Today, ACER issues its Opinion on the draft statutory documents proposed by future hydrogen transmission network operators to formally establish the European Network of Network Operators for Hydrogen (ENNOH) as an association under the Belgian law.

As an independent body, ENNOH will be responsible for fostering collaboration among hydrogen transmission network operators across the EU.

What’s the role of ACER?

ACER is mandated to provide an Opinion on ENNOH’s draft statutory documents, which were submitted at the end of August.

ACER conducted a public consultation from 23 September to 21 October 2024, seeking views from organisations representing all stakeholders, in particular hydrogen system users, including customers. All responses received are available on the consultation page.

What is the main conclusion?

ACER welcomes the draft statutory documents received, and suggests how to enhance them to further support the establishment of ENNOH. ACER highlights, however, that a crucial factor for success lies in the timely and committed transposition of certification provisions from the Hydrogen and Decarbonised Gas Market Directive by the Member States. This responsibility, ACER notes, rests with the relevant ministries, not ENNOH or its members.

What are the next steps?

This ACER’s Opinion is addressed to the European Commission, which now has three months to provide its opinion. Should the Commission’s opinion be favourable, future hydrogen transmission network operators will have three months to adopt and publish the statutory documents.

ACER issues its Opinion on the Winter Supply Outlook 2024/25 published by the European Network of Transmission System Operators for Gas (ENTSOG).

ENTSOG’s Winter Supply Outlook 2024/2025 evaluates the resilience of the European gas system by analysing different scenarios involving prolonged disruptions of Russian gas imports. The Outlook focuses also on Europe’s preparedness for winter 2024/2025 and summer 2025, examining its gas system’s capacity to cope with typical and severe winter conditions (including high demand and the consequences of the expiry of Ukraine’s gas transit agreement with Russia by the end of December 2024). It also assesses the potential impact of supply disruption via the TurkStream pipeline (running from Russia to Turkey) and models varying levels of Liquified Natural Gas (LNG) supply to Europe, including high, standard, and low supply scenarios.

Highlights of ENTSOG’s Winter Supply Outlook:

• High gas storage levels: on 1 October 2024, EU gas storage reached 94% of its capacity, thanks to reduced consumption, high initial storage levels, and measures by Member States.

• Monitor withdrawals from gas storage: Early gas withdrawals could deplete storage by the end of the season, increasing the risk of demand curtailment during cold spells.

• Summer storage targets: maintaining 30-40% of storage at the start of the next injection season (March 2025) is crucial to meet the 90% target by the end of summer 2025.

• Reduced reliance on Russian gas: the EU could maintain 40% storage levels at this winter's end without Russian pipeline gas, showing increased independence.

• Mitigating full supply disruptions: in case of a full gas supply disruption, extra supplies mainly from LNG imports and a 15% demand reduction are needed to avoid curtailment and maintain storage levels.

• LNG and Norwegian gas: LNG and Norwegian gas are now primary sources for EU Member States and the Energy Community’s contracting parties.

What is in ACER’s Opinion?

• ACER acknowledges that ENTSOG enlarged the scope of its methodology to include gas supply and storage developments (i.e. strategic reserves based on each Member States’ regulations, Ukrainian storage as a last resort) and to reconsider the role of LNG regasification terminal tanks for short-term storage flexibility. ACER also supports ENTSOG's efforts to model a ‘low LNG supply scenario’ that excludes Russian LNG supplies.

• ACER acknowledges that ENTSOG enlarged the scope of its methodology to include gas supply and storage developments (i.e. strategic reserves based on each Member States’ regulations, Ukrainian storage as a last resort) and to reconsider the role of LNG regasification terminal tanks for short-term storage flexibility. ACER also supports ENTSOG's efforts to model a ‘low LNG supply scenario’ that excludes Russian LNG supplies.

• ACER recommends ENTSOG to consider the following methodological improvements:
  • The inclusion of a qualitative analysis of gas futures prices and summer-winter spreads for better forecasting of potential challenges for market-based filling of gas storages.
  • Clarify the assumptions and methodology used to build the ‘low LNG supply scenario’.
  • Specify capacities added by newly commissioned projects.
  • Compare seasonal demand projections with forecasts from other institutions.

• ACER highlights the importance of a close cooperation between ENTSOG and ENTSO-E to ensure consistent results in their respective seasonal outlooks. In addition, ACER identified several risk factors for the upcoming year:
  • likely stop of Russian gas transit through Ukraine after 2024;
  • unusually cold winter;
  • failure to reduce gas demand;
  • increased demand volatility from gas power plants;
  • rising Asian gas demand;
  • low storage levels at the end of winter;
  • operational incidents in supply routes;
  • rising tensions in the Middle East affecting LNG flows and crude prices.

