The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today its Opinion on the European Network of Transmission System Operators for Gas (ENTSOG) Winter Supply Outlook 2021/2022.

What are the main highlights of ENTSOG Winter Supply Outlook?

ACER highlights the following findings from ENTSOG’s Outlook:

• The EU storage level on 1st October 2021 (75% of overall storage capacity) is one of the lowest in recent years, with varying situations among countries.

This is primarily due to a record high use of storage flexibility during the previous winter and a low injection during the summer with record-high gas wholesale prices.

• The European gas infrastructure offers sufficient flexibility to supply volumes to meet demand in Europe, assuming that gas supply is available in similar volumes as in recent years.

However, in case of a cold winter, the gas market would need to increase imports from pipelines and/or LNG by 5% to 10% more than the maximum volumes observed in recent years.

• Early and significant gas withdrawals from storages would result in low storage levels at the end of the winter season, with a negative impact on the gas system flexibility.

• South-Eastern Europe has significantly reduced its exposure to demand curtailment following the commissioning of new infrastructures, such as the Trans Adriatic Pipeline, Turk stream and other investments.

Despite this improvement, the Outlook’s supply route disruption simulations show that some demand curtailment under extreme temperatures are possible in selected regions.

What is ACER’s assessment?

ACER welcomes the timely publication of the ENTSOG Winter Outlook and finds it contributes to the objectives of the EU Regulations.

In particular, the Agency:

• notes with concern that, in case of a cold winter, the gas market would need to increase its gas imports from pipelines and/or LNG compared to maximum volumes observed in recent years, creating a risk of exposure to high gas wholesale prices.

• welcomes ENTSOG’s willingness to monitor the storage levels’ evolution and import volumes throughout the upcoming winter and to report on a regular basis and when anomalies appear.

• highlights the critical importance of counting with adequate storage levels towards the end of the winter season in anticipation of possible high demand or system stress situations.
  • Early and significant withdrawal would result in low storage levels at the end of the winter, with a negative impact on the flexibility of the EU gas system.
  • ACER expects storage users to prudently withdraw gas from storage to contribute to safeguarding the continuity of gas deliveries throughout the winter, in compliance with the contractual commitments and storage obligations, where applicable.

• identifies the existence of specific risk factors for the upcoming winter season (not always factored or mentioned in the Outlook), such as:
  • uncertainty on the availability of additional volumes from major sources of gas imports going beyond the contracted volumes,
  • very high gas wholesale prices.

ACER calls on ENTSOG and all actors with responsibilities related to gas supply continuity and price monitoring to remain vigilant for the upcoming winter in regards of those risk factors.

What does ACER recommend?

ENTSOG should consider improving future Outlook’s assumptions and methodology to better identify potential supply risks, including exposure to very high gas wholesale prices.

In particular, ACER encourages ENTSOG to consider using a complementary scenario based on expected gas supply and booked capacities in addition to the current scenarios based on historical values of gas supply. ACER also suggests to  include embedding expected gas prices and gas price demand elasticity into ENTSOG’s modelling.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today its second report on the implementation of the EU Network Code on Harmonised Transmission Tariff Structures for Gas in Slovenia. In the report, ACER recommends that the Slovenian national regulatory authority for energy (NRA) improves the compliance of the reference price methodology with the requirements of the Tariff Network Code, including on transparency and on the choice of the cost drivers used to derive tariffs for all points of the network.

In addition, the Agency recommends that the NRA provides a clarification on the Transmission System Operator (TSO) revenue to be recovered through tariffs and on the reconciliation of past under-recoveries. This should improve transparency on the revenue to be recovered by the TSO and predictability on the calculation of future tariffs.

The recommendations made by the Agency aim at ensuring several requirements laid out in the Network Code, which relate to transparency, cost reflectivity and to preventing undue cross-subsidisation when setting transmission tariffs. These rules contribute to market integration, enhancing security of supply and promoting the interconnection between gas networks.

The Slovenian NRA shall take a motivated decision by 23 January 2022.

Access the report.

