The EU Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) publish their joint White Paper on Rules to Prevent Methane Leakage in the Energy Sector. The White Paper is the outcome of a survey of National Regulatory Authorities.

It presents the views of ACER and CEER on the European Commission’s Communication on an EU strategy to reduce methane emissions.

The paper has 13 recommendations covering six areas:

• the general scope and the overall approach to the introduction of rules to prevent methane leakage in the energy sector,
• monitoring and detection
• quantification
• reporting
• validation and mitigation, and
• the regulatory treatment of costs related to methane emissions.

Access the White Paper. 

The paper is one of a series of ACER-CEER “European Green Deal” Regulatory White Papers.

Register for the ACER-CEER Methane Emissions Webinar (14 September).

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.

Access the report.

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. 

Main recommendations

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.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today a Recommendation, addressed to national regulatory authorities (NRAs), on setting the level of the multipliers used for the calculation of gas transmission tariffs applied to non-yearly capacity products.

Why are multipliers relevant?

Multipliers are used to calculate the reserve prices of quarterly, monthly, daily and within-day gas capacity products, and they have an impact on network users’ booking strategies.

More specifically, the Network Code on Harmonised Transmission Tariff structures defines the level for day-ahead and within-day multipliers for standard capacity products to be between one and three. ACER carried out a public consultation in November and December 2020 to assess the possibility of setting a lower cap for multipliers for day-ahead and within-day capacity products.

What are the main recommendations?

After a careful assessment, ACER recommends NRAs to better substantiate their decisions regarding high daily and within-day multipliers, taking into account the specificities of each interconnection point and detailing their regulatory objectives (market integration, liquidity, competition, cost reflectivity and tariff stability, etc.). NRAs of Member States connected by transmission pipelines should also better coordinate their decisions when setting multipliers in combination with seasonal factors.

Access the Recommendation 01/2021.

Read more on its Annexes I and II (overview of multiplier levels & analysis and evaluation of responses).

The European Commission’s hydrogen strategy acknowledges the potential future need for transporting hydrogen over long distances throughout Europe. Two main options are considered for connecting supply and demand by transporting hydrogen:

• building new hydrogen-carrying pipelines or
• repurposing existing natural gas pipelines for transporting pure hydrogen.

In order to assess these options, ACER reviewed more than 20 studies focusing on the technical and the cost aspects of repurposing existing gas infrastructure to pure hydrogen. The analysed studies range across various sources and stakeholders, including the gas industry, multi-partner hydrogen initiatives, industry partnerships, academia, think tanks, and others. As a result, ACER developed a summary paper on the technical possibilities for repurposing, based on these available studies. The paper also offers a reflection on the technical and hydrogen market conditions that could trigger the repurposing of natural gas pipelines to pure hydrogen.

What are the main findings?

• Repurposing is feasible and cheaper than building from scratch: as a rule-of-thumb, repurposing does not present insurmountable technical challenges and is cheaper than building new pure hydrogen networks.

• Studies also draw attention to the suitability of salt cavern facilities for storing hydrogen, noting that these facilities are geographically clustered in selected areas in a few EU Member States.

• Ways of hydrogen transportation: similarly to natural gas, trucks and ships can also transport pure hydrogen. In all cases, distance and volume are the main drivers determining the most cost-efficient mode of transportation. However, at this time, transporting pure liquefied hydrogen by ship is not cost-efficient. Shipping hydrogen as a constituent of ammonia appears to be considerably cheaper.

• Future pure hydrogen networks: studies offer divergent visions of the future extent of pure hydrogen networks. These visions range from a large-scale, pan-European backbone transmission infrastructure primarily based on repurposed natural gas networks, to regional, cluster-like systems handling hydrogen supply and demand in closer geographic proximity. Several studies conclude that, based on industrial hydrogen demand, technology and cost assumptions, there is no indication that a large-scale pan-European hydrogen network would be justified.

• Repurposing to hydrogen may be conditional on:

  1. the presence of loop (parallel) lines in natural gas pipeline systems, so that at least one string could be repurposed to pure hydrogen,

  2. ensuring security of natural gas supply to consumers during the conversion phase to pure hydrogen,

  3. hydrogen market uptake in the area serving a pure hydrogen corridor.

It is uncertain when and where these conditions for repurposing would be met across Europe, and whether they will be met at all.

Following a cautious approach in the implementation phase of pure hydrogen corridors seems to be a reasonable strategy, where repurposing would be triggered by compelling hydrogen market commitments and demand expectations. 

The review is provided on a “best effort” basis and should be seen as a “live reference document”, which may need to be further updated as more knowledge about the future of hydrogen networks emerges. 

ACER and energy regulators will continue discussing the repurposing outlook and stand ready to exchange views with all stakeholders, with the goal of delivering on the decarbonisation targets, as well as ensuring cost-efficient and cost-effective solutions to the benefit of energy consumers.  

