Post on 21-Dec-2015
Dipl. Ing. Dr. Stephan ResslCChair EFET SSEHead of Business DevelopmentEcongas
Joint WorkshopGRI SSEPrague, 21/01/2008
European Federation of Energy Traders
Stephan Ressl Prague, 21.01.2008 2
EFET RECIT Model – Introduction 1
The political decision makers decided in the Lisbon Strategy to make also the European energy market an efficient and competitive one and hence the goal is to create a single European energy market for gas and electricity
To achieve that the EC has produced a series of legislative text which have to be complied with on a European level
However, several problems are in the “detail” and thus ERGEG created the regional initiatives to support the Madrid process and EFET has proposed as a pragmatic and intermediate step forward a paper on how to overcome potentially these challenges via a regional approach
Also for EFET the goal is to achieve a single European energy market in due time
Stephan Ressl Prague, 21.01.2008 3
EFET RECIT Model – Introduction 2
EFET presented a vision on a “Regional Independent System Operator model” at the IG SSE GRI meeting in Maribor. In order to avoid misunderstanding EFET considers to change the name of the model to a “Regional Cooperation of Independent TSOs” model – “RECIT”
EFET believes that the RECIT model will effectively provide market integration in a swift manner
The proposed model is not a new “proposal” for design of the European gas market, it is simply a possible and more detailed interpretation of the draft 3rd package published by the EC in September 2007
The model as such would be fully neutral and compatible with all suggested types of unbundling of TSOs (OU, national ISO or OU+ISO) ---> the “political” decision on structure of the TSOs would not have a particular influence on the processes and interactions determined in the model
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EFET RECIT Model – Introduction 3
RECIT and aspects of security of supply
physical capacity available from source to final customers?
Transport cost clearly calculable at point of supplier‘s decision on where tosource gas from?
Historically, many major investments happened because of international (cross-border) consortia/cooperation (e.g. Megal, TAG, BOG,…)
Aim must be that at least some different supply sources must potentially physically arrive in each area – no security of supply without physical interconnection (long term and short term)
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EFET RECIT Model – Introduction 4
RECIT and aspects of competition
final customerPooling of consumption withinone balancing area – increase of negotiating powerLarger netting of imbalance positions reduces opportunity costs for suppliersMore potential suppliers, reductionof market concentration
for shippers/suppliersMore similar customers in one market areaReduced opportunity cost: nomination, balancing,registration, etc.. reduced risk to deliver
Macro-economic/politicalPotential of economies of scale for system operationEg potential for higher capacity provision through larger flow optimisationReduced national influence
Grid 2007
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EFET RECIT Model - Objectives
Objectives of the model:
to reduce the existing market areas through establishment of Regional Independent System Operators
to enable all stakeholders of gas industry to take part in the drafting of binding documents on topics that affect parts of the industry (market rules for future European gas market) at equal terms
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EFET RECIT Model
The first aspect derives from market knowledge and the finding of the Sector Inquiry – where it was stated that a decent market size is a prerequisite for increase of liquidity (through diversity of source, routes, storages, players) and small balancing areas hinder competition
Additionally a bigger market area with flow optimisation based on regional ((intra))/inter-national) coordination will improve security of supply in the relevant region and increases potentially supply diversity
A R_ISO might be able to better compete against third party take over bids if designed in such a way
The merging of the market zones with now different operational, technical and commercial (balancing) rules, will implicitly optimise cross-border trade and enhances market entry opportunities (bigger customer potential) and reduces market concentration
Establishment of clear regional governance for the R_ISO backed by a consistent and stable regulatory framework with a strong European approach will overcome pure national interests and also increase investment incentives.
