In January 2020, the European Federation of Energy Traders (EFET) reported a functionality process issue to the Functionality Platform and proposed to enhance the availability of firm gas capacity at interconnection points (IPs).

ACER and the European Network of Transmission System Operators for Gas (ENTSOG) have published a series of proposals that address the issue by providing shippers with greater flexibility to book firm capacity at IPs.

What is the functionality process issue about?

EFET considers that the current Network Code on Capacity Allocation Mechanisms (CAM NC) standard auction timetable limits gas trading opportunities, which could affect market efficiency and the quantity of capacity sold by Transmission System Operators (TSOs).

What is the proposed solution?

EFET’s proposal suggests enabling TSOs to sell firm IP capacity in uniform price allocation (UPA) auctions outside the current yearly, quarterly and monthly auctions envisaged by the CAM NC.

The ACER and ENTSOG proposed solutions go beyond the initial EFET proposal. They aim at enhancing the effectiveness of the capacity allocation rules of the CAM NC, while ensuring their adaptability with market conditions and market participants’ needs by:

• Introducing additional booking opportunities;
• Allowing for advance booking of monthly and daily capacity products;
• Improving the efficiency of allocation process; and
• Introducing more flexibility to adapt several CAM rules and parameters.    

What are the next steps?

The Issue Solution Note and the Issue Supporting Note (Annex I) are available at the case page: Greater flexibility to book firm capacity at IPs.

ACER and ENTSOG will publish additional documents (Annex II to the Solution Note) to propose corresponding amendments to the CAM NC.

In the wake of the Russian invasion of Ukraine, the changes in supply and demand created transportation bottlenecks as the gas system was originally designed for optimal transportation of Russian supplies. With liquified natural gas (LNG) and increased pipeline supplies primarily entering the EU from the west, bottlenecks in transportation occurred.

Due to physical congestion at LNG terminals and at cross-border pipelines in North-West Europe, the system was used at full capacity and gas could not easily flow to where it was needed most during the 2022 energy crisis, which drove hub price-spreads high. To address these bottlenecks in the short term, the existing infrastructure must be optimised to accommodate new supply routes. 

In the gas market crisis, short-term mitigating actions are important. The voluntary gas-demand reduction target has been extended until 31 March 2024 and storage-filling trajectories for 2023 have been updated. Addressing the most acute bottlenecks presents a no-regret measure to improve market efficiency in the short term.

In addition to its annual monitoring of congestion, ACER made a focused research of how congestion emerged in the most acutely congested markets of Belgium, France, Germany and the Netherlands, and how the respective transmission system operators (TSOs) and national regulatory authorities (NRAs) addressed the bottlenecks.

ACER’s preliminary findings

• Coordination between TSOs weakened while maximising the availability of firm and interruptible capacities at either side of the respective borders between Belgium, France, Germany and the Netherlands, leading to mismatched transmission capacities; and
• Gas flows from Belgium to the Netherlands, from Belgium to Germany and from France to Germany suffered from physical bottlenecks.

What does ACER recommend?

ACER expects the TSOs to:

• Extensively coordinate their operational actions;
• Jointly optimise the network to accommodate the restructured supply routes;
• Jointly maximise marketing of firm bundled capacities;
• Optimise the sale of interruptible capacities;
• Efficiently bring back unused capacities to the market via congestion management procedures (CMPs); and
• Carefully consider if investment is needed where physical bottlenecks remain after the operational optimisation of the existing network.

ACER expects NRAs to:

• Extensively coordinate;
• Remove any regulatory obstacles that prevent an optimal use of the network to accommodate the new supply routes, e.g., addressing different odourisation practices on the route from France to Germany; and
• While congestion revenues may be used to finance network investment that removes structural bottlenecks, NRAs shall carefully assess the appropriateness of such investment considering the Union’s energy and climate policies.

What are the next steps?

In summer 2023, ACER will publish a report specifically on congestion in North-West Europe with findings and recommendations.

In its 10th Report on Congestion in the EU Gas Markets and How it is Managed, ACER finds a tripling of network congestion. ACER calls on gas Transmission System Operators (TSOs) and National Regulatory Authorities (NRAs) to relieve the bottlenecks.

In the gas market crisis, short-term mitigating actions are important. Europe’s voluntary gas-demand reduction target has been extended until 31 March 2024 and storage-filling trajectories for 2023 have been updated. Addressing the most acute bottlenecks presents a no-regret measure to improve market efficiency in the short term.

Understanding congestion and shift in gas supply routes

Congestion occurs first at the level of contracts when network users cannot obtain the capacity contract they need to flow gas. It is addressed by bringing any unused capacity back to the market.

In the wake of the Russian invasion of Ukraine, the changes in supply and demand created gas transportation bottlenecks. With liquified natural gas (LNG) and increased pipeline supplies primarily entering the EU from the west (in a system originally designed for transporting Russian supplies to Europe), bottlenecks in transportation occurred.