Access the Review.

Despite the unprecedented impact of COVID-19 over the economy of the EU, the functioning of the EU gas market continued to improve in 2020. This has been evidenced by an increase in markets’ price integration and supply competition, as well as by the rise in liquidity at many gas trading hubs. Markets representing three quarters of EU gas consumption are assessed today as well functioning and sufficiently integrated. Other jurisdictions with some of the historically less developed hubs are also showing promising signs of progress.

This is one of the main conclusions of the first volume released (Gas Wholesale Volume) of the annual Market Monitoring Report (MMR) developed by the EU Agency for the Cooperation of Energy Regulators (ACER), the Council of European Energy Regulators (CEER) and the Energy Community.

With the volume on Gas Wholesale being the first to be published this year; the other two volumes, namely, Electricity Wholesale and Retail and Consumer Protection, will be released later this year. 

The Gas Wholesale Volume published today presents the results of monitoring the gas markets of the European Union and the Energy Community (a selection of neighbouring countries in Southeast Europe and the Black Sea region committed to extending the EU internal energy market). The volume assesses the progress made towards a fully functioning internal gas market. Complementarily it offers recommendations to overcome some identified barriers that can still hinder the competitiveness of selected markets or limit their market integration.

Access the Gas Wholesale Volume. 

Coinciding with the launching of this volume, ACER presents a series of key facts of the EU gas sector. 

COVID-19 together with LNG rising imports depressed prices, bolstered hub liquidity and reduced cross-border flows

The significant impact of COVID-19 on gas demand, together with the irregular import volumes of liquefied natural gas (LNG) led to a series of supply and demand rebalances throughout the year. This setting impacted on prices, market liquidity, cross-border flows and other key metrics, some of which moved to levels not seen before. 

The COVID-19 related reduction in economic activity led to a substantial decrease of gas demand in the second quarter of 2020.  That coincided with record deliveries of LNG and record-high gas stocks in underground storages in the first half of the year. All these factors, together with the reduced prices of other energy commodities, resulted in historically low EU gas hub prices in spring and early summer of 2020. However, gas demand recovered after summer, while LNG deliveries decreased substantially from the third quarter onwards because many cargoes shifted away into Asian markets. Hub prices recovered accordingly and by the end of the year, they had climbed beyond 2019 levels.

Hub traded volumes also reached historical highs increasing by 14% as market participants continuously re-adjusted their positions due to the changing supply balance and the high price volatility.

Common EU rules are bearing fruit; neighbouring countries are starting to apply them

In light of record-high price volatility, the price convergence between EU gas hubs increased compared to 2019. Amongst other reasons, abundant supply and availability of interconnection capacity smoothed regional price differences. Though full price convergence is not the aim of the Internal EU Gas Market, greater price convergence indicates that market integration is improving.

Network codes, the common EU rules intended to facilitate the harmonisation, integration and efficiency of the European gas market, are producing results. For instance, cross-border gas flows are progressively becoming more responsive to hub price signals assisted by the higher flexibility that the codes grant to transport capacity bookings. Also due to EU regulation, the balancing of gas systems has become more transparent and market based. That has also helped to improve the liquidity in some spot markets.

As of 2020, all gas network codes are also applicable in the Energy Community Contracting Parties. However, their implementation advanced only in Ukraine, generating the first beneficial effects on market integration with EU neighbouring countries. Due to some positive regulatory changes, also gas trading activity substantially increased in Ukraine.

Does gas contribute to decarbonisation?

In recent years, gas has contributed to the EU energy sector decarbonisation by replacing higher carbon emitting fuels like coal and in some instances oil in power generation. However, gas is also a significant source of greenhouse gas emissions in its own right. Therefore, conventional natural gas needs to be fully replaced by alternative energy sources or by low-carbon and renewable gases in 2050. To enable such a shift the European Commission will shortly launch a review of the gas legislative framework as part of its Fit for 55 package.

The supply share of low-carbon gas is still low in the EU even if it has doubled in the last 10 years. Low-carbon gases accounted for only 3.8% of total gas supply in 2020, chiefly in the form of biogas. This is because the cost of the currently cheapest low-carbon gas, biogas, was three to four times higher than the price of conventional natural gas at average 2020 prices. Green hydrogen produced at water electrolyser facilities with renewable power is becoming central in the EU hydrogen strategy. However, at present, it remains limited compared to future expectations, while less than 3% of commercial hydrogen supply was produced using electrolysis in 2020. A combination of market, technological and policy drivers will determine the reach of each low-carbon gas technology or alternatives in the years to come.    

The EU Agency for the Cooperation of Energy Regulators (ACER) and the Council of European Energy Regulators (CEER) will hold on 6 July a webinar to present the main findings and recommendations of the Gas Wholesale Volume of the Market Monitoring Report (MMR) to be published on 14 July 2021.

