas with their H-gas market
areas
– GUD has asked BNetzA for an open consultation since
combination of H- and L-gas market areas needs to follow
transparent rules and will have an effect on costs for endconsumers at the end
– BNetzA has published the KEMA study, the OGE study and has
raised different questions
 Consultation will be decisive
 on the principal possibility to combine H-gas and L-gas market
areas in Germany
 on the basic rules to combine NCG and OGE L-gas (as of
01.04.2011 ?) as well as GASPOOL and AEQUAMUS (as of … ?)
10
Market areas (3)
- KEMA study 
KEMA presents a practical way to combine H-gas and L-gas
market areas in the regulatory framework in Germany, i.e.
– Full flexible entry and exit capacities, independent from gas
quality at the respective points
– H-gas and L-gas points can be combined in one balancing
group
– Balancing within the balancing groups, independent from gas
quality at the respective points
 L-gas exits can be served from H-gas entries and vice versa

KEMA proposes a combination of 3 measures in its
conceptual study
– Virtual or commercial quality conversion
– Technical quality conversion (blending)
– Switch of markets from L-gas to H-Gas
 The combination of these 3 measures is the best way to
combine H- and L-gas areas in one balancing zone on short
notice and to deal with the decreasing L-gas production in
Germany mid term
11
Capacity management (1)
- Current situation 



First come first serve is main allocation principle in
Germany
Entry / exit capacities nearly completely booked on short
term and significantly booked on mid / long term
Monitoring of BNetzA shows in average low level of usage
of booked capacities in major pipelines
Acc. to BNetzA contractual congestion is limiting further
development of the market, physical congestion is not in
the focus yet;
 Capacity allocation & congestion management are the
remaining issues to be solved by regulation in Germany
 New GasNZV is dealing mainly with capacity allocation &
congestion management and will be further detailed by
BNetzA decision following the planned consultation
12
Capacity management (2)
- New rules laid down in the new GasNZV In general:
 Supra-regional TSOs (“TSOs”) have to calculate full-flexible entry
& exit capacities in accordance with specific rules; aim is to
maximize entry & exit capacities (base capacity);
– based on historical and assumed flows in the market area

BNetzA has to approve the calculated base capacity for each TSO;
– if full-flexible base capacity is too low TSO may after prior approval of
BNetzA pay for flow commitments or reduce flexibility;



TSO may offer additional capacity to the market based on
additional (short term) assumptions; 50% of additional revenues /
costs for those additional capacities are for the benefit / burden of
the TSO;
TSO may buy back capacities from the market to secure technical
integrity of their systems;
TSOs are obligated by 1st of April each year to explore and publish
the long term capacity demand for the market area;
 Obligation for TSOs to maximize capacity offer and (limited)
incentive to offer additional capacity by way of taking additional
risks
13
Capacity management (3)
- (New) rules laid down in the new GasNZV Capacity products:
 Full flexible firm and interruptible entry & exit capacities for
terms of at least 1 day, 1 month, 1 quarter and 1 year;
 TSOs have to establish entry & exit zones to further
simplify grid access and to maximize the capacities offered
to the market;
 Max 65% of all entry & exit capacities can be booked with
a duration of more than 4 years; 20% of all entry & exit
capacities needs to be reserved for bookings with a
duration of max 2 years;
– Deviation from 65% after prior decision of BNetzA possible
 Existing contracts are not affected by new rules re terms
 BNetzA to report about the experiences re term of
contracts by 01.10.2013
14
Capacity management (4)
- (New) rules laid down in the new GasNZV Marketing of capacities:
 TSOs have to establish one common IT platform for booking of
entry & exit capacities on the primary market by 01.08.2011;
 TSOs have to establish one common IT platform for selling /
leasing entry & exit capacities on the secondary market; shippers
are obligated to sell or lease entry & exit capacities to other
shippers only via this platform;
– Tariffs on secondary capacity market must not exceed tariffs on the
primary market significantly

Allocation of entry & exit capacities at cross border points and
market area points as of 01.10.2011 onwards only by way of
auctioning
– Tariff to be paid = clearing price (“Markträumungspreis”)

Allocation of all other entry & exit points (e.g. storages, green gas,
production, LNG, end consumer) acc. to first come first serve;
 Revenues from auctions exceeding the regulated revenues to be
used by TSOs for measures to mitigate the congestion
15
Capacity management (5)
- (New) rules laid down in the new GasNZV Unused capacities:
 Until moment of nomination Shippers are obligated to offer
fully or partly unused firm entry & exit capacities on the
secondary market or to return them to the TSO;
 After moment of nomination TSO is obligated to offer fully
or partly not nominated entry & exit capacities of a shipper
(after respective consideration of re-nomination rights) as
firm capacity on the primary market for the next day;
– Shipper remains responsible for paying the tariff

