The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today an overview of European Gas Wholesale Markets trends in 2021, as an early publication of its annual Market Monitoring Report (MMR).

The MMR presents the results of monitoring the European internal electricity and gas markets and recommends further actions to foster their integration, as well as providing guidance and evidence on how energy markets can perform more efficiently.

In 2022, the MMR will comprise two volumes: one analysing the Gas Wholesale Markets, and the other analysing the Energy Retail Markets and Consumer Protection with expected publications dates of Q3 (July) and Q4 (September) respectively.

What are the main monitoring trends in wholesale gas markets in 2021?

• EU gas demand increased, primarily driven by the economic recovery. However, the record-high gas prices led to some gas-to-coal switching for power generation resulting in a drop in gas consumption for power generation.

Explore the evolution of total gas demand and the link with demand for power generation in individual Member States over the last few years in the interactive gas markets dashboard.

• Meanwhile, gas supply did not keep pace with the increase in demand. Domestic gas production in the EU and United Kingdom continued to decline and European liquefied natural gas (LNG) imports dropped, with modest pipeline supply. In the years to come, LNG will likely play an increasingly relevant role in the European gas supply portfolio.

Investigate the evolution of gas supply per origin and the evolution of European LNG imports over the last few years.

• Limited gas supply led to a higher reliance on underground storage stocks, which reached historically low levels because of higher withdrawals and lower injections.

You can compare underground storage levels over the last few years in our interactive dashboard.

• Wholesale gas prices rose sharply in all countries, but to different degrees. Nevertheless, the strong hub price convergence that was already achieved was not overturned.

Track the development of spot gas prices and price convergence over the last few years.

For the full overview, access the analysis on key Gas Wholesale Markets developments.

What were the main monitoring trends in the Electricity Wholesale Markets in 2021? Find out more.

Deepen your insights (e.g. by country and/or time frame) by exploring our interactive dashboard of dynamic charts of market and trading data.

ACER publishes today its second report on the implementation of the European Union Network Code on Harmonised Transmission Tariff Structures for Gas (NC TAR) for the Danish transmission system.

ACER concludes that the Danish transmission system operator (TSO), Energinet, does not sufficiently demonstrate the compliance of the proposed reference price methodology (RPM) with the requirements of the NC TAR.

What are ACER’s recommendations?

ACER recommends the national regulatory authority (NRA) to further assess the compliance of the proposed RPM with the NC TAR requirements on cost-reflectivity and cross-subsidisation.

The NRA should additionally provide further transparency on a proposed non-transmission emergency supply service and should revise the compliance of the proposed discount to capacity contracted on long-term basis.

ACER also provides additional guidelines on the on-going discussion to merge an upstream pipeline with the Danish transmission network.

In particular, the Report refers to the revenue regulation applicable to transmission assets and to the NC TAR requirements to allocate these costs to the transmission network’s users. 

The Danish NRA shall take a motivated decision on the RPM by 14 May 2022.

Access the report and find out more on the other national tariff consultation documents.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today two Opinions related to the review of exemptions from the obligation of enabling bi-directional capacity in gas pipelines at two interconnection points (IPs).

In particular, ACER provides an assessment on the Decisions taken by the national regulatory authorities of:

• Austria and Hungary at the Mosonmagyaróvár IP: accepting the transmission system operators (TSOs)’ proposal (Gas Connect Austria and FGSZ) and considering the obligation of enabling bi-directional capacity as already fulfilled,

• Austria and Slovenia at the Murfeld/Ceršak IP: accepting the TSOs’ (Gas Connect Austria and Plinovodi) proposal and prolonging the exemption from the obligation of enabling bi-directional capacity.

What is the role of ACER?

After being notified by the Competent Authorities (i.e. the relevant NRAs) that the Decisions have been taken, ACER shall issue Opinions on the elements of the coordinated Decisions according to the requirements of the Security of Gas Supply (SoS) Regulation.

ACER’s Opinions are then submitted to the Competent Authorities and the European Commission, for possible consequential actions.

What is ACER’s assessment?

1. Interconnection point "Mosonmagyaróvár" (Hungary to Austria)

ACER believes the TSOs’ proposal was prepared and consulted in compliance with the SoS Regulation.

The Austrian and Hungarian energy regulatory authorities, E-Control and MEKH, timely decided on the proposal in a coordinated way. The TSOs proposal and the Decisions sustain there is already permanent bi-directional capacity at the Mosonmagyaróvár IP, under certain conditions related to:

• gas demand and temperature in Hungary,

• a request of application of solidarity from the Republic of Austria.

However, ACER notes the proposal does not include a feasibility study for a reverse flow project enabling permanent marketable capacities and a cost-benefit analysis based on the requirements of the TEN-E regulation.

