ACER publishes today a consultancy study on the impact of EU and national gas storage regulations.
The study was commissioned to VIS Economic & Energy Consultants with the aim of:
collecting and analysing national measures recently applied by EU Member States (with and without storage facilities) within the framework of the European Gas Storage Regulation;
assessing how these measures contribute to achieving the storage filling targets, and, where possible, estimating the associated costs; and
identifying possible difficulties when implementing the measures.
Gas storages play an important role in the European gas system as they supply up to 25-30% of the total gas consumed in the EU during winter. Storing gas physically in the EU helps mitigating the impact of a potential gas disruption. This is key in a context where the EU’s internal gas production declines, while Europe aims to phase out its remaining dependency on Russian gas supply.
The energy crisis which followed Russia’s invasion of Ukraine in February 2022 underscored the importance of having gas storages adequately filled in across Europe, in case of potential gas supply disruptions.
When gas prices are similar during winter and summer, or even more expensive during summer (as it happened during 2022), market participants are discouraged from injecting gas into storages during the summer, as they would do it at a loss. As a consequence, winter storages levels may be lower and less gas can be withdrawn in case of need. This may pose a risk to the security of gas supply as storage levels at the start of the winter may not be sufficient to address supply-demand imbalances. In such cases, administrative measures may be required to ensure that gas storages are filled in, regardless of unfavourable market signals.
The analysis concluded the following measures recently helped meeting the storage filling targets, despite the discouraging market signals:
Financial incentives for storage users: offering financial incentives for storage users facilitated the utilisation of storage capacity. Incentives such as tariff discounts and direct subsidies have proved to be effective. On the other hand, the interest of market participants in taking part in more elaborate incentive schemes, such as signing contracts for differences, was limited.
Stockholding obligations: imposing stockholding obligations help guaranteeing that storing filling targets can be achieved. However, when positive market price signals incentivise market participants to store gas, there is the risk they can reduce the overall flexibility of the gas system (if stockholding obligations account for the largest part of the storage capacity).
Last resort storage entities: appointing an entity to provide storage filling of last resort contributes to safeguard security of supply, in case the market would not act, but it comes at a cost. The mechanism should be made more efficient by planning when the entity should act, volume requirements, and introducing risk reduction mechanisms (e.g. price hedging by the designated entity).
Use-it-or-lose-it mechanisms: implementing these mechanisms enabled the swift release of booked but unused capacity and contributed considerably to storage filling.
The report further concluded that some measures are in need of greater transparency and verifiability.
The report also found that:
Member States without underground storage facilities made efforts to store gas in neighbouring countries but the remaining technical and commercial constraints should be addressed, by strengthening coordination between Member States with and without storage and finding ways to enhance regional solidarity.
All Member States with underground gas storage facilities met the filling target obligations. Measures implemented by Member States helped overcome negative market signals during the 2022 injection period and contributed to achieve adequate levels of stored gas.
In 2022, the Member States’ underground facilities collectively stored over 630 TWh of gas as result of the measures. This amount represents approximately 53% of the European Union’s total aggregated storage capacity.
As a next step, the Council of European Energy Regulators (CEER) will undertake another study on storage burden-sharing mechanisms and identification of best practices and recommendations to enhance the efficiency of storage filling obligations.
Access the report and the slides summarising the most important findings.
8 March 2024 update: Access the second part of the study.
With gas markets being impacted by a global pandemic (2020) and a European energy crisis (2022), the resilience of the current market rules (also known as “network codes”) has been tested. Although they have mostly ensured a proper market functioning (see ACER’s Market Monitoring Reports and congestion reports), lessons have yet to be learned to further enhance market resilience.
The European gas market must also ensure its readiness to align with the latest policy and technological developments, guaranteeing that the decarbonisation targets set by the Green Deal can be met.
Against this background, the latest European Gas Regulatory Forum (also known as “Madrid Forum”) has recently emphasised the importance of having gas market rules which can adequately reflect this evolution, and therefore prompted for the revision of the Capacity Allocation Mechanisms Network Code (“CAM NC”).
