ACER analyses the national gas balancing regimes of the EU
What are the main findings?
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.
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.
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.