Find out more and access all ACER reports on national tariff consultation documents.

The EU Agency for the Cooperation of Energy Regulators (ACER) today submitted to the European Commission its Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design.

The European Commission, in its “toolbox” Communication of 13 October 2021, tasked the Agency with carrying out an assessment of the current wholesale electricity market design by April 2022, and providing a preliminary assessment by mid November 2021.

What’s in ACER’s preliminary assessment?

The ACER Preliminary Assessment complements the analysis already presented in ACER’s Note on the High Energy Prices, published in October.

The Agency’s Preliminary Assessment:

• provides some key factors for the relatively uneven electricity price impacts across Member States, and shows how countries with high gas dependency and low interconnectivity were more exposed to high electricity prices;

• looks at how the move towards more spot pricing of gas in Europe (rather than long-term contracts) has yielded significant benefits over the past decade and how this relates to price volatility issues going forward;

• includes key characteristics of the current electricity market design, adding ACER’s initial perspective on certain price volatility issues, and (in light of the current political debates) on alternative market design approaches including the notion of possibly decoupling electricity market outcomes from gas price dynamics through price caps or technology-dependent average prices;

• adds the latest data and analysis from ACER’s energy market monitoring on related dynamics in the European electricity market; and

• provides an initial outline of ACER’s upcoming April 2022 assessment.

What to expect in the ACER April 2022 assessment?

In its broader assessment due in April 2022, ACER will provide an analysis of:

• the benefits and drawbacks of the current wholesale electricity market design and related matters;

• the issue of sufficient revenue certainty in electricity markets in view of the massive  investment needs up ahead; and

• the options for cushioning or shielding end-consumers from perceived excessive levels of price volatility that impact affordability.

What’s next?

ACER will hold a workshop with stakeholders in the first half of February 2022.

To receive the latest ACER news direct to your inbox, sign up (for free) to ACER’s infoflash news.

Access the Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design.

Over the years, market players have raised numerous issues with access to gas transmission capacity at the borders between the European Union (EU) and the Energy Community, as well as within the Energy Community itself. As a consequence, the EU Agency for the Cooperation of Energy Regulators (ACER) and the Energy Community Secretariat (ECS) jointly held a public consultation to investigate how the market assesses access to capacity in the region, receiving 15 responses. As a follow up of the analysis, ACER and ECS publish today a joint summary note of the responses.

Among others, market users identified obstacles related to transparency, lack of connection between transmission capacity and commodity markets and gas quality standards. They also pointed out possible solutions including:

• full adoption and application of the EU and Energy Community regulatory framework (e.g. Network Codes)

• greater regulatory oversight and

• addressing market dominance.

ACER and ECS call upon the national regulatory authorities (NRAs) and transmission system operators (TSOs) to follow up with the relevant market players on these issues. These actions can take place at regional level through the Gas Regional Initiative South-South East, whereas specific interconnection points may require action from individual NRAs and TSOs.  

Find out more in the Summary Note.

Market players have no interest in making long term commitments that pay for gas network expansion according to the latest report on the monitoring of incremental capacity published by the EU Agency for the Cooperation of Energy Regulators (ACER).

The report investigates the incremental capacity cycle between July 2019 and July 2021 and focuses on those regulatory decisions approving projects to proceed to the incremental process’ final stage.

What is the incremental capacity process?

The incremental capacity process mandates transmission system operators (TSOs) to investigate whether some degree of non-binding interest for new capacity can be found at EU gas markets’ borders. If TSOs find sufficient demand, they design a project based on the expressed interest and submit a joint project proposal (including the economic parameters to carry out a viability test) to the concerned national regulatory authorities for coordinated approvals.

In the final step of the process, TSOs request binding commitments from the market through an auction of the incremental capacity based on the approved economic parameters. The project is implemented by TSOs only when the market commitments lead to a viable project where revenues exceed the expected costs.  Otherwise, the incremental project is not implemented.

This process of market testing is repeated every odd year on all EU gas markets’ borders.

What is the role of ACER?

