ENTSOG Current Work on Auctions Joint meeting with Users, European - - PowerPoint PPT Presentation

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ENTSOG Current Work on Auctions Joint meeting with Users, European - - PowerPoint PPT Presentation

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ENTSOG Current Work on Auctions Joint meeting with Users, European Commission and ERGEG ENTSOG Auction Test Case TF Brussels 28 th October 2010 Sofitel Europe Hotel at Place Jourdan 1, 1040 BRUSSELS Purpose of meeting Discuss the

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SLIDE 1

ENTSOG Current Work on Auctions

Joint meeting with Users, European Commission and ERGEG

Brussels – 28th October 2010 Sofitel Europe Hotel at Place Jourdan 1, 1040 BRUSSELS

ENTSOG Auction Test Case TF

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SLIDE 2

Purpose of meeting

  • Discuss the current process from the FG to the NC
  • Exchange opinions on new considerations
  • Present and debate the current stage of work on Auctions
  • Receive early feedback from the market for further consideration
  • Further develop the relationship with all parties
  • Early exchange between the parties as pre-meeting towards the

Stakeholder Joint Working Sessions during the NC Development period

  • Subsequent meetings will be accompanied by more organisations

2

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SLIDE 3
  • 1. Agenda
  • 2. CAM Framework Guideline
  • Role of Auctions in the FG; FG revision process (role of Auctions, Existing
  • vs. Incremental capacity); Appropriate level of detail in the NC
  • 3. Current Work on Auctions within ENTSOG
  • Focus on process in terms of timing; Underlying Standard Capacity

Products; Status of progress of work on Auctions

  • 4. Auction process and interaction with other areas
  • Process: Sequence from long to short term Auctions; Interaction with

CMPs, Balancing, Tariffication

  • 5. Auctioning process for different Standard Products
  • 6. Future collaboration between the parties

3

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SLIDE 4
  • 2. CAM Framework Guideline

Framework Guideline revision process

  • Role of Auctions in the Framework Guideline/Network Code?
  • One Auction or open for un-harmonised IP specific solutions?
  • Appropriate level of detail of Auction process in the CAM Network

Code?

  • Existing vs. Incremental capacity to design an Auction?
  • Pricing rules?
  • Are new elements expected for interruptible capacity?

4

What changes will be included in the final FG?

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SLIDE 5
  • 3. Current Work on Auctions within ENTSOG

Approach of work on Auctions

  • Identification of theoretical Auction methods
  • Definition of Auction principles to be reflected
  • Development of Auction Options for most Standard Capacity

Products for further discussion

  • Started with short-term to develop functioning process
  • First outline of rough procedure  then exact timing etc.
  • Exact days when e.g. Windows open are defined subsequently

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Target: Basis for discussion during Code development phase

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SLIDE 6
  • 3. Current Work on Auctions within ENTSOG

Underlying Standard Capacity Products

  • Users (Eurogas, EFET and OGP) proposed set of Standard Capacity

Products in conjoint letter

  • Letter expressed preference for exclusive Standard Products:
  • Proposal taken as basis for ENTSOG’s auction considerations
  • All required transmission durations (short to long term) could be
  • ffered via the combination of each Standard Product
  • Quarterly products (1st Jan-Apr-July-Oct) allows different start of year

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Days Months Quarters Short to long term duration

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SLIDE 7
  • 3. Current Work on Auctions within ENTSOG

Analysis Phase

Work Meeting With Market Parties Definition

  • f

Products and Auction Generic Principles Options for Within-Day

Jul-2010 Oct-2010 Jan-2011

Preparing NC development with test case Building common understanding on content Gaining experience on the process of developing EU-wide solution

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Options for Short Term Options for Mid Term Options for Long Term Revision and Selection

  • f

preferred

  • ption

Process Within-Day Process Short Term Process Mid Term Process Long Term

Detailing Phase

Work Meeting With Market Parties

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SLIDE 8

Auction sequence

  • Selected Products are to be auctioned sequentially – no overlap
  • Unsold capacity is carried forward to next Auction (LT  MT  ST)