The Decisions note that the main infrastructure standard indicator of the SoS Regulation (the so-called N-1 indicator) is already at an adequate level in Austria.

ACER agrees that there is no need to increase the capacity from Hungary to Austria at the Mosonmagyaróvár IP under the current circumstances. The investment costs of having significant marketable firm reverse flow capacity at this IP would significantly outweigh the very limited prospective benefits in terms of security of gas supply.

However, ACER is not convinced that the cumulative conditions indicated in the TSOs’ proposal could qualify as permanent physical bi-directional capacity. ACER believes that the agreed crisis scenarios, including any conditionalities to the physical flow capability, must be relevant and meaningful to offer gas flows from Hungary to Austria in a supply crisis.

Alternatively, a request for exemption should be submitted or a physical reverse flow project offering marketable capacity should be developed.

Read more on the ACER Opinion (Hungary - Austria).

2. Interconnection point "Murfeld/Ceršak" (Slovenia to Austria)

ACER believes the TSOs’ proposal was prepared and consulted in compliance with the SoS Regulation.

The Austrian and Slovenian energy regulatory authorities, E-Control and the Slovenian Energy Agency, timely decided on the proposal in a coordinated way.

ACER confirms the Decision fulfils the requirements of the SoS Regulation. However, the request for an exemption does not include a complete feasibility study for the project and a cost benefit analysis as required by the TEN-E regulation.

The Decisions note that the main infrastructure standard indicator of the SoS Regulation (the so-called N-1 indicator) is already at an adequate level in Austria.

ACER confirms there is no need to establish bi-directional capacity from Slovenia to Austria at the Murfeld/Ceršak interconnection point under the current circumstances.

The establishment of the capacity from Slovenia to Austria in the short - to medium - term, when not supported by the market, may result in inefficient investments. The investment costs of having permanent bi-directional reverse flow capacity at this interconnection point would significantly outweigh the very limited prospective benefits in terms of security of gas supply.

Find out more on ACER’s Opinion (Slovenia - Austria).

ACER publishes today its second series of reports on the implementation of the European Union Network Code on Harmonised Transmission Tariff Structures for Gas for both transmission systems in Poland: the national transmission system and the SGT pipeline. The latter refers to the Polish section of the Yamal transit pipeline, running from Russia through Belarus and Poland to Western Europe.

Regarding the national transmission system, ACER recommends that the Polish national regulatory authority for energy (URE), further justifies the reference price methodology (RPM) with the requirements of the Tariff Network Code, providing additional transparency regarding the expected use of the network. The Agency also recommends that the NRA provides additional transparency on investment projects. The NRA should also set a fixed entry-exit split or should provide due justification on the conditions that would trigger a change of the split.

Regarding the section of the SGT pipeline within Poland, the Agency recommends that URE further justifies the RPM, including additional clarity on the contracted capacity forecast, the detailed calculation steps of the methodology, and the calculation of the cost allocation assessment.

The Polish NRA shall take both motivated decisions by 31 March 2022.

Find out more and access all ACER reports on national tariff consultation documents.

ACER and Europe’s energy regulators welcome the European Commission’s hydrogen and decarbonised gas market legislative package.  In their joint Position Paper on Key Regulatory Requirements to Achieve Gas Decarbonisation, ACER and CEER provide recommendations in three areas:

• Enabling gradual and flexible regulation for hydrogen.

• Ensuring a level playing field in a decarbonised and integrated energy system.

• Empowering and protecting consumers for the energy transition.

It is clear that a successful energy transition must not only meet decarbonisation targets but also must meet consumers’ legitimate expectations of having reliable and affordable energy services. ACER and CEER set out nine key recommendations to carry out a successful energy transition:

1. Adopt a gradual and flexible regulatory approach to facilitate the emergence of competitive hydrogen markets, by defining core market and regulatory principles, guaranteeing a level playing field, ownership unbundling, third-party access, transparency and regulatory oversight;

2. Monitor hydrogen markets periodically to identify their development and whether more regulation is needed;

3. Apply cost reflectivity and beneficiary-pays principles to hydrogen networks, avoiding cross-subsidies between energy carriers;

4. Ensure an integrated, liquid and interoperable EU internal gas market, including by foreseeing a more flexible approach to the application of relevant network codes with respect to specific cross-border charges;

5. Adopt a more integrated approach to infrastructure development, both in relation to different levels of the supply chain (vertical), and to the various energy carriers (horizontal), consistent with the revised TEN-E Regulation;

6. Guarantee consumer rights regardless of energy carrier;

7. Embed robust consumer protection, future innovation, technology developments and new market trends in decarbonisation policies, recognising the specificities of gas markets;

8. Ensure cost efficiency and affordability to safeguard inclusiveness and a just transition, including by promoting and facilitating energy efficiency measures and information; and

9. Provide consumers with clear and reliable information and support, as well as ensure effective enforcement of their rights and consumer-centric digitalisation rules to enhance their empowerment and trust in the energy transition.