Due to physical congestion at LNG terminals and at cross-border pipelines in North-West Europe, the system was used at full capacity and gas could not easily flow to where it was needed most during the 2022 energy crisis, which drove hub price-spreads high. To address these bottlenecks in the short term, the existing gas infrastructure must be optimised to accommodate new supply routes.  

What are Report’s key findings?

• Congestion emerged at 50 interconnection points following tight market conditions and the need to reroute gas flows away from historic east-west routes to predominantly west-east routes in Europe (with the Russian invasion of Ukraine);
• Congestion revenues collected by TSOs rose sharply from €55 million in 2021 to around €3.4 billion in 2022;
• In North-West Europe, congestion was also physical, meaning that LNG terminals and gas pipelines in North-West Europe were fully used; and
• The most used mitigating measure to avoid unused capacity was selling interruptible capacity, while oversubscription remained the most used among the congestion management procedures (CMPs) that aim to make (unused) firm capacity available.

What does ACER recommend?

ACER urges:

• TSOs to address congestions and maximise availability of capacities;
• NRAs to monitor the congestion in their markets more closely to contribute to the efficient functioning of the internal market for gas.

Access ACER’s 10th Report on Congestion and its technical annex.

ACER invites EU electricity experts to help identify and define 'structural congestion”, in electricity networks. The Regulation on capacity allocation and congestion management (CACM) defines structural congestion in rather vague terms as congestion:

• that can be unambiguously defined;
• is predictable;
• is geographically stable over time; and
• is frequently recurring under normal power system conditions.

ACER considers that the current definition of structural congestion needs to be improved and would benefit from quantitative criteria to better identify such congestion.

Hence, ACER seeks EU electricity network experts' views on how structural congestion should be defined quantitatively and invites them to fill in a survey by 15 June 2023.

ACER encourages interested stakeholders to join the ENTSOs’ new Stakeholder Reference Group (SRG), called ‘Scenarios ETAG’.

ACER’s Framework Guidelines (January 2023) seek to ensure robust joint scenarios for electricity and gas network development planning for the EU’s ten-year network development plans (TYNDPs).

The Framework Guidelines introduce a larger role for stakeholders in the scenarios’ preparation process with a new scenarios SRG to be facilitated by the ENTSOs. 

What is the role of this Stakeholder Reference Group?

The SRG will:

• Offer scrutiny, independently from the ENTSOs, on the inputs, assumptions and methodologies proposed by the ENTSOs and provide its advice to the ENTSOs, within an agreed timeframe. This advice shall be included in the draft Scenario Report submitted for ACER’s Opinion and European Commission’s approval.
• At the end of the scenarios-development process, formulate (a second) advice including an evaluation of the process and recommendations for improvements for the next biennial cycle. The SRG shall share this advice with ACER and the ENTSOs.
• Be an instrument through which the ENTSOs can organise the broad consultation foreseen in Article 12(3) of the TEN-E Regulation.

ACER expects the SRG to offer continuity beyond the biennial TYNDP cycle. ACER encourages the SRG to be involved in the TYNDP 2024 scenarios to the extent possible and formulate an evaluation of the process, while preparing the next scenarios-development cycle.  

What are the next steps?

ACER calls on all interested stakeholders to sign up for the ‘Scenarios ETAG’ Stakeholder Reference Group (via the ENTSOs’ online form). ACER will be an observer to the group and will check that it can function independently as foreseen in the Framework Guidelines.

Access the calls by ENTSO-E and ENTSOG.

ACER publishes today the 32nd edition of its REMIT Quarterly.

What is the REMIT Quarterly?

The REMIT Quarterly is ACER’s main channel of communication with stakeholders on REMIT-related matters, providing updates on ACER’s REMIT activities.

REMIT (Regulation on Wholesale Energy Market Integrity and Transparency) provides an EU framework for the transparency and integrity of energy markets and deters market participants from manipulating the market. It therefore has an important role in protecting the interests of companies and consumers, and ensuring trust in energy markets.

The 32nd edition of the Quarterly has an improved format and wider scope. It covers the first quarter of 2023 and features:

• Cross-border capacity hoarding;
• A summary of the European Commission’s proposals for amending REMIT;
• A report on the potentially distortive use of cross-border wash trades in Single Intraday Coupling (SIDC);
• The statistics for registered reporting mechanisms’ (RRMs’) contingency reports;
• An updated overview of the sanction decisions for the past four quarters, with 364 REMIT cases under review at the end of the first quarter;
• A brief overview of trading on organised market places in the first quarter; and
• Other latest REMIT updates.

Access the 32nd issue of REMIT Quarterly.

Access all issues of REMIT Quarterly.