The rules for allocating gas transmission capacity have been in place since 2017, when the current version of the Network Code on Capacity Allocation Mechanisms was adopted.
These market rules harmonise how network users can utilise the gas transmission network to enter or exit a market, and how these capacity rights can be obtained.
As a first step, ACER is planning a public consultation (opening on Tuesday 14 November 2023) and workshop (on Tuesday 12 December 2023) to take stock of what works under the current market rules and collect views from stakeholders on the way forward.
ACER will benefit from this information when it may recommend amendments to the CAM NC in the course of 2024.
ACER is launching a public consultation on the “Capacity Allocation Mechanisms Network Code: achievements and the way forward”, which will run from Tuesday 14 November 2023 until Friday 5 January 2024.
On Tuesday 12 December 2023, ACER will also organise an online workshop on the same topic. Registrations will open on Tuesday 14 November 2023.
The event aims to:
debate the achievements and possible areas of improvement of the CAM NC; and
provide stakeholders with the opportunity to present their views.
ACER also intends to publish a policy paper, tentatively in the first quarter of 2024, to follow up on any identified areas of improvement. This policy paper will be a first input when the formal review of the CAM NC may be launched in the course of 2024.
On 26 September 2023, ACER initiated a procedure to decide on the Transmission System Operators’ (TSOs) proposal on the alternative bidding zone configurations for the Baltic region. After having received the results of the Locational Marginal Pricing (LMP) analysis carried out by the Baltic TSOs, ACER is now in a position to start this decision-making process.
A bidding zone is the largest geographical area within which market participants are able to exchange energy without allocating capacity. Currently, bidding zones in Europe are mostly defined by national borders. However, the existing European electricity target model requires defining bidding zones based on network congestions. Better defined bidding zone configurations, i.e. whose borders are based on long-term, structural congestions, can bring several benefits, including:
increased opportunities for cross-zonal trade,
more efficient network investments, and
cost-efficient integration of new technologies.
To initiate the review process, all involved TSOs need to submit a proposal for:
the methodology and assumptions that should be used, and
the alternative configurations of bidding zones that relevant national regulatory authorities (NRAs) should analyse and approve unanimously.
The bidding zone review process initiated in October 2019; however, the TSOs’ initial proposal lacked alternative bidding zone configurations for a large part of Europe. They were therefore requested by the NRAs to submit an updated version of the proposal, which was then referred to ACER for decision (July 2020).
As a following step, ACER issued two separate decisions:
In November 2020, ACER approved the bidding zone review methodology and assumptions, and requested TSOs to carry out an LMP analysis.
In August 2022, following provision of information, ACER decided on the alternative bidding zone configurations to be analysed in the review process for all EU Member States, except for those of the Baltic region. This decision was deferred due to lack of data.
Following the submission of the results of the LMP analysis by the Baltic TSOs, ACER is now able to decide also on the alternative bidding zone configurations for the Baltic region.
ACER will adopt this decision by 26 December 2023.
To take an informed decision, ACER will consult with TSOs and NRAs.
ACER publishes today its Opinion on the draft regional lists of proposed electricity projects of common interest (PCIs) and projects of mutual interest (PMIs).
PCIs were introduced by the 2013 TEN-E Regulation. PCIs are infrastructure projects which benefit from accelerated permitting procedures and funding as they are identified as key contributors to achieving the EU’s energy and climate objectives, as set by the European Green Deal. The recent 2022 revision to the TEN-E Regulation introduced hydrogen projects as an eligible category for PCI status (see ACER Opinion on the draft regional lists of proposed hydrogen PCIs/PMIs 2023).
The revision also introduced the concept of PMIs. These are projects promoted by the EU in cooperation with third countries and are recognised as enabler of the energy transition (and therefore also benefit of accelerated permitting procedures).
The list of PCIs and PMIs is constructed by the European Commission and the Member States every two years. This is the first list under the revised Regulation.
Under the TEN-E Regulation, ACER:
provides input to the Regional Groups during the assessment of candidate projects in coordination with National Regulatory Authorities (NRAs), and
assesses the draft regional lists and provides an Opinion to the Commission on the consistent application of the criteria and the cost-benefit analysis (CBA) across regions.