ACER monitors the process to ensure it allows for greater interconnectivity and a better functioning of the internal gas market without burdening the existing network users.

What are the report’s main findings?

The analysis showed that, despite TSOs found significant non-binding interest from the market on gas networks expansion (in about one third of the assessed market borders), the market was not willing to convert such interest into any binding contracts that would pay for the capacity increase.  As a consequence, no new capacity was developed by the incremental auctions in the latest cycle (2019-2021).

When comparing the results with the previous cycle (2017-2019), the report finds not a single unit of gas transmission capacity developed on the basis of the incremental process after four years.

This outcome can be explained by:

• the maturity and saturation of the gas transmission capacity’s market

• by market players factoring in the European Union’s and national climate and energy policies in forecasting the evolution of the gas market, or

• the market finding unattractive the current access conditions to incremental capacity.

ACER reminds the importance of having a network expansion based on robust demand indications to ensure the overall efficiency of the incremental process. This is particularly key in the current gas market, and in view of achieving the European Union’s climate and energy policy objectives.

Find out more in the report.

The EU Agency for the Cooperation of Energy Regulators (ACER) found improvements in the selection of projects of common interest (PCIs) for trans-European energy infrastructure such as a list of gas projects where sustainability criteria has been considered and a more objective process for selecting electricity projects. However, in both ACER Opinions on the matter published today, one on gas projects and another one on electricity's ones, ACER also notes shortcomings including lack of transparency in the assessment methodologies.

The opinions also include the view of National Regulatory Authorities on specific candidate projects and provide further recommendations for future PCI selection processes.

ACER acknowledges the efforts by the European Commission to enable a smooth selection process, despite the pandemic-related difficulties prevailing at the time of the PCI selection.

Selection of gas projects resulted in shorter PCI list

The path towards decarbonisation shows in the selection of a shorter list of projects in the field of gas, where sustainability criteria has been considered.

In its opinion, ACER also highlights positively the fact the consultation period for PCI candidates was extended and that the indicators used in the infrastructure needs' methodology were simplified and aligned with the projects assessment's methodology. Furthermore, consistency was improved by applying the same threshold value across Regional Groups for project selection.

More objective selection process for electricity projects

In the field of electricity, ACER welcomes the European Commission’s steps towards a more objective selection process. This has been achieved by reducing the number of potentially subjective benefits established by project promoters and by eliminating the enhanced socio-economic welfare approach used in the previous PCI selection round.

Shortcomings for an in-depth analysis

Due to a lack of transparency in the assessment methodologies, ACER was not able to assess fully the consistency of the application of the criteria and the cost-benefit analysis in accordance to the EU Regulation for Trans-European Energy Infrastructure. In addition, while the regulation requires the consideration of multiple scenarios when selecting electricity projects, only one scenario was used.

ACER calls on the Regional Groups, responsible for proposing and reviewing projects of common interest, to continue their work on further improving the transparency of the process and the methodologies for assessing the candidate PCI projects taking into account ACER’s recommendations included in its Opinions.

Access the electricity PCI Opinion (its Annex) and the gas PCI Opinion.

Energy commodity prices have reached unprecedented high levels across Europe. Gas prices in October 2021 are 400% more expensive than in April 2021. Power prices have increased by 200% (driven mainly by the increase in gas prices). Governments are interested in identifying the key drivers and in determining if it is a temporary shock or a permanent shift. The answers to these issues will help inform their policy response.

Today, the EU Agency for the Cooperation of Energy Regulators (ACER) publishes a note providing data and insights on the recent high energy prices in Europe. ACER’s note on high energy prices:

• identifies the drivers and the impact on price levels across Europe;
• provides the dominant market outlook of how long it is likely to last;
• looks at certain market behaviours; and
• touches on some important policy considerations (both short term and longer term).

Why are energy prices so high and how long will it last?

While various factors have contributed to the high energy prices in Europe, the main driver is the surge in the price of natural gas, caused mainly by a tight global LNG market. Forward markets expect a significant drop in wholesale prices for gas and electricity in spring 2022. A key variable in the very near term is the upcoming winter and its implications for gas demand.

