ACER publishes its Opinion on the 2023 Summer Supply Outlook of the European Network of Transmission System Operators for Gas (ENTSOG). ACER welcomes ENTSOG’s Outlook but recommends some targeted improvements to it.

ENTSOG’s Summer Outlook 2023 assesses the resilience of the European gas network for the summer of 2023 by examining the potential evolution of gas demand and supply. In particular, it analyses the likelihood of gas storage sites being filled to 90% of their capacity by 30 September 2023 (in line with Europe’s minimum gas storage filling obligations), considering the existing gas supply risks and the current dependence of the EU on Russian gas. With EU gas storage above 75% in early July 2023, Europe is on track to meeting the 90% target if current gas storage injection levels continue.

Highlights of ENTSOG’s Summer Supply Outlook

ENTSOG’s Summer Supply Outlook 2023 presents two scenarios:

• Minimised Russian gas imports; and
• Complete disruption of Russian pipeline supply.

Its main findings include:

• Reaching 90% storage filling levels by end of this summer is possible in both scenarios, if there is cooperation among EU countries.
• The existing gas infrastructure, including recently commissioned projects, can effectively reduce the dependency on Russian gas supply.
• In a 'cold winter' with full Russian pipeline disruptions (which is the harshest scenario), additional gas supplies and demand reduction would be required.
• Additional measures to improve the security of gas supply include:
  • Increased liquified natural gas (LNG) imports (beyond historically observed import levels);
  • Enhanced capacities provided by transmission system operators (TSOs), leading to shift in gas flow (from West to East); and
  • Implementation of the existing target to reduce gas demand by 15%.

What is in the ACER Opinion?

• ACER appreciates that ENTSOG’s Outlook reflects already reduced gas flows from Russia and has a scenario of complete disruption of Russian gas.
• ACER welcomes that the recently commissioned infrastructure has added significant cross-border capacities and more than 30 bcm of LNG import capacities, improving the resilience of the EU gas system to import gas from sources other than Russia.
• ACER agrees with ENTSOG that additional LNG imports, enhanced transmission capacities and the implementation of a 15% gas demand reduction target may be needed to secure adequate levels of gas storage at the margins of 2023/24 winter season.
• ACER also stresses that continued vigilance regarding gas supplies and monitoring of storage filling trajectories are crucial because of the persistent risks of a significant reduction in Russian gas supply.

ACER’s main recommendations to ENTSOG for improving Outlook’s methodology and results:

• Use a complementary scenario based on expected gas supply and booked capacities;
• Estimate the effects of high gas prices on gas demand;
• Where relevant, adapt gas supply assumptions to potential events impacting the gas supply import capabilities, going beyond assumptions based on historic values;
• Use gas demand projections which are fully consistent with the European targets on gas demand reduction and phase-out of Russian gas; and
• Increase the level of granularity of the simulation results, the network topology, and its visualisation.

ACER highlights the importance of a close cooperation between ENTSOG and the European Network of Transmission System Operators for Electricity (ENTSO-E) to ensure consistent assumptions and results in their respective seasonal outlooks.

Access the ACER’s Opinion on ENTSOG’s Gas Summer Supply Outlook 2023.

Also see the recent ACER communication on ENTSO-E’s Summer Outlook 2023.

ACER monitors and reports annually on the EU (internal) markets of electricity and natural gas (in our so-called Market Monitoring Reports (MMR)).

In 2023, ACER publishes a series of overviews of gas markets and the progress towards an internal EU gas market. Today’s Key developments publication provides an initial assessment of key developments in European wholesale gas markets over the recent months. The analysis will be further elaborated in our September’s MMR on European gas market trends and price drivers.  

What are the key findings?

Among the main trends identified in 2022 and the first half of 2023:

• The extreme wholesale gas price rises during 2022 can be primarily attributed to the Russian supply shock. However, it was the resilient demand for gas, driven upwards by above-average storage injections, that caused prices to clear at record-high levels;
• Since the end of 2022, the demand-supply balance in the gas market has improved due to a combination of rising liquified natural gas (LNG) imports and a decrease in demand, effectively compensating for the loss in Russian pipeline flows;
• This improved balance has resulted in a reduction in gas prices, which are now approaching pre-crisis levels. However, supply is overall still tight exposing prices to unexpected developments. China’s LNG demand remains an important factor for EU gas prices going forward;
• The significant price spreads between Northwest European (NWE) and South European hubs during the summer of 2022, caused by limited access to NWE, have returned to normal levels, due to increased LNG import capacity;
• Gas trading activity has increased in recent weeks due to more favourable prices and reduced margin requirements.