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Border price
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Decision making process concerning EU Grid Code
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Consultation process on the EU-Grid Code
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EFET RECIT Model – role of market players
The model propose clear definition and separation if the task and
responsibilities of particular market players:
R_ISO– Management of capacities in the Regional Gas Grid; – Balancing services – implementation of market place for them;– Long-term planning;– Drafting of the grid standard transportation contracts following the
framework agreed within EASEE-gas;– Facilitation of a secondary market platform for trading and secondary
markets for capacity – Dispatching centre;– Collection of E/E fees and redistribution to the relevant TO;
TO – Maintenance of transmission pipelines in accordance with the R_ISO
´s standards;– Compute and announce the available capacity to the R_ISO;– Enter into contract on exchange data with others TO and R_ISO;– Contribute to long-term adequacy;
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EFET RECIT Model – role of actors on the regional/European market
Regulatory level – EU/regional: monitor, approve, enforce– To ensure convergence between the regulatory principles and practices – To approve the long term plans, methodology for calculation of tariffs– To approve Regional Grid Code based on European Grid Code chapters
(regional appendix)
Easee-Gas – Procedures for a coherent and common grid access to the EU;– Drafting of the grid standard transportation contracts;– Harmonisation of Invoicing and payments;– Harmonisation of Balancing rules / charges;– Defining of data format of communication– Defining codification method;– Defining and agreeing on quality specification:– Harmonisation of trading arrangements;
ENTSO (GTE+)– Setting up of the Inter-TO compensation model– Preparing of the ten Year Statements on system enhancement– Ensuring closer communication and coordination among TOs; best dispatch– Agreeing of the minimum safety and maintenance requirements– Agreeing standardized methodology for capacity calculation– Deciding on emergency procedures
Stephan Ressl Prague, 21.01.2008 12
GRI SSE: EFET RECIT Model – Comments received
Stakeholder consultation on the paper on RECIT model was
taken, the deadline was 10 January 2007
Comments from following parties has been received so far :CEER – supportive, asks for more detailsOGP – rather supportive, wants to avoid inefficient structures and more detail on the economiesEurelectric – supportiveEurogas – rather supportiveGTE – rather negative, does not want to make effort before 3rd package readyOMV Gas – rather negative, asks for impact assessment
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GRI SSE: EFET RECIT Model – Evaluation of comments
OGP position:OGP Europe supports the principle of establishing regional ISOs as an interim measure leading to single European market, the measures leading to free market for importing gas into and through Europe via investments in LNG; interconnectors etc.; establishment of independent NRAs with similar power and aim to achieve a single grid code via regional grid codes. However the costs for usage of network (economics between R_ISO and TOs) should be more explained
EFET: ok, point taken, think on sort of impact assessment
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GRI SSE: EFET RECIT Model – Evaluation of comments
OGP position:Statements regarding control of flows in supplying pipelines see 2.2. should be more explained and suggest to insert “proposal for” prior to future grid investments decisions.
EFET: positive consideration, after WS clear
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GRI SSE: EFET RECIT Model – Evaluation of comments
OGP position:Criteria set out for independence of the R_ISO in 2.3. could prevent the R_ISO for being a commercially viable operation without significant additional cost to network users.
EFET believes that the independence (effective unbundling) of R_ISO is a key issue in the whole model as only company/entity with no possible influence by particular interested parties will be able to fulfill its responsibilities like efficient management of capacities and gas flows in the regional grid, balancing market based regime coordinated on regional level etc.
We believe that a really functioning regional (European) market based on the clear determination of role for particular market players will bring significant benefits (less capacity congestion, harmonised market and technical rules etc.) to the network users
? Could be part of a potential impact assessment
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GRI SSE: EFET RECIT Model – Evaluation of comments
OGP position:Increasing number of interfaces (from this proposal and proposal for 3rd package – ACER, ENTSOG, R-ISOs) could result in increased bureaucracy.
In comparison to 3rd package the model does not propose any “new” interfaces, it only elaborates on possible way for regional integration and actually significantly reduces the number of interfaces (not each TSO is an interface to the market – parts of the one-stop shop principle)
It only determines roles of particular market players more precisely and gives a clear form for the proposed public consultation process in the 3rd package
It has to be taken into account that the R_ISOs should be established only in the regional/areas where it is reasonable in accordance with the physical and technical conditions/limitations
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GRI SSE: EFET RECIT Model – Evaluation of comments
GTE position:Welcomes the EFET paper as a contribution how the European market might develop, nevertheless its first priority is the development and implementation of the 3rd package – establishment of ENTSOG and its role in consultation processes
EFET does not want to wait for 3-5 years and already tackles now the elements included in the 3rd package.