ACER and CEER stand ready to provide advice and they continue to work towards putting the consumer at the centre of the energy transition by promoting consumer awareness and protection.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today its Opinion on the European Network of Transmission System Operators for Gas (ENTSOG) Winter Supply Outlook 2021/2022.

What are the main highlights of ENTSOG Winter Supply Outlook?

ACER highlights the following findings from ENTSOG’s Outlook:

• The EU storage level on 1st October 2021 (75% of overall storage capacity) is one of the lowest in recent years, with varying situations among countries.

This is primarily due to a record high use of storage flexibility during the previous winter and a low injection during the summer with record-high gas wholesale prices.

• The European gas infrastructure offers sufficient flexibility to supply volumes to meet demand in Europe, assuming that gas supply is available in similar volumes as in recent years.

However, in case of a cold winter, the gas market would need to increase imports from pipelines and/or LNG by 5% to 10% more than the maximum volumes observed in recent years.

• Early and significant gas withdrawals from storages would result in low storage levels at the end of the winter season, with a negative impact on the gas system flexibility.

• South-Eastern Europe has significantly reduced its exposure to demand curtailment following the commissioning of new infrastructures, such as the Trans Adriatic Pipeline, Turk stream and other investments.

Despite this improvement, the Outlook’s supply route disruption simulations show that some demand curtailment under extreme temperatures are possible in selected regions.

What is ACER’s assessment?

ACER welcomes the timely publication of the ENTSOG Winter Outlook and finds it contributes to the objectives of the EU Regulations.

In particular, the Agency:

• notes with concern that, in case of a cold winter, the gas market would need to increase its gas imports from pipelines and/or LNG compared to maximum volumes observed in recent years, creating a risk of exposure to high gas wholesale prices.

• welcomes ENTSOG’s willingness to monitor the storage levels’ evolution and import volumes throughout the upcoming winter and to report on a regular basis and when anomalies appear.

• highlights the critical importance of counting with adequate storage levels towards the end of the winter season in anticipation of possible high demand or system stress situations.
  • Early and significant withdrawal would result in low storage levels at the end of the winter, with a negative impact on the flexibility of the EU gas system.
  • ACER expects storage users to prudently withdraw gas from storage to contribute to safeguarding the continuity of gas deliveries throughout the winter, in compliance with the contractual commitments and storage obligations, where applicable.

• identifies the existence of specific risk factors for the upcoming winter season (not always factored or mentioned in the Outlook), such as:
  • uncertainty on the availability of additional volumes from major sources of gas imports going beyond the contracted volumes,
  • very high gas wholesale prices.

ACER calls on ENTSOG and all actors with responsibilities related to gas supply continuity and price monitoring to remain vigilant for the upcoming winter in regards of those risk factors.

What does ACER recommend?

ENTSOG should consider improving future Outlook’s assumptions and methodology to better identify potential supply risks, including exposure to very high gas wholesale prices.

In particular, ACER encourages ENTSOG to consider using a complementary scenario based on expected gas supply and booked capacities in addition to the current scenarios based on historical values of gas supply. ACER also suggests to  include embedding expected gas prices and gas price demand elasticity into ENTSOG’s modelling.

The EU Agency for the Cooperation of Energy Regulators (ACER) publishes today its second report on the implementation of the EU Network Code on Harmonised Transmission Tariff Structures for Gas in Slovenia. In the report, ACER recommends that the Slovenian national regulatory authority for energy (NRA) improves the compliance of the reference price methodology with the requirements of the Tariff Network Code, including on transparency and on the choice of the cost drivers used to derive tariffs for all points of the network.

In addition, the Agency recommends that the NRA provides a clarification on the Transmission System Operator (TSO) revenue to be recovered through tariffs and on the reconciliation of past under-recoveries. This should improve transparency on the revenue to be recovered by the TSO and predictability on the calculation of future tariffs.

The recommendations made by the Agency aim at ensuring several requirements laid out in the Network Code, which relate to transparency, cost reflectivity and to preventing undue cross-subsidisation when setting transmission tariffs. These rules contribute to market integration, enhancing security of supply and promoting the interconnection between gas networks.

The Slovenian NRA shall take a motivated decision by 23 January 2022.

Access the report.

Find out more and access all ACER reports on national tariff consultation documents.

The EU Agency for the Cooperation of Energy Regulators (ACER) today submitted to the European Commission its Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design.

The European Commission, in its “toolbox” Communication of 13 October 2021, tasked the Agency with carrying out an assessment of the current wholesale electricity market design by April 2022, and providing a preliminary assessment by mid November 2021.