ACER has released its Opinion on the recent coordinated decisions to grant a temporary exemption for the STORK I pipeline from the requirement to establish permanent physical bi-directional gas flow capacity at the cross-border interconnection point (IP) ‘Cieszyn/Český Těšín’ between Poland and the Czech Republic.

What is bi-directional gas flow capacity?

Under the European Security of Gas Supply Regulation, Transmission System Operators (TSOs) must establish permanent physical capacity for gas transport in both directions (bi-directional capacity) at all IPs between Member States. However, temporary exemptions can be granted following a detailed assessment and consultations with stakeholders, other Member States, and the European Commission.

ACER’s assessment

ACER reviewed the coordinated decisions taken by the Czech and Polish responsible Ministries. Both decisions accept the respective TSOs’ proposals to grant the temporary exemption until the end of 2025.

ACER notes that:

• The exemption complies with regulatory requirements.
• The reverse gas flow project at this IP is unlikely to significantly enhance gas supply security (e.g. the N-1 indicator) in the Czech Republic. However, enabling reverse flow could offer some benefits for the Czech Republic, such as improved access to Liquefied Natural Gas (LNG) supplies from Poland.
• A market assessment by the project promoters shows no interest in developing transportation capacity from Poland to the Czech Republic.
• The exemption (valid until December 2025) allows more time to evaluate the project's necessity and feasibility.

Before the exemption expires, ACER recommends that project promoters reassess the project, focusing on:

• technical solutions on the Czech side to enable firm capacities and ensure permanent physical reverse flow capabilities;
• market interest and expected gas flows; and
• the project’s potential to reduce the Czech Republic’s dependency on Russian gas.

What are the next steps?

ACER has submitted its Opinion to the relevant authorities of the Czech Republic and Poland, as well as to the European Commission for further consideration. The Commission may choose to either raise no objections to the decisions or request modifications.

For the first time, ACER publishes its Country Sheets to present key metrics on retail electricity markets across EU Member States and Norway. These short 1-pagers provide insights into:

• key market facts;
• consumer trends, including contract uptake and bill breakdown;
• national progress towards 2030’s decarbonisation targets, showing status of electric vehicles’ (EVs') uptake, EV’s charging stations, the installation of heat pumps and the share of final renewable energy consumption;
• a high-level SWOT analysis to show strengths, weaknesses, opportunities and threats of each market.  

What are the key findings? 

ACER finds that demand-side flexibility remains limited: the majority of consumers in most countries are on fixed-price contracts, hindering their active participation in electricity markets.

This is despite in many cases, the access to smart metering should enable the provision and uptake of more flexible contracts for both household and non-household consumers.

ACER’s Country Sheets complement the annual Retail Market Monitoring Report and accompanying retail (electricity and gas) data dashboard.

Natural gas and hydrogen network developments are instrumental for achieving EU’s decarbonisation goals, ensuring natural gas security of supply and fostering the hydrogen market. Consistency in network planning at European and national levels promotes efficient network development.

Every two years, ACER evaluates how well national gas and hydrogen Network Development Plans (NDPs) align with the EU-wide Ten-Year Network Development Plan (EU TYNDP).

What is in ACER’s latest Opinion?

ACER’s latest Opinion (covering 2023-2024) reveals two main trends:

• Growing consistency in gas network planning: there is a modest yet encouraging trend towards aligning national gas NDPs with the EU TYNDP. Key findings suggest:
  • A shift towards biennial gas NDP updates to align with EU TYNDP timeline.
  • Consolidated network operators’ plans published at the Member State level instead of separate publications from each operator.
  • More scenario planning processes that jointly consider gas and electricity sectors.
  • NDPs’ increased focus on integrating low-carbon and renewable gases, along with decommissioning and repurposing projects.

• Emerging hydrogen network planning practices: several countries have developed hydrogen strategies, legal frameworks, and specific hydrogen planning activities.
  • There is a low but growing consistency in hydrogen TYNDP projects included in the NDPs (rising from 17% in 2022 to 33% in 2024).

What does ACER recommend?

To improve consistency of NDPs:

• Consult stakeholders and coordinate with neighbouring operators to exchange information on scenarios, infrastructure gaps, and cross-border projects.
• Coordinate the timing of national planning with the EU-TYNDP development process as much as possible.
• Reinforce national regulatory authorities’ oversight.
• Emphasise the integration of low-carbon and renewable gases, along with decommissioning and repurposing projects.