What are the next steps?

• September: European gas market trends and price drivers (analysing the drivers behind record-high gas prices in spring and summer 2022);
• November: 2023 Synthesis and Recommendations for gas; and
• December: Analysis of LNG market developments.

Access the Key developments in EU gas wholesale markets – 2023 Market Monitoring Report.

Dive into our interactive dashboard and explore the evolution of price and demand supply metrics for the period 2015 to 2023.

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.

ENTSOG is required to publish a draft cost-benefit analysis (CBA) methodology for hydrogen infrastructure projects, in accordance with Article 11 of the recast Trans-European Networks for Energy (TEN-E) Regulation.

ACER contracted VIS Economic & Energy Consultants to conduct a study to identify recommendations for European Network of Transmission System Operators for Gas’s (ENTSOG’s) future CBA methodology for hydrogen infrastructure.

What are the key findings?

The VIS study:

• Assesses existing CBA documents and technical-economic assessments for hydrogen infrastructure;
• Reviews hydrogen transportation plans and supply/demand targets in selected EU Member States;
• Assesses market and network conditions justifying building hydrogen infrastructure; and
• Provides recommendations to ENTSOG for a CBA methodology for hydrogen infrastructure consistent with CBA methodologies used for other types of energy infrastructure projects.

The recommendations have been clustered into four thematic groups:

The main findings of this study were presented during the ACER webinar on 14 April 2023.

What are the next steps?

• ENTSOG’s CBA methodology will first be used for the development of the European wide ten-year network development plan (TYNDP) 2024 and the following selection process of Projects of Common Interest (PCI).
• ENTSOG is currently consulting on its preliminary CBA methodology. After concluding the consultation, ENTSOG will adapt its preliminary methodology and submit a draft CBA methodology to ACER, the EU Member States and the European Commission.
• ACER shall provide its Opinion within three months upon ENTSOG’s submission, which is expected in June 2023. This consultancy study provides ideas that ACER will consider for its Opinion. However, the information and the views set out in this study are those of the author (VIS) only and may not, in any circumstances, be regarded as stating ACER’s official position, opinion, or recommendation. ACER does not guarantee the accuracy of the data and the statements contained in the study.

Access the consultancy study about cost-benefit analysis for hydrogen networks.

ACER publishes today its report on Latvia’s proposed gas transmission tariffs.

What is in the report?

ACER assessed the proposed methodology to calculate the gas tariffs, including:

• The tariff structure applicable to Latvia as a result of its participation in the merged market zone between Finland, Estonia and Latvia (FinEstLat); and
• The tariffs applicable to domestic exit points of the Latvian network and to the Latvian exit point to Lithuania.

What are ACER’s main findings?

The public consultation of the Latvian national regulatory authority, the Public Utilities Commission (PUC), is missing certain information required to be included in the consultation according to the Network Code on Gas Transmission Tariffs.

ACER recommends that PUC improves:

• Assessment on cross-subsidies resulting from the FinEstLat market merger;
• Calculate the exit tariff to Lithuania using the proposed reference price methodology; and
• Apply capacity-based tariffs at domestic exit points.

Access the ACER report on the Latvian gas tariffs.

Access all ACER reports on national tariff consultation documents.

The European Union Agency for the Cooperation of Energy Regulators (ACER) launched its daily Liquefied Natural Gas (LNG) benchmark on Friday, 31 March 2023, as required by Council Regulation (EU) 2022/2576.

The LNG benchmark provides for greater market transparency based on mandatory data reporting, and hence is expected to reflect real-world prices for LNG. Stakeholders may use the LNG benchmark voluntarily.

The daily LNG benchmark complements ACER’s daily LNG price assessments, launched on 13 January 2023.

Access the LNG Price Assessment and LNG benchmark (of 31 March 2023).

Learn more about the LNG price assessment and benchmarks.

What is the difference between the LNG price assessment and the LNG benchmark?

ACER publishes three distinct and independently calculated Delivered Ex-Ship (DES) Spot LNG price assessments: for Europe (EU), for North West Europe (NWE) and South Europe (SE).

In addition, ACER publishes a daily LNG benchmark determined by the spread between the daily LNG price assessment for DES LNG Spot EU and the settlement price for the TTF Gas Futures front-month contract established by ICE Endex Markets B.V.

How is the LNG benchmark determined?