What’s in ACER’s preliminary assessment?

The ACER Preliminary Assessment complements the analysis already presented in ACER’s Note on the High Energy Prices, published in October.

The Agency’s Preliminary Assessment:

• provides some key factors for the relatively uneven electricity price impacts across Member States, and shows how countries with high gas dependency and low interconnectivity were more exposed to high electricity prices;

• looks at how the move towards more spot pricing of gas in Europe (rather than long-term contracts) has yielded significant benefits over the past decade and how this relates to price volatility issues going forward;

• includes key characteristics of the current electricity market design, adding ACER’s initial perspective on certain price volatility issues, and (in light of the current political debates) on alternative market design approaches including the notion of possibly decoupling electricity market outcomes from gas price dynamics through price caps or technology-dependent average prices;

• adds the latest data and analysis from ACER’s energy market monitoring on related dynamics in the European electricity market; and

• provides an initial outline of ACER’s upcoming April 2022 assessment.

What to expect in the ACER April 2022 assessment?

In its broader assessment due in April 2022, ACER will provide an analysis of:

• the benefits and drawbacks of the current wholesale electricity market design and related matters;

• the issue of sufficient revenue certainty in electricity markets in view of the massive  investment needs up ahead; and

• the options for cushioning or shielding end-consumers from perceived excessive levels of price volatility that impact affordability.

What’s next?

ACER will hold a workshop with stakeholders in the first half of February 2022.

To receive the latest ACER news direct to your inbox, sign up (for free) to ACER’s infoflash news.

Access the Preliminary Assessment of Europe’s high energy prices and the current wholesale electricity market design.

Over the years, market players have raised numerous issues with access to gas transmission capacity at the borders between the European Union (EU) and the Energy Community, as well as within the Energy Community itself. As a consequence, the EU Agency for the Cooperation of Energy Regulators (ACER) and the Energy Community Secretariat (ECS) jointly held a public consultation to investigate how the market assesses access to capacity in the region, receiving 15 responses. As a follow up of the analysis, ACER and ECS publish today a joint summary note of the responses.

Among others, market users identified obstacles related to transparency, lack of connection between transmission capacity and commodity markets and gas quality standards. They also pointed out possible solutions including:

• full adoption and application of the EU and Energy Community regulatory framework (e.g. Network Codes)

• greater regulatory oversight and

• addressing market dominance.

ACER and ECS call upon the national regulatory authorities (NRAs) and transmission system operators (TSOs) to follow up with the relevant market players on these issues. These actions can take place at regional level through the Gas Regional Initiative South-South East, whereas specific interconnection points may require action from individual NRAs and TSOs.  

Find out more in the Summary Note.

Market players have no interest in making long term commitments that pay for gas network expansion according to the latest report on the monitoring of incremental capacity published by the EU Agency for the Cooperation of Energy Regulators (ACER).

The report investigates the incremental capacity cycle between July 2019 and July 2021 and focuses on those regulatory decisions approving projects to proceed to the incremental process’ final stage.

What is the incremental capacity process?

The incremental capacity process mandates transmission system operators (TSOs) to investigate whether some degree of non-binding interest for new capacity can be found at EU gas markets’ borders. If TSOs find sufficient demand, they design a project based on the expressed interest and submit a joint project proposal (including the economic parameters to carry out a viability test) to the concerned national regulatory authorities for coordinated approvals.

In the final step of the process, TSOs request binding commitments from the market through an auction of the incremental capacity based on the approved economic parameters. The project is implemented by TSOs only when the market commitments lead to a viable project where revenues exceed the expected costs.  Otherwise, the incremental project is not implemented.

This process of market testing is repeated every odd year on all EU gas markets’ borders.

What is the role of ACER?

ACER monitors the process to ensure it allows for greater interconnectivity and a better functioning of the internal gas market without burdening the existing network users.

What are the report’s main findings?

The analysis showed that, despite TSOs found significant non-binding interest from the market on gas networks expansion (in about one third of the assessed market borders), the market was not willing to convert such interest into any binding contracts that would pay for the capacity increase.  As a consequence, no new capacity was developed by the incremental auctions in the latest cycle (2019-2021).

When comparing the results with the previous cycle (2017-2019), the report finds not a single unit of gas transmission capacity developed on the basis of the incremental process after four years.

This outcome can be explained by:

• the maturity and saturation of the gas transmission capacity’s market

• by market players factoring in the European Union’s and national climate and energy policies in forecasting the evolution of the gas market, or

• the market finding unattractive the current access conditions to incremental capacity.

ACER reminds the importance of having a network expansion based on robust demand indications to ensure the overall efficiency of the incremental process. This is particularly key in the current gas market, and in view of achieving the European Union’s climate and energy policy objectives.

Find out more in the report.