Policy considerations – short term and longer term

The European Commission’s is preparing  a “toolbox” of measures that national governments could use to respond to price hikes without endangering the functioning of EU wholesale markets. This note by ACER touches on a few select policy considerations related to this response, namely:

• disproportionate effects of high prices on vulnerable consumers and the possibility for Member States to mitigate this in the short term without unduly distorting fundamental market signals;
• the functioning and rationale of the current EU electricity market design vis-à-vis the current high prices;
• certain issues related to gas supply going forward such as possible joint purchasing of strategic gas reserves as well as possible obligations for gas storage; and
• longer term transition trajectories and the link to holistic policy.

Today’s energy price squeeze is a reminder of Europe’s still high-dependency on imported fossil gas and the inherent volatility of global commodity markets. It is also a reminder that a well-designed energy transition pathway going forward will rely on holistic policy that targets demand just as much as supply, focusing on both the short-term and the long-term. As such, Europe’s transition pathway will likely need to be a more “managed transition” in the years ahead with both government and regulatory monitoring playing a significant role.

See also the ACER Director’s presentation on Europe’s energy prices to Finance Ministers at the 4th October Eurogroup meeting.

Top of the agenda of today’s Eurogroup meeting (4th October 2021) is the macro-economic situation in the euro area, including inflation and energy price developments. 

The Eurogroup is an informal body in which the Finance Ministers from the Eurozone discuss various euro-related matters concerning their countries' common responsibilities. Its main task is to ensure close coordination of economic policies among the euro area’s member states and promote conditions for stronger economic growth.

Mr Cristian Zinglersen, Director of the EU Agency for the Cooperation of Energy Regulators (ACER), was invited as a guest speaker today to update the Eurogroup on recent energy price developments. 

Among various topics, Mr Zinglersen addressed:

• the drivers of the energy price developments and impacts across Europe

• the outlook for the next six months, and

• policy considerations (short term, market design and broader energy transition pathways).

He explained that global gas (LNG) supply/demand dynamics play a key factor impacting energy prices, that the tight market conditions are expected to relax in Spring 2022, and that the policy implications are significant.

Register to ACER newsletter not to miss any updates on this topic.

In the meantime, check out the ACER Director’s slides.

The EU Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) publish their joint White Paper on Rules to Prevent Methane Leakage in the Energy Sector. The White Paper is the outcome of a survey of National Regulatory Authorities.

It presents the views of ACER and CEER on the European Commission’s Communication on an EU strategy to reduce methane emissions.

The paper has 13 recommendations covering six areas:

• the general scope and the overall approach to the introduction of rules to prevent methane leakage in the energy sector,
• monitoring and detection
• quantification
• reporting
• validation and mitigation, and
• the regulatory treatment of costs related to methane emissions.

Access the White Paper. 

The paper is one of a series of ACER-CEER “European Green Deal” Regulatory White Papers.

Register for the ACER-CEER Methane Emissions Webinar (14 September).

The EU Agency for the Cooperation of Energy Regulators (ACER) has published its latest Balancing Monitoring Report including a comparative performance assessment of the gas balancing zones of 22 Member States with the aim to assist National Regulatory Authorities for Energy (NRAs) and Transmission System Operators (TSOs) understand the strengths and weaknesses of each regime.

Transparent balancing systems pave the way for fairly priced balancing products, and consequentially lead to efficiency gains at the wholesale level, which should ultimately benefit final consumers.

