Fi Financing nancing the gas gas tr trans ansmis mission sion - - PowerPoint PPT Presentation

Fi Financing nancing the gas gas tr trans ansmis mission sion netw twork

• rk

Analyzing the effects of duration dependent multipliers

Eren Çam | Dominic minic Lencz ncz | Simon Schulte | ENERDAY - Dresden | 12.04.2019

Agenda da

• Motivation & Background
• Research question and methodology
• Preliminary results

2/13

Introd troduct uction ion Motivation

• Decreased demand for long-term transmission capacity
• Increased demand for short-term (e.g. daily) transmission capacity

Consequ quence ce Implicati tion

• n
• Efficient pricing of short-term vs. long-term transmission capacities gets more

relevant

Energ rgy transi sitio tion Curren ent t German gas demand Indicati tive ve German gas demand for 2050

Electrification scenario - dena EL95 Jan Apr Jul Oct Dec 6000 5000 4000 3000 2000 1000 GWh/ h/d Jan Apr Jul Oct Dec 6000 5000 4000 3000 2000 1000 GWh/ h/d 3/13

Introd troduct uction ion Background

Financi ncing ng the e gas s transmis ission n netw twork rk

Who: Gas traders who transfer gas using the gas transmission network Wh What: t: Entering and exiting a transmission grid market area (entry-/exit-tariffs) How: Traders need to buy the transmission capacity they require in explicit auctions How is trans nsmis issi sion

• n capaci

city y priced ed?

duration dependent tariff (reserve price) auction premium

PL Gaspool

Reduced tariff

Multip tipliers iers 1 - 1.5 for quarterly and monthly capacity 1 - 3.0 for daily and intradaily capacity EU TAR 2017

Effect ect of multiplier ers Multipliers increase the relative price of short-term capacities in comparison to long-term capacities Impact on transport, storage, gas prices …

Impact on 1) short-term efficiency, 2) long-term efficiency and 3) allocation of costs

4/13

Introd troduct uction ion Research question

The big multiplier er quest stion

• n

What are the adequate multipliers to balance between

• 1. facilitating short-term gas trade,
• 2. providing long-term signals for efficient investment in the transmission network,
• 3. enhancing cost reflectiveness of transmission network charges?

This question is discussed currently EU-wide within an a consultation (NC TAR 2017 (Article 28))

Questi tion

• n

analyzed d in this resea earc rch

What are the effects of multipliers on the gas dispatch?

Intuitive hypotheses: 1. Multipliers increase long-term capacity bookings. 2. Multipliers decrease volatility of gas transports. 3. Multipliers increase storage utilization. 4. Multipliers increase price differences between market zones in most situations. 5. Multipliers increase total costs in the short-term and hence reduce efficiency.

5/13

Literat erature ure revie iew

Theory Topic . Application/ Methodology

• Inefficient offers of network

services in entry/exit regulations

Hallack and Vazquez (2013) – European Union regulation of gas transmission services: Challenges in allocation of network resources through entry/exit schemes

Entry-Exit tariffs Principles of Public Utility Rates Scenario Analysis/ LP

• Rates based on short-term marginal costs

incentivize efficient short-term utilization

Borenstein (2016) – The economics of fixed cost recovery by utilities

• Rates based on long-term marginal costs

incentivize efficient investments

• Rates based on short-term marginal costs

incentivize efficient short-term utilization

Bonbright et al. (1961) – Principles of public utility rates

• Recommends differentiating tariff structures

between intra EU, domestic exits and EU borders

• Proposed schemes bring with them different

distributional effects

Harald Hecking (2015) – Two new tariff models to foster competition and security of supply in the EU gas market

• Comparison of capacity-

weighted distance vs least squares approaches for computing tariffs

• Weighted computation

methodologies more suitable for including transmission network features

Bermudez et al.(2016) – Gas transmission networks in Europe: Connections between different entry-exit tariff methodologies

• High resolution gas infrastructure and dispatch model
• Pipeline gas flow, storage and LNG simulations

Lochner (2011) – Identification of congestion and valuation of transport infrastructures in the European natural gas market

