Position paper on the draft changes of the regulation on grid access
(Gasnetzzugangsverordnung) in Germany
Paris, 27th of April 2017
On 20th April 2017, the German Federal Ministry of Economic Affairs and Energy (BMWi)
published an amendment to the regulation on grid access (GasNZV) in Germany. The
consultation was open to the German Bundesländer and industry associations and ended
on 27th March 2017. PEGAS uses the opportunity to publish a position paper regarding
the proposed changes of the GasNZV.
Market area integration: Cost-benefit analysis required
The draft regulation contains the obligation for the German Market Area Managers (MAM)
to merge the two German hubs, GASPOOL and NCG, at the latest by 1st April 2022. The
discussion of market area integration was initiated in 2016 by Germany’s Federal Network
Agency (BNetzA) following the ACER gas target model. BNetzA requested a study by the
independent consultant WECOM, which was then opened for consultation. A large number
of market participants and associations handed in their responses, and, in addition, the
topic was also discussed in a joint workshop with market participants and BNetzA. It is
recommended by WECOM and widely shared by the industry as well as BNetzA that any
decision on market area integration shall follow a cost-benefit analysis.
In line with the reasoning of the proposed changes in the GasNZV, the integration of NCG
and Gaspool shall ensure that end consumers in both German market areas benefit from
the advantages of a potential international integration in the future. However, it is not a
given that German market participants will benefit from international market area
integration. This depends on the costs of such integration and the supply and demand
situation in neighbouring countries. Lastly, PEGAS believes that cost and benefit
considerations should include neighbouring markets as well and should not be limited to
Germany.
Obvious costs arise from harmonisation and integration efforts, as well as from the fact
that the market areas of GASPOOL and NCG are physically not sufficiently
interconnected. This issue can be resolved by either investing in infrastructure or by letting
the MAM manage congestion, both measures creating costs that, finally, end consumers
will bear.
While the potential benefit of market area integration would rather stem from bundling
liquidity a possible improvement of security of supply remains questionable. As regards
the spot markets, the corresponding benefit is assumed by WECOM and PEGAS to be
small, since spot markets in the market areas of GASPOOL and NCG are already very
liquid and competitive. However, as regards the derivatives markets, the liquidity in both
German market areas is underdeveloped, since the market participants chose the TTF as
the central market area for hedging purposes as prices are very correlated. The
constellation with liquid local spot markets and a liquid central hub for hedging is, thus, an
outcome on which the market has coordinated and which enables efficient short-term
balancing and mid-/long-term hedging.
This trade-off shows that neither a full integration of hubs in Europe (little gains from
liquidity pooling and high costs) nor fragmented and illiquid local markets constitute
optimums,
but
rather
a
solution
between
these
two
extremes.
Under consideration of these commercial and trading aspects, PEGAS is of the view that
the constellation of GASPOOL, NCG and TTF is close to that optimum. However, the
question of whether this is true needs to be verified by a cost-benefit analysis, taking into
account effects in Germany and neighbouring countries.
Introduction of Within-Day transport capacities booking on non-interconnection
points
PEGAS welcomes the proposed changes to enable intraday transport capacities equally
for (existing) interconnection points and now also for non-interconnection points (e.g. gas
storage facilities). As a result, the number of market participants active on the market can
be increased to reinforce support for the “Energiewende” with market-based products and
prices and harmonised trading mechanisms.
Germany has a high share of flexible renewable energy sources with very short lead times
for activation/deactivation, but, at the same time, with a limited operating time of a few
hours per day. It is, therefore, helpful to enable booking and payment of gas transport
capacities also for individual hours. This could increase both the competitiveness of the
natural gas infrastructure (e.g. gas-fired power plants or usage of gas storage capacities)
and the value of natural gas as a commodity to back up the “Energiewende”. PEGAS has
already introduced corresponding trading products for the respective next 24 individual
hours in spring 2016.
Summary
In summary we can confirm that PEGAS is of the view that a cost-benefit analysis should
constitute the basis for any market area integration. In the case of Germany, we believe
that the costs exceed the benefits.
PEGAS welcomes the fact that within-day capacities will also be available on noninterconnection points in future.
Contact
Dr Jan Richter
Head of Regulatory Affairs & Communications
Powernext SA
Tel.: +33 173 03-7608
[email protected]
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