Current ENTSOG tasks are not operational at all Like other stakeholders (OGP, CEER), EFET would prefer to define a system for a public consultation procedure which ensure for all parties same “power”, access to information etc. We believe that it can be more easily guaranteed by an organisation where all parties are represented than by a body where “only” TSOs have the control
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GRI SSE: EFET RECIT Model – Evaluation of comments
OMV position:Assessment of the impact – which benefits; will competition increase; how the proposal fit with existing contracts between Gazprom and its customers
As mentioned in the beginning the model does not try to find a “new way” to the proposal in 3rd package, it only provides a practical proposal how it can be interpreted
EFET accepts the proposal for the impact assessment, nevertheless in its opinion it should be done by and in the cooperation with ERGEG SSE members (E-Control, AEEG) as chairs of the regional initiative
EFET believes that the proposal of setting up a regional independent body which is responsible only for the issues relating to network (management of capacities, balancing services, dispatching etc.) should fit with the essentials of existing contracts between the importing company (Gazexport) and its customers (shippers) as their position will not change without legal changes
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GRI SSE: EFET RECIT Model – Evaluation of comments
OMV position:Short-term transportation contracts versus long-term
EFET describes in the paper in its opinion necessary types of markets which will support development of a competitive and integrated market facilitated at the wholesale level through trading which can be possible even beyond the national borders
The EFET RECIT paper does not at all propose to cancel all long-term contracts, it even requires that the forward market should cover also long-term periods at least up to 10 years. What EFET is stressing is the importance to increase traders´ confidence in short-term markets which can be ensured through its long term stable development --->short term markets (price transparency) facilitate new market entry and increases competition
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GRI SSE: EFET RECIT Model – Evaluation of comments
OMV position:Potential new legal entity has to face barriers given by different legal and market framework ---> long phase of implementation therefore TSO cooperation is more suitable
EFET is aware about the possible legal obstacles by creating of a regional legal entity nevertheless we believe that the discussion about the obstacles is constructive when a process of setting up such an entity starts (so far it will be only very theoretical discussion)
What is necessary in this case is the commitment of the decision making parties (state representatives, EC, regulators) to support regional integration with all its modalities like a regional independent system operator
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GRI SSE: EFET RECIT Model – Evaluation of comments
OMV position:ENTSOG´s responsibility for inter-TO compensation is superfluous as well as responsibility for operational issues
EFET believes that the proposed model cannot work without any system of payment for the usage of TO networks therefore we proposed an inter-TO compensation system (such a system has been already used in electricity) and as a most suitable entity for proposing such a system seems to be the ENTSOG
The model of R_ISO would bring benefits also to the region SSE which faces obstacles like a lack of supply routes, a lack of active players, a lack of transparency and optimisation of the gas flows however EFET believe that the model is applicable in the whole EU as can be seen by many examples already:- Ruhrgas-Eon and Bayerngas JV, several German zones are merging already-GTS and BEB-GRTG and TIGF; GATRAC; MOL
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EFET RECIT Model - Conclusion
EFET is very much interested in the comments which will be given today and will envisage establishing an updated version with the ultimate goal to tackle all concerns and get support from all parties as reasonably possible
EFET believes that implementation of such a model is key for further development of the liberalised market starting now and taking already the elements of the 3rd package on board
The creation of such a model will lead to the development of regional markets and at the same time reduce the market concentration, ensuring better non-discriminatory and transparent market access.
Regions must be established on a pragmatic basis, e.g. Italy may well remain a region for the time being, however it must introduce a fully fledged balancing market as soon as possible etc..
Regions obviously must be compatible with each other
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Addendum
According to information that EFET has just received
The transit regime in CZ und in SK (also in H und A) differs from national transport.
The situation for Poland and Slovenia is less clear. Clarification will be sought at this
point.