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  • 3. Current Work on Auctions within ENTSOG

SHORT TERM MONTHLY CAPACITY Rolling Monthly Release MEDIUM TERM CAPACITY Monthly Capacity- Annual Release LONG TERM CAPACITY Quarterly Capacity - Annual Release SHORT TERM DAILY CAPACITY Within Day

  • Bal. of

day Day Ahead 1 day 1 month z months 'n' years (e.g. 15 years)

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SLIDE 9

Capacity Portfolio build-up

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  • 3. Current Work on Auctions within ENTSOG

Within-Day Long Term Capacity Quarterly Capacity - Annual Release Short Term Daily Capacity Day-Ahead Short Term Monthly Capacity Rolling Monthly Medium Term Capacity Annual Monthly Capacity 3 7 10 20 60

Example User Portfolio

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SLIDE 10
  • 4. Interaction with other areas

CMPs – e.g. Restriction of re-nom rights

  • Restriction undermines product offered / sold
  • Users would over-book capacity to get around the reduction rules

 TSO has capacity bookings that do not reflect the actual needs

  • May increase risks of grid operation if TSO used these inflated bookings
  • Buy back risks are increased – but are they ‘real’ bookings – either way

TSO may need to buy back

  • Users may be faced with significant increase of balancing costs

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Benefits of the restriction of re-nomination rights do not

  • utweigh the efforts and implications.
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SLIDE 11
  • 4. Interaction with other areas

Balancing

  • Target model: simple daily commoditised
  • Cash-out at the end of the day
  • Intra-day balancing may require physical products
  • Locational: delivery at a specific entry or exit points
  • Temporal: delivery during a specific period within the day
  • Nomination procedures will become an important issue in balancing
  • This calls for compatibility of capacity and balancing rules
  • Capacity release mechanisms to be alligned with flexible gas

deliveries/offtakes

  • Common gasday would be nice to have

11

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SLIDE 12

Pricing (1/3)

  • REGULATION (EC) No 715/2009

Article 13(1): “Tariffs, or the methodologies used to calculate them, shall facilitate efficient gas trade and competition, while at the same time avoiding cross-subsidies between network users and providing incentives for investment and maintaining or creating interoperability for transmission networks. Article 14(2): “Transport contracts signed with non-standard start dates or with a shorter duration than a standard annual transport contract shall not result in arbitrarily higher or lower tariffs that do not reflect the market value of the service, in accordance with the principles laid down in Article 13(1).”

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  • 4. Interaction with other areas
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SLIDE 13

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  • 4. Interaction with other areas

Pricing (2/3)

  • Auction objectives
  • Establish market value in event of scarcity
  • Otherwise capacity secured at reserve price
  • Reserve price determination
  • To reflect underlying costs
  • To avoid cross-subsidisation between system users
  • To secure TSO revenue
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SLIDE 14

Pricing (3/3)

  • Context of Reserve Price Discussion
  • CAM and CMP will lead to increased short term capacity release
  • There will be uncertainty about capacity booking levels
  • Promotion of short term trading and low short term Reserve Prices

seems to be the aspiration

  • Issues to consider
  • Volume and price uncertainties create risks for all players
  • Over and under-recovery mechanisms to be defined

Inappropriately low Reserve Prices for short term capacity undermines longer term bookings which creates distortions and cross subsidies

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  • 4. Interaction with other areas

Issue to be discussed prior to defining Reserve Price rules

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SLIDE 15
  • 5. Auctioning process for different Products

Introduction

  • Standard Capacity Products as an assumption from the

interpretation of Draft CAM FG and the Letter by Eurogas, OGP, EFET

  • Auction Options represent the current work stage
  • Mechanisms not approved within ENTSOG
  • Subsequently, preferred Options are intended to be detailed (types
  • f Auctions, Pay-As-Bid/Cleared-Price etc)