To improve consistency of EU TYNDPs:

• Provide detailed information on costs and, where possible, on monetised benefits, following electricity TYNDP practices.
• Improve planning to prevent recurrent delays in the TYNDP development and release.
  • Ensure relevant projects appear in both NDPs and TYNDPs.
  • Synchronise expected market developments with a prudent assessment of infrastructure needs.

What are the next steps?

Member States and European Network of Transmission System Operators for Gas (ENTSOG) are expected to implement the new provisions set out by the Hydrogen and Decarbonised Gas Package. ACER encourages them to consider the recommendations of this Opinion to increase consistency in future national and European NDPs.

The next ACER Opinion will be published in 2026.

For a deeper understanding of the European hydrogen landscape and market developments, check out our Market Monitoring Report on European hydrogen markets, published today.

Europe's Hydrogen and Gas Decarbonisation legislation (2024) tasks ACER with monitoring the emerging hydrogen market.

ACER’s first hydrogen monitoring report highlights that, despite ambitious EU strategies, hydrogen projects face risks from uncertainties of future hydrogen demand and high costs.

What are the main findings?

• Low hydrogen demand: The EU is likely to miss the 2030 strategic goal of 20 Mt renewable hydrogen consumption, as current consumption at European level is 7.2 Mt (99.7% of it produced from fossil fuels). EU renewable energy and decarbonisation targets can increase demand for renewable and low-carbon hydrogen by 2030, but so far uptake has been slow.

• Limited electrolyser capacity:
  • Total installed capacity of electrolysers in Europe in 2023 was 216 MW.
  • Further 70 GW planned for 2030 announced but few are advanced.
  • Overall planned capacity is less than the 100+ GW needed to reach EU’s 10 Mt renewable hydrogen production target by 2030.

• High costs prevent renewable hydrogen uptake: The cost of renewable hydrogen is currently 3 to 4 times higher than hydrogen produced from natural gas, discouraging its early offtake.

• Significant infrastructure planned but they face uncertainties in being realised:
  • 42,000 km of hydrogen pipelines, numerous storage projects and terminals are planned for the next decade, but only 1% has reached final investment decision, as future hydrogen demand uncertainties pose significant challenges to project promoters.
  • Integrated planning by network operators is needed to ensure grid development at sufficient pace and to optimally locate electrolysers.

What are ACER’s key recommendations?

• Quickly transpose the EU (2024) hydrogen and decarbonised gas laws into national legislation and implement them.
• Speed up electrolysers deployment and decarbonisation of electricity sector to increase renewable hydrogen’s cost competitiveness.
• Improve forecasting and accelerate integrated planning to identify realistic hydrogen infrastructure needs, avoiding overinvestments and reducing costs related to under-recovery risks.
• When future demand is highly uncertain, consider incremental infrastructure development based on market needs (to avoid building too much network too fast and stranded assets).
• Consider carefully the repurposing of gas networks for hydrogen to minimise costs, while not overlooking the potential impacts on the broader gas sector (including security of gas supplies).                                                     
• Swiftly address demand risk in financing hydrogen networks.
• Provide market certainty over the role of non-renewable, low-carbon hydrogen.

Do not miss the ACER webinar: Europe’s emerging hydrogen market on Tuesday, 3 December (10:00 – 11:00 CET). Register for free and debate with our experts!

Today, ACER releases its report on the Estonian gas transmission tariffs, directed at the Konkurentsiamet, the National Regulatory Authority (NRA) of Estonia.

The report assesses whether the proposed reference price methodology (RPM) complies with the requirements of the Network Code on Harmonised Transmission Tariff structures (NC TAR). The proposed postage stamp RPM is complemented by an inter-transmission system operator compensation (ITC) mechanism, providing part of the revenue collected between Estonia, Finland, and Latvia as part of a market merger process called ‘FINESTLAT’.

What are the key findings?

After analysing the NRA’s consultation document, ACER concludes that:

• The capacity cost driver presented is not sufficiently defined, making it unclear whether it represents an efficient indicator for network utilisation.
• There is limited assessment of the ITC’s impact on the proposed methodology, causing uncertainty in the revenue collected from the proposed RPM.
• The consistent under-recovery of revenue, combined with the implementation of a price cap regime, raises questions about the efficient estimation of target revenue under Article 17 of the Gas and Hydrogen Regulation.
• Due to insufficient information, ACER cannot determine whether the methodology used to calculate tariffs meets the requirements of cost-reflectivity, cross-border subsidisation, cross-border trade, and volume risk.
• No evidence of discrimination in applying the RPM has been identified.

What does ACER recommend?