Most relevant findings on balancing systems design, imbalances, and TSO’s balancing actions are:

• Greece – No trading platform is evident.
• Romania – Several days of TSO balancing actions on both sides of the market with inverted prices, which is not a straightforward outcome.
• Italy – The use of storage tools side by side with short-term standardised products and high levels of long and short imbalances subject to cash-out, compared to other balancing zones.
• France – The availability of the linepack service (GRTgaz’s Alize, Teréga’s SET) partly undermines the incentive of network users to balance themselves fully on a daily basis. 
• Germany – High levels of costs visible in balancing, although these might be justified in the context of wider benefits of variant 2 insofar as it supports competition amongst gas suppliers and which might be the subject of a cost-benefit assessment.
• Croatia – Pricing effects may result from the combination of illiquid balancing market and default imbalance pricing rules that may create instability.
• Lithuania – The system is apparently always short, necessitating only TSO balancing buys, and the balancing regime may be distorted via facilities that allow network users to trade after-the-end of the gas day.
• Hungary – Still using two trading platforms which may fragment short term market liquidity and transparency of price formation.
• Czech Republic – Most imbalance cashouts are avoided via an after-the-day trading of linepack flexibility whereby, effectively, network users are allowed to trade after the end of the gas day.
• Spain – The data submission implies that only within-day title products are used for TSO balancing, yet some aspects raise questions about the need to refine the TSO’s balancing policy.
• Slovakia – Limited TSO balancing actions are fragmented across balancing platform trades and balancing services rather than being focussed on the trading platform.
• Slovenia – Outcomes may be distorted by wide imbalance price differentials which give rise to a bias towards balancing sells other than during some discrete periods within year when balancing buys are dominant.
• Ireland and Latvia-Estonia – The TSO balancing actions are dominated by system sells.
• Denmark-Sweden – Imbalances are higher than observed in our analysis in earlier years, possibly due to a temporary decrease in domestic gas production.

The report, which is the 5th annual report published by the Agency on the matter, has suggestions for further research on balancing implementations in the EU gas markets. ACER considers that a closer look at national balancing systems is needed in case of:

• High price differentials between TSOs balancing actions buy/sell and network users buy/sell.
• High values of network users’ imbalances or TSOs’ actions.
• System asymmetries on either the buy or sell side.

Access the report.

How was the assessment done?

The principal objective of this year’s monitoring has been to offer automated calculations for the indicators of the Balancing Analytical Framework (BAF). These indicators, which describe various aspects of balancing implementation, were first presented by ACER in its 2nd Report on the Implementation of the Balancing Network Code. The work has involved setting up a new IT system to capture data inputs and to process them. The automation will support to systematically assess individual balancing regime performance and cross-balancing regime comparison in the future.

What does the cross-balancing regime comparison show?

ACER compared the 22 balancing regimes using 8 key indicators and paid particular attention where the selected indicators showed extreme values in this cross-country comparison. Briefly, the indicators describe:

• Four of them, the residual role of the TSO with a reference to the frequency and the average price spreads concerning the TSOs’ buy and sell actions.
• Three of them, the network users’ balancing activity looking at the imbalance quantities of the network users, the average imbalance prices and price spreads, in order to understand the different incentives network users might face within the different EU balancing regimes.
• Finally, a single indicator explains the net payments charged or credited to network users, assessing whether these payments are of a high value.

The indicators suggest that some implementations could evolve in order to maximise the benefits from the implementation of the Balancing Code.

What comes next?

The Agency sees two significant strands of activity that could support implementation in the upcoming years:

• The first strand would involve enhancing the IT application, for example allowing access to the data and outputs for individual NRA/TSO.
• The second strand would be for ACER to perform further studies with increased interaction with NRAs/TSOs/stakeholders about the local specificities of balancing regime implementations and deepen the qualitative part of the analysis, as it was done in earlier reports.

The Agency welcomes the stakeholders’ feedback on this report and solicits views about the suggested next steps. 

Main recommendations

The application of the BAF, in particular the cross-regional comparison, may help NRAs to refine the national balancing regimes. In ACER’s view, key regime parameters (e.g. small adjustment in imbalance cashout pricing, the performance of the information systems) should change, as the market evolves. The evolution of the market will create further opportunities to refine the design and/or certain parameters to deliver more efficient outcomes.

The Agency notes that progress has, and continues, to be made. The Agency observes as well that a few countries may be incompliant with certain provisions of the Balancing Code. Whilst this year’s analysis has been focussed on an assessment of effectiveness, it remains desirable to review compliance in a future study.