November 2010

Issue: November 2010

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Feature
- Success in regional and inter-regiona market integration

Publications
- Status Review on the ERGEG Regional Initiatives 2010
- ERGEG study on congestion management procedures & antihoarding mechanisms in the European LNG terminals  
- Evaluation of ENTSOG’s European Ten Year Network Development Plan 2010-2019

Press release
-  Success in regional and inter-regional energy market integration
-  European Energy Regulators welcome the European Commission’s Communication on Infrastructure
-  The Slovenian Government and ACER sign Seat Agreement

Public Consultations
-  Conceptual model for the European gas market

Region in the Spotlight
-  How the ERGEG Electricity Regional Initiative is leading to transparency improvements

Editorial
This month the European Commission issued its “Energy 2020” strategy which defines five energy priorities for the next ten years.

Importantly, the Commission has also published its Energy Infrastructure priorities, which will be discussed at the Energy Council (December 2010) and the special summit on energy of the European Council (February 2011). European Energy Regulators' initial reaction to the Infrastructure Package (see Press Release PR-10-09) emphasises that efficient development of infrastructure is key to tackling challenges of climate change and security of supply – but costs must also be managed; and that the proposals must be linked closely to measures introduced in the 3rd Energy Package. In particular ACER (and national energy regulators) will play a key role in driving market integration through the process of Framework Guidelines and overseeing the Ten-Year Network Development Plan (TYND).

ERGEG published a report on the different congestion management mechanisms and anti-hoarding mechanisms currently applied at European LNG terminals. It focuses on the need for harmonisation and transparency at the EU level.

ERGEG’s evaluation of ENTSOG’s European Ten-Year Network Development Plan (TYNDP) 2010-2019 recommends that a top-down model-based scenario analysis be used also in future TYNDPs (this the first gas TYNDP was based on a bottom-up approach only). ERGEG has also launched a call for evidence regarding an EU gas target model.

Success in regional and inter-regional energy market integration is the topic of this month’s feature article.  This is particularly timely given that the inter-regional market coupling between the CWE and Nordic markets went live on 9 November.  The short feature in this newsletter gives a flavour of some of the achievements (further detail,region by region and topic by topic, is set out in the Status Review on the ERGEG Regional Initiatives 2010 published this month). In the regional spotlight this month, rather than focusing on one of the regions, we demonstrate how the ERGEG Electricity Regional Initiative is leading to transparency across the seven electricity regions.

Also this month, the Slovenian Government and ACER signed a Seat Agreement which governs the relationship between the Slovenian Government and ACER (see ACER Press Release)

Feature: Success in regional and inter-regional energy market integration

Aim of the Regional Initiatives
ERGEG’s Regional Initiatives (RIs) are aimed at speeding up the integration of Europe’s national energy markets in an innovative “bottom-up” approach.  Based on the voluntary cooperation of stakeholders, and led by regulators, specific barriers to trade and competition are identified and solutions found within each of the seven electricity and three gas regions so as to improve market integration.

Achievements – electricity
The 2010 Status Review of the ERGEG Regional Initiatives details the major achievements during the past year as well as coherence and convergence across regions. It includes some case studies and also, for the first time, policy advice from the Regional Initiatives’ experiences (see Press Release, PR-10-08).

In electricity there are important and concrete results particularly with regard to capacity calculation, capacity allocation and congestion management. Some regions have in place single auction platforms (Central-West and Central-East) and others are moving in that direction. A key development is a new interregional dimension with extension of price coupling to the whole Central-West region (9 November 2010) and simultaneously the harmonisation of two regional market coupling projects (Central-West electricity region and the Northern market). These are important steps towards the target of pan-European price coupling by 2014. In January 2010 the European Commission mandated ERGEG to elaborate proposals for guidelines on fundamental data transparency in electricity. The regional transparency reports (developed in six regions) are an extremely valuable basis for this work (see Region in the spotlight section of this newsletter).

Achievements – gas
The GRIs have played a central role in strengthening existing and new cross-border infrastructure, thus improving security of supply.

In all three gas regions, investments have been evaluated based on the actual needs of the market (e.g. coordinated open seasons have been used to assess the need for capacity and to secure project financing) and regional investment plans are being developed. Regions are also optimising the use of existing capacity through improved capacity allocation and congestion management procedures. The North-West gas region has significantly improved gas transparency which serves as an example for other regions to follow and has helped shape EU comitology guidelines on gas transparency.

From regional market integration towards a single EU energy market
Despite the many challenges to market integration (for which, ultimately, legislation has been introduced to overcome) each of the regions has been successful in taking practical steps towards integration in areas such as cross-border electricity trading, transparency of information and much needed coordinated regional infrastructure investment.

The development of regional electricity and gas markets is an important step and practical bridge towards the ultimate goal of a single competitive EU market. The next step is creating a single European market from the seven electricity and three gas regions.

How the Regional Initiatives fit in with the European Commission's Infrastructure Package
The Regional Initiatives are a key complement to the Energy Infrastructure Package in delivering concrete results on the ground such as methods for maximising the use of existing infrastructure and increasing physical capacity based on coordinated investment decisions involving several Member States.

Future Prospects – the Regional Initiatives under ACER
ERGEG has advocated (Strategy Paper Conclusions, June 2010) that going forward the Regional Initiatives, under the EU’s Agency for the Cooperation of Energy Regulators (ACER), could be used to focus on implementing the new harmonised rules (e.g. Framework Guidelines and resulting Network Codes in areas such as capacity allocation or gas balancing), which are currently being developed. They could assist ACER by sharing best practices and in monitoring progress towards a single EU market in electricity and gas.

CEER/ERGEG Events

Calendar of current and future public consultations