ACER recommends that the NRA, when adopting its decision:

• Enhances the clarity of published information, ensuring all elements required by Article 26(1) of the NC TAR are included.
• Provides a more elaborate assessment of the RPM, taking into consideration the ITC’s effects on the RPM, in line with Article 7 of the NC TAR.
• Publishes a simplified tariff model, including details on the interaction between the ITC and the proposed RPM.
• Offers a detailed description of the methodology used to compute the target revenue, in line with Article 17 of the Gas and Hydrogen Regulation.

Additionally, ACER invites the Estonian NRA to evaluate the effects of potentially moving to a non-price cap regime and implementing revenue reconciliation principles.

Finally, ACER reiterates its recommendation for NRAs involved in the market integration process to jointly consult on the ITC, aiming for adopting a joint NRA decision.

Access all ACER reports on national tariff consultation documents.

ACER has released its Opinion on a recent decision concerning the bi-directional gas flow capacity at the cross-border Interconnection Point (IP) ‘Deutschneudorf EUGAL’ between Germany and the Czech Republic.

What is bi-directional gas flow capacity?

Under the European Security of Gas Supply Regulation, Transmission System Operators (TSOs) must establish permanent physical capacity for gas transport in both directions (bi-directional capacity) at all IPs between Member States. However, temporary exemptions can be granted following a detailed assessment and consultations with stakeholders, other Member States, and the European Commission.

ACER’s assessment

ACER reviewed the decision by Bundesnetzagentur, the German National Regulatory Authority (NRA), which was taken in coordination with the Czech Ministry of Industry and Trade. The decision accepts the German TSO’s proposal, which claims that the obligation for bi-directional capacity at the EUGAL IP has already been fulfilled. It concludes that both countries meet the necessary infrastructure standards for securing gas supply and that there is no need for additional capacities from the Czech Republic to Germany.

While ACER considers that the decision complies with most of the Regulation requirements, it identified two missing elements:

• a feasibility study; and
• a cost-benefit analysis (CBA).

Additionally, the TSO proposal and the decision state that the need for an exemption to maintain bi-directional gas flow capacity at the ‘Deutschneudorf EUGAL’ IP is no longer necessary, as bi-directional gas flow capacity could be ensured during a gas supply crisis scenario. However, ACER notes that no significant investments or capacity upgrades took place at this IP between 2020 and 2024.

What are the next steps?

ACER has submitted its Opinion to the relevant authorities of Germany and the Czech Republic, as well as to the European Commission for further consideration. The Commission may choose to either raise no objections to the decision or request modifications to it.

Today, ACER releases its third quarterly review of key developments in European gas wholesale markets as part of its 2024 Market Monitoring Report (MMR). The first and second publication were issued respectively in March and July 2024.

The report finds that despite supply uncertainty re-emerging, Europe avoided severe gas price volatility in Q3 2024. What’s novel in this quarterly edition is the new focus on the evolution of cross-border gas transport tariffs, which have been rising in recent years. While transport costs currently have a relatively small impact on price formation, their influence is expected to grow, affecting how the EU gas market operates in the future.

• Gas prices: In Q3 2024, European gas wholesale prices rose but remained less volatile than last year due to increased Norwegian supply, healthy storage levels, and low demand.
• Price integration: Price integration across most EU gas hubs remained consistent, although some divergence occurred due to the rising German storage levy.
• Gas demand: Stagnant household demand and a modest increase in industrial demand were outweighed by a reduced call on gas-fired electricity generation, leaving overall EU gas demand slightly lower than in 2023 and well below pre-crisis levels.
• Renewables continue to displace gas generation: Increased renewables’ output limited the opportunities for conventional power plants (gas and coal) to run profitably. This lowered carbon emissions, loosened the EU gas demand-supply balance and reduced instances of gas setting marginal prices in electricity markets.
• Storage: The EU reached its 90% gas storage target ahead of schedule, despite lower year-on-year injections throughout the quarter.
• Transmission tariffs: Gas transmission tariffs have been rising in some EU countries, with little evidence so far of impacting price convergence. More tariff increases are expected in the near-term, warranting monitoring of the effects of tariff changes on cross-border trade and market integration.

What challenges lie ahead?

• The Russian gas transit agreement through Ukraine expires in 2024, pushing Central Europe to seek alternative supply routes.
• If gas withdrawals this winter significantly exceed the previous years, the EU may face increased competition in LNG markets for 2025, potentially driving up wholesale gas prices.
• Several LNG production projects are under construction, but major new LNG volumes are expected only from 2026 onwards.

ACER will continue to closely monitor trends in the European gas markets that could lead to short-term volatility for European energy markets. The next update on the European gas wholesale markets will be published early in 2025.

Check out our other 2024 MMR publications.