The Volume shows that, despite the unprecedented impact of COVID-19, the functioning of the internal gas market has continued to improve in 2020: market price integration, liquidity and competition improved in 2020 compared to 2019.  Three-quarters of EU gas consumption takes place in well-functioning and integrated markets and importantly is advancing across several other jurisdictions.

The event will discuss these and many other findings on the remaining barriers identified in the report for the completion of the EU internal market for wholesale gas, the main developments in 2020 – Covid19-related and wider – and on the report’s main recommendations.

Access the Agenda and register here.

ACER and ENTSOG have published a solution on the Gas Network Codes Functionality (FUNC) platform, related to the issue "Dutch TSO requirement of message PRODOC".

​The platform allows relevant parties to notify implementation and operational issues related to the gas Network Codes.​ The web-based platform collects the issues and facilitate cooperation among stakeholders to find relevant solutions.

In February 2020, the European Association for the Streamlining of Energy Exchange – gas (EASEE-gas)​ reported that the Dutch TSO requirement of message PRODOC is unnecessary and contrary to Network Code on Gas Balancing of Transmission. PRODOC is a document containing information about the load forecast that a balancing responsible party sends to the system operator as part of the daily balance area management process for the day ahead.

When processing the issue, ACER and ENTSOG were made aware that the use of the PRODOC message is a requirement under Dutch national law. In the issue solution, ACER and ENTSOG conclude that the review of the Dutch Energy Act is pending, and it foresees to discontinue the PRODOC requirement in the future. Since the changes in the national law remain a precondition to solve this issue and since the preparatory work for the legislative changes are ready, ACER and ENTSOG propose that the issue be solved at the national level.

The solution paper and relevant documents are available on the FUNC platform. 

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Every 2 years, ACER provides a non-binding opinion on the draft grid plans (called Ten-Year Network Development Plans or TYNDPs) proposed by the network operators.

In its Opinions on the draft 2020 plans, ACER finds that the electricity and gas plans (developed by ENTSO-E and ENTSOG respectively) do not sufficiently contribute to the efficient market due to several shortcomings. With respect to gas,​ in ACER's view:

• Too many conventional gas projects - close to €75 billion – are proposed by network operators and not all are assessed by ENTSOG. Despite ongoing efforts, the framework also fails to properly assess the contribution of gas projects to sustainability.

• The TYNDP core building blocks need to be improved such as scenarios development and cost-benefit analysis (CBA). There are also shortcomings in public consultations with stakeholders on key elements of the energy projects being proposed by network operators.

• A number of shortcomings could be remedied by legislators in the current TEN-E reforms by strengthening the independent assessment of projects and the regulatory oversight of network operators. ACER has previously pointed to risks of lack of neutrality of the two European Networks of Transmission System Operators (ENTSOs) and the need for step changes in TEN-E governance to avoid conflict of interests while ensuring transparency.

See also the ACER Opinion on the ENTSO-E electricity network plan.​

Shortcomings could be remedied by improving the TEN-E Regulation

The EU framework for energy infrastructure needs to be robust for cost-efficient cross-border projects which are best for the energy transition.

ACER believes that the shortcomings of the TYNDP process as can be remedied by improving the TEN-E investment framework in line with the European Green Deal. To this end, regulators (ACER and CEER) issued two position papers, one in March 2021 and one in June 2020​ on how to improve the revision of TEN-E Regulation including on infrastructure development governance.

ACER has called on the European co-legislators to consider the regulators' proposals as a solution to promote a neutral technical assessment of infrastructure projects in line with the European Green Deal, avoiding risks of unjustified costs to European consumers.

For example, currently the transmission system operators (TSOs), through the European Network of Transmission System Operators (ENTSOs), develop the scenarios to assess projects in different futures. TSOs can be perceived as biased towards favouring more infrastructure as it is in their interest. The neutrality of scenarios and the credibility of the TYNDP process can thus be compromised. To safeguard neutrality, regulators have proposed the introduction of ACER framework guidelines for TYNDP scenarios for the ENTSOs to follow. This has been taken up in the European Commission's legislative proposals but should be further strengthened and streamlined, as suggested by regulators.

Europe's energy regulators have pointed to the need for strengthened regulatory scrutiny over the ENTSO's to safeguard the public interest, for ACER to be given the powers to approve the methodologies for the Cost-Benefit Analysis (CBAs) which are used to assess projects, and to issue binding guidelines to the ENTSOs for the TYNDP development.

What are ACER's key findings of the 2020 draft gas TYNDP?

ACER has issued an Opinion on the European Network of Transmission System Operators for Gas (ENTSOG) TYNDP 2020 for gas. The ACER Opinion is addressed to ENTSOG, the European Commission, the European Parliament and the Council.

