Connecting markets. Pamela Taylor, Ofgem Gas Target Model, 3 rd stakeholder workshop 11 th April 2011, London. What are we trying to achieve?. Where technically feasible gas should flow to where it is valued most Greater price convergence 2. Efficient use of cross-border infrastructure
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Pamela Taylor, Ofgem
Gas Target Model, 3rd stakeholder workshop
11th April 2011, London
2. Efficient use of cross-border infrastructure
Objective is for short term firm capacity to allow for more short term gas trading
Markets are still not developed in all parts of Europe
Progress has been made, but more needs to be done
Has been effective in GB, but requires NRAs to set appropriate incentives
Long-term market (explicit capacity allocation)
Intra-day shipper trading
Use it or lose it: unused capacity is sold through auction or FCFS
Firm day-ahead auction of any capacity that was not nominated (Use It Or Sell It)
Gas trading would shift to where auction takes place, but
can be adapted to allow for renomination during the gas day
More efficient than explicit capacity auctions as it removes risk of separate transactions and allows markets to merge where no physical congestion
Before CWE coupling
After CWE coupling
Auction gate closures
(explicit capacity allocation)
Continuous implicit allocation may be a solution to allow for efficient gas flows while keeping the flexibility provided by continuous trading?
Surplus inter-connection capacity
High level of interconnection capacity
Some markets have higher proportion of transit than others
Options for reserve prices for short term capacity
1. No reserve price (solution in electricity) but in gas domestic tariffs subsidise transit flows?
2. Set a reserve price to recover costs- impact on price convergence at congested points?
3. Set a reserve price at non-congested points but not at congested
4. No reserve price at interconnection points but a ’membership fee’ at end-user exit points
a. Flat rate
b. Based on flows
Need a redistribution mechanism
How could a redistribution mechanism work?
a. Agreed amount form end-users for national network
b. Estimate amount from congestion revenues
c. Country A & B (or ACER) set a ‘membership fee’ to recover shortfall
d. Congestion revenues and membership fee combined and redistributed