ACER’s Opinion identifies three key areas of improvement:
Selection process: the selection process would benefit from ensuring that the Ten-Year Network Development Plan (TYNDP) is finalised before the assessment of PCIs and PMIs starts, as well as from greater transparency. The latter can be achieved by:
Releasing all key data and information to stakeholders before the project assessment starts.
Making the comments received in the public consultation on the candidate projects publicly available.
Informing stakeholders about the key elements of the methodologies used for the selection, and consulting with them in a timely manner.
Clearly explaining the reasoning for the inclusion or exclusion of the candidate projects from the draft PCIs and PMIs lists in the document submitted to ACER.
How infrastructure needs are identified: base the discussion on the identification of infrastructure needs on the ENTSO-E’s needs analysis and calculations – e.g. the needed target capacities per border.
Selection methodology: ACER proposes that the selection methodology could be improved by:
Considering multiple scenarios for the assessment.
Introducing a simplified methodology for assessing those projects that are in their early stages.
Using the monetised benefits as a basis of the methodology, while other drivers, such as the fulfilment of wider EU policy objectives, could be considered as a separate step.
ACER concludes that it is unable to assess the consistent application of the criteria of the TEN-E Regulation and the cost-benefit analysis across all the candidate projects. This is due to the lack of transparency in the implementation of the selection methodology and the lack of consideration of multiple planning scenarios.
ACER’s Opinion will be taken into consideration by the Regional Groups to finalise the PCIs/PMIs list. The Commission will then decide on the list by 30 November 2023.
ACER publishes today its Opinion on the draft regional lists of proposed hydrogen projects of common interest (PCIs) and projects of mutual interest (PMIs).
PCIs were introduced by the 2013 TEN-E Regulation. PCIs are infrastructure projects which benefit from accelerated permitting procedures and funding as they are identified as key contributors to achieving the EU’s energy and climate objectives, as set by the European Green Deal.
The TEN-E revision (2022) introduced the concept of PMIs. These are projects promoted by the EU in cooperation with third countries and are recognised as enabler of the energy transition (and therefore also benefit of accelerated permitting procedures).
Under the TEN-E Regulation, ACER:
Provides the Regional Groups with input during the assessment of candidate projects in coordination with National Regulatory Authorities (NRAs) and
assesses the draft regional lists and provides an Opinion on the consistent application of the criteria and the cost-benefit analysis (CBA) across regions.
This year, the Commission will adopt the first PCIs/PMIs list since the 2022 revision of the TEN-E Regulation. For the first time, the list includes hydrogen infrastructure as an eligible PCI category. The hydrogen sector holds considerable potential for shaping the future energy landscape. Its introduction as a PCIs/PMIs category has resulted in the submission of numerous hydrogen projects for PCI/PMI status.
In our Opinion, we delve into the 2023 PCIs/PMIs selection process, pointing out challenges faced within it and providing recommendations for the future selection rounds (happening in 2025).
ACER’s Opinion identifies three key priorities:
Identifying the needs: identifying hydrogen infrastructure needs poses its own specific complexities. As the hydrogen industry is in its early stages, assessing the future demand is difficult. Identification of needs would benefit from a more advanced methodology with more precise data inputs. ACER recommends Regional Groups dedicate more effort to tailor a robust process that anticipates the hydrogen sector’s growth.
Creating an effective selection methodology: developing a selection methodology that takes into consideration the unique uncertainties and specificities of the hydrogen demand and supply, needs to be a priority. ACER recommends synchronizing the finalisation of the Ten-Year Network Development Plan (TYNDP) process with a start of the PCIs/PMIs selection process and incorporate a hydrogen-specific CBA (see ACER Opinion on the draft ENTSOG CBA methodology of hydrogen infrastructure projects). ACER also recommends adopting an approach which considers various scenarios, aligned with the EU targets, to ensure a more comprehensive project assessment.