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5.1 Auction of Daily Capacity – Option 1

Bidding Windows Allocation Lead Time B1 A1 B2 A2 B3 A3 B4 A4 B5 A5 B6 A6 B7 A7 B8 A8 ... ... Bx Ax D1 D2 D3 D4 Dx D5 D6 D7 D8 ... Capacity = x consecutive days

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SLIDE 17

5.1 Auction of Daily Capacity – Option 2

Allocation Lead Time A1 A2 A3 A4 A5 A6 A7 A8 ... Ax Bidding Windows BW D1 D1 BW D2 D2 D8 BW D3 D3 BW D4 D4 BW D5 D5 BW D6 D6 BW D7 D7 BW D8 ... ... BW Dx Dx Capacity = x consecutive days

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SLIDE 18

5.1 Auction of Daily Capacity – Option 3

Allocation Lead Time A1 A2 A2 A3 A3 A3 A4 A4 A4 A4 A5 A5 A5 A5 A5 A6 A6 A6 A6 A6 A6 A7 A7 A7 A7 A7 A7 A7 A8 A8 A8 A8 A8 A8 A8 A8 ... ... ... ... ... ... ... ... ... Ax Ax Ax Ax Ax Ax Ax Ax Ax Ax D1 D2 BW D2 BW D1 Bidding Windows BW D8 D3 D4 D5 BW D3 BW D4 BW D4 BW D4 BW D4 BW D5 BW D6 BW D7 BW D7 BW D6 BW D6 BW D6 Dx BW D2 BW D3 BW D3 BW Dx BW Dx D7 D8 BW D6 BW D5 BW D5 BW D5 BW D5 BW D6 D6 BW Dx BW Dx BW Dx BW Dx BW Dx ... BW D7 BW D8 ... BW Dx BW Dx BW Dx BW D7 BW D8 ... BW D8 BW D8 BW D8 BW D8 BW D7 BW D7 BW D7 BW D8 ... ... ... ... ... ... ... Capacity = x consecutive days

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SLIDE 19

5.2 Auction of Monthly Capacity – Option 1

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Bidding Windows Allocation Lead Time B1 A1 B2 A2 B3 A3 B4 A4 B5 A5 B6 A6 B7 A7 B8 A8 B9 A9 B10 A10 B11 A11 B12 A12 ... ... Bz Az M2 M6 M7 M8 M9 M1 M5 M4 M3 M10 M11 M12 ... Mz Capacity = z consecutive months

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SLIDE 20

5.2 Auction of Monthly Capacity – Option 2

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Allocation Lead Time A1 A2 A3 A4 A5 A6 A7 A8 A9 A10 A11 A12 ... Az B3 B2 M2 M3 M4 B9 B8 B4 M8 Mz Bidding Windows B1 M5 M6 M7 B12 ... M10 Bz M12 ... B5 B6 B7 M11 B11 B10 M9 M1 Capacity = z consecutive months

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SLIDE 21

5.2 Auction of Monthly Capacity – Option 3

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Bidding Window Allocation Lead Time B1 A1 B2 A2 B3 A3 B4 A4 B5 A5 B6 A6 B7 A7 B8 A8 B9 A9 B10 A10 B11 A11 B12 A12 ... ... Bz Az M9 M10 M1 M2 M3 M4 M5 M6 M7 M8 M11 M12 ... Mz Capacity = z consecutive months

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SLIDE 22

5.3 Auction of Quarterly Capacity

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Bidding Window Allocation x Quarter Lead Time Alloc Q1 Y Q1 Y Lead Time Q1 Alloc Q2 Y Q2 Alloc Q3 Y Q3 Alloc Q4 Y Q4 Alloc Q1 Y+1 Q1 Alloc Q2 Y+1 Q2 Alloc Q3 Y+1 Q3 Alloc Q4 Y+1 Q4 Alloc Q1 Y+2 Q1 Alloc Q2 Y+2 Q2 Alloc Q3 Y+2 Q3 Alloc Q4 Y+2 Q4 ... Alloc Qn Y+r Qn ANNUAL BIDDING WINDOW Capacity = Y Capacity = Y+1 Capacity = Y+2

