Fi Financing nancing the gas gas tr trans ansmis mission sion netw twork ork Analyzing the effects of duration dependent multipliers Eren Çam | Dominic minic Lencz ncz | Simon Schulte | ENERDAY - Dresden | 12.04.2019
Agenda da Motivation & Background Research question and methodology Preliminary results 2/13
Introd troduct uction ion Motivation Indicati tive ve German gas demand for 2050 Energ rgy transi sitio tion Curren ent t German gas demand Electrification scenario - dena EL95 GWh/ h/d GWh/ h/d 6000 6000 5000 5000 4000 4000 3000 3000 2000 2000 1000 1000 0 0 Jan Apr Jul Oct Dec Jan Apr Jul Oct Dec Decreased demand for long-term transmission capacity • Consequ quence ce Increased demand for short-term (e.g. daily) transmission capacity • Efficient pricing of short-term vs. long-term transmission capacities gets more • Implicati tion on relevant 3/13
Introd troduct uction ion Background Financi ncing ng the e gas s transmis ission n netw twork rk Who: Gas traders who transfer gas using the gas transmission network PL Wh What: t: Entering and exiting a transmission grid market area (entry-/exit-tariffs) How: Traders need to buy the transmission capacity Gaspool they require in explicit auctions How is trans nsmis issi sion on capaci city y priced ed? Reduced tariff Multip tipliers iers EU TAR duration dependent tariff auction 1 - 1.5 for quarterly and monthly capacity 2017 (reserve price) premium 1 - 3.0 for daily and intradaily capacity Multipliers increase the relative price of short-term Impact on transport, Effect ect of capacities in comparison to long-term capacities storage, gas prices … multiplier ers Impact on 1) short-term efficiency, 2) long-term efficiency and 3) allocation of costs 4/13
Introd troduct uction ion Research question What are the adequate multipliers to balance between The big 1. facilitating short-term gas trade, multiplier er 2. providing long-term signals for efficient investment in the transmission network, quest stion on 3. enhancing cost reflectiveness of transmission network charges? This question is discussed currently EU-wide within an a consultation (NC TAR 2017 (Article 28)) What are the effects of multipliers on the gas dispatch? Intuitive hypotheses: Questi tion on 1. Multipliers increase long-term capacity bookings. analyzed d in 2. Multipliers decrease volatility of gas transports. this resea earc rch 3. Multipliers increase storage utilization. 4. Multipliers increase price differences between market zones in most situations. 5. Multipliers increase total costs in the short-term and hence reduce efficiency. 5/13
Harald Hecking (2015) – Two new tariff models to foster Literat erature ure revie iew competition and security of supply in the EU gas market Recommends differentiating tariff structures • between intra EU, domestic exits and EU borders Proposed schemes bring with them different Hallack and Vazquez (2013) – • European Union regulation of gas distributional effects transmission services: Challenges in allocation of network resources through entry/exit schemes Inefficient offers of network • Bonbright et al. (1961) – Principles of Entry-Exit Principles of services in entry/exit regulations public utility rates tariffs Public Utility Rates Rates based on long-term marginal costs • incentivize efficient investments Topic . Theory Bermudez et al.(2016) – Gas Rates based on short-term marginal costs • transmission networks in Europe: incentivize efficient short-term utilization Multiplier Connections between different entry-exit tariff methodologies Comparison of capacity- • weighted distance vs least Borenstein (2016) – The economics of fixed squares approaches for cost recovery by utilities Application/ computing tariffs Rates based on short-term marginal costs • Weighted computation Methodology • incentivize efficient short-term utilization methodologies more suitable for including transmission network Scenario features Analysis/ LP Lochner (2011) – Identification of congestion and valuation of transport infrastructures in the European natural gas market Our contribution High resolution gas infrastructure and dispatch model • Pipeline gas flow, storage and LNG simulations • 6/13