Ensuring greater transparency and data availability: ACER highlights the need for greater transparency in the application of the selection methodology for candidate projects. Sharing results transparently with Regional Group members promotes a shared understanding and enables informed decision-making. ACER observes also other challenges of this process, such as the unavailability of project-specific CBA results and the limited competence of National Regulatory Authorities in hydrogen, that prevents ACER to make a comprehensive assessment under the current TEN-E Regulation criteria.
ACER concludes in its Opinion that is unable to assess the consistent application of the foreseen selection criteria and the cost-benefit analysis of all candidate projects as outlined above.
ACER’s Opinion calls for improvements in the next PCIs/PMIs selection process (happening in 2025), namely:
more transparency;
more precise methodologies and coherency in their application; and
timely synchronization between the TYNDP process and the PCIs/PMIs selection process.
As ACER acknowledges these questions are adding complexity, it believes addressing them in the next PCIs/PMIs selection process is key to build a robust and future-proof hydrogen sector.
See also our Opinion on the proposed electricity PCIs/PMIs, published today.
Today, ACER releases the 2023 report on the security of EU electricity supply.
The report looks into four main areas:
The report provides recommendations on improving Europe’s security of EU electricity supply framework.
ACER will present the key messages of the security of EU electricity supply report at its webinar on 11 October 2023.
High-level panellists Catharina Sikow-Magny (DG-ENER), Christian Zinglersen (ACER) and Tim Schittekatte (Florence School of Regulation) will discuss the findings of the report and address key questions on the topic.
Access the Security of EU electricity supply report.
Dive into ACER's informative infographic.
Explore the monitoring data on security of electricity supply.
ACER publishes today an Opinion on the European Network of Transmission System Operators for Gas' (ENTSOG's) draft cost-benefit analysis (CBA) methodology for hydrogen infrastructure.
ENTSOG is required by the TEN-E Regulation (2022) to draft the CBA methodology for hydrogen infrastructure projects.
ENTSOG’s CBA methodology should allow for a comparison between the costs and expected benefits of the infrastructure projects in a clear and unbiased way. It is a useful tool for decision-makers to understand the merits of hydrogen infrastructure projects.
In particular, the project-specific CBA assessments are used to evaluate projects in:
the European ten-year network development plans (TYNDPs);
the selection process of projects of common interest (PCIs); and
decisions on cross-border cost allocation (CBCA) of PCIs.
ACER’s Opinion:
Reviews ENTSOG’s development and consultation process that led to the draft methodology.
Assesses whether the draft CBA methodology is compliant with the TEN-E Regulation and its consistency with other CBAs methodologies.
Provides ENTSOG with recommendations that need to be considered before submitting the draft CBA methodology to the European Commission for approval (expected by the end of 2023).
ACER concludes that the draft CBA methodology for hydrogen infrastructure projects largely aligns with the requirements outlined in the TEN-E Regulation.
However, ACER recommends ENTSOG to consider improvements in the following areas:
Making CBA results more understandable to project evaluators by adding examples of the application of the CBA methodology to fictional hydrogen infrastructure projects.
Adapting the hydrogen reference networks.
Strengthening clustering rules and aligning them with ACER’s position paper (towards greater consistency of cost benefit analysis methodologies) while allowing some flexibility in the implementation for the next TYNDP 2024.
Improving the consistency with other CBA methodologies foreseen in the TEN-E Regulation (e.g. in reference to parameters such as the social discount rate (SDR), the timeline of analysis and the use of residual value).
Enhancement of the CBA indicators to ensure they are fit-for-purpose. More clarity is needed on how dual assessments are performed and for which indicators.
Improved assessment of the security of supply impacts. Different values for the costs of disruption for natural gas (CoDG) and for hydrogen (CoDH) should be used.
Application of the CBA methodology for all TYNDP projects.
ACER’s recommendations aim to improve the CBA methodology, making it more effective and transparent in evaluating the merits of hydrogen infrastructure projects.
In line with the TEN-E Regulation, ENTSOG is required to take into account ACER’s recommendations before submitting an adapted version of the methodology to the Commission for approval (by the end of 2023).
Stay tuned for further developments in hydrogen infrastructure such as ACER’s upcoming Opinion on the draft regional lists of proposed hydrogen PCIs.