Multiplier Our contribution

6/13

Methodolo hodology gy The TIGER model

Geocoded ed Databa base se Coverage: Europe > 600 nodes

> > 900 p

pipeline ne sections ns

• Based on TSO maps
• Capacity/ pressure/ diameter
• Entry- and Exit-Points

> 200 Storages es

• Storage type
• Maximum injection/

withdrawal capacity

• Working gas volume

> 30 L

LNG import terminals nals

• Max. hourly/ annual capacity
• LNG storage capacity

Gas Supply Gas Demand Gas Infrast stru ructu cture re Natural ral gas trade Infrast stru ructu cture re utiliza zatio ion Import costs/ HUB prices Linear Optimiza zatio ion Objective function: Cost-minimal demand satisfaction, restricted by available capacities Input Output Implicit it assum umpt ption ions Perfect information (no uncertainty)

7/13

Methodolo hodology gy Model extension

8/13

5 10 15 20 25 30 35 40 45 50

Hyp ypotheses

• theses testing

ting Indicative model results

Both hypotheses are supported by our model results. Multipliers increase long-term capacity bookings. Multipliers decrease seasonality and short-term volatility of gas transports. Capacity booking/transport (NCG – Switzerland) Without

• ut multiplier

iers

Jan Apr Jul Oct Dec

Hypothe heses es 1/2: 2: Model resul ults ts Daily Yearly Quarterly Monthly Lege gend

mcm/d

5 10 15 20 25 30 35 40 45 50

With multipli liers

Jan Apr Jul Oct Dec mcm/d

Transport volume

9/13

Hyp ypotheses

• theses testing

ting Indicative model results

When multipliers are in place storages are utilized more. Multipliers increase storage utilization. Hypothe heses 3: Model resul ults ts

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 Januar 17 April 17 Juli 17 Oktober 17

bcm

Without multiplier With multiplier

Storage levels for a single country (Austria)

Jan Apr Jul Oct Dec 10/13

0,2 0,4 0,6 0,8 EUR/MWh Without multiplier With multiplier

Hyp ypotheses

• theses testing

ting Indicative model results

Multipliers increase price differences between market zones in most situations. Hypothe heses 4:

• Price difference differ with

and without multipliers

• On average price differences

are higher with multipliers

• When there is capacity which

is booked but used (only the case in scenario with multipliers) price differences are zero

Price Spread (NCG – Gaspool)

Hypothesis is supported by our model results. Model resul ults ts Jan Apr Jul Oct Dec

11/13

Ou Outloo look

Out utlo look

• Analysis regarding the implications on short-term efficiency (Hypothesis 5)

 based on the model framework  in a theoretical framework

• Analyzing the impact of uncertainty

12/13

Energiewirtschaftliches Institut an der Universität zu Köln gGmbH

Dominic Lencz

| 12.04.2019

Research Associate

dominic.lencz@ewi.uni-koeln.de | +49 221 27729 324

Hyp ypotheses

• theses testing

ting Indicative model results

Multipliers reduce volatility as assumed and reduce congestion. Multipliers decrease seasonality and short-term volatility of gas transports. Hypothe heses 2: Model resul ults ts

500 1.000 1.500 2.000 2.500 3.000 mcm/d

LT OT TTF NetConnect CH ZEE TR RS BG_2 FI PL RO SI GR Gaspool PEG_NORD NBP UA BY LV NordStream HR PSV HU VTP_SK IB CEGH VTP_CZ IE OPAL GTF

Withou

• ut

t multiplier iers

Cros

• ss

s market ket area a trans nspo ports ts

500 1.000 1.500 2.000 2.500 3.000 mcm/d

LT OT TTF NetConnect CH ZEE TR RS BG_2 FI PL RO SI GR Gaspool PEG_NORD NBP UA BY LV NordStream HR PSV HU VTP_SK IB CEGH VTP_CZ IE OPAL GTF

With multipli liers

14

Hyp ypotheses

• theses testing

ting Indicative model results

Storages are utilized more when multipliers are in place. Multipliers increase storage utilization. Hypothe heses 3: Model resul ults ts

0.0 0.5 1.0 1.5 2.0 2.5 3.0 3.5 4.0 4.5 5.0 5.5 Januar 17 April 17 Juli 17 Oktober 17

bcm

Without multiplier With multiplier 0.1 0.2 0.3 0.4 0.5 0.6 Without multiplier With multiplier

cycles

+6%

Storage levels for a single country (Austria) Total equivalent storage cycles

15

Methodolo hodology gy Model extension

16