ACER’s daily LNG benchmark (published daily from 31 March 2023) is determined by the spread between ACER’s daily LNG price assessment for ‘delivery ex-ship’ (DES) LNG Spot EU and the settlement price for the TTF Gas Futures front-month contract established by ICE Endex Markets B.V.

When and where will the daily benchmark be published?

ACER will publish the LNG benchmark every weekday as soon as technically possible. The results will be published on TERMINAL.

How has ACER’s price assessment methodology evolved so far?

ACER published the first beta version of its LNG price assessment methodology on 13 January 2023 and the second one on 8 March 2023. The second version increased the robustness of the methodology and reduced the time-lag resulting from the rolling window used to calculate the price (see 6 March news).

The latest version, published on 23 March 2023 and with effect from 31 March 2023, covers both the LNG price assessment methodology and the benchmark methodology.

ACER will continue to periodically revise the methodology and the guidance on reporting LNG market data, in consultation with stakeholders.

Check out ACER’s LNG price assessment methodology documents.

When will the methodology be revised next?

The exact date of the next update is not determined yet.

ACER publishes today its report on Lithuania’s proposed gas transmission tariffs.

ACER provides recommendations to the Lithuanian national regulatory authority (NRA), VERT, particularly regarding the existing regional networks and the need to enhance transparency on the proposed asset splits.

What is in the report?

ACER assessed the proposed methodology to calculate the gas tariffs, including:

• The treatment of regional networks;
• The tariffs applicable to the transmission service to the Kaliningrad District; and
• The tariffs applicable to the domestic exit to the Achema fertilizer plant.

What are ACER’s main findings?

ACER recommends to the Lithuanian NRA, VERT, to implement improvements:

• On regional networks, ACER recommends that VERT changes the category of regional networks from transmission to distribution.
• On the asset split applicable for the transmission to Kaliningrad, VERT should provide clarity on the criteria used to establish the asset split.
• On the proposed tariff differentiation to the domestic exit point to the Achema fertilizer plant, ACER recommends specifying the criteria on which a consumer, including Achema, could get a different tariff compared to all other regional network exits.

Access the report on the Lithuanian gas tariffs.

Access all ACER reports on national tariff consultation documents.

ACER’s Position Paper towards greater consistency of cost benefit analysis methodologies, published today, identifies topics where consistency is needed across the Cost Benefit Analysis methodologies (CBA methodologies) currently under development by the European Commission and the European electricity and gas grid operators.

Greater consistency of CBA methodologies will enable a more efficient energy system across Europe by ensuring similar terms of assessment of projects in a technology neutral way.

Why did ACER issue this Position Paper?

The updated TEN-E Regulation (Regulation (EU) 2022/869) introduced the task of the development of separate CBA methodologies for the various energy infrastructure categories and by different entities:  

• The EU network of transmission system operators for electricity (ENTSO-E) for electricity transmission projects (including offshore grids);
• The EU network of transmission system operators for gas (ENTSOG)  for hydrogen projects; and
• The European Commission (EC) for projects of energy storage, electricity smart grids, gas smart grids, electrolysers and CO2 networks and facilities.

ACER must provide opinions on the ENTSO-E and ENTSOG CBA methodologies and on the draft lists of PCIs prepared by the EC. The Regulation tasks ACER with promoting consistency in the CBA methodologies developed by the EC with the CBA methodologies elaborated by ENTSO-E and ENTSOG.

To this end, ACER’s Position Paper sets out the topics where consistency should be promoted among all CBA methodologies.

Where is consistency of CBA methodologies needed?

1. Common input data set and assumptions;
2. Selection and use of scenarios and ways to deal with uncertainty;
3. Length of assessment period, residual value of projects, and social discount rate;
4. Definition of reference case networks;
5. Treatment of interdependency with other projects;
6. Project implementation status;
7. Clustering rules;
8. Criteria to assess the plausibility of projects’ commissioning dates;
9. Implementation Guidelines;
10. Definition and handling of capital and operational expenditures;
11. Consideration of the impact of the future extreme weather events on infrastructure resilience;
12. Approach to calculate social and environmental impacts of projects;
13. Methodology to calculate the benefit-to-cost ratio and Net Present Value of projects;
14. Sensitivities;
15. Modelling interlinkages of CBA methodologies;
16. Presentation of CBA results.

Next steps

The ACER Position Paper could serve as a reference document, e.g. during the cooperation with the EC and the ENTSOs during the development phase of their CBA methodologies, as well as when drafting the ACER opinions on the ENTSOs’ CBA methodologies, or when the EC Advisory Board for Climate Change forms their views on the methodologies.

Access the ACER Position Paper.