ACER finds that the draft gas TYNDP 2020 follows a similar methodology as previous editions.

What are the key improvements in the 2020 draft gas TYNDP?

ACER's opinion notes limited improvements and evolution of the draft plan in comparison to previous TYNDP. Improvements are mainly limited to a better presentation of results and for the first time, the inclusion of a heterogeneous category of projects addressing the energy transition. ACER concurs with ENTSOG that current gas infrastructure in Europe is resilient, near to the completion of the internal gas market and that the limited infrastructure investment gaps will be closed in the next five years by projects already currently under development.

What are the key shortcomings of the 2020 draft gas TYNDP?

ACER regrets that the TYNDP includes a broad investment portfolio of conventional gas projects close to € 75 billion, clearly exceeding reasonable needs, in view of the lack of market appetite for developing additional transmission capacities and the decarbonisation objectives. Less than half of these are assessed by ENTSOG in the TYNDP framework. As regards the sustainability assessment of projects, although progress in observed in this TYNDP, there is room to refine it further in the future.

ENTSOG should consider ways to increase stakeholders' interest and engagement in the TYNDP development process, in view of the low number of responses (9) received during its public consultation.

ACER identifies 4 main shortcomings:

1. Lack of proper analysis of the existing and forecasted use of gas infrastructure as critical criterion to take into account when analysing the need of additional gas infrastructure.

2. Shortcomings in the applied methodologies, such as a lack of a complete quantitative needs assessment and doubtful quality of the cost-benefit analysis (CBA) methodology and its application which still requires improvement to demonstrate benefits exceed costs so that each individual gas project contributes to sustainability.

3. The asymmetric treatment of candidate projects depending on whether the projects are intending to apply for Project of Common Interest (PCI) selection or not. ACER expects ENTSOG to apply project-specific cost-benefit analysis for all projects, the same way it is done for the electricity.

4. Shortcomings in the public consultations of the scenarios methodology and the needs methodology.

In ACER's Opinion the draft gas TYNDP 2020 does not sufficiently contribute to the objectives of non-discrimination and efficient functioning of the market.

What does ACER recommend for improving future gas TYNDPs?

ACER is of the view that improvements in European infrastructure planning are feasible. ACER encourages the ENTSOs to address the remaining shortcomings and stands ready to provide guidance or clarifications where needed. ACER proposes several recommendations to ENTSOG in pursuit of an efficient, further integrated and transparent network planning at the service of consumers, decarbonisation, and sector integration ambitions:

For the Final Gas TYNDP 2020

• Consider the National Regulatory Authority's (NRA's) comments on the TYNDP 2020 projects

• Provide a feedback document on how the Public Consultation and ACER's Opinion have been taken into account

• Classify the energy transition projects into gas supply/ production projects and network related investments

• Complete information related to project CBA assessments

• Update information on projects' status by end of year 2020

For the Gas TYNDP 2022 and beyond

• Implement ACER's recommendations on scenarios

• Improve planning process to avoid recurring delays, by publishing next TYNDP by mid-2022

• Incorporate the market perspective on infrastructure gaps

• Improve the implementation of CBA methodology

• Include a number of “conventional" gas infrastructure projects commensurate to the assessed needs, by flagging and filtering out unrealistic projects during the data collection stage

• Roll out modelling tools allowing for sector-integrated assessments of electricity and gas projects

• Provide the same (maximum) level of cost transparency for all TYNDP regulated projects

• More attention focused on adaptations of gas infrastructure for the injection of higher shares of renewable, low carbon and de-carbonised gases (hydrogen, synthetic methane, and bio-methane)

• Together with ENTSO-E, identify suitable locations for power-to-gas installations in the system needs analysis

• Factor the level of utilisation and congestion of existing infrastructure in the needs assessment

• Consider ways of covering methane emissions associated with gas infrastructure

What is the TYNDP?

Every two years, ENTSOG publishes a non-binding TYNDP which looks forward over a ten-year horizon and includes a European supply adequacy outlook for natural gas. TYNDPs are essential for assessing and identifying the need of new infrastructure projects to ensure an adequate level of security of gas supply, market integration and competition. The TYNDP must be consistent with National Development Plans (NDPs) and should take into account the energy policy objective of decarbonisation under the European Green Deal.

Projects of Common Interest (PCIs) are selected from the TYNDP via a separate process led by the European Commission. The TYNDP should provide essential and comprehensive information for the selection of PCIs, in particular through complete, monetised, and reliable cost-benefit analysis (CBA) and a sustainability assessment of projects.

What is the role of ACER and its overall assessment?

ACER monitors the development and execution of the plan, and issues an opinion on the draft TYNDP taking into account the objectives of non-discrimination, effective competition, and the efficient and secure functioning of the internal gas market. ACER also looks to the alignment of the plan with broader energy transition and decarbonisation goals.