Methodolo hodology gy The TIGER model Input Output Implicit it assum umpt ption ions Linear Optimiza zatio ion Perfect information Gas Supply Natural ral gas trade Objective function: (no uncertainty) Gas Demand Infrast stru ructu cture re utiliza zatio ion Cost-minimal demand satisfaction, restricted by available capacities Gas Infrast stru ructu cture re Import costs/ HUB prices Geocoded ed Databa base se Coverage: Europe > 600 nodes > 900 p pipeline ne sections ns > • Based on TSO maps • Capacity/ pressure/ diameter • Entry- and Exit-Points > 200 Storages es • Storage type • Maximum injection/ withdrawal capacity • Working gas volume > 30 L LNG import terminals nals • Max. hourly/ annual capacity • LNG storage capacity 7/13
Methodolo hodology gy Model extension 8/13
Hyp ypotheses otheses testing ting Indicative model results Multipliers increase long-term capacity bookings. Hypothe heses es 1/2: 2: Multipliers decrease seasonality and short-term volatility of gas transports. Capacity booking/transport (NCG – Switzerland) 50 mcm/d mcm/d 50 Without out multiplier iers With multipli liers 45 45 40 40 35 35 30 30 25 25 20 20 15 15 10 10 5 5 0 0 Jan Apr Jul Oct Dec Jan Apr Jul Oct Dec Lege gend Quarterly Transport volume Yearly Monthly Daily Model resul ults ts Both hypotheses are supported by our model results. 9/13
Hyp ypotheses otheses testing ting Indicative model results Hypothe heses 3: Multipliers increase storage utilization. Storage levels for a single country (Austria) 5.5 5.0 4.5 4.0 3.5 3.0 bcm 2.5 2.0 1.5 1.0 0.5 0.0 Jan Apr Jul Oct Dec Januar 17 April 17 Juli 17 Oktober 17 Without multiplier With multiplier Model resul ults ts When multipliers are in place storages are utilized more. 10/13
Hyp ypotheses otheses testing ting Indicative model results Hypothe heses 4: Multipliers increase price differences between market zones in most situations. Price Spread (NCG – Gaspool) EUR/MWh Price difference differ with and without multipliers 0,8 On average price differences are higher with multipliers 0,6 When there is capacity which 0,4 is booked but used (only the case in scenario with 0,2 multipliers) price differences are zero 0 Jan Apr Jul Oct Dec Without multiplier With multiplier Model resul ults ts Hypothesis is supported by our model results. 11/13
Ou Outloo look Out utlo look Analysis regarding the implications on short-term efficiency (Hypothesis 5) based on the model framework in a theoretical framework Analyzing the impact of uncertainty 12/13
Dominic Lencz Research Associate Energiewirtschaftliches Institut an der Universität zu Köln gGmbH | 12.04.2019 dominic.lencz@ewi.uni-koeln.de | +49 221 27729 324
Hyp ypotheses otheses testing ting Indicative model results Hypothe heses 2: Multipliers decrease seasonality and short-term volatility of gas transports. Cros oss s market ket area a trans nspo ports ts Withou out t multiplier iers mcm/d mcm/d With multipli liers 3.000 3.000 2.500 2.500 2.000 2.000 1.500 1.500 1.000 1.000 500 500 0 0 LT OT TTF NetConnect CH LT OT TTF NetConnect CH ZEE TR RS BG_2 FI ZEE TR RS BG_2 FI PL RO SI GR Gaspool PL RO SI GR Gaspool PEG_NORD NBP UA BY LV PEG_NORD NBP UA BY LV NordStream HR PSV HU VTP_SK NordStream HR PSV HU VTP_SK IB CEGH VTP_CZ IE OPAL IB CEGH VTP_CZ IE OPAL GTF GTF Model resul ults ts Multipliers reduce volatility as assumed and reduce congestion. 14
Hyp ypotheses otheses testing ting Indicative model results Hypothe heses 3: Multipliers increase storage utilization. Storage levels for a single country (Austria) Total equivalent storage cycles 5.5 0.6 +6% 5.0 0.5 4.5 4.0 0.4 3.5 cycles 3.0 bcm 0.3 2.5 2.0 0.2 1.5 0.1 1.0 0.5 0 0.0 Without multiplier With multiplier Januar 17 April 17 Juli 17 Oktober 17 Without multiplier With multiplier Model resul ults ts Storages are utilized more when multipliers are in place. 15
Methodolo hodology gy Model extension 16
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