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SLIDE 23

5.4 Auction of Within-Day Capacity – Option 1

Allocation A1 A2 A3 A4 A5 A6 Last bidding window of the day A20 Bidding Window BW 1 Bidding Window / Lead Time 06.00 07.00 08.00 BW 20 03.00 10.00 11.00 12.00 02.00 04.00 05.00 06.00 BW 3 BW 4 BW 5 BW 6 09.00 BW 2 Capacity = balance of day (remaining hours of Gas Day)

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5.4 Auction of Within-Day Capacity – Option 2

Allocation A0 A1 A2 A3 A4 A5 A6 Last bidding window of the day A20 BW 2 BW 3 06.00 07.00 08.00 09.00 10.00 11.00 12.00 02.00 06.00 Bidding Window Bidding Window / Lead Time BW 20 02.00 05.00 BW 4 BW 5 BW 6 03.00 04.00 BW 0 BW 1 Capacity = balance of day (remaining hours of Gas Day)

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5.4 Auction of Within-Day Capacity – Option 3

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Allocation Allocation A0 A1 A2 A3 A4 A5 A6 Last bidding window of the day A20 Unsatisfied capacity bids from daily auction are carried over (as an option) to the within- day auctions 05.00 06.00 07.00 08.00 09.00 10.00 06.00 12.00 11.00 02.00 03.00 04.00 BW 20 Bidding Window of Daily Capacity Auctions Bidding Window / Lead Time BW 6 BW 1 BW 2 BW 3 BW 4 BW 5 Bidding Window / Lead Time Capacity = balance of day (remaining hours of Gas Day)

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5.5 Overview of Auctions for all durations

Type of allocation Lead time and Bidding Window Possible Service Duration Standard Capacity Product Share of total calculated capacity Auction type LT: During the gas day, at least 3 hours taking renom lead-time into account Any remaining available capacity FCFS vs Auctions Rolling monthly allocation One month Monthly Total calculated capacity minus allocated quantities from previous auctions Upcoming Discussions Sealed-Bid vs Open Bid Single Round vs Multiple-Rounds Cleared-Price vs Pay-as-Bid Reserve Price Definition Rolling daily day- ahead allocation Monthly Within day allocation Remainder of the day Daily (or balance of day) LT: Day-ahead – x hours before 6am. LT: X months before the start of the first month on sale LT: X months before the start of the first quarter

  • n sale

LT: Month-ahead, xth of the month, prior to the month of service Total calculated capacity minus allocated quantities from previous auctions One day Daily Total calculated capacity minus allocated quantities from previous auctions Annual Quarterly long term allocation Any (combination

  • f) quarters from x

up to x+15 years out Quarterly Maximum x% of calculated available capacity on Long term Annual monthly allocation Any (combination

  • f) months up to x

months out

26

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SLIDE 27

5.6 Example of Bidding Window organisation

DAY 1 DAY 2 DAY 3 DAY 4 DAY 5 DAY 6 DAY 7 DAY 8 DAY 9 DAY 10 Day 11+ End of Day Capacity Allocation (Tranche 1) Bidding Period Tranche 1 25%

  • ffered

End of Day Capacity Allocation (Tranche 2) Reporting Period Bidding Period Tranche 2 25%

  • ffered

End of Day Capacity Allocation (Tranche 3) Reporting Period Unsold capacity Bidding Period Tranche 3 25%

  • ffered

End of Day Capacity Allocation (Tranche 4) Reporting Period Unsold capacity Bidding Period Tranche 4 25%

  • ffered

PLUS Unsold Capacity Unsold capacity Reporting & conclusion

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  • 6. Future collaboration between the parties
  • How to best organise the collaboration?
  • Topics for next meetings and homework?

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SLIDE 29

Thank you!