NRAs’ Open Letter Call for evidence on the use of the gas interconnectors on Great Britain’s (GB’s) borders and on possible barriers to trade Interconnector Analysis Industry Workshop, 21 November 2012 Darren Reeve, Commercial Director
Introduction Interconnector Provides pipeline capacity Customers nominate their flow requirements Offers considerable within day flexibility Key Messages Nominated flows through Interconnector are highly efficient There is a clear bias to UK Exports Have identified the reason for the bias Import Capacity Export Capacity 810 GWh/d 630 GWh/d Interconnector 34,000 MW 26,000 MW Electricity Interconnector 500 to 2,000 MW
NRAs’ Analysis 1 January 2009 to 30 June 2012 (Includes Planned Maintenance Periods)
Flow vs Price Data Interconnector Flows Actual flow is measured Day Ahead Price Data Many prices are actually assessed several days in advance • Sunday, Monday, Bank Holidays Several Sources of Price Data NRAs: Bloomberg (average of 3 broker prices) Interconnector: Heren (price assessment at 16:30) Good Alignment Eclipse*: Spectron (average price within a window) Flows Prices compared Actual, Measured, Accurate Assessed, Day(s) Ahead against * Interconnector have commissioned Eclipse to undertake independent analysis
NRAs’ Outliers Net flow (kWh/d) Net flows from NRAs’ Outliers 750,000,000 Belgium to GB (NRAs’ price data) 550,000,000 350,000,000 150,000,000 ZEE > NBP price NBP > ZEE price -50,000,000 -20 -15 -10 -5 0 5 10 15 p/therm -250,000,000 -450,000,000 Net flows from GB to Belgium -650,000,000 1 January 2009 to 30 June 2012 (Excludes Planned Maintenance Periods)
NRAs’ Outliers Net flow (kWh/d) Net flows from NRAs’ Outliers 750,000,000 Belgium to GB (using Interconnector’s price data) 550,000,000 350,000,000 150,000,000 ZEE > NBP price NBP > ZEE price -50,000,000 -20 -15 -10 -5 0 5 10 15 p/therm -250,000,000 -450,000,000 Net flows from GB to Belgium -650,000,000 1 January 2009 to 30 June 2012 (Excludes Planned Maintenance Periods)
Interconnector Analysis Net flow (kWh/d) Net flows from 750,000,000 NRAs’ Outliers Belgium to GB Other data points (all using Interconnector’s 550,000,000 price data) 350,000,000 150,000,000 ZEE > NBP price NBP > ZEE price -50,000,000 -20 -15 -10 -5 0 5 10 15 p/therm -250,000,000 -450,000,000 Net flows from GB to Belgium -650,000,000 1 January 2009 to 30 June 2012 (Excludes Planned Maintenance Periods)
Interconnector Analysis Net flow (kWh/d) Capacity Net flows from 750,000,000 Highly Efficient Belgium to GB Bias to UK Exports 550,000,000 24 Dec 2009 350,000,000 25 & 26 Dec 2010 150,000,000 ZEE > NBP price NBP > ZEE price -50,000,000 -8 -6 -4 -2 0 2 4 6 8 p/therm 24 to 27 Dec 2011 -250,000,000 Days prior to or shortly after -450,000,000 the 2011 Planned Maintenance Net flows from Capacity GB to Belgium -650,000,000 1 January 2009 to 30 June 2012 (Excludes Planned Maintenance Periods)
GB Export Bias Zero reserve prices for short term capacity Under-recovery on capacity Escalating NGG commodity charges Recently increased by a further 29% Capacity Shippers can opt to utilise the NTS Optional Capacity Under-Recovery Commodity (Short-Haul) Tariff Commodity 1.8 p/therm 1.6 NTS Entry Commodity Charge 1.4 1.2 1 Capacity under-recovery 0.8 Increasing incentive to avoid 0.6 high commodity charges 0.4 0.2 0 Oct-99 Oct-00 Oct-01 Oct-02 Oct-03 Oct-04 Oct-05 Oct-06 Oct-07 Oct-08 Oct-09 Oct-10 Oct-11 Oct-12
Flow Decision Production Bacton 1.6 p/th Beach BBL 0.02 p/th NBP Hub Zee Hub 0.5 p/th IUK 1.6 p/th Bacton 0.5 p/th Currently: ~1 p/th incentive to ship Beach gas to Zee AND ~2 p/th required for UK imports Unintended consequence of zero reserve prices for capacity
NBP to Zee Price Differential Net flow (kWh/d) Highly Efficient Capacity Net flows from 750,000,000 Bias to UK Exports Belgium to GB 550,000,000 350,000,000 150,000,000 ZEE > NBP price NBP > ZEE price -50,000,000 -8 -6 -4 -2 0 2 4 6 8 p/therm -250,000,000 -450,000,000 Net flows from Capacity GB to Belgium -650,000,000 1 January 2009 to 30 June 2012 (Excludes Planned Maintenance Periods)
Appropriate Price Differential Net flow (kWh/d) Highly Efficient Capacity Net flows from 750,000,000 Justified Export Bias Belgium to GB 550,000,000 FAPDs Number of Days 17 350,000,000 % of days 1.4% % of volume 0.3% 150,000,000 % of value 0.03% NBP > ZEE price -50,000,000 -8 -6 -4 -2 0 2 4 6 8 p/therm Very few FAPDs (Flows ZEE > Bacton price Against Price Differentials) -250,000,000 UK Export Flows plotted against the appropriate price differential (i.e. Bacton Beach to ZEE) -450,000,000 Net flows from Capacity GB to Belgium -650,000,000 1 January 2009 to 30 June 2012 (Excludes Planned Maintenance Periods)
Within Day Renominations Increasing Interconnector nominations following GB supply issues (and a gas balancing alert) 18,000,000 4 January 2010 16,000,000 Nominations at 14:00 14,000,000 at 12:00 12,000,000 at 10:00 kWh/h 10,000,000 at 08:00 Flow 8,000,000 6,000,000 4,000,000 2,000,000 Price differential was assessed on 31 December at 0.75p/th 0 Hourly Nominations and Flows
Conclusion IUK provides a highly flexible service Many companies own capacity Active secondary market Analysis demonstrates Interconnector flows are efficient NRAs’ analysis does not provide a sound platform for further policy interventions directed at interconnector pipelines Distorting effect of high commodity charges in GB Creates a bias to GB exports via the Interconnector Results from the under-recovery of NGG capacity charges High (and rising) commodity charges are within the NRA’s power to address Would bring GB more in line with Continental Europe
NRAs’ Open Letter Call for evidence on the use of the gas interconnectors on Great Britain’s (GB’s) borders and on possible barriers to trade Interconnector Analysis Industry Workshop, 21 November 2012 Darren Reeve, Commercial Director
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