16
In case of contractual congestion  “use-it-or-lose-it” –
rule (period of consideration: 3 months)
Capacity management (7)
- Content of the consultation process / capacity decision 
Bundling of capacities at market area points and cross border points



Start of yearly contracts either 01.10. or 01.01. to be decided;
Tariffs for terms less than one year pro rata temporis;
Point of nomination / restriction of re-nomination rights
–
–
Obviously limited to the willingness of foreign TSOs
Existing contracts ?
–
–
–
10:00 am as initial nomination deadline to establish a day-ahead capacity market
Restriction of re-nomination rights after 10:00 am to free up unused firm capacity for
second marketing through the TSO
…
–
–
–
Dates and frequency of auctions
One-level or multi-level auction process
…
–
–
Anonymity
Technical implementation

Details for the auctioning of capacities, e.g.

Principles for the primary capacity platform, e.g.

Deadlines for implementation
 TSOs are currently in detailled discussions with BNetzA
 Participation of the market (BNetzA consultation) expected in the next days …
17
Investments in infrastructure (1)
- Recent developments / current situation 


Intensive discussions with BNetzA and politicians re needs &
economic conditions for investments in gas infrastructure
over the past 12 months;
Amendments of ARegV improves economic conditions for
new investments since TSOs are now allowed to earn back
the OPEX related to an investment (e.g. fuel gas for a
compressor station)
However, in general return from base business will further
decrease through recent amendments of GasNEV since
– “Planning” costs are no longer allowed
– “One-time” costs are no longer allowed
 Methodical deficit re cost coverage !
 Lack of an integrated regulated approach taking the
different situation of TSOs into account
 Willingness vs. obligation vs. ability for TSOs to invest
18
Investments in infrastructure (2)
- Remaining obstacles -
 Rate of returns for new investments still too low to
activate capital
 Effect of new investments in efficiency benchmarking /
incentive regulation still unclear / most probably
negative
 Outlook for return from base business negative, i.e.
ability for financing of new investments questionable
 Dominating mindset: TSOs earn too much !
 Role of natural gas in the future in Germany ???
(energy concept of government)
 Outlook and sustainability of new investments ???
 …
19
Thank you very much ….
… However, we are still believing in and working for a
better future …
20
Framework Guidelines on
Capacity Allocation
Mechanisms
Based on ERGEG’s final version on 10th June 2010
TSO Corporation
FG should specify procedures for adjacent TSO’s to corporate
on following topics:
Harmonisation and coordination of capacity services
Harmonisation and coordination of allocation procedures
Coordination of maintenance affecting IP’s
Common communication procedures
Calculation and maximisation of capacity
Forecast information
Potential congestions and the use of CMP measures
Breakdown and offer (quotas)
At least 10 % of the available capacity shall be reserved for
firm short term capacity products
Short term = less than 1 year
The amount for each capacity service should be aligned
between adjacent TSO’s
Bundled services
TSO’s should jointly offer bundled services
Single allocation procedure
Single nomination
Bundling does not apply capacity allocated before Regulation
715/2009 enters into force
March 2011
Entire technical capacity bundled 5 years after binding
network code has entered into force
Presumably 2017-2018
Capacity allocation
TSO’s should offer capacity on a regular basis
For all firm and interruptible services
The longer the capacity duration, the longer the lead time
Allocation procedures should be timed on EU level for all IP’s
Capacity allocation - auctions
Firm capacity should be allocated through auctions
Anonymous
Transparent
Online based
Day-ahead auctions are required
Pro rata may be used for other durations (than day-ahead) where
conditions for efficient and fair auctions are not met
Auction revenues can be used for:
Lowering network tariffs
Investment in removing congestion
Incentive for TSO to offer maximum capacity
Interruptible services
TSO’s should align interruptible capacity at every
interconnection point
Interruptions should be coordinated
Network code should define reasons for interruptions, classes
and sequence how interruptions takes place
Within day interruptible nominations should be allowed
Without having capacity
Specific topics to discuss
Bundling vs. coordinated products
Auctioning models
Interruptible products
Restriction on renomination rights (CMP)
Bundling vs. coordinated products
Should trading on border points still be a possibility, or should
all capacity be bundled?
How to create a compromise (smaller shippers / traders urge
for bundled products)?
Auctioning models as allocation mechanism for
capacity
Is it acceptable to have different auctioning models for the
different products (year, month, week, day)?
Should the auction model be theoretical optimal, or include
other aspects/requirements?
Interruptible products
Shall the interruptible product be based on nominations or by
contracts?
How should interruptible products be designed in the future,
in relation to auctions?
Restrictions on renomination rights
Congestion Management Principle
Is restrictions on renomination rights acceptable in a lighter
version (e.g. German model)?